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April 9, 2007, Alert No. 1,562.
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US to Complain to WTO Regarding PR China's Failure to Protect IPR

4/9. The Office of the U.S. Trade Representative (OUSTR) announced that the US will initiate two related complaint proceedings before the World Trade Organization (WTO) regarding the People's Republic of China and intellectual property rights (IPR).

The two requests for consultations, to be filed with the WTO on Tuesday, April 10, will address China's failure to protect IPR in movies, music, books and other content, and China's access barriers for US content distributors.

That is, the gist of the two requests will be that not only does China not engage in adequate criminal enforcement, and not provide US content providers with adequate civil remedies, but that China also precludes US content providers from competing with their pirates.

Susan SchwabSusan Schwab, the USTR, argued in a statement [4 pages in PDF] that "The United States believes we have a strong case on IPR protection and a strong case on the market access problems facing our audiovisual and publications industries, and we will vigorously pursue our rights as a WTO Member."

Notably, these proceedings will not address all of China's failures to provide adequate IPR related protection. Moreover, not all copyright based industries whose works are pirated in China have backed (or opposed) this action by the OUSTR. The Business Software Alliance (BSA), for example, maintains its neutrality.

OUSTR Summary of its Requests. The OUSTR announced in a release on April 9 that the US "will make two requests tomorrow for World Trade Organization (WTO) dispute settlement consultations with the People’s Republic of China: one over deficiencies in China's legal regime for protecting and enforcing copyrights and trademarks on a wide range of products, and the other over China’s barriers to trade in books, music, videos and movies."

The OUSTR release summarizes the content of the first request, regarding deficiencies in IP laws. First, it states that the request "focuses on provisions of Chinese law that create a substantial ``safe harbor´´ for wholesalers and retailers who distribute or sell pirated and counterfeit products in China. China has established quantitative thresholds that must be met in order to start criminal prosecutions of copyright piracy and trademark counterfeiting." It states that pirates are "able to operate below high thresholds without fear of criminal liability. These thresholds appear to effectively permit large-scale piracy and counterfeiting."

Second, the release states that the first request "focuses on the rules for disposal of IPR infringing goods seized by Chinese customs authorities. Those rules appear to permit goods to be released into commerce following the removal of fake labels or other infringing features, when WTO rules dictate that these goods normally should be kept out of the marketplace altogether."

Third, it states that Chinese law apparently denies "copyright protection for works poised to enter the market but awaiting Chinese censorship approval." It adds that "Immediate availability of copyright protection is critical for new products entering a market, and it appears that copyright protection is available immediately to Chinese works."

Fourth, the OUSTR release states that Chinese criminal law "appears to provide that someone who reproduces a copyrighted work without the owner’s permission is not subject to criminal liability unless he also distributes the pirated work. Thus, persons who copy large quantities of copyrighted goods may face no possibility of criminal punishment." However, it also notes that a recent Chinese judicial interpretation "appears designed to address this problem".

All of this, the OUSTR asserts, violates WTO Agreement on Trade-Related Aspects of Intellectual Property Rights, which is also known as TRIPS.

The OUSTR then summarizes the second request for consultations, regarding market access. First, it states that this request "focuses on a Chinese legal structure that denies U.S. companies the right to import books, journals, movies, music, and videos, and instead requires all imports to be channeled through specially authorized state-approved or state-run companies."

Second, it states that there are "rules that severely impede the efficient and effective distribution of publications and home entertainment video products within China. These rules appear to prohibit some distribution activities outright, and in other areas, they seem to apply discriminatory rules to U.S. and other foreign companies involved in the activities that are allowed.  These barriers slow down the flow of genuine products within China".

See also, OUSTR release [PDF] regarding IPR protection, and OUSTR release [PDF] regarding market access.

Congressional Reaction. Sen. Max Baucus (D-MT), the Chairman of the Senate Finance Committee (SFC), stated in a release [PDF] that "Rampant and large-scale piracy and counterfeiting in China have persisted too long, and China is not penalizing pirates and counterfeiters. WTO action is overdue, and I commend Ambassador Schwab for taking it ... I know that China can do more to crack down on intellectual property violations, and it’s high time the U.S. did more to protect Americans hurt by these offenses. Vigorous enforcement of intellectual property rights is good for the United States, good for China's economy, and good for our bilateral economic relationship."

Sen. Charles Grassley (R-IA), the ranking Republican on the SFC, stated in a release [PDF] that "I'm glad to see this action. Intellectual property drives a big part of our economy. We need to defend U.S. companies against abuse and hold our trading partners to the commitments they made in joining the WTO. The ability to protect intellectual property is a hallmark of a mature economy and responsible trading partner."

