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On the weekend, news that Trade Minister Warren Truss announced that Australia would join, as a third party, the dispute resolution brought in the WTO by the United States against China relating to enforcement of intellectual property rights.

[Update: apparently the Labor party (or at least Simon Crean) approves this decision, labelling it a ‘tentative’ step in the right direction.]

Hmmmm. Do you think this (a) a silly move; (b) a considered and sensible way to protect Australia’s interests; (c) another example of Australia doing its ‘me too’ act with the US on intellectual property law regardless of Australia’s own economic interests? Let’s have a think about this.

For this to be a sensible move, one would want to be sure that Australia had either (a) a significant economic stake in the dispute and its outcomes, or (b) a significant concern with the legal issues that might arise in the context of the case, right? We’ll come back to these, but first…

What’s the case about?

First things first. The case is emphatically not a general dig at China for failing to stop counterfeiting, failing to provide adequate enforcement of intellectual property, or failing to treat foreign IP equally with local IP in any general way. It’s actually a much more confined case than that. All the documents are available on the WTO website, via their documents online search facility. According to the US’ request for the establishment of a panel, there are basically three issues being raised in the case:

1. Thresholds for criminal procedures and penalties. The US is arguing that China’s thresholds for applying criminal penalties to ‘willful trademark counterfeiting or copyright piracy on a commercial scale’ are too high, and insufficient to provide a deterrent against such infringement, contrary to Articles 61 and 41.1 of TRIPS. China, it argues, only applies criminal penalties where the circumstances are ‘serious’ or ‘relatively large’;
2. Customs and confiscation. The US is arguing that China’s measures for disposing of confiscated goods that infringe IP rights are inconsistent with TRIPS. China, it says, allows such goods to pass into channels of commerce after removal of infringing features like infringing labels or trade marks, contrary to TRIPS Articles 46 and 59;
3. Copyright and censorship The US is saying that China’s policy of denying copyright protection to copyright-protected content not yet approved for distribution in China by the censors is contrary to the requirement of national treatment. Basically, the US is saying that China provides no copyright for that period where distribution isn’t approved – increasing incentives for piracy of pre-release copyright goods like movies and video games (there’s a separate case brought by the US about censorship regimes).

So you can see the case is about questions of compliance with the letter of TRIPS; not about resources or the amount of enforcement or anything like that. This proceeding will not address the kinds of concerns raised in the submissions of groups like the Australian Film Commission, the Australian Wine and Brandy Corporation, the Institute of Patent and Trade Mark Attorneys, Trade Mark Investigation Services, or even the Copyright Agency Limited – all of which talk about enforcement as a practical matter.

Now let’s think about Australia’s role in the case.

Does Australia have a significant economic stake in the case?

Whether Australia has a significant economic stake in this case depends on two issues: first, whether Australia has a significant stake in how copyright law operates in China generally, and second, whether Australia has a significant stake in these particular aspects of Chinese copyright law.

As to the first point, it is not clear that Australia’s economic interests are much affected by copyright and trade mark law as it operates in China. I’m aware, of course, of the claims of stakeholders, and the Australian Industry Group study that IP law in China is important to Australian businesses, but we do need to keep such claims in perspective. The problem is assessing the strength of these claims from interested parties when compared to the economic interests of Australia as a whole. No doubt IP is important to some people – but how important is it to Australia overall? Not all that much, if you look at a recent study done by the Melbourne Institute of Applied Economic and Social Research and the University of Melbourne (I was another author). We did a representative survey aimed at all Australian business, not just particular interest groups. That survey suggested that IP infringement represented an important impact on profits for 0.4% of Australian businesses. That’s not a huge percentage, whichever way you look at it. That’s not to denigrate the importance of the issue to that focused group – but it is to say these things have to be kept in perspective.

Further, it’s not clear that the particular issues in the case will address the concerns of that 0.4%. If you look at the submissions on the DFAT website, or the AIG study, the concerns are mostly generally voiced concerns over the degree of enforcement occurring in China. Changing the laws raised in the US WTO case would not necessarily make any difference at all to the degree of enforcement going on. Even if, say, you lower the threshold for bringing a criminal case, it doesn’t mean the police will bring more criminal prosecutions. Only one of the published submissions I could find on the DFAT website specifically mentions issues like the threshold for criminal proceedings – and that is the submission of AFACT which, frankly, seems more concerned with Hollywood movies than Australian ones (their submission specifically states that an agreement between the US and China about US movies should ‘improve enforcement matters’ in China and quotes US statistics on counterfeits).

Does Australia have a significant stake in the legal issues in the case?

Even if the economic interest in the case wasn’t strong, there still might be a reason for Australia to be involved if we had a strong interest in any interpretations of TRIPS that might come out of the case. The Trade Minister’s press release hints at this when he says the case raises:

important commercial and systemic issues in relation to WTO rules on intellectual property protection, including the meaning of counterfeiting or piracy ‘on a commercial scale’

Now, the definition of ‘commercial scale’ is important – it defines the degree of freedom a country has to decide when its public law enforcement resources should be enlivened. I can see why Australia might want to be a party if it wanted to preserve it’s freedom to define for itself ‘commercial scale’. The problem with this, however, is that Australia has already signed up, via the AUSFTA, to an extremely wide definition of ‘commercial scale’: under the AUSFTA,

Wilful copyright piracy on a commercial scale includes:
(i) significant wilful infringements of copyright, that have no direct or indirect motivation of financial gain; and
(ii) wilful infringements for the purposes of commercial advantage or financial gain.

In other words, it is ‘commercial scale’ if it is a single deliberate copy leading to commercial advantage. Frankly, you cannot get broader than that. This is the definition required by the United States; presumably some such interpretation will be being pushed by the US in the dispute resolution proceedings. Having signed up to this, I’m not sure what the point of Australia being involved is. Are we going to be there arguing for a similar broad definition to be imported into TRIPS via interpretation? And alienate all the countries that, unlike us, want to preserve some freedom to determine their own IP enforcement policy? I don’t see the point, I really don’t.

Conclusions

China has significant IP issues; including significant IP enforcement issues. I’m all for continuing to address these. I’m all for finding interesting ways to do so even in the context of an FTA. But doing so by joining a rather narrow, technical case brought by the US against China? I don’t see the point. I wonder if DFAT have been drinking the AUSFTA cool-aid, and now see themselves as the little ambassadors for strong IP law in the Asia-Pacific Region. Sigh.