WTO dispute process started over failed IP negotiations with China

The United States has filed two requests with the World Trade Organization (WTO) claiming that China has not met its IP obligations as a member of the WTO or under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Canada has also asked to participate in these proceedings as a third party.

Despite some progress of bilateral discussions to encourage China to improve its IP protection system and reduce barriers to international trade, the United States has sought the aid of the WTO dispute settlement process to persuade China to do more to punish infringers and to lift restrictions on the importation and distribution of entertainment imports.

The first WTO request is aimed at:

• further reducing certain thresholds, particularly the recently established minimum quantity of 500 infringing units, required to initiate criminal proceedings for wilful violations of IP rights;
  
  
• disallowing the release into the marketplace or auction of seized infringing goods after fake labels or other infringing features have been removed;
  
  
• permitting foreign copyright owners, like their domestic counterparts, to file suits for infringement of works for which Chinese censorship approval is still pending; and
  
  
• subjecting copyright pirates who do not distribute the infringing goods to potential criminal liability.

The second WTO request addresses US access to the Chinese marketplace by seeking to persuade China:

• to eliminate its right to limit importation of print, audio and video goods to specially authorized state-approved or state-run companies; and
  
  
• to eliminate an array of rules that prohibit distribution of certain copyrighted works by foreign entities in favour of Chinese state-owned or state-controlled entities.

As a first step, the filing of requests for consultations under the WTO rules will require the United States and China to consult within 30 days and will simultaneously initiate a 60-day period before permitting referral to a WTO dispute settlement panel for arbitration. This may serve to pressure China to concede to changes that will arguably conform to obligations under China's accession protocol into the WTO and the TRIPs Agreement. The United States appears to be trying to continue its trend of success in employing WTO dispute settlement rules to facilitate negotiations with China.

Dennis Prahl and Matthew Asbell, Ladas & Parry LLP, New York