Sen. Charles GrassleySen. Grassley (at right) added that "Litigation isn’t always the answer, but when informal negotiations don’t work, we need to stand up for ourselves. The WTO gives us a forum to assert our rights. The Administration is making good use of that forum. This is the latest in a number of cases the United States has brought to hold the Chinese accountable for trade-distorting policies. In each case, we filed a WTO complaint as a last resort after informal efforts at resolution failed. That's the way it should be. American businesses and consumers stand to lose if we overreact. But when China continues to refuse to play by the rules, then we need to take strong action, like we’re doing today."

The SFC and the House Ways and Means Committee held hearings in mid-February that covered this subject. See, story titled "Senate and House Hold Hearings on Trade, TPA and IP Theft in PRC" in TLJ Daily E-Mail Alert No. 1,538, February 15, 2007. See also, story titled "Schwab Discusses Doha Round and IPR Violations in PR China" in TLJ Daily E-Mail Alert No. 1,530, January 31, 2007.

The House is in recess for another week. The Senate formally returns from its April recess on April 10.

Industry Reaction. Dan Glickman, head of the Motion Picture Association of America (MPAA), stated in a release [PDF] that "This is a welcome and logical next step in efforts to spur progress in China ... Fair market access and respect for the intellectual property of other countries are basic conditions of membership in the global community which China committed to live by when it sought acceptance into the WTO. This action is fair, timely and appropriate."

The Association of American Publishers (AAP) stated in a release that "copyright piracy and trademark counterfeiting remain endemic" and that "China has failed to fulfill its commitments as a WTO member to liberalize restrictive importation and distribution practices that hobble the ability of foreign companies to do business in the Chinese market."

The China Copyright Alliance (CCA) issued a short release to "applaud" Schwab's announcement. The CCA is an umbrella group that was formed in late 2005 to work with the OUSTR on this issue. It members include the MPAA, AAP, Recording Industry Association of America (RIAA),  and other copyright groups. However, it does not include the BSA, or other groups that primarily represent software companies.

Robert Holleyman, head of the BSA, stated in a release that the "BSA continues to believe that a constructive dialogue between the U.S. and China is the best way to address the broad range of issues that affect both countries and their economies. We look forward to continued productive dialogue in the future."

He also wrote that "We have long been in favor of legal reforms in China that would make it easier to take criminal action against piracy on a commercial scale."

He also noted that China has improved its protection of software. He explained that "It is important to note that there have been recent improvements in IPR protections in China. For example, the software piracy rate in China has decreased significantly over the last three years. BSA and its members were encouraged by the software legalization measures announced by the Chinese government after U.S.-China trade talks a year ago, which included China’s commitment to complete and implement a plan for ensuring legal software use by enterprises by the end of 2006. The Chinese government also issued decrees requiring computer makers to pre-install legally licensed operating system software on all computers sold in China, and separately, required all Chinese government agencies to procure computers with legally licensed operating system software pre-installed."

WTO Procedure. The OUSTR has announced that on April 10 it will take the first step in the WTO complaint process -- the filing of requests for consultations. It clarified that there will be two separate requests.

China, as a member of the WTO, must respond to these requests within sixty days. TLJ spoke with James Bacchus of the Washington DC office of the law firm of Greenberg Traurig. He is legal counsel to the CCA. He stated that most requests are resolved at this stage.

See also, the WTO's introductory web page titled "Understanding the WTO", and especially  web page titled "Settling Disputes: a Unique Contribution" and web page titled "Settling Disputes: the Panel Process".

However, if both requests do not result in resolution, then the next step for the US is to file with the WTO requests for the establishment of panels. This, said Bacchus, is the "WTO equivalent of the filing of a legal complaint".

China can delay proceedings for another 30 days. Then, the WTO would form two separate ad hoc panels, which process can take one to two months. These panels take around 11 months to complete their work and issue a report.

The next step, if the underlying disputes are still not resolved by the parties, would be appeals to the standing WTO appellate body. The appellate body rules within 90 days. Finally, there is acceptance of the appellate body's decision by the Dispute Resolution Body.

Ultimately, the WTO has no enforcement authority. However, if a party is found to be in violation of its WTO obligations, and does not then come in to compliance, then the WTO may authorize the aggrieved WTO member to impose trade sanctions.

Washington Tech Calendar
New items are highlighted in red.
Monday, April 9

The House will not meet on April 2-6 or 9-13. See, House 2007 calendar. The next meeting will be at 2:00 PM on April 16.

