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23 September 2004
Chinese Intellectual Property Piracy Criticized by U.S. Congress
House hearing draws attention to inadequate foreign IPR enforcement
Washington -- House of Representatives members railed at pirated versions of U.S.-made goods in several countries, most notably China, that they say are costing U.S. businesses hundreds of billions of dollars in lost revenue as well as lost jobs.
At a September 23 hearing of the House Government Reform Committee, Representative Rob Simmons complained that foreign counterfeiting of products derived from U.S. intellectual property hurts small and medium-sized U.S. businesses, not just the giant film and music industries.
Simmons described how counterfeit gauges made in China, defective knock-offs of gauges made for vehicles and boats by the Faria Corp. hurt the small company in his Connecticut district.
Not only was Faria deprived of millions of dollars in lost revenue by Chinese pirates flooding the international market with cheap imitations of its products, Simmons said, but also it was spending money replacing for free any defective gauges made illegally by the Chinese that were returned to the company in an attempt to defend its reputation for quality products.
Layoffs at Faria's Connecticut plant are inevitable if the company continues to lose market share to Chinese piracy, he said.
"We must tell the Chinese and others who are turning a blind eye to these criminal acts that we will not stand for their inaction any longer," Simmons said. "These criminals are cheating, not competing."
Representative Tom Davis, Republican chairman of the committee, said counterfeiting and piracy of U.S. intellectual property abroad is rampant, costing U.S. businesses $200-250 billion a year in lost revenue.
During the hearing, he pointed to an exhibit of indistinguishable legitimate and counterfeit movies, music and consumer goods, including some counterfeits from China.
Davis said foreign intellectual property laws are most often entirely inadequate to protect U.S. patents, copyrights and trademarks.
"Those countries that do have laws often do not enforce them," Davis added.
Lacking jurisdiction abroad to enforce U.S. intellectual property protection law, U.S. government agencies have made some efforts against foreign piracy, including the Office of the U.S. Trade Representative's Special 301 process to identify problem countries for investigation. Such investigations could ultimately result in imposition of U.S. trade sanctions.
Also, customs agents in the Department of Homeland Security seize counterfeit products at the U.S. border. In 2003, the department reported, its agents confiscated $90 million worth of such goods; goods from China, many of them cigarettes, accounted for about two-thirds of the value.
Recognizing that approximately 10 U.S. government agencies have some authority to enforce intellectual property rights, Congress in 1999 established the interagency National Intellectual Property Law Enforcement Coordination Council (NIPLECC) to bring more coherence to the fight against piracy.
Testimony from an official of the Government Accountability Office (GAO), Congress' investigative agency, however, said NIPLECC "has struggled to find a clear mission, has undertaken few activities, and is generally viewed as having little impact."
The statement from Loren Yeager, GAO's director of international affairs and trade, said U.S. efforts to strengthen foreign protection of intellectual property face serious challenges.
First, she said, other U.S. policy objectives, including the fight against terrorism, might take priority. Second, she said, foreign countries might lack the political will to enforce anti-piracy laws because doing so might hurt their economic interests.
Third, Yeager said, even when countries have the political will, challenges to enforcement might arise from economic factors including the low cost of producing counterfeit goods, potential high profit for selling them, and the big difference in prices to consumers choosing between legitimate and counterfeit goods.
Yeager's prepared testimony can be found online at http://www.gao.gov/new.items/d041093t.pdf.
Davis said the U.S. government needs to spend more money bolstering foreign governments' enforcement of intellectual property rights. Under consideration in Congress for the fiscal year beginning October 1, he said, is $20 million in spending by NIPLECC for that purpose.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
