Girl sporting a sweatshirt with “Wickey Mouse,” an approximation of the Mickey Mouse Disney character, seen at a street market in Beijing. PHOTO BY BERKSHIRE PUBLISHING.
The Chinese have a long history of freely borrowing ideas from other countries, which, in the past, has caused no problems. But in today’s global marketplace, ideas, or intellectual property, have become a commodity. Borrowing intellectual property has become infringement, a violation of ownership rights. China is one of the world’s worst offenders of intellectual property infringement.
Visitors to China can easily buy pirated CDs and DVDs on the streets of most major cities. Representatives from U.S. companies find imitations of their products in the factories and markets they visit in China. Editors of journals and books in the United States and Europe too often turn down written work from Chinese authors because of obvious plagiarism. These are examples of blatant infringement of intellectual property rights, a persistent problem in China.
Intellectual property broadly refers to creative content, including music, art, writing, and innovation, such as the research and development creations of business and corporate work. In general terms, intellectual property rights (IPR) are the exclusive rights of individuals or businesses to control the production and reproduction of their creative, intellectual property. This is often seen in the form of copyrights, patents, and trademarks, and frequently discussed in terms of music, films, printed texts (such as books and periodicals); software, and proprietary business developments. IPR infringement has become an increasingly visible issue as global markets for foreign products widen. As demand for access to a greater range of intellectual property grows, illicit reproduction of this creative content has become more commonplace. In economic, trade, and diplomatic circles, IPR protection has become a top agenda item for foreign countries and businesses entering China, one of the fastest growing consumer markets.
As a member of the World Trade Association (WTO), China is required to have in place an IPR protection and enforcement system that includes consistent enforcement, criminal and civil procedures to deal with IPR infringers, and equal protection, access, and treatment for holders of copyrights, trademarks, and patents, whether the copyright holders are foreign or Chinese. But protection of intellectual property rights has been somewhat lax in China.
In 2005 the International Intellectual Property Alliance (IIPA) reported that more than 86 percent of the business software in use in China, 92 percent of entertainment software, 85 percent of all music, 93 percent of all movies, and 52 percent of all books were pirated. In surveying the U.S. copyright-based industries (software, publishing, music, and film) that it represents, the IIPA discovered that China was responsible for an estimated $2.6 billion in lost trade revenue in 2005.
Several high-profile companies have taken action against IPR infringement. One is Starbucks Corporation, which was successful in 2005 in getting two coffee shops to give up the name Xingbake, a Chinese phonetic approximation of Starbucks, with xing also meaning “star,” and to stop using a near duplicate of the famous green Starbucks logo.
Despite Starbucks success IPR infringement remains rampant in China, with everything from the most popular and noticeable brands to the most minute parts and components of everyday products being copied. The rapid rise of the Internet and the burgeoning numbers of Internet users has made piracy even easier and less costly for the infringer—though it should be added that this problem is not unique to China. U.S. interests would like to see China bring more cases of infringement of foreign-owned copyrights, patents, and trademarks to court. The IIPA noted that in 2005, of all the cases of IPR infringement prosecuted in China’s courts, only approximately 2 percent involved protecting foreign-owned intellectual property.
The United States uses three main methods to target IPR infringement: bilateral negotiations, the option (and sometimes threat) of a WTO dispute case, and a provision of the U.S. Trade Act of 1974 called Special 301.
The United States and China have two major mechanisms for addressing bilateral trade issues in general, and these mechanisms have been moderately useful for discussing issues related to IPR. The first is the U.S.-China Joint Commission on Commerce and Trade (JCCT), established in 1983, and the second is the U.S- China Strategic Economic Dialogue (SED), launched in 2005. The JCCT meets twice annually, once in Beijing and once in Washington, for discussions of market access, subsidies, IPR, and other trade issues. The SED has become a forum for high-level talks between officials, including cabinet-level officials from the United States and their equivalents among the Chinese leadership.
The United States uses JCCT talks to pressure Chinese leaders on the local level to crack down on IPR infringement in their jurisdictions. The JCCT has allowed China and the United States to discuss disagreements, solve trade-flow issues, and address pending regulations before they are implemented, thereby averting future problems. For example, officials from Washington and Beijing were able to reach an agreement on a proposed software law in China that would have limited foreign companies’ ability to get legitimate software into Chinese government offices. If the law had been enacted, not only would it have hurt foreign companies’ ability to do business in China but also would have undermined efforts to curb IPR infringement. Without easy access to legitimate software, government offices would most likely have turned to pirated software.
The SED talks have been used mainly as a catalyst to invigorate areas of bilateral negotiations by raising them to the senior levels of government. Because the SED involves senior-level officials, it can be used to increase the focus on getting results from other forums, such as the JCCT, and to make political commitments to support such things as IPR enforcement. In 2006 the SED talks allowed the United States and China to lay out commitments on IPR (for example, a province-by-province review of China’s IPR enforcement) that would be further discussed through the JCCT.
