US WTO Cases Against China Draw Reactions

By Tove Iren S. Gerhardsen

NEW YORK – A United States official who presented the arguments for why the United States has taken China to the World Trade Organization (WTO) for alleged breaches of trade law related to intellectual property rights and market access was met with strong support from industry and lawyers, but equally strong criticism from others at a recent conference.

On 10 April, the United States brought two cases against China at the WTO Dispute Settlement Body, relating to market access and intellectual property rights, particularly copyright (IPW, 12 April 2007, WTO/TRIPS).

At a 13 April event at Fordham University, Victoria Espinel, assistant US trade representative for intellectual property and innovation, said that the US had worked with China for “many years” and active steps had been taken, but there are still “specific WTO problems.”

Among the core points are Chinese thresholds for the lowest amount of piracy or counterfeiting (in terms of illegal profits or number of illegal copies) that would generate criminal liability. One of these was 1,000 pirated copies of a work until a week before the case was filed, when it was changed to 500 copies, Espinel said. She added that often raids had generated just under the threshold amounts, allowing safe harbour against criminal prosecution.

Other issues are customs enforcement, as well as copyright protection during censorship reviews, Espinel said. The censorship issue is that while the government is reviewing new books and other works, they cannot be copyright protected while almost everything is available in pirated version during this period, she said. The scope of criminal liability is also potentially an issue to the United States, which hopes to clarify whether China has resolved concerns that people who are caught reproducing movies cannot be found liable unless they also distribute them, she said.

As for market access, Espinel said there were problems with importation and distribution rights related to copyrighted material, which appeared inconsistent with the WTO Agreement on Trade in services and China’s protocol of accession to the WTO.

The US move was strongly supported by some participants. Eric Smith of law firm Smith, Strong & Schlesinger in Washington, DC, said that TRIPS is “not about good will” but about meeting international obligations.

But Peter Yu, professor at Michigan State University College of Law, said that the US move was “not the best way.” He said none of those he had asked, including former US officials, had listed intellectual property issues higher than currency exchange and nuclear non-proliferation in China in terms of importance.

Yu said it was not desirable to push for stronger government in China. He commended the US for focusing on specific issues, but said there is a bottoms-up development occurring, which he said is better than a top-down approach.

Sir Hugh Laddie, Rouse & Co. International and University College London, said the case was “absolutely absurd.” He said that if China was not trying to get up to speed, it would have been acceptable, but China had made impressive improvements over the past 15 years. He said China was training hundreds of judges to become IP specialists.

Laddie also said it would not be practical for China to raid every single person, saying that he had also done some shopping while in New York and had come across pirated goods also there. China was simply doing a “staggering job,” he said, adding that if they should do more, they would not have more police power to deal with any other issue in the country.

Another issue is employment, Laddie said, noting that the pirated goods industry employs millions in China. He said WTO presumably would not make it acceptable to put millions out of work overnight. Laddie further said that the US had “simply ignored” a copyright case that had previously been brought against it at WTO, adding that, “At least China should do what America is doing.”

Qian Wang of the Intellectual Property School of East China University of Politics ad Law in Shanghai said that piracy is wrong and should be fought, but disagreed with the case. He said the pirate, who he said was a “thief,” is a by-product of social problems as these people are often unemployed people.

Wang said that the US should not pressure China to take rough measures but should rather provide assistance to raise awareness. “We need time,” he said.

One participant said this is a “very, very important case,” as especially during the consultation period, TRIPS standards will be interpreted, showing that TRIPS is not only “aspirations” but “real.” This will be important for TRIPS to remain effective in the future, he said.

Sources have indicated that US industry pressure contributed to the US decision to proceed with the cases, but a US source said the two governments had worked for months in a sort of last-ditch effort to find ground for resolution of US questions and had been unable to do so.

The US may elevate the case further 60 days from the date of filing if the consultations are unsatisfactory. As of last week, no consultations appeared to have been scheduled.

William New contributed to this report.

Tove Gerhardsen may be reached at tgerhardsen@ip-watch.ch.