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USTR Wants More Input on China Piracy

Only a day after Democratic presidential nominee John Kerry criticized President Bush's China trade policy enforcement, the United States Trade Representative (USTR) office said Thursday it would seek additional industry input on Beijing's enforcement of intellectual property laws.

Earlier this week, Kerry wrote an editorial in The Wall Street Journal saying the Bush administration "refuses to show our competitors that we mean business. They have brought only one WTO case for every three brought by the Clinton administration, while cutting trade enforcement budgets and failing to stand up to China's illegal currency manipulation."

In previous stump speeches, Kerry has said the United States should be tougher in enforcing intellectual property rights in China. The USTR last week rejected a petition to seek World Trade Organization (WTO) sanctions against China for its refusal to allow its currency value be set by the free market, contending progress is being made with China on the issue.

Thursday afternoon, Deputy USTR Josette Shiner called an impromptu media gathering to stress that the administration's number one concern is protecting intellectual property rights. Shiner then released a letter sent to a number of IT groups and entertainment companies, including the U.S. Chamber of Commerce, the Business Software Alliance and the Motion Pictures Association of America, seeking specific examples of copyright piracy in China.

Shiner said in the letter the comments received would be used to "accurately measure progress" in China's WTO intellectual property obligations. The request for comments came only a day after a comment deadline for a USTR report on China to Congress.

"To effectively evaluate China's progress and to protect U.S. intellectual property rights (IPR) interests in China, we need industry to provide data on the prevalence of IPR infringement in China and provide examples of specific individual cases where IPRs in China have or have not been respected," Shiner wrote.

Last spring, China, while attending a Joint Commission on Commerce and Trade in Washington, agreed to address a number of IPR issues by the end of the year. At that same meeting, the Bush administration scored a major victory in its trade negotiations with Beijing when China indefinitely suspended a looming deadline to impose a proprietary wireless LAN encryption scheme within its borders.

The IPR issues "included a list we [USTR] had honed over many months with various U.S. stakeholders, including small and medium industries and copyright industries, to really determine what areas they felt needed the most immediate improvement," Shiner told reporters.

In addition to seeking a large range of data, Shiner wrote, "We encourage industry to provide its detailed evaluation of specific strengths and weaknesses of China's legal regimes for enforcement of IPRs in light of relevant international standards and U.S.-China bilateral commitments."

In a separate filing for the USTR report to Congress, the Information Technology Association of America (ITAA) has already claimed that China is failing to enforce intellectual property laws and refusing to extend its commitments to Web services.

"Although China's rhetoric strikes the right chord with the international community, its actions behind the scenes hit a sour note," said ITAA President Harris N. Miller in a statement released Friday. "To China, every court ruling, every regulatory interpretation seems to be another opportunity to protect her players domestically and to secure competitive advantage in the world at large."

Miller added, "The door to international trade must swing both ways. Every day that China resists opening her markets to international competition is a missed opportunity for the Chinese people and the global economy."

According to the ITAA, China has made progress in developing a legal framework for intellectual property rights, but is failing in enforcement efforts.

"The shortfall in China's intellectual property protection lies not in its legal framework but more in the area of intellectual property rights enforcement," The ITAA comments state. "Although China has established a Supreme People's Court to hear only intellectual property issues, international companies have not received satisfying results."

The ITAA claims civil litigation in China is a time consuming and difficult process. In its comments to the USTR, the ITAA says, "Furthermore, successful litigants on the legal principle frequently find that the awarded damages are inadequate to compensate for their losses."

U.S. copyright holders estimate they lost $2.6 billion last year to illegal copies of books, music, film and software in China.

"Until steps are taken to improve this environment, companies doing business in China still face a high risk of intellectual property rights infringement," the ITAA states.

In addition to dropping its proprietary encryption standards in April, China announced in July it would end its policy of giving rebates to domestic producers of integrated circuit makers, while levying a 17 percent Value Added Tax (VAT) on imported semiconductors. U.S. based chipmakers and manufacturers had argued that the policy was in effect a tariff designed to keep other competitors out of China's market for such chips.