The United States has sought improvements in China’s IPR system primarily through bilateral dialogue instead of taking action through the WTO because bilateral dialogue generally produces faster results than a drawn-out WTO case does. Additionally, to date there has never been a WTO case against China on IPR, which means that bringing such a case involves navigating an uncharted area of WTO dispute settlement. Nevertheless, the U.S. industries most affected by IPR infringement have been outspoken in Washington about pushing for better IPR protection in China, and there has been a lot of talk about pursuing a WTO case against China on IPR.
In April 2005 the United States, Japan, and Switzerland did use Article 63.3 of the WTO Agreement on Trade-Related Aspects of Intellectual Property to request that China spell out the specific details of its IPR system. The biggest challenge in a WTO case is proving that China’s system is ineffective. As is the case wi
th most countries, China is obligated to protect only trademarks, copyrights, and patents registered in China. It is not required to enforce the intellectual property laws of any other country or to protect patents, trademarks, or copyrights that are registered in other countries but not in China. To prove that China is failing to meet WTO-mandated IPR commitments, companies need to try to prosecute cases in China’s courts. This means that they have to have registered their trademarks, patents, or copyrights in China. They then must file a suit there and see the suit through to some conclusion.
Because registering a copyright and then proving infringement is a tedious and oftentimes frustrating process, negotiators and trade officials feel that mounting and proving a WTO case could be difficult to do quickly, though U.S. officials have been amassing data and information so they will be prepared should they choose to pursue such a case. A WTO-dispute case would be difficult because the United States would have to show that U.S. companies went through the Chinese court system and that the system failed them in order to prove that China’s system does not provide the level of protection agreed to under the WTO. In the meantime, industry groups, including the IIPA, have asked their members to register their copyrights and to attempt to bring IPR cases to China’s courts so that the deficiencies of China’s systems will be evident when proof is needed.
The United States also uses Special 301, an annual review process provided for in the Trade Act of 1974, to identify countries that are especially egregious violators of IPR rules and standards. China has long been listed on the Priority Watch List, a designation that dictates extra attention and bilateral dialogue aimed at improving IPR enforcement. U.S. officials use the Priority Watch List designations to increase the amount of resources devoted to targeting IPR protection in a country. Additionally, if a country is on the Priority Watch List, it is subject to special investigation. The United States also uses the Special 301 designations as a trigger for increasing its negotiations with countries that have failed to meet their IPR commitments. In 2008 China was listed on the Priority Watch List, along with Russia, Argentina, Chile, India, Israel, Pakistan, Thailand, and Venezuela.
China’s Point of View
China’s history, specifically its efforts to establish its independence from foreign influence, has in part been attributed to its notoriety as a place for IPR infringement. As China tried to move beyond foreign allegiances and strengthen its standing, copying intellectual material, mainly books, that would aid in such growth was seen as morally defensible. Without any overall negative sense being attributed to copyright infringement, there was little impetus to curb such infringement.
Further, China established efforts to solidify its individual standing in the world by limiting the amount of foreign content allowed inside the country (such as a quota on foreign films) and boosting its own intellectual production. And since China has started to take a larger place in the global market and its own intellectual property has become attractive, especially in cinema, Chinese producers have started to see their own products subject to illegal infringement. IPR advocates see this development as key to reversing the trend of illicit reproduction of creative content in China.
Many government and trade-group officials in the United States believe that IPR infringement can be further curtailed by increasing enforcement, shutting down major piracy operations, and getting pirated products off the streets. A more effective enforcement system is critical to China’s economic development and trade relations with the United States, a fact that the Chinese leadership is sure to be aware of.
Office of the United States Trade Representative. (2008). USTR issues 2008 Special 301 report. Retrieved February 4, 2009, from http://www.ustr.gov/Document_Library/Press_Releases/2008/April/USTR_Issues_2008_Special_301_Report.html
Protecting IPR is to protect productivity: Premier Wen. (24 April 2006). People’s Daily. Retrieved December 2, 2008, from http://english.peopledaily.com.cn/200604/24/eng20060424_260749.html
Smith, E. (2006). Recommendations for China from the International Intellectual Property Alliance. Guanxi: The China Letter, 1(12).
Stiglitz, J. (2006). Making globalization work. New York: Norton.
Yu, Peter K. (2006). Causes of piracy and counterfeiting in China. Guanxi: The China Letter, 1(12).
Source: Eldridge, Scott II. (2009). Intellectual Property Rights. In Linsun Cheng, et al. (Eds.), Berkshire Encyclopedia of China, pp. 1168–1171. Great Barrington, MA: Berkshire Publishing.
Man illicitly photographing children’s book covers at the American Collective Stand at the Beijing International Book Fair in 2006. PHOTO BY KAREN CHRISTENSEN.
Intellectual Property Rights (Zh?shí ch?nquán ????)|Zh?shí ch?nquán ???? (Intellectual Property Rights)