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Hearing of Subcommittee on Courts, the Internet, & Intellectual Property of the House Judiciary Committee - International Piracy:Intellectual Property


Location: Washington, DC

Hearing of Subcommittee on Courts, the Internet, & Intellectual Property of the House Judiciary Committee - International Piracy:Intellectual Property


REP. HOWARD COBLE (R-NC): Thank you, Howard, Mr. Chairman. I want to join you in welcoming all to our hearing this morning, and I want to commend you, Mr. Chairman, and Ranking Member Smith. I believe you all convened at least three hearings on this very significant subject in 2005.

The investment in time, capital, and effort needed to obtain a valid patent trademark or copyright is enormous, as you all know. The reward for that investment is supposed to be the exclusive right for a limited time to manufacture, market, or license an invention, product, or work. But that reward is a little incentive on a value if individuals and governments are unable, or when the latter is just sometimes unwilling to provide meaningful protection and enforcement to the owners of intellectual property rights.

A number of developments in recent years have overwhelmed the methods that countries traditionally employ to prevent legitimate producers from being exposed to unfair competition, and to protect consumers from health and safety risks associated with unsafe goods.

The expansion of transnational trade, the development of the Internet as a commercial tool, and the ability of producers anywhere in the world to cheaply and rapidly produce, distribute, and transport goods to virtually any other part of the globe, have revolutionized not merely the relationships between producers and consumers, but also the relationship between and among nations and their citizens.

To protect the legitimate interest of nations and inventors with respect to promotion of intellectual property rights, Mr. Chairman, it seems the United States is party to numerous international, multilateral, and bilateral agreements.

Our ability to ensure that these agreements and understandings are properly carried out merely here at home -- not merely here at home, but also in the markets overseas that demand the creative products Americans are so skilled at producing, is fundamental to the continued vitality of our economy.

When you consider that our copyright industry typically receives about half of its revenue from outside the United States, industries that rely on IP protection account for over half of all U.S. exports, and these industries together represent about 40 percent of the U.S. economic growth, it is obvious why it is still important that we assure that foreign governments respect the rights of our producers.

One of the personable methods that our government uses to promote these interests is the Section 301 review process, which was established pursuant to the Trade Act of 1974.

Among other things, Section 301, as you know, requires the U.S. Trade Rep. to publish an annual report that details foreign government policies or practices that violate a bilateral or multilateral trade agreement, or are unreasonable and unjustifiable or discriminatory, and are unnecessary and burdensome to the United States commerce.

For many years, the Section 301 report had documented various violations for the governments of China and Russia as you just pointed out in your statement, Mr. Chairman, with respect to the protection and enforcement of U.S. intellectual property rights.

Indeed, the failure of China to -- in particular to reduce its levels of counterfeiting and piracy, which in many copyright sectors routinely approaches 90 percent, has led to the United States filing two IP-related complaints at the WTO.

Rather than stealing the thunder of our witnesses who can describe in great detail the status of our concerns with China and Russia and other countries of priority to U.S. IP owners, I want to first acknowledge the progress, the administration -- Congress and private industry have made in recent years in improving the exchange of information and developing strategies to improve the situation for IP owners.

There are no quick fixes in this area as complex as this. Real progress requires more sustained attention and a bipartisan commitment.

Mr. Chairman, I've spoken longer than I usually do, but I don't know of any subject that impacts our economy any more significantly than what we're discussing today.

President Reagan once summed up the U.S. policy of negotiating arms control agreements as "Trust, but verify." In my view, meaningful progress in the promotion of intellectual property rights requires a similar transparency. In other words, we need a little less trust and a lot more verification.

I thank you, Mr. Chairman. I yield my time.


REP. COBLE: Mr. Chairman, I thank you for that. For the information of the witnesses, some weeks ago in my district a church had a fund raiser, and the high bidders, Mr. Chairman, were assured that they would be my guest for lunch.

So if I don't appear in the member's room on or about 11:30, they're not going to be happy with me. I've got to pick up the time. Thank you, Mr. Chairman.

Ms. Espinel, given that China is the fourth largest economy in the world --

REP. BERMAN: Is this an online program?



