US Files WTO China IP Complaints

If you've been visiting here, I've given advanced warning--not once, but twice--that the US Trade Representative (USTR) would file intellectual property (IP) complaints against China soon. This issue has been a matter of dispute for the longest time between these two countries. Although the US has held back when on the brink countless times before, it appears that it has now become fed up with perceived Chinese inaction. (Or at least domestic political undercurrents have become too strong to hold back any longer.) Some have estimated Chinese counterfeit goods to account for between 15 to 20% of products made in China. Well, the deed is almost done. Today the USTR announced that it will lodge two complaints tomorrow at the WTO Dispute Settlement Body (DSB)--the first deals with China's lax enforcement of IP laws, while the second deals with market access restrictions on American IP products and services. (It looks like Bloomberg jumped the gun on the story; the cases will be filed tomorrow as per their update.)

The U.S. filed said it will file two complaints against China at the World Trade Organization aimed at stopping what it said is piracy of copyrighted movies, music, software and books.

U.S. Trade Representative Susan Schwab announced today that cases were filed will be filed tomorrow at the Geneva-based trade arbiter. One case argues that China sets too high a value on pirated movie or music disks before prosecuting violators. The second objects to Chinese restrictions on the sale of foreign books and movies.

The complaint about widespread sale of pirated disks dates back at least a decade with China. In 1996, the U.S. was set to levy billions of dollars of sanctions against China before the Chinese agreed at the last minute to new measures to curb the export of pirated recordings and computer software.

Over the past three years, U.S. officials have complained often and loudly about what they say is the scale of theft of trademarked and copyrighted goods. The administration was set to file the complaints twice before, only to delay at the last minute as the Chinese government and some U.S. companies urged patience...

China last week announced a crackdown on hawkers of counterfeit goods and halved the criminal thresholds for prosecuting pirates. Possession of 500 pirated DVDs, rather than 1,000, would lead to criminal prosecution, the Supreme People's Court said, according to the Chinese Embassy in Washington.

"That was a step in the right direction, but doesn't go far enough," Schwab said.

"The thresholds create a safe harbor for pirates,'' she said. A vendor need only make sure he has only 499 illegal videos or CDs on hand, and "the most Chinese authorities could do would be to seize the goods and impose an administrative fine,'' she said. "The proprietor could resume business in a short period of time without fear of prosecution.''

The U.S. wants the thresholds eliminated, and seeks new rules on the disposal of pirated items seized by Chinese customs authorities.

As the World Trade Law blog notes, these are the fourth and fifth cases brought before the WTO DSB by the US against China. I will add more details as they come in. The USTR site has not yet updated its material on this matter, nor has China made its usual comments on being "strongly dissatisfied," etc. The filing should also appear on the WTO site soon. In the meantime, look at the USTR's recent report on China, particularly the sections on intellectual property rights protection (pp. 105-12) and audio-visual services (pp. 128-29).