[Congressional Record Volume 150, Number 97 (Wednesday, July 14, 2004)]
[House]
[Pages H5682-H5687]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  URGING THE GOVERNMENT OF PEOPLE'S REPUBLIC OF CHINA TO IMPROVE ITS 
               PROTECTION OF INTELLECTUAL PROPERTY RIGHTS

  Mr. BALLENGER. Mr. Speaker, I move to suspend the rules and agree to 
the resolution (H. Res. 576) urging the Government of the People's 
Republic of China to improve its protection of intellectual property 
rights, and for other purposes, as amended.
  The Clerk read as follows:

                              H. Res. 576

       Whereas in 2001, the People's Republic of China agreed to 
     implement a set of sweeping reforms designed to protect 
     intellectual property rights;
       Whereas since 2001, China initiated a series of measures 
     and a comprehensive review of its intellectual property 
     rights laws to bring itself in compliance with international 
     standards in patent, trademark, copyright, trade secret, and 
     other intellectual property laws;
       Whereas central and local Chinese Government officials 
     continue to work with their counterparts in the United States 
     to improve China's intellectual property rights enforcement 
     through regular bilateral discussions, roundtable meetings, 
     and numerous technical assistance programs;
       Whereas China has initiated campaigns to seize illegal and 
     pirated goods, closed or fined several assembly operations 
     for illegal production lines, seized millions of illegal 
     audio-visual products, and expanded training of law 
     enforcement officials relating to intellectual property 
     rights protection;
       Whereas although China has made significant improvements to 
     its framework of law, regulations, rules, and judicial 
     interpretations regarding intellectual property rights, its 
     intellectual property rights enforcement mechanisms still 
     face major obstacles, which have resulted in continued 
     widespread piracy and counterfeiting of film, recorded music, 
     published products, software products, pharmaceuticals, 
     chemical products, information technology products, consumer 
     goods, electrical equipment, automobiles and automotive 
     parts, industrial products, and research results throughout 
     China;
       Whereas such widespread piracy and counterfeiting in China 
     harms not only the economic development of China but also the 
     economic and legal interests of United States business 
     enterprises that sell their products or services in China, 
     whether or not these United States business enterprises have 
     invested in China or ever will invest in China;
       Whereas United States losses due to the piracy of 
     copyrighted materials in China is estimated to exceed 
     $1,800,000,000 annually and counterfeited products to account 
     for 15 to 20 percent of all products made in China, 
     approximately 8 percent of the country's gross national 
     product;
       Whereas the market value of counterfeit goods in China is 
     between $19,000,000,000 and $24,000,000,000 annually, causing 
     enormous losses for intellectual property rights holders 
     worldwide;
       Whereas the export of pirated or counterfeit goods from 
     China to third country markets causes economic losses to 
     United States and other foreign producers of patented, 
     trademarked, and copyrighted products competing for market 
     share in those third country markets;
       Whereas current criminal laws and enforcement mechanisms 
     for intellectual property rights in China by administrative 
     authorities, criminal prosecutions, and civil actions for 
     monetary damages have not effectively addressed widespread 
     counterfeiting and piracy;
       Whereas administrative authorities in China rarely forward 
     an administrative case relating to intellectual property 
     rights violations to the appropriate criminal justice 
     authorities for criminal investigation and prosecution;
       Whereas China currently has high criminal liability 
     thresholds for infringements of intellectual property rights, 
     with an unreasonable proof-of-sale requirement totaling 
     approximately $24,100 for business enterprises and $6,030 for 
     individuals (according to current exchange rates) that makes 
     criminal prosecution against those enterprises or individuals 
     that violate intellectual property rights extremely 
     difficult;
       Whereas seizures and fines imposed by Chinese authorities 
     for intellectual property rights violations are perceived by 
     the violators to be a cost of doing business and such 
     violators are usually able to resume their operations without 
     much difficulty;
       Whereas China has the second largest number of Internet 
     users in the world, it still has not acceded to the 1996 
     World Intellectual Property Organization (WIPO) Internet-
     related treaties that reflect international norms for 
     providing copyright protection over the Internet;
       Whereas China's market access barriers for United States 
     and other foreign cultural products such as movies, music, 
     and books

