China claimed a moral victory as it almost managed to wriggle out of World Trade Organization piracy ruling, bought against it by the US. Welcoming the verdict regarding its dispute on the severity of "threshold" for criminal prosecution, China regretted the WTO's decision to rule against the country two other cases involving copyright protection and auctioning of counterfeit goods.
The WTO panel of judges gave a fovurable judgment to the US in two of the three cases bought by the US in 2007, while deciding in China's favour regarding changing its laws that lets off counterfeiters from criminal prosecution.
The mixed ruling brings the US close to obtaining billions of dollars as compensation from China on the money it lost through piracy every year although China and the US can still appeal the rulings that went aginst them.
The WTO ruled in favour of the US on patent and copyright protections after movie makers, music and software companies complained that they lost nearly $2 billion in 2006 as their products were being pirated by the Chinese and the government was turning a blind eye to these activities.
Lobby groups representing Microsoft, Walt Disney, and Vivendi said that the movie, music and software companies in the US lost more than $3 billion in sales in 2007.
The US argued that China was clearly breaching WTO guidelines regarding protecting intellectual property rights because the thresholds in China for successful criminal prosecution of people who pirate copyrighted products is very high that the companies have no choice but to allow sales of these products in the market.
The WTO ruled that China, which allowed the reintroduction of seized counterfeit goods in the market by merely removing the label and trademark, must now destroy all counterfeit software and movies and give legal protection to foreign goods.
But the US lawyers failed to convince the panel of judges on the main sticking point on the thresholds for criminal prosecution of counterfeiters who counterfeit copyrighted goods in China, which has been the main agenda of the complaint during the past four years.
The WTO panel's report said "the US has not established that the criminal thresholds are inconsistent with China's obligations under the first sentence of Article 61 of the TRIPS Agreement."
On commentator said that the Chinese laws on counterfeiting are so lax that if Beijing cannot solve the problem of pirating in its own domestic industries, how one can expect it to solve on foreign products.
China's Ministry of Commerce said in a statement that it ''welcomed'' the WTO ruling on the threshold for criminal prosecution, while it ''regretted'' the decision to rule against the country on the issues relating to copyright protection and auctioning of counterfeit goods.
Analyst feel that for the US, this issue has become more important than the currency issue and has the potential of becoming a major irritant in the US-China relations, who is seeking protection of patents for its home company products like auto parts, handbags, which are copied by the millions and pharmaceuticals.
The Chinese ministry of commerce also said that the Chinese authorities always gave great importance to protecting intellectual property rights and in the past 30 years had made great changes in IPR laws, enforcement, education and international cooperation.
But if one takes a round to Shenzhen, in the Guangdong province, foreign visitors will be shocked to see fake copies of Apple's iPhone and mobile phones having logos of Nokia spelt as 'Nokla' and 'Suny' products of Sony displayed in shops and sold for one-fifth the price of the original branded product.
The counterfeit products is known as 'Shanshai' originally referred to the mountain fortresses of bandits, who disregarded the numerous Chinese dynasties and nowadays a lot of Chinese view these counterfeit products as a symbol of anti-establishment and give their whole hearted support to these goods.
These counterfeit goods churned out by the millions in the factories of Guangdong province have similar functions as the original and is bought out one or two months after the release of these products in the West.
According to Yazhou Zhoukan, a Hong Kong magazine, more than 100 million shanzhai goods are produced annually in the Guangdong province and it is not that the Chinese authorities are not aware of these counterfeit products but has done little to stop it even though it loses money in value-added-tax.