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Peeking Behind Canada's Copyright Complaint Against China at the WTO

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Monday February 09, 2009
Late last month, the World Trade Organization released a much-anticipated decision involving a U.S.-led complaint against China over its intellectual property laws.  Canada was among a number of countries that participated in the case, which alleged that China’s domestic laws, border measures, and criminal penalties for intellectual property violations do not comply with its international treaty obligations.

On April 25, 2007, David Emerson, then the Minister of International Trade, issued a press release announcing Canada's participation, stating that it was "based on concerns expressed by Canadian stakeholders on a range of issues related to China's intellectual property rights regime." Yet, as reported in my weekly technology law column (Toronto Star version, homepage version) according to dozens of internal Canadian government documents obtained under the Access to Information Act, Canadian officials, unable to amass credible evidence of harm to Canadian interests, harboured significant doubts about the wisdom of joining the case and ultimately did so only under the weight of great pressure from the United States.

The case centred on three claims - that Chinese law does not provide adequate legal protection to all works; that its border measures, which allow customs officials to donate confiscated items to the Red Cross, violate international trade law; and that the Chinese criminal enforcement does not live up to international standards by establishing a minimum threshold before authorities are able to prosecute cases of infringement.  Canada supported the U.S. position on all three issues.

The WTO panel confirmed the U.S. claims on legal protection for all works, but virtually all of the Chinese border measures were upheld as lawful.  Moreover, the panel rejected claims regarding the criminal thresholds, admonishing the U.S. for failing to provide adequate evidence to demonstrate a violation of China's treaty obligations.

The panel's emphasis on the lack of evidence should resonate with Canadian officials since documents indicate that the inability to gather solid evidence of Canadian harm in China hampered the case from its very inception.

Government records reveal that the U.S. began to pressure Canada to join the case as a full party in 2006, months before the case was formally filed with the WTO.  In April 2006, officials at the Department of Foreign Affairs asked the Beijing and Shanghai consular offices for information on intellectual property infringement problems, but neither provided much assistance.

Two months later, with the case making little progress (in May, an RCMP official wondered aloud why Canada was even concerned with enforcement in other countries), Foreign Affairs launched a public consultation on intellectual property enforcement abroad.  The consultation was not limited to China, as officials decided to keep it open-ended.

The consultation generated 55 responses, but officials hoping to build a solid case against China were left sorely disappointed.  According to a government summary (the consultation results have never been disclosed to the public and were obtained under Access to Information), only one-third of the responses specifically referenced China as a problem.  In fact, there were more responses that criticized the United States and the consultation itself.

By the end of the summer, the U.S. had provided Canadian officials with its legal arguments, but Canada was without the evidence it needed to demonstrate harm and thereby participate as a co-complainant in the case.  Indeed, on the key issue involving criminal enforcement thresholds, a Department of Justice official noted that Justice and RCMP guidelines used similar thresholds for prosecutorial decisions and that the Chinese could effectively make similar claims against Canada.

Given the weak position, Canadian officials could not support becoming a co-complainant, instead recommending that Canada join as a third party.  Anticipating an October 2006 complaint, a press release was prepared but was never issued after the U.S. decided to delay launching the case.

With no complaint in sight, the Canadian Recording Industry Association, which had been the most vocal supporter of Canadian participation, met with senior Foreign Affairs officials in January 2007.  Documents prepared by department officials in advance of the meeting noted that CRIA's previous efforts to encourage participation had "lacked specifics."  The memo concluded that "we remain of the view that we do not have enough information related to specific Canadian experiences and interests to go forward as a co-complainant" and that "there is still no real concrete information however, of Canadian interests that have been harmed in China."

Over the next few months, Canadian officials grappled with several concerns as a U.S. complaint appeared inevitable.  For example, with plans for Canada to participate in the intellectual property case against China but not in a second case on market access, officials feared that the Canadian steel industry would voice its objections.

Further, as Canadian officials drafted a formal letter of notification of its participation, a Geneva-based official asked "do we have statistics to mention about intellectual property owned by Canadians sold in China or something like it to explain why we are interested?"  Without solid statistics, the formal notification did not reference the issue, instead merely stating Canada's "concern" with Chinese practices.