[[Page H5683]]

     stops or slows the legal entry of these legitimate products 
     into China, in turn increasing the demand for pirated 
     products; and
       Whereas United States Trade Representative, Ambassador 
     Zoellick, and Secretary of Commerce Evans co-chaired an 
     expanded Joint Commission on Commerce and Trade Meeting 
     during Chinese Vice Premier Wu Yi's visit to the United 
     States in April 2004 that led to the Chinese Government's 
     commitment to an action plan to address the piracy and 
     counterfeiting of American ideas and innovations: Now, 
     therefore, be it
       Resolved, That the House of Representatives--
       (1) commends the Government of the People's Republic of 
     China for the steps it has taken to improve its legal 
     framework for intellectual property rights protection and for 
     efforts to bring itself toward compliance with international 
     standards for intellectual property rights;
       (2) recognizes Chinese Government's renewed commitment 
     through an action plan presented at the 2004 United States-
     China Joint Commission on Commerce and Trade to significantly 
     reduce intellectual property rights infringement levels by 
     increasing penalties for intellectual property rights 
     violations, cracking down on violators, improving protection 
     of electronic data, and launching a national campaign to 
     educate its citizens about the importance of intellectual 
     property rights protection;
       (3) further recognizes, despite the steps referred to in 
     paragraph (1) and paragraph (2), the continued existence of 
     widespread intellectual property rights violations in China;
       (4) urges the Chinese Government to closely adhere to its 
     action plan referred to in paragraph (2) in undertaking a 
     coordinated nationwide intellectual property rights 
     enforcement campaign, and to further eliminate the high 
     criminal liability threshold and procedural obstacles that 
     impede the effective use of criminal prosecution in 
     addressing intellectual property rights violations, to 
     increase the criminal penalties provided for in its laws and 
     regulations, and to vigorously pursue counterfeiting and 
     piracy cases;
       (5) encourages the Chinese Government to fully and 
     comprehensively implement a legal framework and effective 
     enforcement mechanisms that would protect not only 
     intellectual property rights held by United States and 
     foreign business enterprises with or without investments in 
     China, but also Chinese intellectual property rights holders, 
     which is crucial to China's own economic development and 
     technological advancement;
       (6) urges the Chinese Government to give greater market 
     access to the foreign producers of legitimate products such 
     as films and other audio-visual products in order to reduce 
     demand for and prevalence of pirated and counterfeit goods in 
     their absence; and
       (7) will continue to monitor closely China's commitment and 
     adherence to its action plan on intellectual property 
     protection presented during the 2004 United States-China 
     Joint Commission on Commerce and Trade, and work with the 
     Administration to further encourage China's efforts to bring 
     its framework of laws, regulations, and implementing rules 
     into compliance with international law and to create and 
     maintain effective intellectual property rights enforcement 
     mechanisms capable of deterring counterfeiting and piracy 
     activities.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
North Carolina (Mr. Ballenger) and the gentleman from California (Mr. 
Lantos) each will control 20 minutes.
  The Chair recognizes the gentleman from North Carolina (Mr. 
Ballenger).


