Complaining about Taobao's IPR Complaint System and a MOU

When the International Intellectual Property Alliance (IIPA) testified for the USCC Hearing on “China’s Intellectual Property Rights and Indigenous Innovation Policy,” April 25, 2011, it focused on the software and recorded music industry. However, they also wrote a letter about the overall IP record in China, see here.

"Sites such as Alibaba.com, Aliexpress.com, GlobalSources.com, Made-in-China.com, DHgate.com, Taobao.com, and Tradetang.com are among the top online marketplaces selling videogame circumvention devices, as well as being cited by industry as offering other copyright infringing products to consumers and businesses, including scanned copies of commercial bestsellers (trade books) and academic textbooks. Unfortunately, most of these sites are unresponsive to rights holder takedown requests."

Alibaba was the only one "commended for their cooperation with videogame right holders in the removal of infringing items".

Seems that Taobao is open to suggestions that can improve the prevention and cessation of trade of IPR infringing goods.

In Hanzhou, Zhejiang province, the internet task force of the Quality Business Protection Committee (QBPC), "the China association of enterprises with foreign investment", had a roundtable meeting with Taobao. Topic of discussion was the less than perfect Taobao IPR complaint system, read here.

Online shopping site Taobao.com signed a memorandum of understanding (MOU) with the International Publishers Copyright Protection Coalition in Beijing, see here a very brief report by the China Daily.

The golden rule expressed by Scottish sinologist James Legge, advertised at a bus stop,
sponsored by the Shenzhen Universiade 2011
photo: Danny Friedmann

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What is so special about Special 301 vis-à-vis China? Part IV

Previous parts can be seen here: Part I, Part II, Part III.

What was said during the Special 301 hearing about Intellectual Property in China?

So who were the four witnesses that spoke about IPR in China?

Ambassador Shaun Donnelly (Senior Director for International Business Policy of the National Organization of Manufacturers) proposed to use both a carrot and a stick. Carrot: the U.S. is already involved in capacity building, training, exchange and industry has been involved a s trade partner. "We have to convince the Chinese to deliver results. To make them clear that we hold them in IPR to a much higher standard." Stick: "If they don't that it has concrete consequences." He urged the USTR to start an Out-of-Cycle review, which involves a systematic evaluation of China's entire IPR enforcement regime, supported by submissions from U.S. manufacturers and businesses to document IPR infringement to the extent possible. This way a strategy could be devised, and a decision be made about benchmarks and on the implications of failure to deliver on the set benchmarks.

Eric Smith (International Intellectual Property Alliance (IIPA) pointed out that although physical copyright piracy remains a problem, for most industries, the internet has taken over as the means to distribute content, including pirated content. China, with its 750 million mobile device users and where 3G broadband has just been introduced, poses a huge problem. For the IIPA criminal action against piracy is the holy grail: "We should ask our trading partners too, first, undertake more criminal actions against piracy of software in the corporate environment, against growing online and mobile device piracy of music, motion pictures, software, video games and books and journals, against continuing piracy of optical disk products and the unauthorized printing and commercial photocopying of books and journals and against the manufacturing and trafficking and circumvention devices."

Mr Smith's wish list continues:

• Enough enforcement resources and training commensurate to the problem;
• To remove onerous and unnecessary procedural barriers to the judiciary acting in civil and criminal cases;
• Impose deterrent penalties in criminal cases and adequate and deterrent damages and remedies in civil cases;
• U.S. government should ask its trading partners to encourage cooperation of ISPs with all content owners so that workable and fair notice and takedown systems and a graduated response mechanisms (3-strikes) to deal with repeat infringers online can be implemented;
• Government agencies, contractors and educational institutions should be urged to use only legal software and legal copies of textbooks and it should be ensured that their networks and computers are not used for infringement of any copyrighted content;
• That laws against camcording motion pictures are enacted and enforced.

Michael Mellis (Senior Vice President and General Counsel of MLB (Major League Baseball) Advanced Media L.B.) testified that his company was affected by an emerging type of telecast IP infringement: unauthorised streaming over the internet of live television programming of all types including live sports telecasts and related programming. The number of sites and services involved in this phenomenon is significant (on an annual bases tens of thousands of hours of live television programming from networks around the world are being pirated) and has grown rapidly. "Many are open doors permitting any type of television programming to be streamed live persistently and globally without authorization from copyright owners." This can be accomplished through the use of this $70 device and some software. "In our rights enforcement efforts through the past several years, during which we have identified and logged thousands of piracy incidents, the dominant pattern we have seen is piracy occurring through a streaming over peer-to-peer services based in China." According to Mr Mellis approximately 75 percent of the pirated retransmissions of the telecast have occurred through offshore sites and services and approximately 50 percent of the total through Chinese sites and services."

