US-China Copyright Rift: Easing?

President Clinton met with Chinese President Jiang Zemin yesterday with thunderclouds on the horizon: military-security and human-rights concerns, and a burgeoning bilateral trade deficit - now bigger than the US imbalance with Japan. And the two leaders are at odds over the terms for China to join the World Trade Organization.

On one US-China controversy, however, there may be a silver lining.

A little progress has been made on copyright infringement, which US music, video, and computer software companies say has been costing them an estimated $2 billion a year.

In July, China signed an agreement with the US to respect international intellectual property rights.

Chen Song Ming, vice general manager at the one compact-disc factory in Shenzhen, China, says the nation has taken serious steps to implement the agreement. Not so long ago, the Shen Fei Laser Optical Systems Company was making pirate copies of American movies. A Hong Kong company claimed to have legal permission to manufacture them, according to a plant official, but the license was a phony. US pressure forced the closure of this factory, and it reopened only recently.

Now, Mr. Chen says, this factory carefully checks all licenses through a central office in Beijing.

"This system insures that we produce only legal CDs," he claims.

Shenzhen, the special economic zone located next to Hong Kong, has been home to many such US-China copyright disputes.

Although the issue has dropped out of the news headlines since the July agreement, US businesses aren't sure that much progress has been made.

"The level of pirated products has gone down somewhat" since July, says Eric Smith, president of the International Intellectual Property Alliance, based in Washington. "But it's still a big problem." He says Beijing must crack down harder on local governments that continue to allow piracy.

Copyright protection is a fairly new concept in China. As recently as the mid-1980s, Beijing had the traditional communist view that intellectual property belongs to all the people. Chinese authors received a salary from the government and their books could be reprinted without paying royalties.

Unify Corp., a Silicon Valley firm, recently won a deal for millions of dollars in back payments from Chinese companies and government agencies for illegal software. The Chinese also agreed to buy new upgrades. But Mr. Smith says other American firms may have a hard time cutting such deals.