US 3, China 0: America Victorious in WTO IP Case

♠ Posted by Emmanuel in ,, at 1/27/2009 08:03:00 AM
I have to run, but note that the US has upped its effective tally in cases brought to the WTO dispute settlement mechanism (DSM) to three. For the record:
  1. China backed down and agreed to a settlement before a case concerning export rebates given to exporters was formally investigated;
  2. China lost its appeal in the case concerning discrimination against foreign auto parts manufacturers;
  3. Now, reports suggest the US has chalked up another one against China regarding intellectual property violations. From the US Trade Representative's site -
Acting U.S. Trade Representative Peter Allgeier [subbing until Ron Kirk is confirmed] announced today that a World Trade Organization (WTO) dispute settlement panel has found important aspects of China’s intellectual property rights (IPR) regime to be inconsistent with China’s obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). The United States brought claims against China because of serious concerns about several shortcomings in China’s legal regime for protecting and enforcing copyrights and trademarks on a wide range of products.

“Today, a WTO panel found that a number of deficiencies in China’s IPR regime are incompatible with its WTO obligations,” Ambassador Allgeier said. “These findings are an important victory, because they confirm the importance of IPR protection and enforcement, and clarify key enforcement provisions of the TRIPS Agreement. 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.”

Allgeier added, “We are pleased that the Panel found that China’s denial of copyright protection to works that do not meet China’s ‘content review’ standards is impermissible under the TRIPS Agreement. Additionally, we are pleased that the Panel found it impermissible for China to provide for simple removal of an infringing trademark as the only precondition for the sale at public auction of counterfeit goods seized by Chinese customs authorities.”

“We also welcome the Panel’s clarification of China’s obligation to provide for criminal procedures and penalties to be applied to willful trademark counterfeiting and copyright piracy on a commercial scale,” Allgeier continued. [The DSM didn't find China in breach on this count as it lowered the threshold amount to press counterfeiting charges.] “The Panel did find, however, that it needed more evidence in order to conclude that actual thresholds for prosecution in China’s criminal law are so high as to allow commercial-scale counterfeiting and piracy to occur without the possibility of criminal prosecution. 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.”
The Financial Times also has an article on the story about the usual Chinese "regret" over the loss. Meanwhile, Forbes says the US is claiming a hollow victory. Both China and the US can appeal, although I believe the former's chances for a major turnaround are minimal. There are yet more cases being contested by these two, but the tally is (unsurprisingly) going in America's favor. It's like shooting fish in a barrel as the Yanks say. Why does this matter? Feeling like it's on a roll, the US may be emboldened to launch the Big One, Section 301 legislation on Chinese currency manipulation. Things are still heating up.

UPDATE: The WTO site now has the reports on this case, DS362.