Streaming video via the internet presents new challenges to copyright law:

Mr Mellis: "Our domestic copyright law is clear that this is copyright infringement. However, litigation in the United States is a remedial tool available to U.S. exporters of television programming only in limited circumstances."

Mr Mellis pointed out two relevant reports about this matter:

- U.S. House of Representative, Committee of the Judiciary, 'Hearing on Piracy of Live Sport Broadcasting Over the Internet', December 16, 2009.

- OECD, 'Piracy of Digital Content', 2009.

Major League of Baseball works together with the Coalition Against Online Video Piracy(CAOVP) which has had informal discussions with Chinese government agencies.

In reply to a question Mr Mellis makes clear that he cannot quantify the damages of the telecast infringements, because of "the recency of the problem" and the unknown parts such as the size of the audience size is, who was involved beyond what we can find out through our own limited means of figuring that out, patterns of piracy. Mellis sends routinely cease and desist letters and notices to infringers abroad, in particular China. To no avail, with one exception.

Mike Palmedo (Assistent Director of the American University Washington College of Law Program on Information Justice and Intellectual Property (PIJIP) criticized the Pharmaceuticals and Research Manufacturers of America (PhRMA) for criticizing China's government about Active Pharmaceutical Ingredients (API), that the enforcement of health regulations for API, noting that chemical manufacturers may sell and ship API products to locations within China and abroad with either no regard for the intended use of the API or choosing not to comply with existing regulations. However, the enforcement of Chinese regulation of APIs is, according to Mr Palmedo, outside the scope of the Special 301 report, since it doesn't address the adequacy or effectiveness of intellectual property rights and PhRMA doesn't suggest that these Chinese health regulations deny fair and equitable market access to United States persons that

rely upon intellectual property protection. Mr Palmedo has a point. However, his conclusion "So if this complaint is included in the Special 301 report, it will be nothing more than an attempt to intimidate Chinese companies which many developing country producers rely on to produce affordable generics." is based on an assumption which is not necessarily true. The reason for it is that counterfeit pharmaceuticals that originate in China have proved lethal. In the report it says: "(..) in China, domestic chemical manufacturers that produce APIs can avoid regulatory oversight by not declaring that the bulk chemical is intended for use in pharmaceutical products. This contributes to China being a major source country for APIs used in counterfeit pharmaceutical products."

Text/Picture: Danny Friedmann

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What is so special about Special 301 vis-à-vis China?

Each year, since 2005, IP Dragon dealt with the annual Special 301 reports, as a ritual dance in April which had to be described concisely and quickly. Not this year. The ferociousness of the tone by some (see below Messrs. Masnick and Basheer) against the perceived lack of legitimacy, methodology and flawed content of the report combined with the important subject matter made me take a closer look.

First the legitimisation of the Special 301 procedure and its report is explored; then the content of the report about the adequacy and effectiveness of intellectual property in China (this is IP Dragon, after all) is investigated (see Part II), then some of the criticism will be debunked (see Part , and some comments on a comment on Mr Masnick's article will be made. After that the testimonies of messrs. Donnelly, Smith, Mellis and Palmedo regarding IPR in China during the hearing will be looked into.

Legitimisation: "You are not strange, you are eh... special"

The Office of the United States Trade Representative (USTR) put China also this year on the so called 'Priority Watch List' and is again subject to 'Section 306 monitoring' ("the USTR may apply sanctions if a country fails to satisfactorily implement an agreement", however these sanctions are restricted to bringing a case to the WTO, see 'Statutory language versus undertakings that remove inconsistency' below). The USTR published its annual report in which it reviews the adequacy and effectiveness of the protection of intellectual property rights in and market access to U.S. persons that rely upon the protection of intellectual property rights.

The Special 301 procedure is pursuant to Section 182 of the Trade Act of 1974, as amended by the Omnibus Trade and Competitiveness Act of 1988 and the Uruguay Round Agreements Act (enacted in 1994). It was controversial for some time, because many countries thought that it gave the USTR the right in case of a perceived denial of adequate and effective protection of IPRs or market access to retaliate unilaterally. Therefore the European Communities brought a case to the World Trade Organization, which got the code WT/DS152. See an excellent 63-page summary of the case, here.

The main complaint of the European Communities was that Section 301(c), which became later 19 U.S.C. Section 2411, authorises the USTR to "suspend, withdraw, or prevent the application of, benefits of trade agreement concessions", or "impose duties or other import restrictions on the goods of, and … fees or restrictions on the services of, such foreign country for such time asthe Trade Representative determines appropriate". It also came to the conclusion that because the U.S. is a member of the WTO it should bring its trade conflicts to a panel of the Dispute Settlement Body to solve the problems multilaterally. The same is also applicable to Section 306.

