Few China Surprises In USTR Special 301 IP Report

As I sort of expected, this year’s Special 301 report wasn’t all that exciting, although it does have more useful information than last year’s yawner. This is not a criticism of the folks at the US Trade Rep’s office, who do a great job with this every year. No, the ‘problem’ is that a lot of the heavy lifting on China IP issues was done years ago, and now the US and China are arguing about technical details and emerging issues.

What that means is that the China section in the report (get it online here) is mostly a list of the IP initiatives China is dealing with currently, including a very good description of the “Special Campaign” to combat IP infringement that Premier Wen Jiabao is overseeing. At least half of the criticism consists of (and I paraphrase) “although we applaud these efforts, China still needs to do X.”

For example, China search engine behemoth Baidu is specifically praised for cutting deals with content owners (i.e. copyright owners), but the report also points out that Baidu has yet to come to terms with American rights owners in the music industry.

So all in all, fairly tame stuff, as we’ve gotten used to over the past few years.

What are the remaining sticking points?

Indigenous innovation policy — some criticism, but mostly a quite detailed review of Chinese law and bilateral negotiations. This is a very instructive read for anyone who needs a primer on the issue (hint: I’m talking to you, journalists).

Standards setting — this is always in the 301 report in one way or another. This time the issue involved compulsory licenses, and as I’ve written many times, I still don’t see China following through on issuing compulsory licenses for tech that has been incorporated in national standards. Again, this is all speculative, based on specific policies that may/may not be used in the future.

Online piracy — rather hopeful tone, I thought. After all the “good news” about what is being done, there is the fear that the Special Campaign will peter out at some point, and we’ll soon be back to where we were a year ago. I guess we’ll have to wait and see on that.

Counterfeiting — same as above, a lot of cautiously optimistic news. The one part here that I found interesting was the suggestion that the provincial government of Guangdong conduct a follow-on project to the Special Campaign, since a significant percentage of counterfeits originate in Guangdong Province.

What I thought was cool about the suggestion is that political will was discussed. It reminded me very much of what I wrote back in 2007 and 2008 in the run up to the Olympics, when I said that if the government proves itself very adept at controlling Olympics-related IP infringement, it will open itself up to subsequent criticism from folks asking why they can’t keep up that same level of enforcement in the future.

Lo and behold, here’s what USTR had to say:

It should be noted that when the Asian Games were held in Guangzhou in November 2010, officials not only conducted robust enforcement of IPR with respect to that event, but also undertook additional crackdowns on counterfeit goods and optical disk outlets.  This same political will should be continued and expanded throughout the whole province.

I guess I’m not crazy after all.

If you’re looking for excitement, this year’s report won’t do it for you. However, if you need a quick rundown of some of the key bilateral IP issues, the report is always a good place to start. Moreover, the report this year does contain very readable and informative sections on China online piracy and indigenous innovation.

Last but not least: I’m sure that some China-based sources will downplay or even criticise the report for not being even-handed. As someone who consistently complains about China bashing with respect to IP infringement, let me just say that the Special 301 Report is, as usual, extremely fair, very well researched (given space constraints), and not at all a piece of advocacy writing.