Track Internet Companies’ Information Handovers to Chinese, Commission Says

Sometimes “security people will just show up” to ISPs and websites without legal orders, demanding information on users, Chmn. Larry Wortzel (R) said in a press conference. Official reporting to the U.S., which would make findings public twice a year, “may actually encourage the public to pressure Congress” to crack down on Internet companies’ China compliance.

The Internet recommendations were among the few that the Commission repeated from previous reports, said Vice Chmn. Carol Bartholomew (D). Readers should presume that the Commission stands by earlier recommendations not mentioned in the 2006 report, but the Commission wanted to emphasize its Internet recommendations, she said. The West now relies on human rights groups to track Internet companies’ compliance with Chinese demands, official or not, and it’s time the U.S. had “a sense of the extent of the problem” through official reporting.

China still operates the “world’s most sophisticated Internet censorship force,” blocking pages by keywords and entire websites, mostly to stop domestic and foreign criticism and stifle protests, the report said. Heavily citing other studies, the report said the govt. uses “burdensome licensing requirements” and “harsh enforcement” to prompt self-censorship. ISPs must retain all user data -- subscriber phone number, sites viewed, time spent online -- to hand over to the govt. whenever asked. The U.S. Bcstg. Board of Governors uses the “push-pull” technique, sending e- mail to politically aware users in China with links to proxy sites that aren’t currently filtered. Those sites then provide unfiltered access to Voice of America, Radio Free Asia and other blocked sites, the report said.

The Commission recommended that Congress expand the Governors’ filtering circumvention program and the State Dept.’s Global Internet Freedom Task Force. That group was set up shortly before Human Rights Subcommittee Chmn. Smith (R-N.J.) debuted his Global Online Freedom Act (HR-4780) -- and on the eve of hearings highlighting Internet companies’ China compliance (WID Feb 15 p1). Bartholomew said the Commission recommendations didn’t appear to mirror Smith’s proposal. His office couldn’t be reached for comment.

USTR: ‘Very Likely’ WTO Case Without Chinese Reversal

Despite some progress, “China is falling short on its implementation” of new IP laws, not enforcing existing laws or complying with international rules, Wortzel said. Chinese officials recognize they have IPR problems, but that’s all, he added: “I can’t paint you a nice rosy picture that things have improved.” Bartholomew said: “People have been satisfied with dialog.” China has failed to hold to “both the letter and the spirit” of its agreements; “rampant piracy” is the norm and the sole economic support for entire towns. The report estimates that copyright industries lose $2.5-$3.8 billion annually in China, and there are piracy rates of 86% for business software and 85% for sound recordings.

Chinese IPR protection is hampered by “lenient rules and regulations, mild penalties for transgressors, and an overall lack of enforcement,” the report said. Chinese authorities’ excuse that they can’t control counterfeiting was belied by the country’s prevention of counterfeiting of the 2008 Beijing Olympics logos, discovered during a Commission visit, Bartholomew said. The govt. encourages patent infringement on technology including telecom equipment by requiring companies to hand over product specs and then turning it over to govt.-backed science and technology groups, the report said. China “must learn to balance its narrow self- interests” against the interests of the rest of the world, Bartholomew said.

Criminal prosecutions move at a “glacial” pace, the report said. China’s Public Security Bureau started nearly 3,000 IPR violation cases in 2005 but closed less than 10%. Even the purported breakthrough in Chinese IPR efforts -- promising to preload computers with legitimate operating systems (WID April 13 p1) -- has borne little fruit, with the International Intellectual Property Alliance reporting that “it had found no evidence that the change had been implemented,” or a corresponding rise in software sales, the report said.

USTR has a “historical” preference for negotiations before filing WTO cases, the report said, even though in a non-IPR context, one WTO complaint “led to a satisfactory conclusion: swift negotiations to end a discriminatory practice by China.” USTR also wants to build the strongest possible case, but that’s complicated by U.S. businesses’ not providing information about piracy in fear of retaliation by Beijing, the report said.

The timing of a USTR case at the WTO was in question. Bartholomew said USTR hadn’t briefed the Commission. An agency spokesman told us the Administration has pushed China for a more “equitable” and “durable” trade relationship. Asked whether USTR is holding off on an all-but-certain case to be filed as early as this fall -- the implication from an official’s testimony this summer (WID June 8 p3) -- the spokesman said whether to file a case was never certain. “Barring significant action from China on IPR,” a WTO case “remains likely,” but “these things sort of take their own course.” Warning that the off-the-cuff estimate was very rough, the spokesman said a decision on a WTO case probably would be made in 2-6 months.

The Democratic takeover of Congress won’t affect U.S.- China policy, Commission leaders said. Congressional districts may exert heavy pressure on aspects of China policy, but the national consensus “doesn’t change across political parties” as a whole, Wortzel said. Bartholomew said the Commission had been briefing Republican and Democratic leaders this week prior to release.

Chinese officials hurt their standing in the report by limiting access when Commission members visited, Wortzel said. The work done at the State Intellectual Property Office, which bragged of setting up 50 IPR “service centers” (WID Aug 31 p7), could be mirrored elsewhere, but the Commission wasn’t allowed to see those efforts, he said. China doesn’t let the Commission identify itself as such -- they go by “advisers,” he added. Even in upscale Chinese hotels, Commission members couldn’t get some information online, Bartholomew said.