EU warns China: piracy is damaging relations

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BRUSSELS -- European Union trade commissioner Peter Mandelson on Tuesday warned the Chinese government that rampant piracy was a "ball and chain" dragging down relations between Europe and China.

However, as speculation mounts that the U.S. will file a World Trade Organization case against China for failing to protect intellectual property, Mandelson ruled out such action by the EU.

The warning came a day after the Motion Picture Assn. filed the latest in a string of lawsuits for content license infringement in China, this time against a South China maker of DVD players, AKI Digital Electronic Appliance.

Speaking to university students in Beijing, Europe's trade czar pleaded with China to do more to tackle the rampant copying of DVDs, CDs, software and other goods.

"Europe needs to see tougher action on counterfeiting in China, which is a ball and chain on EU competitiveness and a growing problem for China itself," Mandelson said. "Last month, China overtook Germany to become the world's fifth-biggest filer for patents. So increasingly the Chinese government is seeing a joint interest in fighting this illegal activity -- but we need to see more enforcement of the law."

China is currently the fourth-largest supplier to Europe of pirated DVDs, CDs and cassettes -- after Thailand, Malaysia and Pakistan -- accounting for 8% of seizures. Despite a number of crackdowns by the Chinese government, counterfeit goods are still widely available in the country.

But Mandelson said he had no intention of straining relations by suing China at the WTO. "I'm not looking for opportunities to take China to the WTO and I hope very much it won't be necessary," he said. "I think the quality of our relationship and our desire to find amicable solutions should make that unnecessary."

His comments contrast with signals emerging from Washington that the U.S. is on the verge of launching WTO action against China for failing to fight piracy in its back yard. U.S. movie, music and other copyright industry companies says they lost more than $2.6 billion in China last year because of pirates who control 85% to 90% of the market. U.S. Trade Representative Susan Schwab last month said painful trade sanctions could be slapped on China imports if Beijing failed to comply with an adverse WTO ruling.

On Tuesday, the MPA, which represents major Hollywood studios, announced that it had filed suit against AKI Digital Electronic Appliance, alleging that the Shenzhen-based manufacture of DVD players had violated the Content Scramble System license agreement that protects DVDs against illegal copying and redistribution.

Breach of the CSS license interferes with the studios' efforts to deliver content to consumers and to expedite the widespread commercial introduction of next-generation DVD discs and players, such as those utilizing the Blu-Ray and HD DVD formats.

China is attempting to introduce new disc formats developed at home to save domestic companies money on royalty payments for technologies developed overseas.

Jonathan Landreth contributed to this report.

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