On 1 October 2007, following a request from the US, the WTO’s Dispute Settlement Body (DSB) set up a panel to hear the US case against China over its record on the protection and enforcement of intellectual property rights (IPR). The US had originally launched the case (China –Measures Affecting the Protection and Enforcement on Intellectual Property Rights) on 10 April. However, consultations, in June, between the two parties, failed to yield a positive result. The US subsequently requested the WTO set up a panel in August. China refused the first request, but under DSB rules, cannot refuse a second.

The US says it is trying to eliminate “significant structural deficiencies that give pirates and counterfeiters in China a safe harbour to avoid criminal liability”. Furthermore, the US hopes to improve enforcement procedures at China’s border, and to supply copyright owners with greater powers to prevent the production of unauthorised copies in China.

The US alleges that China violates provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) relating to three aspects of China’s IPR regime: 

  • first, according to the US, the threshold for launching criminal prosecutions is set too high to effectively deter piracy and counterfeiting on a commercial scale; 
  • second, laws that allow IPR-infringing goods seized by Chinese customs authorities to be released back into the marketplace, once stripped of fake labels or other infringing features, contravene WTO rules; and 
  • third, the apparent denial of copyright protection for works ready to enter the market but awaiting Chinese censorship approval – this leaves them vulnerable to piracy during the approval period, as unlike legitimate producers, pirates do not wait for the Chinese content review to be completed.

China responded that since joining theWTO in 2001, China had spared no efforts to improve its IPR legislation, and the legislation was in full accordance with WTO rules.

The US also launched a second case on 10 April 2007: China—Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products. The case concerns Chinese import restrictions and distribution rules on films, books, journals, videos and music. In October, after months of fruitless consultations, the US asked the WTO to set up a panel to investigate if the Chinese import restrictions and distribution rules violate WTO rules.