                             General Leave

  Mr. BALLENGER. Mr. Speaker, I ask unanimous consent that all Members 
may have 5 legislative days within which to revise and extend their 
remarks and include extraneous material on H. Res. 576.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from North Carolina?
  There was no objection.
  Mr. BALLENGER. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of House Resolution 576, urging the 
government of the People's Republic of China to improve its protection 
of intellectual property rights, and I would like to thank the 
gentlewoman from California (Ms. Watson) for introducing this 
resolution.
  Mr. Speaker, the unprecedented scale and speed of China's ongoing 
modernization commands the world's attention. Given the immensity of 
that country, its transformation cannot but have a profound effect and 
impact well beyond its borders. All of those witnessing China's rebirth 
understand that its actions and ambitions will become increasingly 
central factors in determining the fortunes of the 21st century.
  As China assumes an ever more prominent role in the international 
system, it remains uncertain if this will be matched by an acceptance 
of responsibilities commensurate with the increasing power it has. Of 
immediate importance is its willingness to abide by a network of 
agreements and rules that underlie the international trade system, 
which operates by consensus and relies heavily on voluntary compliance 
with its many provisions.
  If this system is to work, cooperation cannot be restricted to 
selected areas of individual advantage but most extend across the 
whole. For that reason, China's entry into the World Trade Organization 
was a milestone in the country's development and signaled a welcome 
commitment to adopting and enforcing its comprehensive rules and 
agreements.
  China's stake in the health of the global economic system is readily 
apparent. The country's transformation has been financed largely 
through direct investment from outside the country and by an ever-
increasing deluge of exports above all to the United States.
  Our annual trade deficit with China has grown every year and now 
exceeds $100 billion, making the United States the indispensable source 
of capital for rapid economic development. Given this reality, it is a 
matter of great concern that the extent of China's commitment to 
upholding the rules underpinning the system remains ambiguous, 
especially in the area of intellectual property rights. The protection 
of these rights is of great and growing importance to many developed 
countries whose economies are increasingly composed of knowledge-based 
industries, with the U.S. leading the list.
  The piracy of copyrighted materials is a global problem, including in 
our own country, but nowhere is the problem greater than in China. It 
is estimated that 60 percent of all goods imported into the United 
States that infringe on intellectual property rights originated in 
China. In that country, an estimated 20 percent of all manufactured 
products are counterfeits. Although the Chinese government has adopted 
increasingly comprehensive legislation and regulation to address this 
issue, these will remain largely empty gestures unless enforced.
  Here the situation is far less positive. One can walk down virtually 
any street in Chinese cities and be assaulted by English offers of 
pirated videotapes and other illegal products in full view of police 
and other authorities. The blame for this open flouting of this law is 
often ascribed to laxity or even complicity by local governments over 
which the central authorities claim to have insufficient control, but 
this assertion is difficult to accept.
  Few would point to China as an example of a country in which the 
government is too weak to enforce its own laws. We have witnessed 
repeated examples of energetic, even harsh measures taken against those 
who would defy the central authorities. It is impossible to believe 
that if China's leaders decided to rein in this open defiance of the 
law that it could not do so and do so quickly.
  We are confident that, being rational, the Chinese authorities will 
eventually realize that a relentless pursuit of self-interest that does 
not accommodate the interests of others cannot be sustained. But until 
that acceptance occurs, it is incumbent upon us to maintain sufficient 
pressure on China and other countries harboring these illegal 
activities to ensure that their costs from tolerating violations are as 
tangible as many benefits that they now enjoy.
  That is why this resolution is both timely and necessary. It 
recognizes the genuine progress that China has made in the area of 
protecting intellectual property rights but couples with this the 
several specific recommendations that the Chinese government must adopt 
if it is to demonstrate its genuine commitment to the protection of 
intellectual property rights.
  It would be difficult to find a better or more precise issue by which 
to judge Chinese leadership, determination on their part to play by the 
rules of the game in the international trading system, and thereby 
discern the nature of its intended participation in the international 
system as a whole.
  Mr. Speaker, I reserve the balance of my time.
  Mr. LANTOS. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I rise in strong support of this resolution, and I urge 
my colleagues to support it as well.
  At the outset, let me pay tribute to my dear friend, the gentlewoman 
from

[[Page H5684]]

