Bridges Weekly Trade News Digest • Volume 12 • Number 34 • 16th October 2008

WTO Issues Mixed Interim Ruling in US-China Piracy Dispute, Sources Say

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A WTO panel has issued a split decision in a dispute between the US and China over the enforcement of intellectual property rights, press sources indicated.

In its confidential interim ruling issued last week, the panel reportedly shot down Washington’s argument that Beijing was wrong to allow a certain number of pirated goods to be traded without prosecution.

Washington had argued that Beijing violated the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) by allowing pirates to be in possession of as many as 500 pirated items before being subject to criminal penalties. (Shortly before the US filed its complaint last year, Beijing lowered the threshold for criminal prosecution from 1,000 to 500 copies of pirated items.)

But Washington said that 500 still represented an unacceptably high bar for prosecuting copyright infringements, and that the threshold allowed large-scale commerce to take place in pirated movies and music with the threat of little more than an administrative fine.

The panel’s interim ruling did not go so far as to endorse the Chinese threshold. Rather, the panel concluded that the US had not done enough to prove that the Chinese policies are so loose as to allow for piracy and counterfeiting on a ‘commercial scale’. The TRIPs Agreement does not currently offer a specific definition of the term.

But press sources reported that the panel largely agreed with two other US claims. The panel found that China had indeed violated the TRIPs Agreement by refusing to offer copyright protection to goods that had been rejected by Chinese censors. And the panel also reportedly agreed with Washington’s assertion that the Chinese government was wrong to auction off confiscated pirated goods from which the trademarks had been removed.

The US requested the establishment of the dispute panel on the piracy issues in April 2007, claiming that China had done too little to enforce copyright and trademark protection on a wide range of goods such as books, CDs, and DVDs (see BRIDGES Weekly, 18 April 2007, http://ictsd.net/i/news/bridgesweekly/7741/). At the time, Beijing chastised the US for taking its complaint to the WTO’s Dispute Settlement Body, saying that the two countries should instead resolve the matter in a less formal context.

Although the recent ruling is only preliminary - and can be challenged by both parties in the dispute - most final judgments offered by WTO panels do not differ significantly from their interim rulings.

ICTSD reporting; “Officials: WTO faults China in piracy dispute,” ASSOCIATED PRESS, 9 October 2008; “China wins 2-1 in US IP case at WTO: source,” REUTERS, 9 October 2008; “US claims win in WTO piracy case versus China,” ASSOCIATED PRESS, 9 October 2008; “WTO Panel Issues Mixed Ruling in China IPR Enforcement Case,” INSIDE US TRADE, 10 October 2008.