U.S. claims victory in China piracy complaint

WTO panel reaches ruling on nation's IPR practices

Related: Hollywood urged to look toward Web in China

NEW YORK -- The U.S. and Hollywood were handed a victory Monday in a World Trade Organization ruling that condemned some of China's intellectual property rights practices but did not agree with the U.S. on all counts.

Acting U.S. Trade Representative Peter Allgeier said a WTO dispute-settlement panel has found important aspects of China's rights regime "inconsistent" with its obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights. The U.S. brought its complaint in April 2007 after years of bilateral talks failed to produce an agreement.

"These findings are an important victory," Allgeier said. "Having achieved this significant legal ruling, we will engage vigorously with China on appropriate corrective actions to ensure that U.S. rights-holders obtain the benefits of this decision."

Importantly, the panel condemned Chinese law for not protecting copyrighted works that do not meet that government's "content review" standards. It also took issue with China's rules for disposing of counterfeit goods by auctioning them off after infringing trademarks are removed.

"Returning these goods to the marketplace with only the infringing mark removed could confuse consumers and harm the reputation of the legitimate product, facilitating -- rather than deterring -- further acts of infringement involving these goods," the Office of the U.S. Trade Representative said.

In a disappointing aspect of the ruling, the WTO panel did not immediately agree with the U.S. on one key issue, saying it needs more evidence to back the U.S. suggestion that China's thresholds for prosecution are so high that they allow counterfeiting and piracy without the possibility of criminal enforcement. China's legal thresholds for prosecution are 500 copies of a pirated DVD or about $7,000 worth of counterfeit goods.

Allgeier would have liked to see a stronger WTO reaction.

"While this conclusion is disappointing, the United States is encouraged that the panel, facing a case of first impression, set forth a market-based, analytical approach that should help WTO members and panels avoid or resolve future disputes concerning obstacles to criminal enforcement against counterfeiting and piracy," he said.

Allgeier also noted that the U.S. complaint has met success in this regard because immediately before the case was filed, China dropped its criminal copyright threshold from 1,000 to 500 infringing copies.

Both the U.S. and China can appeal the WTO ruling.

MPAA chairman and CEO Dan Glickman lauded the piracy decision.

"We are thankful to the U.S. officials for their hard work and dedication to this case and are gratified," he said. "This decision is welcome news for creators as it reinforces the importance of protecting their innovative products."

Glickman also expressed disappointment that the WTO did not agree with the U.S. on all counts.

"Intellectual-property theft in China is a serious problem, and our industry is committed to using all available tools to address it," he said. "While we recognize that the Chinese government has made efforts to tackle piracy since the filing of the WTO action, much more needs to be done."