I've been wading through this case over the last couple of days (difficult to do in the evening when you're still struggling with jet lag). I am writing up a summary for work, but I thought that a few blog entries might help to clarify my thoughts. As there were three major sets of claims in the case, I'll do three posts, starting with the copyright claim today.

Caution: this is rather esoteric IP law, so if you choose not to partake, I will not feel slighted. For die-hard China watchers, you may want to muddle through, as the issue is quite interesting since it involves not only copyright protection but the related effects of China's censorship of copyrighted works.

1. Intro

The United States claims that China is acting inconsistently with its obligations under the TRIPS Agreement by denying the protection of its Copyright Law to creative works of authorship (and, to the extent Article 4 of the Copyright Law applies to them, sound recordings and performances) that have not been authorized for, or are otherwise prohibited from, publication or distribution within China. (Panel report, p. 15).

At the time this case was filed, my initial reaction was "WTF is this all about"? I wasn't aware of this issue, could not find anything relevant in the Copyright Law, and no one I asked could tell me anything. Well, with the panel report, at least that mystery is solved.

Here's the issue: the first sentence of Article 4 of China's Copyright Law states the following:

Works the publication and distribution of which are prohibited by law shall not be protected by this Law. (依法禁止出版、传播的作品，不受本法保护。)

FYI, the translation of "传播" I have uses "distribution," but for the purposes of the case, they eventually went with "dissemination." Upon reflection, I like the latter better as "distribution" suggests a narrower activity than "dissemination." You also see "传播" translated as "transmission," as in the case of copyrighted works being "transmitted" over the Internet.

Anyway, back to Article 4 — yeah, that language is the basis of all this furor. The reason I hadn't heard about this before (and neither had a lot of other people) is that the dispute does not spring from a number of ongoing disputes. It is more of an academic, or theoretical, discussion of what could happen in the future if Article 4 is applied in such a way that the U.S. considers inconsistent with WTO's TRIPS Agreement.

In a nutshell, the worry is that the protections of the Copyright Law will not be available for works prohibited by law. The panel report includes some long discussions regarding the meaning of "prohibited by law" and "protections of the Copyright Law" by the way. However, it is not too difficult to think about where all this comes from. Suppose you are a movie studio, record label, or book publisher and you find that your work, which may not even have been licensed for distribution in China, is being infringed upon. In other words, copies are being sold illegally. The worry is that these guys will go into court against the infringer but will be thwarted by Article 4 because of the content of the work. For example, if the movie Dark Knight cannot be licensed into China because it is deemed too violent, yet infringers are selling DVDs on every street corner, the copyright owner may not be able to stop that activity.

Simple, right? (Actually, that is a gross over-simplification but is hopefully understandable.)

2. U.S. Argument

The United States claims that Article 4(1) of China's Copyright Law denies to the authors of works "the publication or distribution of which is prohibited by law" the broad set of rights enumerated in Article 10 of the Copyright Law, which largely encompasses the rights contemplated by the provisions of the Berne Convention (1971). Nor do authors of works denied protection of the Copyright Law benefit from the remedies specified in Articles 46 and 47 of the Copyright Law. Consequently, the authors of such works do not enjoy the minimum rights that are "specially granted" by the Berne Convention[.] (Panel report, p. 23.)

To simplify: China promised to uphold certain IP laws when it joined WTO. Those laws, which reflect/incorporate international copyright law, require protection for copyrighted works. Article 4 denies those protections, and there is no provision in international law/WTO law that allows for Member States to carve out an exception for works whose content is prohibited.

This is a central point, which is kind of interesting is you're an IP geek or if you think censorship is interesting. Should prohibited content enjoy copyright protection?

3. China Argument

I found this to be particularly bizarre:

China responds that copyright vests upon creation and is independent of publication. Article 2 of the Copyright Law grants full copyright protection by expressly incorporating into Chinese law the rights conferred under international agreements, including the Berne Convention and the TRIPS Agreement.
. . .

China submitted that Article 4(1) of the Copyright Law did not affect the vesting of copyright under Article 2 of that Law. China asked the Panel to note that under the Chinese system of copyright, "copyright" and "copyright protection" are distinguishable. To the extent that Article 4(1) of the Copyright Law would come into play with respect to a work, it would operate not to remove copyright, but to deny the particularized rights of private copyright enforcement. (Panel report, p. 24.)

You got that? Copyright vests automatically, and Article 4 has no effect on that. So if I make a movie offshore, I enjoy the copyright to the work. If that movie does not pass censorship in China for import purposes, I still enjoy the copyright; however, I will be denied the right to enforce that copyright against third parties.

4. Resolution

The U.S. government found the distinction between copyright and copyright enforcement to be nonsensical, and the Panel ultimately agreed with them, ruling in favor of the U.S. — I agree with the result. Although this seems rather obvious to me, here is what the Panel had to say about it, so you get the official determination:

The Panel considers that the distinction drawn by China is inapposite. It appears to be a consequence of the rule that the enjoyment and exercise of copyright shall not be subject to any formality whilst the denial of protection, in China's view, is subject to a formal determination. Even accepting the distinction at face value, it does not properly address the situation after a court or the NCAC has denied protection to a work under Article 4(1) of the Copyright Law. It is difficult to conceive that copyright would continue to exist, undisturbed, after the competent authorities had denied copyright protection to a work on the basis of the nature of the work and the prohibition in the Copyright Law itself. (Panel report, p. 32.)

Yep. If you can't enforce your copyright, it's kind of hard to say that you actually still own the IP right.

5. Final Note

The above, believe it or not, is a highly simplified version of the Panel Report. There is a lot more nuance there, and many arguments back and forth between the parties regarding China's Copyright Law, the Berne Convention, and TRIPS. Not much point in going through all that on a blog, though.

One final issue that I thought was interesting regards content control and IP enforcement. One of China's arguments is that because it excercises strict content controls in the first place, this is a de facto measure against third party dissemination of unauthorized works, and therefore this obviates the need for copyright owners to excercise their rights against infringers in these cases.

Example — let's use Dark Knight again. I own the distribution rights to the movie Dark Knight, which is deemed too violent and scary for the China market (i.e. it can't be imported). The Chinese government is saying that because the film cannot be imported, the PSB or AIC will ensure that no one is distributing the movie at all. And because the government is so good at this sort of thing, I (the copyright holder) have nothing to worry about.

Kinda reminds me of an old M*A*S*H episode (I'm dating myself here). The hospital was being shelled by U.S. artillery. The docs called up battalion HQ and complained about it. The response was that since the army wouldn't attack its own hospital, they must be mistaken — they weren't being fired upon at all. I think the phone blew up at that point.

So . . . prohibited content may not be disseminated in China. The authorities are good at their jobs. Therefore, if you see Dark Knight sold on the street corner, you must be mistaken. Must be some other movie.

The next "exciting" installment will be on the customs issue. Hopefully I'll get to that tomorrow.