Piracy Panel

In the next six to 12 months, China may have to nervously wait for a ruling by the World Trade Organization (WTO) on whether the nation is weak in protecting intellectual property rights (IPRs).

The United States has asked the world trade body to set up a panel to settle a dispute with China, which is the first of its kind in over IPR protection. In another case, still under negotiation, the US filed for protection of its books, music, videos and movies.

Sean Spicer, spokesman for the US Trade Representative, says China has taken tangible steps to improve IPR protection and enforcement in recent years, but the US still sees "important gaps that need to be addressed".

Under WTO rules, its Dispute Settlement Body will consider the US request at its next meeting on August 31.

Washington filed the two complaints with the WTO in April, claiming that China was not doing enough to punish illegal copiers of films and music and that its restrictions on entertainment imports violate trade rules.

Senior Chinese officials denounced the US move, warning that the complaints would damage bilateral trade ties.

Chinese Vice-Premier Wu Yi, who heads the national working group for IPR protection, the highest organization specializing in the issue, said the US Trade Representative ignored the strides China has made.

The US action "flies in the face of the agreement between the two countries' leaders to propose dialog as a way of settling disputes", she said.

Acknowledging the importance of IPR protection for investors and its own development, China has made increasingly strenuous efforts to fight product piracy and encourage innovation.

After joining the WTO, the country modified its IPR laws and regulations to ensure consistency in its legislation to meet WTO rules.

The number of invention patent applications in China ranked fourth in the world last year. It increased by 28.4 percent on average between 2000 and 2006.

"IPR protection is a natural option for building an innovative country. It also serves China's goal for overall development. So the Chinese government will continue its efforts to protect IPRs and combat copyright piracy no matter what decisions the US makes," says Tian Lipu, commissioner of the State Intellectual Property Office.

Officials also admitted China lacks an effective enforcement taskforce to supervise and tackle IPR violations. As well, general public has limited knowledge of how to help combat piracy.

The increase in made-in-China counterfeit products found around the world in recent years is partly due to ignorance in domestic firms and activities of overseas criminal gangs, Tian notes.

"Lacking awareness of intellectual property (IP) protection, many Chinese enterprises produce strictly according to the orders they receive from overseas," he says. "Some foreign criminal groups take advantage of this weakness and export to overseas markets."

Tian explained some Chinese manufacturers focus mainly on increasing quality and reducing costs to sharpen their competitive edge in the international market - but seldom care about what label is attached to the products they make or whether technology is protected by IP laws.

Instead of blaming China, there should be international collaboration to crack down on IPR piracy of this kind, he says.

A dispute over China's tax on semiconductors at the WTO, the first between China and the US, ended through consultations.

In the ongoing IPR disputes, the US can apply to suspend the arbitration after a panel is established.