WTO Appellate Body Affirms in Movie and Music Case

December 21, 2009. The Appellate Body of the World Trade Organization (WTO) issued its report [195 pages in PDF], upholding the findings and conclusions of the Dispute Settlement Panel's report in the WTO's proceeding titled "China -- Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products".

This affirms the panel's conclusions that the PRC's access barriers for US content distributors violate its WTO commitments. The US had also complained about deficiencies in the PRC's legal regime for protecting and enforcing copyrights and trademarks. However, the panel did not rule in favor of the US on that issue. Also, the US complaint could have, but did not, encompass any PRC violations of its WTO obligations that harm US software makers.

Japan, Taiwan, Korea, the European Communities, and Australia also joined in this proceeding.

This Appellate Body affirmance is a victory for the movie and music industries.

Ron Kirk, the head of the Office of the U.S. Trade Representative (OUSTR), stated in a release that "Today America got a big win. We are very pleased that the WTO has found against China's import and distribution restrictions on U.S. movies, music, DVDs and publications".

Kirk (at right) continued that "The Appellate Body's findings are key to ensuring full market access in China for legitimate, high-quality entertainment products and the exporters and distributors of those products. U.S. companies and workers are at the cutting edge of these industries, and they deserve a full chance to compete under agreed WTO rules. We expect China to respond promptly to these findings and bring its measures into compliance."

"This case is also an important part of our efforts to combat intellectual property piracy", said Kirk. "The panel and Appellate Body findings ensure that legitimate American products are granted market access so that they can get to market and beat out the pirates."

The US filed its complaint (nominally a request for consultations) with the WTO on April 10, 2007. See, story titled "US to Complain to WTO Regarding PR China's Failure to Protect IPR" in TLJ Daily E-Mail Alert No. 1,562, April 9, 2007.

The US requested the establishment of a Dispute Settlement Panel (DSP) on August 13, 2007. See, story titled "US Requests WTO Dispute Settlement Panel Re PRC Failure to Protect IPR" in TLJ Daily E-Mail Alert No. 1,623, August 15, 2007.

A WTO panel issued its report [147 pages in PDF] on January 26, 2009, with findings and conclusions in favor of the U.S. See, story titled "WTO Panel Rules in PRC IPR Case" in TLJ Daily E-Mail Alert No. 1,889, February 2, 2009.

The PRC appealed. And now, it has lost.

The WTO has no authority to enforce this decision. The Appellate Body report merely advises the PRC to come into compliance with its WTO obligations. However, if the PRC does not come into compliance, then the WTO may authorize the US and other aggrieved WTO members to impose trade sanctions.

Neil Turkowitz of the Recording Industry Association of America (RIAA) stated in a release that "We greet today's important and unequivocal decision upholding the earlier Panel Report on the incompatibility of certain Chinese measures with great optimism. China maintains a variety of restrictions on the ability of U.S. record companies to do business in China, thereby undermining the potential for growth in the world's most populous country. Today's decision is a reminder of the importance of international trade rules that govern the behavior of states, and which generally ban overtly discriminatory measures. Ultimately, liberalization of China's market will serve the interests of U.S. and Chinese creators alike by providing a more robust and competitive infrastructure for the distribution of creative materials."

Dan Glickman, head of the Motion Picture Association of America (MPAA), stated in a release that "With today's rejection of China’s appeal, the WTO has taken a major step forward in leveling the playing field for America’s creative industries seeking to do business in China."

Glickman added that "This ruling will complement our strategy to fight movie piracy in China. In spite of all the restrictions we face, there is no shortage of U.S. filmed entertainment in China. Unfortunately, far too much of it is pirated. This ruling represents a positive step in promoting the growth of legitimate U.S. movies in a market that is growing rapidly, and with great potential."