The Senate will not meet on April 2-6 or 9. See, Senate 2007 calendar. The next meeting will be at 10:00 AM on April 10. It will then begin consideration of S 5, the "Stem Cell Research Enhancement Act of 2007", and S 30, the "Hope Offered through Principled and Ethical Stem Cell Research Act" or "HOPE Act".

Deadline to submit affidavits to the Copyright Office (CO) to assist it in compiling a new specialty station list "to identify commercial television broadcast stations which, according to their owners, qualify as specialty stations for purposes of the former distant signal carriage rules" of the Federal Communications Commission (FCC). This list is relevant to the cable compulsory license, which is codified at 17 U.S.C. § 111. The CO requests that "all interested owners of television broadcast stations that qualify as specialty stations, including those that previously filed affidavits, to submit sworn affidavits to the Copyright Office stating that the programming of their stations meets the requirements specified under the FCC regulations in effect on June 24, 1981." See, notice in the Federal Register, February 8, 2007, Vol. 72, No. 26, at Pages 6008-6010.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding AT&T's petition for forbearance from enforcement of certain FCC cost assignment rules. See, Public Notice [3 pages in PDF] (DA 07-731). This proceeding is WC Docket No. 07-21.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding the license transfer application filed by News Corporation, Directv Group, Inc., and Liberty Media Corporation. News Corps seeks to divest its interest in Directv, and Liberty Media seeks to divest its interest in News Corp. See, FCC Public Notice [PDF]. This is DA 07-637 in MB Docket No. 07-18.

Tuesday, April 10

The Senate will return from recess. It will meet at 10:00 AM for morning business. It will then begin consideration of S 5, the "Stem Cell Research Enhancement Act of 2007", and S 30, the "Hope Offered through Principled and Ethical Stem Cell Research Act" or "HOPE Act".

9:30 AM. The U.S. Patent and Trademark Office (USPTO), National Inventors Hall of Fame Foundation, and The Advertising Council will hold a news conference to announce a "national public service advertising (PSA) campaign designed to engage a new generation of children to make innovation, invention and technological development an integral part of their lives". See, USPTO notice. Location: Zenger Room, National Press Club, 529 14th Street NW.

10:00 AM. The Senate Commerce Committee will hold an oversight hearing on the Federal Trade Commission (FTC). The witnesses will be the five Commissioners of the FCC, Deborah Majoras, Pamela Harbour, Jonathan Leibowitz, William Kovacic, and Thomas Rosch. See, notice. Location: Room 253, Russell Building.

1:30 - 4:30 PM. The Department of Homeland Security's (DHS) National Infrastructure Advisory Council (NIAC) will hold a meeting. The agenda includes "The Insider Threat to Critical Infrastructure Control Systems". The speakers include Thomas Noonan (General Manager, IBM Internet Security Systems). See, notice in the Federal Register, March 16, 2007, Vol. 72, No. 51, Pages 12625-12626. Location: National Press Club, 529 14th St., NW.

2:30 PM. The Senate Commerce Committee will hold an hearing titled "Voice over Internet Protocol (VoIP) and the Future of 9-1-1 Services". See, notice. Location: Room 253, Russell Building.

4:00 - 6:00 PM. The DC Chapter of the Copyright Society of the USA will host a panel discussion titled "User Generated Content: The Copyright Conundrum". The speakers will be Sarah Deutsche (Verizon), Alec French (NBC Universal), Peter Jaszi (American University law school), Mike Remington (Drinker Biddle & Reath), Steve Tapia (Microsoft), Fred von Lohmann (Electronic Frontier Foundation). Rob Kasunic (American Univ. and Copyright Office) will moderate. Location: American University Washington College of Law, 4801 Massachusetts Ave., NW.

6:00 PM. The Federal Communications Bar Association (FCBA) will host a dinner. The speaker will be FCC Chairman Kevin Martin. The reception begins at 6:00 PM. Dinner is at 7:30 PM. Prices range from $100 to $275. See, registration form [PDF]. Location: Hilton Hotel, 1919 Connecticut Ave., NW.

Wednesday, April 11

Day one of a two day meeting of the Department of Labor's Bureau of Labor Statistics' (BLS) Business Research Advisory Council. The agenda for the 1:00 PM session includes "Internet data collection". See, notice in the Federal Register, March 27, 2007, Vol. 72, No. 58, at Pages 14299-14300. Location: Conference Center of the Postal Square Building, 2 Massachusetts Ave., NE.

10:00 AM. The Senate Judiciary Committee (SJC) will hold a hearing titled "Judicial Nominations". Sen. Charles Schumer (D-NY) will preside. See, notice. Location: Room 226, Dirksen Building.

