Poor U.S. Case Against China at WTO Will Embolden Russia, Commission Hears
The U.S. must keep Russia in mind as it prepares for its WTO case against China alleging intellectual property rights (IPR) violations, commissioners and witnesses said at a U.S.-China Economic & Security Commission hearing Wed. The case could be filed as early as the fall (see separate story), but Comr. Richard D'Amato fretted that “the cards are stacked against us” because of WTO procedures and the U.S.’s relative unpopularity in Geneva these days. A former RIAA chief also lamented that Chinese online infringement rules, weakened a year ago in an administrative decision, are about to get worse from the group’s perspective.
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China’s eagerness to police copyright violations has waned with its achievement of permanent normal trade relations with the U.S. in the late 1990s, said Berman Rosen Global Strategies founding partner Jay Berman, in joint prepared remarks with RIAA. Hundreds of websites in China offer unauthorized music, split among BitTorrent, eMule, deep-linking search engines and traditional P2P services, and many charge subscription fees or run advertising, adding insult to injury, the former RIAA chief said. The thousands of takedown notices sent to Chinese ISPs 2003-2004 slowed to a trickle in 2005 after an administrative rule change that made takedowns more difficult. That change is expected to be upended soon by the State Council, but the latest draft regulations show a weakening of notice requirements, DRM anticircumvention, ISP liability and the method of demanding takedowns, Berman said.
RIAA believes 90 optical disc plants are operating in China. The need for foreign record companies to have a Chinese joint-venture majority partner to enter the market deprives users of legitimate works, driving them to buy counterfeit CDs and download through illicit services, Berman said.
Enforcement is a joke without criminal penalties, Berman said at the hearing, echoing U.S. Trade Representative criticisms earlier in the day. A major counterfeit market shuttered in Shanghai quickly reopened in another part of town -- helped in finding new digs by the Chinese authorities, he said, citing an Economist report. Such raids are “just the cost of doing business, and the pirates are happy to pay for the privilege of being back in business the very next day,” he said. With penalties typically amounting to a small fine or suspended sentences, and Chinese reluctance to add a “fingerprint” to each optical disc -- an idea under discussion between the countries -- enforcement is “just not effective and never will be,” Berman said.
“The problems in Russia are even worse” on IPR violations, Berman said. The country is home to possibly the most notorious website -- Allofmp3.com -- offering tracks for purchase, at cents per megabyte, that the industry claims don’t have rights clearances. He cited “endemic corruption in the [Russian] system” that dwarfed China’s simple apathy toward IPR enforcement: “We need to marshal that sense that Congress is simply not [supporting Russia’s WTO accession] for the sake of having the Russians in the WTO.” The U.S. has leverage over Russia now, just as it did with China in the mid-1990s, and if it’s not used wisely now, “Congress will be creating a Russia Economic Commission” after Russia joins the world body, he warned. Commission Vice Chmn. Carolyn Bartholomew said of the U.S. back & forth with China: “They're not very good lessons” to send to Russia.
D'Amato said China’s behavior gave the U.S. a “slam dunk case,” but the U.S. faced restrictions at the WTO that could make its effort all for naught. He proposed creating a public fund for litigants to offset the giant cost of bringing a case against China. Berman supported the idea but said the U.S. had to bring the case, regardless of how enthusiastic the IP industries were: “Under the best circumstances, this is a long and tortuous process.”