Appellate Body Report in Sino-American Dispute about Market Access for Copyrighted Products

Yesterday, it was announced that the Report of the Appellate Body in China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products, WT/DS363/AB/R was published. The three Members of the Appellate Body who served on this appeal were:

Ms. Jennifer Hillman, as Presiding Member, Mr. Shotaro Oshima and Mr. Ricardo Ramírez-Hernández.

You can download the 183 pg report here (see on your right hand side 'All documents').
I have not read the whole thing yet, but according to the Financial Times the report has the following conclusion:

• The Appeals Body upheld the Dispute Panel Body ruling that restrictions on imports of US films and music are not allowed under WTO;
• US and other foreign companies should be allowed to import films, music and books into China, rather than through state-owned entities;
• US and other foreign companies should be permitted joint ventures with Chinese companies to dirstribute music over the internet;
• The right to censor foreign films and publications is not challenged, nor the Chinese quota 20 foreign movies a year.

The relation between market access and copyright infringement is simply that market access restrictions for copyrighted products will create demand for copyright piracy.

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Murdoch, Procrustus and the WTO Copyright Cases

October 12, Sky Canaves of the Wall Street Journal has an article about Rupert Murdoch who is urging China to enforce copyright piracy and open up its market for copyrighted products. See here (or on page 8 of the printed WSJ). Mr Murdoch used the World Media Summit in Beijing to tell the Chinese leadership present that these two points are crucial if China wants to achieve their ambition to develop a global media industry.

Mr Murdoch's advice is similar to the two claims the US made against China at the WTO dispute settlement body: DS 362 (China - Measures affecting the protection and enforcement of intellectual property rights) and DS 363 (Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment products), based on the minimum enforcement levels of the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPs) an integral part of the Agreement Establishing the World Trade Agreement (WTO Agreement).

Thinking about TRIPs, and the divergent views it provokes, IP Dragon was reminded about the story of Procrustus. Procrustus was a "hospitable" man who invited guests to his home. There was one problem. If the bed was too big for the guest, Procrustus simply stretched the guest by brute force. And if the bed was too small for the guest, Procrustus would amputate the parts that could not fit in the bed. And because Procrustus had in fact two beds, no guest was ever fitting for both beds. If you are in an imaginative mood, you can see the Greek myth as a metaphor for China that was invited over to do trade under the WTO system, of which TRIPs is an integral part. Some argue that TRIPs is too demanding and that countries such as China are stretched to the limit, while some argue that TRIPs' ambition level is just too low and that more needs to be done like cutting off IPR infringing activities in China. And the two beds can be seen as a double standard in historic perspective: when the developed countries were developing, for example when the US broke free from Brittain, they were infringing IPR as well, and now that they are a developed country to expect developing countries to protect and enforce the same minium standards of IPR rights. Even though TRIPs has built in some flexibilities, it is considered by some as a straight jacket, a "one size fits all", "take it of leave it" treaty.

Picture is taken by exo_sh

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China Appeals WTO DS 363 About Market Access of Copyrighted Goods

China is appealing the panel decision DS 363 (Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment products) by the Dispute Settlement Body, in which many of the US allegations were uphold. According to the BBC, no documents with the grounds for the appeal have been released, yet.

How does a DSU (Dispute Settlement Understanding) appeal work?

• "A standing Appellate Body shall be established by the DSB. The Appellate Body shall hear appeals from panel cases. It shall be composed of seven persons, three of whom shall serve on any one case.": article 17 (1) DSU;
• "As a general rule, the proceedings shall not exceed 60 days from the date a party to the dispute formally notifies its decision to appeal to the date the Appellate Body circulates its report. In fixing its timetable the Appellate Body shall take into account the provisions of paragraph 9 of Article 4, if relevant. When the Appellate Body considers that it cannot provide its report within 60 days, it shall inform the DSB in writing of the reasons for the delay together with an estimate of the period within which it will submit its report. In no case shall the proceedings exceed 90 days." article 17 (5) DSU;
• "An appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel." : article 17 (6) DSU;
• "An Appellate Body report shall be adopted by the DSB and unconditionally accepted by the parties to the dispute unless the DSB decides by consensus not to adopt the Appellate Body report within 30 days following its circulation to the Members." : article 17 (14) DSU.

This case, DS 362, can be read in connection with DS 363. Restrictions of market access of copyrighted goods can be conducive to a copyright piracy rich climate.
Read Deng Shasha's article for Xinhua here.

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Creemers' Summary Of And Comments On DS363

Rogier Creemers of the University of Maastricht summarised 491 pages of the panel report on DS363: China - Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Product, and gave some comments, see here.

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WTO Report of the Panel DS363

Intellectual property enforcement and market access are interrelated. About the first part we have seen the report DS362, and August 12th 2009, WTO's panel issued a report about the latter: DS363: China - Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Product.

