Piracy: China Still in the Game

Nov. 15, 2010 — -- Whether there is illegally-copied computer software for sale on the streets of Beijing or "designer" merchandise offered to Americans online, China continues to be a major player when it comes to piracy.

"They aren't just selling counterfeit clothing or electronics," U.S. Attorney General Eric Holder said at an intellectual property conference in Hong Kong last week, according to Reuters. "They're selling defective and dangerous imitations of critical components, like brake pads, or everyday consumer goods, like toothpaste. They're conducting corporate espionage. They're pirating music, movies, games, software and other copyrighted works -- both on our cities' streets and online. And the consequences are devastating."

Last year, U.S. customs and other law enforcement agents made nearly 15,000 seizures of counterfeit goods, 80 percent of which came from China.

John Morton, director of Immigration and Customs Enforcement (ICE), said piracy poses a triple threat to the United States.

"It robs industries of jobs, steals American innovation and know-how and fuels organized crime. It affects literally every segment of U.S. manufacturing and production and badly undermines U.S. competitive strength as an economic powers," he said.

ICE has offices in 46 countries including China, which he said was a chief source of counterfeit, pirated products, despite U.S.-Chinese efforts to combat the problem.

"The rise of the Internet has added a new domain to the problem," Morton said. "Before it was the corner of Fourth and Main. ... Perfume on street corners. ... Now you have occurrences in the cyberworld."

He said that counterfeiting had gotten worse and that the Internet had allowed for rapid growth.

"It's not just a teen downloading a song or a movie," Morton said in an interview with ABCNews.com. "It's about an assault on the economic fiber of the entertainment industry. About whether the engine in the aircraft you're flying on contains counterfeit parts. Whether medicine over the Internet is real, is safe."

China: Principle Source of Piracy

Although Morton said China was a principal source of piracy and counterfeiting annually, the ICE director said he saw lots of positive signs that the country was moving toward change, especially as China becomes a more sophisticated economy producing its own goods.

"China needs to work through laws, intellectual property laws," he said. "International partnerships are critical. One of the main things we [the U.S.] can do is set a good standard, work with international partners to do the same, and assist with training and the writing of better laws."

Software Companies Fight for Copy Right

Eric Smith, co-founder of the International Intellectual Property Alliance, said the U.S. lost more money in China because of unlicensed software than counterfeit imports. Smith has worked with China and the U.S. on copyright laws for 20 years. His group is made up of seven trade associations, including the Motion Picture Association of America.

"The software industry market is basically a business market," he said. "The amount of government use is pretty high."

Last month, Microsoft CEO Steve Ballmer slammed China and its government for rampant software piracy and said that businesses were the biggest offenders, according to GamePolitics.com.

Smith put the piracy rate of software in China at 82 percent -- eight out of 10 software products in use are unlicensed. Software includes everything from computer programs to movies, music and video games. He said it was a continuing problem because the Chinese government refused to criminalize software piracy.

"There is a lack of deterrent enforcement in China," he said. "China has not been great in bringing criminal action against pirates. The government has simply failed to devote energy and resources to dealing with the problem. Any kind of deterrent would get results."

Though the country enforces intellectual property laws through administrative ministries, these organizations only find the offender and then fine them very small fees. Smith said the threshold was quite high for an offender to be tried criminally.

Internet No. 1 Piracy Problem

Like ICE's Morton, Smith said the Internet was the No. 1 problem. "It's out of this world," he said of Internet piracy. "It pays to be a pirate."

He said that besides the dangers of U.S. consumers downloading viruses attached to illegal software, the U.S. economy suffered a loss of revenue and jobs.

"The copyright industry employs 5 percent of U.S. jobs -- it should be 10 percent," he said. "If piracy was more under control, it would create more jobs and revenue."

Reuters and The Associated Press contributed to this article.