U.S. claims victory in WTO complaint on China piracy

WASHINGTON (Reuters) - The United States claimed victory on Monday in a groundbreaking World Trade Organization case against China for failing to protect and enforce copyrights and trademarks on a wide range of goods.

A local official shovels pirated DVDs before destroying them during a campaign in Taiyuan, Shanxi province, April 20, 2008. REUTERS/Stringer

“Today, a WTO panel found that a number of deficiencies in China’s IPR (Intellectual Property Rights) regime are incompatible with its WTO obligations,” acting U.S. Trade Representative Peter Allgeier said in a statement.

“We will engage vigorously with China on appropriate corrective actions to ensure that U.S. rights holders obtain the benefits of this decision.”

Washington launched the dispute in 2007 out of frustration at rip-offs of films, branded goods and other trademarked property openly available in Chinese cities.

The International Intellectual Property Alliance, a coalition of U.S. music, movie, book and software industry groups, conservatively estimates that piracy in China costs them more than $3.7 billion in lost sales.

The WTO ruling means China and other nations “can’t simply go through the motions” of protecting intellectual property, but must provide effective results, Neil Turkewitiz, an executive vice president at the Recording Industry Association of America, said in a statement.

The United States persuaded the dispute settlement panel that China violated WTO rules by barring copyright protection for movies, music and books that have not been approved by state censors for legitimate sale, Allgeier said.

“China restricts access to many legitimate titles, but that doesn’t stop the pirated distribution of virtually all U.S. films in China,” Dan Glickman, president of the Motion Picture Association of America, said in a statement.

The panel also said it was “impermissible” for China to allow public auction of counterfeit goods seized by Chinese customs authorities, with only the requirement that the fake brand or trademark be removed from the good, Allgeier said.

The United States failed to persuade the WTO panel on one main point of its case: that Chinese copyright pirates and counterfeiters have no fear of criminal prosecution because the government’s threshold for bringing a case is too high.

That was “disappointing,” but the panel established a market-based analytical approach that should help WTO members avoid or resolve future disputes over obstacles to criminal enforcement of counterfeiting and piracy, Allgeier said.

The U.S. recording industry also welcomed the ruling “that enforcement must be effective not only in law but in practice, and that standards of effectiveness change over time and reflect the realities of the marketplace,” Turkewitz said.

Both the United States and China can appeal the panel ruling, the results of which leaked when a confidential preliminary report was released in October.

Reporting by Doug Palmer; Editing by Sandra Maler and Cynthia Osterman