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Tossing the Baby Out with the Bathwater: Avoiding Protectionism While Using Existing Law to Safeguar

BACKGROUND:

The practice of counterfeiting has been a marketplace problem for centuries. Whenever an original product has a marketable value, there will likely always be those who seek to attain the superior value of the original

attached to an inferior, imitated product. Thus, it should come

as no real surprise that in today’s economic marketplace, counterfeit goods currently compose an estimated 5-7% of world trade and about $600 billion USD annually in illicit goods.

Last month, the US government uncovered counterfeit component parts that had been installed on military aircraft and in the nation’s ballistic missile defense systems. The common origin in both instances? China. In our technological world, products today truly are as strong as their weakest link. One can imagine that a simple electrical malfunction caused by a defective, counterfeit part within an aircraft’s computer system at 25,000 feet could have dire consequences for passengers and bystanders alike. Or if a multi-million dollar missile defense system fails to fire due to the failure of a part that costs less than a cup of coffee. Naturally, this is cause for concern, but we must avoid the knee-jerk impulse to react as legal avenues exist to adequately address these intellectual property (IP) violations and issues.

ANALYSIS:

U.S.-China Relations Act of 2000 (22 U.S.C. § 6901)

Under the U.S.-China Relations Act of 2000 (22 U.S.C. § 6901), the United States has a viable mechanism for addressing issues with China as a trade partner. Specifically, 22 U.S.C. § 6902 provides that it is the policy of the United States “to pursue effective enforcement of trade-related and other international commitments by foreign governments through enforcement mechanisms of international organizations and through the application of United States law…” Further, 22 U.S.C. § 6931 requires that the United States monitor China’s compliance through “an annual review” focused on China’s terms of accession to the World Trade Organization (WTO). As a result, the United States Trade Representative’s (USTR) office has produced and provided annual reports to Congress since 2002. Although the 2010 report concedes that Chinese enforcement of IP laws require greater attention, it recognizes that ongoing bilateral discussions between US and Chinese agencies led to “positive results.” As a result of these discussions, the Chinese agreed in December 2010 to a six-month campaign to enhance enforcement against an assortment of IP infringements. The 2010 report also has exclusive sections that focus directly on IP Rights (IPR). As a nation on the “Priority Watch List,” China is also included on the USTR’s “Special 301” Report that focuses on global IPR protection and enforcement issues pursuant to Section 182 of the Trade Act of 1974.

When bilateral discussions between the United States and China fail to reach a resolution, the United States can formally file a dispute with the WTO in order to hold China accountable to WTO rules. In using this mechanism, the United States has brought several dispute actions to the attention of the WTO. One such recent success centered on a dispute between the United States and China on IPR enforcement of copyrights and trademarks. As noted in the 2010 report, the United States sought to challenge deficiencies in China’s legal regime related to IPR enforcement. The WTO panel found in favor of the United States on two of its three claims including one that China was deficient in the “handling of border enforcement seizures of counterfeit goods.” As a remedy, China agreed to take measures in order to comply with the ruling. In the aforementioned instance of the counterfeit parts in United States military aircraft and ballistic missile defense systems, the United States is likely already following this framework. In essence, the counterfeit goods that entered the United States defense product stream are the goods that already fall under the umbrella of the U.S.-China Relations Act of 2000. As a result, the IPR infringement has been identified and compliance monitored.

CONCLUSION:

The United States must endeavor to protect the integrity of defense-centric goods and overall safety of the end user as well as the integrity of the market in which the goods proliferate. Counterfeit goods from China that enter the United States defense product stream undoubtedly pose a serious and significant risk to national security. However, the United States must avoid a knee-jerk, politically motivated reaction related to the origin of the counterfeit goods and instead move to open lines of communication to better influence the regulation of intellectual property laws abroad pursuant to the U.S.-China Relations Act of 2000. Through continued bilateral dialogues with the Chinese government, the United States can work towards cooperation and mutual beneficence in IPR enforcement.

Photograph obtained from www.gizmodo.com.

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