Statutory language versus undertakings that remove inconsistency

According to the panel the statutory language was indeed inconsistent with the obligations under the WTO Agreement. However, such inconsistency could be removed upon examination of the US' undertakings: namely a Statement of Administrative Action (SAA) in which the US promised to follow the route set out by the WTO to settle trade conflicts and made a promise that consecutive US governments will honour this pledge.

To be continued: see Part II, Part III and Part IV.

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IIPA: "China and Russia Remain Major Concerns for Copyright Industries"

The International Intellectual Property Alliance (IIPA) has made a statement on USTR’s decisions in its 2009 Special 301 Review affecting copyright protection and enforcement around the world. No real surprises, including that the IIPA commends USTR for the decision to elevate Canada to the Priority Watch List.

This is what IIPA stated April 30, 2009 about China:

“China and Russia both continue to be major concerns to the copyright industries, as they were in 2008 and prior years. While there have been some positive developments in both these key markets over the past year, enforcement efforts generally remain inadequate, and the copyright industries continue to await sustained, effective and deterrent enforcement, enhanced legal reform, and greater market access for legitimate copyrighted materials.”

“While the Chinese government has launched enforcement efforts, these have so far not proven to be effective in dealing with pervasive piracy in the physical and online markets. These problems have been exacerbated by the maintenance of severe and discriminatory market access restrictions for the distribution of some categories of U.S. content. China must significantly expand its use of criminal measures in appropriate circumstances and employ all available tools, including administrative sanctions, to prevent companies such as Baidu and Kangjian Shixun from continuing to profit from providing access to infringing materials.”

China's number one search engine Baidu needs no introduction. Beijing Kangjian Shixun Technology Company with the sites http://www.kjmed.com.cn/ and http://www.kjmed.com.cn/ offers "subscribers access to the firm’s Foreign Medical Journal Full-Text Service (FMJS), a paid service that sells electronic copies of medical journals, including many well-known American ones, obtained from libraries at no cost", according to the US-China Business Council, see here.

• Business Software losses 2008 2940.0 million US dollar levels 79 percent.

Business Software Alliance (BSA)’s 2008 statistics are preliminary. They represent the U.S. software publishers’ share of software piracy losses in each country, and follow the methodology compiled in the Fifth Annual BSA and IDC Global Software Piracy Study (May 2008). These figures cover, in addition to business applications software, computer applications such as operating systems, consumer applications such as PC gaming, personal finance,and reference software.

• Records & Music losses 2008 564.0 million US dollar levels 90 percent.
  

Read the IIPA's press release (4 pages pdf) here.

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How to Sanction Lack of IPR Enforcement in China: Priority Watch List (IILA) or Foreign Country/Section 306 Monitoring Status (IACC)

The International Anti-Counterfeiting Coalition (IACC) is an organisation that represents companies concerned with trademark counterfeiting and copyright piracy. The IACC submitted the following recommendations to the Office of the US Trade Representative (USTR) in their annual Special 301 review of intellectual property protection issues in foreign countries. As in the past years, China and Russia remain the main concern for the IACC. China should be dealt with as a Priority Foreign Country, Section 306 Monitoring, according to IACC.

The International Intellectual Property Alliance (IIPA), an alliance representing U.S. producers of content and materials protected by copyright laws, including computer software (BSA joined IIPA, see here), films, television programs, music, books and journals, has the most problems with China, Russia and Canada. The IIPA submitted these recommendations to USTR. It suggest to the USTR that China stays on the priority watchlist, see here. The IIPA also recommends that Hong Kong SAR deserves 'Special Mention' (which is a warning sign), read here and so does Taiwan, read here.

Priority Foreign Countries: those countries that USTR believes have the most onerous or egregious policies with the greatest adverse impact on U.S. right holders or products. These countries are subject to accelerated investigations and possible sanctions.

Section 306 monitoring: means that the USTR can move directly to the application of trade sanctions against China if monitoring shows a slippage in China's enforcement of bilateral intellectual property rights agreements. The USTR is granted this authority under Section 306 of the U.S. Trade Act of 1974.

Priority Watch List: those countries which do not to provide adequate IP protection and enforcement or market access for U.S. persons relying on intellectual property protection.

Special Mention: These countries have made progress in improving their level of intellectual property protection but USTR believes they still need to be monitored. USTR also included countries in which problems with intellectual property protection were beginning to become more serious.

I will elaborate on these recommendations, later.

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