GENEVA — The World Trade Organization adopted a dispute panel judgment Friday that ruled largely in favor of a U.S. complaint that some Chinese measures fail to adequately protect and enforce intellectual property rights and breached global copyright and trademark rules.

This story first appeared in the March 24, 2009 issue of WWD. Subscribe Today.

The new U.S. Trade Representative, Ron Kirk, hailed the decision and said “the United States will not hesitate to use all appropriate tools at our disposal to ensure our domestic industries, authors and artists are protected. I look forward to China’s prompt compliance.”

During a session of the WTO’s dispute settlement body, the U.S. delegation said it has been concerned for some time “that levels of counterfeiting and piracy remain unacceptably high.”

The International Intellectual Property Alliance, an umbrella group, has conservatively estimated piracy losses exceeded $3.5 billion in China in 2007, the most recent figures available.

The panel found China failed to protect copyrighted works that did not meet its content review standards and also that China’s laws exclude some copyright and trademark infringements from criminal liability. The panel “correctly concluded that China’s criminal thresholds are so high as to exclude criminal procedures and penalties for some commercial activity,” the U.S. delegation said.

The panel agreed with the U.S. that the term “commercial scale” in the WTO rules means China “cannot set its threshold for prosecution of piracy and counterfeiting in a manner that ignores the realities of the marketplace.” But it concluded that while it did not endorse China’s threshold, the evidence presented by the U.S. side was “inadequate” to show whether the cases that China excludes under its thresholds involved activity on “a commercial scale.”

The threshold for criminal prosecution under Chinese law is if the trademark counterfeiting or copyright piracy exceeds $7,000 worth of infringed goods or 500 copies of pirated works.

The Chinese delegation countered that like any other country “it does not have a perfect record on protection and continues to face difficulties and challenges.”

“We have won on major points, and on the others we can change the law,” said a senior Chinese official.

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