REP. COBLE: He always disrupts me, but with a smile on his face.


REP. COBLE: Given that China is the fourth largest economy in the world and poised to become the second largest trading nation in the world, why should it be considered a developing nation?

And let me ask you this, Ms. Espinel, are there any economic or trade benefits that extend to China based on this designation?

MS. ESPINEL: Well, certainly, with respect to the area that I cover, intellectual -- and I'm not conceding that China is a developing country or has any particular status, but if China asserts that it is, we don't believe that would serve as an excuse for China not to strengthen its intellectual property system and adequately protect American interests consistent with the obligations and commitments that it has under the WTO.

REP. COBLE: And I wanted to ask Mr. Smith a question, but I want to put one more question to Ms. Espinel. Your statement referred generally to some of the commitments contained in the Bilateral IPR Agreement, but it did not make clear which if any of the specific actions that the Russian government was obligated to complete by June 1st of this year had been satisfactorily performed.

If you will, Ms. Espinel, can you identify which commitments were required to be performed by 1 June, and the User's current assessment of Russia's performance on each?

MS. ESPINEL: I'd be happy to. There are two categories of commitments. Some are -- were required to be in place by June 1st, some, particularly those related to enforcement, are commitments that Russia signed up to start acting on immediately and commitments that we think should continue after the WTO membership is complete, should we come to that point?

Two, that I want to highlight in particular, one of the commitments that Russia made in the bilateral agreement was to shutdown or to terminate the leases of the illegal optical disc plants that are operating on government sites that are referred to as restricted access sites.

And Russia has made progress in this area. I believe there are 17 such plants. Russia has terminated the leases -- or by the end of this year, Russia should have terminated the leases of 16 of those 17 plants.

And I can assure you, we wonÂÂ't forget about the one that is remaining. But this significant progress on an issue that has been quite a contention between the U.S. and Russia for some time.

Russia has also stepped up enforcement against illegal unlicensed optical disc plants, and they've conducted seven raids of unlicensed plants here. They conducted 17 raids of warehouses where illegal products are stashed.

So that is progress. However, there are a number of areas where Russia still needs to make considerable progress, and we will continue to push them on that. And few of those areas are, for example, there's customs legislation that they committed to pass, that they have not yet -- has not yet going to enforce.

It's now pending in the Duma, that they -- Russia needs to pass that customs legislation to give their customs authorities more -- to give their customs more authority to take action at the border.

Russia needs to take action against illegal pirate websites, the successors of the Allofmp3, which has been mentioned by -- some of my fellow panelist. Russia needs to make amendments to its civil code to bring it into compliance with the TRIPS Agreement.

Russia needs to complete its accession to the WIPO Internet Treaties to protect copyright in the digital age. So again, while Russia has made some progress in some areas, there are still a number of areas where Russia needs to make further progress in order to be in compliance with the agreement that we've negotiated.

REP. COBLE: I thank you. Mr. Smith, for some time the IIPA members called upon the United States Government to utilize the WTO dispute settlement mechanism to press our concerns regarding China.

Now that we've done so, what do you consider to be the next most important steps that USG can take to improve conditions for IP owners in China?

MR. SMITH: Well, I think that case has to proceed apace. It's an important case, and I think Ms. Espinel can probably give you the details.

IIPA is not directly involved in that case. It's a subgroup of our group called the China Copyright Alliance. But I think that case has to proceed, and I think the people who are involved in that case feel very certain that that case will go well.

And it is -- I think, the key is going to be, if that is true, the implementation phase of that case, when it is completed, to try to leverage additional improvements beyond those -- the actual panel decision on the narrow facts of the particular claims that are being brought.

REP. COBLE: I thank you for that. Mr. Chairman, I know about the red lights, but if I may make one more statement, Mr. Chairman.

The international trading system, ladies and gentlemen, is rules based, and respect for those rules demands that there be serious consequences for countries which have voluntarily agreed to abide by the rules of the road, but yet choose to consistently and continually -- (audio break) -- impediments, Mr. Chairman, that we must encounter successfully.

Thank you. And thank you, Mr. Chairman.


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