2011 report to congress - U.S.-China Economic and Security Review ...

83scious policy seeking to drive Chinese competitiveness while permittingfree access to foreign content through unapproved piratechannels.’’ 292 Says the Alliance:High copyright piracy levels persist in China, from pervasiveuse of unlicensed software by businesses and pre-installationof unlicensed software (hard disk loading piracy)at the distribution level, to widespread online piracy ofmusic, films, television programming and other copyrightmaterials, and piracy of hard goods. . . . China’s principalreliance on its woefully under resourced administrative systemto deal with IPR [intellectual property rights] infringementsrather than through criminal enforcement presents asignificant hurdle to effective enforcement. 293Among the remedies suggested by the United States and requiredby the WTO 294 during negotiations with China is the greateruse of criminal penalties rather than administrative fines, whichare too often levied at a nominal rate and are absorbed by Chinesecounterfeiters as a cost of doing business.A Case Study: The Rise of Internet Piracy in ChinaThe increased use of the Internet to market and to sell productsand services has also created a new and hard-to-trace pathwayfor illicit sales of copyrighted software. The case of music piracyoffers an illustration of how the Internet eventually couldfacilitate lawbreaking on a massive scale in other informationtechnology sectors, such as business software. In the case ofmusic, Chinese government statistics indicate that nearly 80 percentof listeners use the Internet to obtain music. And nearly allmusic downloads are pirated. ‘‘Legitimate [music] content is notmade available in significant quantities online in China due tothe prevalence of piracy, market access restrictions, and otherdiscriminatory measures which effectively keep legitimate contentout,’’ according to Michael Schlesinger of the InternationalIntellectual Property Alliance.In addition, music piracy in China is facilitated by official tolerancefor websites, such as the search engine Baidu, that directsusers to infringing content and is supported by advertising.The website has promised to end the practice of providing piratedmusic but only in the case of music with a Chinese copyright.295 As a result, the International Intellectual Property Allianceestimates the piracy level for music in China on the web is99 percent. 296 Many of the same websites and techniques used todistribute pirated music can be employed to distribute piratedbusiness software, including Internet auction sites, peer-to-peersites, BitTorrent sites, and social networking sites. 297China’s 457 million Internet users constitute the largest groupof computer users in the world, most of them with broadbandconnections. Two-thirds of them use mobile phones to surf theweb for music downloads.dkrause on DSKHT7XVN1PROD with $$_JOBVerDate Nov 24 2008 13:46 Nov 10, 2011 Jkt 067464 PO 00000 Frm 00095 Fmt 6601 Sfmt 6601 G:\GSDD\USCC\2011\067464.XXX 067464