U.S. vague on piracy policy

Officials mum despite rising corruption in China, Russia

WASHINGTON — Piracy levels in China and Russia might be beyond all control if the U.S. doesn’t take decisive action soon, according to testimony before a House subcommittee hearing.

But despite pledges from the Bush administration to address the problem, it remained unclear when — or even if — the White House would take a leading role.

Tuesday’s hearing of the House Subcommittee on Courts, the Internet and Intellectual Property, came in the wake of a recent report from the White House Office of the U.S. Trade Representative confirming China and Russia as havens for rampant copyright violation.

Neither country has much incentive to reverse the trend, according to witnesses. China’s economy is increasingly linked to pirated goods, corrupt Russian authorities protect pirates and organized crime is involved in both countries.

Rampant crime

A USTR official testified that in 2003, an estimated 90% of all software installed on computers and over 90% of sound recordings on the market in China were pirated. In Russia, the official added, prosecution delays and suspended sentences are common for those convicted of intellectual property rights violations.

The administration “places the highest priority on stemming the tide of IPR infringement,” said Victoria Espinel, assistant U.S. trade rep.

But when asked directly when the White House would take specific action, such as initiating a case against China in the World Trade Organization, Espinel would only say “within a reasonable time frame.”

The USTR, Espinel added, was still reviewing the situations in China and Russia and still consulting with the U.S. copyright industry on the best course of action.

China appears to represent the larger problem because of interrelated, complicating factors. “The copyright industry is in dire straits in China,” said Eric Smith, president of the Intl. Intellectual Property Alliance. Chinese authorities, he said, rely on “ineffective and uncoordinated IP enforcement efforts.”

Organized efforts

Smith also said, “There’s no question that Asian organized crime has a lock on piracy,” thus making it a “flight of fancy” to expect China to stop the illegal activity on its own.

Moreover, the country’s economy has incorporated piracy to the point that “every aspect of China’s industrialized future relies in some part on pirated goods,” testified Ted C. Fishman, author of the book “China, Inc.”

Fishman added that U.S. companies that import Chinese goods “that have been built on pirated platforms” — and U.S. consumer who buy the products — bear some responsibility for supporting piracy.

“All of Hollywood, Bollywood and even French, Italian and Russian cinema is available for a pittance in the streets of China,” Fishman said. “The IP problem is going to grow as China becomes richer and more global” because consumers everywhere will buy the cheaper pirated goods.

Russia has become a major manufacturer of pirated optical discs, witnesses said. As many as 18 illicit factories turn out 370 million pirated CDs and DVDs a year, Espinel said. The bribing of Russian authorities effectively minimizes the threat of punishment.

“Corruption is endemic at every level of enforcement,” testified Bonnie J.K. Richardson, senior VP of international policy for the Motion Picture Assn. of America.

Lack of enforcement

Russian prosecutors routinely dismiss piracy cases, said Matthew Gerson, senior VP for public policy and government relations for Universal Music Group.

To stem the problem, copyright industry witnesses said the U.S. government needs to take aggressive steps against both countries quickly.

Gerson suggested using Russia’s desire to enter the WTO as leverage to secure improvement in intellectual property law enforcement and protection.

Fishman suggested levying tariffs on Chinese goods imported in the U.S., which account for 14% of the Chinese economy.

Rep. Darrell Issa (R-Calif.) asked whether the administration’s efforts to secure China’s help in halting the North Korean nuclear program has been a factor in why the USTR has not yet pursued a WTO case against China.

“Relations with China are very complex,” Espinel replied. “And the size of the Chinese market makes it hard for the Chinese government to control.”