The U.S. commenced its action on April 9, 2007. Canada filed its notification as a third party participant two weeks later and within hours, CRIA wrote to Foreign Affairs to offer its assistance on the case. Nearly three years after Canada began exploring its potential participation, the case has led to a double loss for Canadian interests.  Not only has the WTO panel rejected most of its key arguments, but Canada's politically-motivated participation has undermined its relationship with China.
Comments (10)add comment

Alexey said:

...
How embarassing! I hope the politicians will take it as a lesson that the recording industry lobby is not looking out for Canadian interests.
February 09, 2009

Confused said:

...
Help me understand the purpose of writing: *an RCMP official wondered aloud why Canada was even concerned with enforcement in other countries*

If this was a case about spam, you would agree that *enforcement in other countries* is important. Same for almost any other crime.

You think this case undermined our relationship with China? We have a host of other issues with China far bigger than this. Get serious.
February 09, 2009

George Smiley said:

...
What else would one expect from CRIA - which may as well stand for the Canadian Recording Industry of America? When will Canadian politicians learn, as former M.P. Sam Bulte did the hard way, that listening to CRIA's propaganda and caving into CRIA's lobbying leads not only to bad policy choices but bad career moves?
February 09, 2009

marty taylor said:

...
hey michael, I really like your blog. maybe you could help me out with a little publicity for my own canadian blog at http://canadianpolitical.blogspot.com. Thanks buddy.
February 09, 2009

@ Confused said:

...
Canadian politicians for no real reason "bent over" for foreign corporate interests with no domestic evidence or interest for the case (as stated by the RCMP officer), and at the same time harmed its relations with China again for no real reason.

Hope this helps.
February 09, 2009

scret said:

PUHLease
this is the harper racism against Chinese again, can some liberal slap da boicth again and make him realize he better play nice in the sand box because when the USA economy goes belly up in a few months as another trillion in loans goes poof the melt don really begins and you better have better trade partners like OH i dont know CHINA , at least they live up to there trade deals UNLIKE harpers bush buddies ( softwood lumber) and now the BUY AMERICAN clause.

I've been doing great business with the chinese and guess what htey are a hell of a lot more honorable then any american , sure there are bad apples but they are far and few between.
February 09, 2009

scret said:

allthe while hollywood spends and spends the doh
http://www.ctv.ca/gallery/html...oto_0.html

and we all get pwned and ya htink they will lower ticket prices and lower the price of pop and popcorn.

ENCONIMIC TERROIRSTS, yes RIAA are terrorists as well as hollywood they are wittling away our livly hoods for what some actor or msuicins that would not even be where they are for it not be us wee folk
February 09, 2009

Gregg said:

What about all the illegal knockoffs...
...that stores are carrying unimpeded?

Illegal CD's and DVD's are raided from stores quite readily, but knockoff labels of clothes and tools and deadly dangerous appliances that should have never been imported are not.
February 10, 2009

PorkBellyFutures said:

Are these guys incompetent?
How can it *possibly* be hard to build a case against China for harm due to extremely lax enforcement of IP rules?

Many companies in China manufacture cheap rip-offs of western products that are deliberately intended to confuse consumers. This is against the law almost everywhere, for good reason, but it remains a burgeoning industry in China.

This could not be made in North America:
http://www.engadget.com/2009/01/12/keepin-it-real-fake-part-clxvii-the-blueberry-is-exactly-what/

Given that it can be purchased anywhere in the world, it seems pretty clear evidence of harm to a Canadian company due to non-enforcement of trademarks (and possibly copyright).

Not that they specifically target Canada:
http://www.nokiaphoneblog.com/?p=454
http://www.product-reviews.net/2007/11/12/samsung-identifies-88-types-of-fake-samsung-phones-in-beijing/
February 10, 2009

Just the facts said:

A plain misrepresentation
Everything is copied in China, so there's clear Canadian interest if Canada has IP. Also, there's clear Canadian interest if Canada cares about others fulfilling treaty commitments. So, good job Canada for participating in the case.

Downplaying the key finding - that China violated its WTO commitments - simply misrepresents and misleads.
February 11, 2009

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