California (Ms. Watson), the author of this resolution, who has done so 
much to protect intellectual property rights across the globe.
  Mr. Speaker, a new generation of policymakers have ascended to power 
in Beijing and with their growth of influence China has begun to play a 
more responsible and constructive role on the international stage. But 
as China has assumed its new global commitments, a yawning gap has 
emerged between Chinese government promises and the reality on the 
ground.
  Mr. Speaker, the stark contrast between China's far-reaching 
international trade commitments and the harsh treatment afforded 
American companies trying to sell to China is just the latest example 
of this enormous credibility gap; and, unfortunately, Mr. Speaker, 
unless senior Chinese officials recognize that they must live up to 
their international trade commitments, hundreds of thousands of 
American workers will lose their jobs.
  Mr. Speaker, the United States trade deficit with China continues to 
grow at an alarming rate. Last year, in 2003, we had a $124 billion 
deficit with China, the largest ever posted with any country on the 
face of this planet. The deficit further widened this January to almost 
$12 billion.
  The matter before the House, sponsored by my good friend, the 
gentlewoman from California (Ms. Watson), addresses one of the main 
reasons for this alarming deficit, the systematic and widespread piracy 
and counterfeiting of copyrighted U.S. materials in China. Fully 15 to 
20 percent of all products made in China are counterfeited products. 
The market value of these goods in China is estimated to be at least 
$24 billion.
  This massive criminal enterprise makes it virtually impossible for 
U.S. patent holders to sell their goods in China and causes them 
further economic losses when China exports pirated goods to third 
countries.
  The gentlewoman from California's (Ms. Watson) measure demands that 
China undertake a coordinated nationwide intellectual property rights 
enforcement campaign as well as implement a legal framework to protect 
both American and Chinese intellectual property.
  Mr. Speaker, I strongly urge the regime in Beijing to pay attention 
to this demand. The U.S. Congress will not tolerate the continued theft 
of American intellectual property on a massive scale by the Chinese, 
while the United States is exporting good manufacturing jobs to China 
by the millions. I urge all of my colleagues to vote for this important 
initiative.
  Mr. Speaker, I reserve the balance of my time.

                              {time}  1315

  Mr. BALLENGER. Mr. Speaker, I yield 4 minutes to the gentleman from 
Indiana (Mr. Souder).
  (Mr. SOUDER asked and was given permission to revise and extend his 
remarks.)
  Mr. SOUDER. Mr. Speaker, I rise today on behalf of the manufacturers 
in my home State who already have not been run out of business by 
unfair Chinese competition. It is bad enough that China continues to 
abuse human rights, that they bully Taiwan, they deny workers' rights 
in China; but we have seen a regular manipulation of their currency 
that has resulted in unfair competition to the tune of up to 40 percent 
in the cost of many goods.
  I have manufacturers in my district that cannot get the raw materials 
for the goods for the costs that the Chinese are selling it. That, by 
definition, is dumping. They are selling in the United States for under 
the cost of goods for even just the basic raw materials.
  We need not just rhetoric out of this Congress. We need an actual law 
passed that says when they manipulate the currency that countervailing 
duties are immediately imposed. The administration has been working 
with dumping lawsuits, but they take up to 3 years. By that time our 
companies are long gone. Many of these manufacturers are very small; 
and by the time they steal the private intellectual property rights 
over the time that they dump illegally into our country, the 
manufacturers are gone. They are the little guys. They cannot afford 
attorneys that go for 3 years. They are laying off their employees, and 
even then they do not know how to fight or how to get big enough to 
fight.
  We in Congress need to be more aggressive, or we will not have a 
manufacturing base left. We can talk about our national defense, and we 
will not have a national defense.
  Now, intellectual property is important not only to movies, not only 
to music, but to manufacturers. I have a company in my district that 
makes the fasteners that go on our containers. We talk about the 
importance of international trade and security and how we are trying to 
push that security out to Singapore and into China so we have 
preclearance before it hits our harbors.
  Our security is only as safe as the sealant on the containers. The 
American companies will give us the numbers of the seals so we can 
trace to see whether people are cheating, but the Chinese manufacturers 
will not; and the reason they will not is because they have stolen the 
intellectual property rights for, for example, this seal. These are 
four Chinese companies that have duplicated this seal even with 
``shinning fortune,'' they meant to say ``shining fortune.'' They 
spelled it ``shinning.'' They copied it and stole it. We now cannot 
track the containers because they have stolen intellectual property 
rights. They have put American companies and workers out of business, 
and that makes our national security more difficult.
  We have to understand that unless we fight for intellectual property 
rights, unless we fight for our manufacturers, we cannot talk about 
free trade if it is not fair; and it has to be fair, or it is just a 
false promise that when we say we are going to have international trade 
we are all going to be better by the international trade. Free trade 
must be fair. This resolution is a start, but we do not need this 
resolution. We need some laws.
  Mr. LANTOS. Mr. Speaker, I am delighted to yield as much time as she 
might consume to the distinguished gentlewoman from California (Ms. 
Watson), the author of this legislation.
  (Ms. WATSON asked and was given permission to revise and extend her 
remarks, and include extraneous material.)
  Ms. WATSON. Mr. Speaker, I want to thank the gentleman from 
California (Mr. Lantos), the ranking member, my good friend and very 
distinguished Member of the House, and the gentleman from North 
Carolina (Mr. Ballenger) for supporting H. Res. 576, a bipartisan 
resolution urging the government of the People's Republic of China to 
improve its protection of intellectual property rights, Mr. Speaker. I 
would also like to thank them for their leadership and their diligence 
in bringing the bill to the floor for consideration.
  Mr. Speaker, H. Res. 576 is a balanced and responsible piece of 
legislation. It recognizes China's efforts to deal with the serious 
problems of intellectual property violations, as well as encourages 
China to redouble its efforts to rectify a serious problem that results 
in the loss of revenues, according to the USTR's most recent figures, 
in excess of $2.5 billion yearly to U.S. companies and manufacturers.
  The resolution recommends that the Chinese government implement more 
effective customs and border measures to prevent exportation of pirated 
goods into the United States and into other countries. It encourages 
the Chinese government to fully and comprehensively implement a legal 
framework to protect intellectual property rights; and it urges the 
Chinese government to give greater market access to foreign producers 
of legitimate products to reduce the demand for counterfeit goods.
  In crafting H. Res. 576, my staff shared the text of the resolution 
with various Federal Departments and agencies, including the State and 
Commerce Departments, U.S. Customs, the U.S. Copyright Office, USTR, 
and the United States Patent and Trademark Offices. In many instances, 
changes suggested by these various entities have been incorporated into 
the final version of H. Res. 576.
  Mr. Speaker, I will submit for the Record at this point letters that 
I have received from Marybeth Peters, register of copyrights from the 
United States Copyright Office; and Douglas Lowenstein, the president 
of Entertainment Software Association, in support of H. Res. 576.

