Fighting China’s Pirates, Legally

Robert Portman, the new U.S. trade representative, got an earful about Chinese intellectual property piracy during his recent confirmation hearing. There are reports almost daily about Chinas failure to comply with the [World Trade Organizations] provisions on intellectual property rights, fumed Sen. Max Baucus. Its a blatant infringement. We all know it, and nothings being done. For his part, Portman acknowledged that what China does with our movies and music and software is pirating. Its theft. He promised an immediate top-to-bottom review of all of our trade issues with China. Tough action, he suggested, was imminent.

Before putting on the boxing gloves, Portman may want to consider another approach: boosting Chinas own legal reform movement. This year, Chinas Supreme Peoples Court will issue its second five-year reform plan. The reform plan is part of a broader restructuring and modernization of Chinas legal system that has been under way since 1979. In the long run, helping China develop a strong and independent justice system may be a more effective strategy for ensuring intellectual property (IP) rights than sanctions or lawsuits.

The most critical task for Beijing is to stop local politicians and Communist Party groups from managing the finances and personnel of local courts. Control of the purse strings allows these officials to systematically influence judges. Political interference of this sort will almost certainly undermine Chinese commitments to protect IP rights, because local officials usually have an incentive to protect powerful local commercial interests. In 2002, the Communist Party pledged to reform the financing and staffing of courts, giving Chinese law experts hope that such reform would be the focus of the upcoming judicial reform plan. But its not clear that Beijing has the political will to follow through on its promise.

Almost as important is establishing a system for reviewing the legality and constitutionality of legislation. Without an independent judiciary peering over the legislatures shoulder, Chinese politicians will be tempted to circumvent their international obligationsincluding IP protectionsthrough lax national legislation. Under current Chinese law, judges have trouble reviewing legislation on their own. If they are uncertain about the validity of a piece of legislation, they are required to seek advice from their higher-ups, who in turn usually consult senior officials and party members. It is a system ripe for abuse. Chinas national legislature claims that it established a body to review the constitutionality of legislation in 2004, but its transparency and independence are in doubt.

Like many other legal systems, Chinas tries to acknowledge the social effects that legal rulings can have. The concepts of legal effects (falu xiaoguo) and social effects (shehui xiaoguo) resemble the Anglo-Saxon common law ideas of law and equity, but they have yet to be clearly defined by Chinese authorities. The problem is that often inadequately trained judges attempting to interpret very poorly written legislation are pressured by the Communist Party to use the concept of social effects to make party policies trump the law. Without proper guidance, the concept of social effects opens yet another door for interference with the legal process.

The more fundamental challenge is convincing Chinese judges that they are more than simple government functionaries. Many judges live in fear of making wrong decisions. A judgment that is reversed on appeal or sent back for retrial is often seen as evidence of poor judgment rather than a reflection of differing, but legitimate, interpretations of the law. To avoid making mistakes and being disciplined, judges seek instructions from higher-ranking colleagues whenever they encounter difficulties. This informal top-down influence tends to dampen the independence and status of lower court judges. Perversely, these judges often write as little as possible to minimize their exposure to criticism. One scholar in Shanghai observed, Judges in Shanghai . . . can give critical comments during private conversations. But their judgments look so silly because they dont want to make mistakes. The more they write, the more easily they will get caught.

If a change in attitude is part of what Chinas judges need, more resources are also required for improving the countrys justice system. As of November 2003, only approximately 65 percent of police officers at the county level and police chiefs across the country had received legal training. Only two thirds of all judicial staff in China received training during the period from 1998 to 2002. Beijing would be pleased to see the United States offer more resources to train judges and officials and improve legislation in China, especially in the countrys poor west.

Portmans negotiating prowess and ability to see the other sides perspective have drawn praise. He no doubt understands that China will be more receptive to recommendations and assistance on legal reform than to trade sanctions. Yet making that view heard over the shouts in congress for immediate sanctions will require persistence and political courage. The idea that the United States should aid legal reform in China even as Chinese companies pirate American intellectual property will be hard for many elected leaders in the United States to swallow.

At the confirmation hearing, Portman explicitly connected trade to the administrations broader push for freedom around the world. Trade, he said, is central to [the U.S.] freedom agenda. An essential element in a free society is the rule of law, and the United States would do well to recognize that China is still very much in the process of constructing it. Helping China down that road is the surest route to protecting American business interests for the long term.