See here all 491-pages of the report. Must be studied. If you want to fast forward to the conclusions and recommendations by the panel, see here.

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Effect of DS362 on Copyright Piracy in China Nil?

Rogier Creemers of the University of Maastricht, Faculty of Law, has written an interesting article that will be published in the forthcoming number of European Intellectual Property Review:

'The Effects of WTO Case DS362 on Audiovisual Media Piracy in China'.

"The outcome of the recent WTO case China - Intellectual Property Rights, mainly concerned with copyright matters, was touted by both the U.S. and China as a victory. Looking beyond the rhetoric, however, shows that the effect of this case on copyright piracy in the real world is limited. The article outlines the case and analyzes its effects. Furthermore, it widens the scope of analysis, to include other factors influencing IP infringements in China, which are crucial in creating and supporting copyright piracy."

You can download the 22-page article from the SSRN site here.

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Who Won The IPR Dispute At The WTO Between China and the US?

Remember April 10, 2007, when the US brought claims against China at the World Trade Organisation (WTO) for allegedly violating the TRIPs Agreement because of unsufficient IPR enforcement (DS 362) and lack of market access (DS 363)? Read here.

Mr Jonathan Lynn reports about DS 362 for Reuters that sources at the WTO have said that China won the dispute on two counts against one brought against it by the US for its allegedly ineffective enforcement of intellectual property rights.

The interim ruling by the WTO Dispute Pannel about the US claims was as follows:

• China has not done enough to tackle counterfeiting and piracy on a commercial scale, was acknowledged by the WTO Dispute Panel;
• China's criminal code does not protect IP sufficiently, was rejected by the WTO Dispute Panel;
• Chinese customs rules allow goods that infringe IP rights to be sold rather than destroyed, the WTO Dispute Panel found on some points that the TRIPs Agreement did not apply, and on other points that the US had not established that the Chinese rules infringed the TRIPs Agreement, so it rejected this claim as well.

Read Mr Lynn's article here.

However, Reuters also reports about an anonymous US official that said exactly the opposite, read here.

So who is right? At this moment the report remains confidential. You can, however, predict who is going to win by reading the following:

Paper Tiger or Roaring Dragon, China's TRIPs Implementations and Enforcement.

The final ruling is expected in November. To be continued ...

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Update WTO IPR and Market Access Case Against China, And What Has Antigua To Do With It?

On April 10 the US requested consultations for two, interrelated, WTO cases:

DS362 China - Measures affecting the protection and enforcement of intellectual property rights

DS363 China - Measures affecting trading rights and distribution services for certain publications and audiovisual entertainment products

These cases are interrelated, because market access is a contributory factor to intellectual property infringement. The salient example is the limited number of movies that are annually allowed into the Chinese market. The number of foreign movies that can be shown in Chinese cinemas is limited to 20 movies per year. One can argue that this stimulated pirated DVDs to the point that only 7 per cent of the DVDs on the market are legitimate. Reuters, 'Market access key to piracy fight', The Age, December 8, 2006, available here.

What happened so far with the respective cases?

DS 362: The following countries joined the consultations: Japan (April 20, 2007), Canada and the European Communities (April 25, 2007), Mexico (April 26, 2007). Subsequently, China informed the DSB that it had accepted the requests of Canada, the European Communities, Japan and Mexico to join the consultations. October 7, 2007, Australian trade minister Warren Truss announced that Australia is going to participate as a third country in the dispute.

"Participation as a third party does not mean we are taking sides in the case," Mr Truss said. "It does, however, allow us to register our views on the legal issues raised in the dispute." Read more here.

September 25, the WTO decided to establish a panel to investigate the claim by the US that China enforces its IP insufficiently. The US and China had twenty days to agree on the panelists. This means that the parties should have agreed yesterday, read more here.

DS363: October 11, 2007, the US Trade Representative has requested the WTO to establish a dispute settlement panel. The US panel request will be considered by the Dispute Resolution Body at its next meeting which will be held October 22, 20007. Read more here.

DS 285 A seemingly unrelated case is the WTO case by Antigua and Barbuda case against the US, because of America's prohibition to offer cross-border gambling and betting services to US citizens (DS285). Seemingly, because Mr Hartley Henderson of Majorwager.com writes:

"In fact many countries are closely monitoring this case to see if the United States is really committed to the WTO and is willing to abide by its rules. In particular, countries like China and a few in Africa are very interested in the outcome of this case given the pressure being exerted on them by the USTR to open up more of its industries. If the USTRs show that they consider the WTO to be a one-way street in favor of themselves, then naturally those industries will stay closed to American interests. The following few months will speak volumes about how serious the U.S. is in the WTO process. " Read Mr Henderson's article here.

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