U.S. vs China at the WTO: “We’re too old!”

This article is by guest contributor Maya Alexandri, who has taught intellectual property law at Tsinghua University and practiced IP law for a majority firm in Washington, DC.

The United States just filed two media-related WTO cases, one complaining that China’s protection of IPR is inadequate, the other challenging market access restrictions for imported media products.

The IPR case seems to be a predictable waste of resources. Fundamentally, IPR enforcement – like the enforcement of any law in China – depends on the state of China’s court system, which is not independent and can be considered “operational” only under the most lenient standards. Whatever other roles the WTO dispute settlement body may serve, it cannot remake the legal system of a sovereign country…and anything short of such measures will leave IPR enforcement in China inadequate.

The market access case, on the other hand, appears – at least with respect to motion pictures – to be a more interesting waste of resources. As Beijing Business Today noted in its report on the cases, the market access complaint is “strange.” It doesn’t mention the 20-film quota on theatrical releases in China. Rather, it challenges China’s requirement that foreign media producers channel their imports through state-run or state-approved companies.

This approach raised your correspondent’s eyebrows for three reasons. First, as the Motion Picture Association of America has argued, the 20-film quota is a market access restriction that relates directly to IPR infringement: when Hollywood releases don’t appear in Chinese theaters, their absence creates demand for counterfeits. So long as the 20-film quota stands, counterfeiting of motion pictures is inevitable. That the United States has nothing to say about the quota in a pair of suits dealing squarely with IPR infringement and market access is conspicuous.

Second, when the business community has previously voiced concerns about the distribution channels for motion pictures in China, it has complained of too many players, not too few. As The China Business Review – the U.S.-China Business Council’s magazine – observed:

[D]istributing DVDs and video compact discs (VCDs) in China poses . . . challenges. For example, instead of using a handful of large chain stores to distribute DVDs, as many distributors do in the United States, companies in China must coordinate with tens of thousands of distribution points. And whereas film distributors promote nationwide in the US market, China’s market is so segmented that films must be promoted separately in each city.

But regardless of whether available distribution channels are too restricted or too numerous, the United States government has more urgent claims on the taxpayer’s dollars than a WTO case arguing about brick-and-mortar distribution channels.

In terms of distribution channels, the focus — in China, as in most of the world — should be online.

Whether consumers turn to online sources for illegal downloads when meatspace counterfeits are scarce, or whether industry captures market share by making legal downloads affordable and easy, the game is online. Squabbling in the WTO about state-run or state-approved companies cornering the market for distribution of foreign media misses the market. Which, in addition to my eyebrows, raises the question:

Sure, we expect the U.S. government suits to be too old to get it, but isn’t that why the movie industry pays lobbyists?