By Susan Krause
Washington File Staff Writer

Washington - The U.S. government is committed to stopping intellectual property theft in China and to protecting the rights of American businesses and innovators, according to Chris Israel, coordinator for international intellectual property enforcement at the U.S. Department of Commerce. 

In testimony March 8 before a Senate Commerce, Science, and Transportation subcommittee, Israel said combating piracy and counterfeiting is a top priority for the Bush administration.

"We are leveraging the capabilities of the United States to promote effective, global enforcement of intellectual property rights (IPR)," he told the subcommittee. 

Israel said his office coordinates the international IPR enforcement efforts of several U.S. government entities, including the Commerce Department's International Trade Administration (ITA) and U.S. Patent and Trademark Office; the Office of the U.S. Trade Representative (USTR); the Department of Homeland Security's Customs and Border Protection (CBP) service; the Department of Justice, including the FBI; and the Department of State.

"Our combined efforts are great, and this allows us to bring even greater focus, energy and prioritization to our IPR efforts," he said.

SITUATION IN CHINA POSES AN ENORMOUS CHALLENGE

Epidemic counterfeiting and piracy in China have become an enormous challenge for U.S. businesses, Israel said.

"Our industry reports that infringement levels in China range from 85 to 95 percent for all copyrighted works, and in 2005 the value of copyrighted works that were pirated exceeded $2.3 billion," he said.

The problem reaches back to the United States, he added.  U.S. Customs figures for 2004 reported that China was the leading source of counterfeit products seized at U.S. borders, Israel said, accounting for 63 percent of total seizures.

"Though we recognize that China has expanded its efforts, there are still critical deficiencies in IPR protection and enforcement," he said. 

Israel acknowledged recent positive developments, such as encouraging statements from Chinese President Hu Jintao and Vice Premier Wu Yi, a few favorable court rulings and a Chinese government initiative to set up 50 reporting centers for IPR violations across the country.

Nonetheless, he said, "So far, China has not lived up to its responsibility to effectively enforce intellectual property rights."  That enforcement has been undermined, he said, by "a lack of sufficient political will, corruption, local protectionism, misallocated resources and training, and a lack of effective public education on the economic and social impact of counterfeiting and piracy."

U.S. GOVERNMENT ENFORCEMENT STRATEGY

Israel said the U.S. government strategy to confront this problem is built on four pillars:

• Engagement through the bilateral consultative mechanism of the U.S.-China Joint Commission on Commerce and Trade (JCCT), a high-level forum for resolving trade concerns and promoting commercial opportunities.

• Effective use of trade tools, such as the USTR's annual "top to bottom" review assessing U.S.-China trade, the Special 301 review process for effectiveness of IPR enforcement and the dispute-resolution process of the World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

• Expanded law enforcement cooperation built on the existing U.S.-China Joint Liaison Group, which facilitates bilateral cooperation on criminal justice matters.

• Cooperation with the private sector, which serves as the "eyes and ears" for government enforcement efforts.

The next meeting of the JCCT is scheduled for April 11, Israel said, just before the scheduled visit of Chinese President Hu to Washington.

As that meeting approaches, Israel said, the U.S. government must review the status of a comprehensive set of commitments that the Chinese government made in the 2005 JCCT meeting.  These include:  increasing criminal prosecutions for IPR violations; expanding law enforcement cooperation; using only legal software in government offices and enterprises; and joining the World Intellectual Property Organization (WIPO) Internet Treaties.  (See fact sheet.)

Progress on these commitments has been slow so far, he said.

A CRITICAL ISSUE FOR U.S. ECONOMIC STRENGTH

Few issues have such critical importance for the current and future economic strength of the United States as the ability to create and protect intellectual property, Israel said.

"U.S. IP industries account for over half of all U.S. exports," he told the senators. "They represent 40 percent of our economic growth and employ 18 million Americans, who earn 40 percent more than the average U.S. wage."

According to the 2006 Economic Report to the President, he added, intellectual property accounts for more than one-third of the value of all U.S. corporations, an amount equal to almost half of the United States' gross domestic product - the total value of goods and services produced within a country's borders in a given year.

Intellectual property rights enforcement is also essential to consumer health and safety around the world, Israel said, noting that counterfeit pharmaceuticals and bogus parts for airliners, automobiles, electrical systems and other critical equipment have become increasingly common.

"In the world of today's sophisticated criminal IP operations, if a product can be easily counterfeited, has an immediate demand and provides a good profit margin, it will be copied," he said.  "Consumer safety and product quality are concerns obviously not on the minds of global IP thieves."

The United States' capacity for innovation is one of its greatest comparative advantages, Israel said.  "Through the applied talents of American inventors, researchers, entrepreneurs, artists, and workers, we have developed the most dynamic and sophisticated economy the world has ever seen," he told the committee.

Intellectual property theft strikes at the heart of this advantage, he stressed.

"A thriving, diversified and competitive economy must protect its intellectual property rights," Israel said.  "We value our heritage of innovation and exploration - it is not only part of our history; it is the key to our future."

The full text (PDF, 13 pages) of Israel's statement before the subcommittee, which includes more detail about U.S. IPR enforcement initiatives, is available at the Senate Commerce, Science, and Transportation Committee's Web site.

For additional information, see The United States and China and Protecting Intellectual Property Rights.