12:00 NOON - 3:00 PM. The Federal Communications Bar Association (FCBA) and the Stanford Institute for Economic Policy Research (SIEPR) will host a continuing legal education (CLE) seminar titled "Economic Analysis and FCC Decision-making". See, registration form [PDF]. Prices vary. This is a brown bag lunch. The deadline to register is 5:00 PM on April 6. Location: Hogan & Hartson, 13th floor, 555 13th St., NW.

12:00 NOON - 2:00 PM. The DC Bar Association's Intellectual Property Law Section will host a panel discussion titled "The Patent Office Speaks". The speakers will be John Doll (Commissioner of Patents, USPTO), Peggy Focarino (Deputy Commissioner for Patent Operations, USPTO), John Love (Deputy Commissioner for Patent Examination Policy, USPTO), and Maureen Browne (moderator, Heller Ehrman). See, notice. The price to attend ranges from $15-$35. For more information, call 202-626-4363. Location: Jurys Washington Hotel, 1500 New Hampshire Ave., NW.

2:00 PM. The Heritage Foundation will host a panel discussion titled "The South Korea - U.S. (KORUS) Free Trade Agreement Context and Prospects". The speakers will include Wendy Cutler, Assistant U.S. Trade Representative and chief negotiator of the KORUS FTA. See, notice. Location: Heritage, 214 Massachusetts Ave., NE.

2:30 PM. The Senate Judiciary Committee's (SJC) Subcommittee on the Constitution will hold a hearing titled "Responding to The Inspector General's Findings of Improper Use of National Security Letters by the FBI". Sen. Russ Feingold (D-WI) will preside. See, notice. Location: Room 226, Dirksen Building.

Deadline to submit requests to the Department of Commerce's (DOC) Bureau of Industry and Security (BIS) to make presentations at the May 2, 2007 meeting of the BIS's Deemed Export Advisory Committee (DEAC) in Atlanta, Georgia. See, notice in the Federal Register: March 7, 2007, Vol. 72, No. 44, at Page 10141.

Thursday, April 12

10:00 AM. The Senate Judiciary Committee (SJC) may hold an executive business meeting. The agenda includes consideration of S 236, the "Federal Agency Data Mining Reporting Act of 2007" and HR 740, the "Preventing Harassment through Outbound Number Enforcement (PHONE) Act of 2007". The agenda also includes consideration of several judicial nominees: Frederick Kapala (to be a Judge of the U.S. District Court for the Northern District of Illinois), Halil Suleyman Ozerden (U.S.D.C. Southern District of Mississippi), and Benjamin Hale Settle (U.S.D.C. Western District of Washington). The SJC rarely follows its published agenda. See, notice. Location: Room 226, Dirksen Building.

12:00 NOON - 2:00 PM. The DC Bar Association will host a panel discussion titled "Developments in Trade Remedy Proceedings and Legislation with China". The speakers will be Robert Heilferty (Office of Chief Counsel for Import Administration, Department of Commerce), Stephen Kho (Akin Gump), Jayme Roth, Marguerite Trossevin (Mayer Brown), and Eileen Bradner (moderator, Wiley Rein). See, notice. The price to attend ranges from $5-$25. For more information, call 202-626-4363. Location: Alston & Bird, 950 F St., NW.

Deadline to submit reply comments to the Federal Communications Commission (FCC) regarding the Missoula intercarrier compensation reform plan federal benchmark mechanism proposal. This proceeding is CC Docket No. 01-92. See, notice in the Federal Register, March 26, 2007, Vol. 72, No. 57, at Pages 14060-14061.

Monday, April 16

The House will return from recess at 2:00 PM.

Deadline to submit comments to the U.S. Patent and Trademark Office (USPTO) in response to its notice of proposed rulemaking regarding amending 37 CFR 2.64 to require a request for reconsideration of an examining attorney's final refusal or requirement to be filed through the Trademark Electronic Application System (TEAS) within three months of the mailing date of the final action. See, notice in the Federal Register, February 14, 2007, Vol. 72, No. 30, at Pages 6984-6986.

Outside of Washington DC

Tuesday, April 10. 12:15 PM. The Federal Communications Bar Association's (FCBA) Midwest Chapter and the Chicago Bar Association will host an event titled "The Cable and Video Competition Law of 2007 ("HB1500")". The speakers will be John Lenahan (AT&T, Assistant General Counsel, State Regulatory Practice Group) and Michael Ward (consultant to the Cable Television and Communications Association of Illinois). RSVP to Rob Neumann at rneumann at global-com dot com. Location: Chicago Bar Association, 321 South Plymouth Court, Chicago, Illinois.

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