China shuts pirate factories as talks set to begin

On the eve of formal talks concerning the protection of intellectual property rights (IPR) in China, the Chinese government has taken action against three pirate factories and issued a call for further controls on the country's CD industry.

On the eve of formal talks concerning the protection of intellectual property rights (IPR) in China, the Chinese government has taken action against three pirate factories and issued a call for further controls on the country's CD industry.

The government has revoked the business licences of the Chaoyang Jinfa CD Technology and the Zhongshan Yisheng CD Production, both based in Guangdong province. It also confiscated and destroyed pirated products and fined each company US$24,000.

Production has also been halted at the Guangxi Guilin Jindie Technology, which the government says had introduced two CD production lines without approval and is suspected of having produced pirated goods.

A spokesman for the Chinese government was unable to say whether any CDs produced at the factories had contained any software applications.

China is also reported to have closed several other factories in recent weeks.

The US and China are set to begin negotiations today on the IPR issue, just a few days before a deadline for the US to impose sanctions on China for its failure to live up to the terms of an IPR agreement signed in February 1995. Without satisfactory evidence of compliance, US officials say, Washington on June 17 will impose sanctions on Chinese goods to the tune of US$2 billion.

"We have confirmed that the Chinese are engaged in efforts to close pirate CD factories. Exactly how many factories have been closed and will be closed remains the subject of our verification efforts on the ground and our continued talks with the Chinese," Charlene Barshefsy, acting US Trade Ambassador, said yesterday in a statement.

"It remains to be seen whether the Chinese effort in this and other areas is sufficient to meet the terms of our agreement," she says. "I also want to ensure that there is an enforcement system in place to crack down on intellectual property piracy in the future."

Barshefsky will lead the US team in its talks in China.

In addition to the factory shutdowns, the Chinese government has decreed that it will not approve any new CD factories and that such factories already in operation without government approval must immediately cease production and sales. It puts the blame for newly built illegal factories on local and regional governments, which it says mistakenly authorised such activity.

"The move again shows the Chinese government's firm stand of protecting intellectual property rights and fighting copyright piracy," a government spokesman says in a statement.

The firmness of that stand is a matter of debate. In testimony before the US House of Representatives this week, Barshefsky expressed scepticism about China's ability to control intellectual piracy.

In spite of some measures, Barshefsky says, "China has not enforced key areas of the 1995 Intellectual Property Rights Enforcement agreement, including halting piracy at its source."

China's antipiracy actions have included seizures of illegal goods and some IPR court cases involving foreign rights holders. "Clearly, where Chinese officials have demonstrated resolve, they have shown that piracy can be brought under control," she says.

Barshefsky is calling for China to take four actions to come into line with the IPR agreement:

-- Take action against factories involved in the production of pirate CDs and CD-ROMs.

-- Intensify enforcement in areas of China, such as Guangdong province, where piracy continues to be rampant. China has largely directed its enforcement efforts against retail outlets, leaving manufacturers and distributers untouched, she says.

-- Take effective action to protect intellectual property at China's borders, particularly seizures of bulk cargo shipments mainly from Southern China through Hong Kong. China's Customs Service has conducted more than 1000 seizures, but mainly directed against foot traffic, she says.

-- Permit market access for US computer software, sound recording and motion picture products and companies.

The significance of the IPR issue extends beyond bilateral relations between the US and China, the world's fastest growing market, Barshefsky says.

"We are not the only nation for which the protection of intellectual property rights is important, and this is well known to China. We have not asked China to do anything more than what other Asian nations are already doing -- indeed, what China has already agreed to do," she says.

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