[[Page H5685]]

                                            U.S. Copyright Office,


                                          Library of Congress,

                                   Washington, DC, March 30, 2004.
     Hon. Diane E. Watson,
     House of Representatives,
     Washington, DC.
       Dear Representative Watson: I am pleased to have this 
     opportunity to respond to your request for the Copyright 
     Office's views regarding H. Res. 576. I wholeheartedly agree 
     that consideration of the problem of copyright infringement 
     in China is especially important and timely.
       The Copyright Office has actively engaged our counterparts 
     at the National Copyright Administration of China (NCAC) for 
     over twenty years in an effort to foster better understanding 
     and improve the protection of copyrighted works in China. Our 
     most recent exchange was earlier this month, when we hosted a 
     delegation led by Deputy Director General Wang Ziqiang of the 
     NCAC for a one week symposium on the protection and 
     enforcement of copyright. The delegation included officials 
     from the central government in Beijing, officials from 
     several of China's provinces with authority for the 
     enforcement of copyright, and judges who hear copyright 
     infringement cases.
       The Copyright Office also plays a crucial role in the 
     United States' bilateral trade relations with China. We 
     advise the Congress, the U.S. Trade Representative's Office, 
     and other federal agencies on copyright protection and 
     enforcement and we participate in trade talks held both in 
     the U.S. and in China.
       Over the years, we have worked with China as it has 
     transformed itself from a country that did not even have a 
     copyright law into a WTO member. But we have also been 
     dismayed by the persistent and overwhelming problem of 
     copyright infringement in China. The U.S. copyright 
     industries continue to report piracy rates of at least 90% 
     across the board in China. This fact, combined with the size 
     of the Chinese market and the growing problem of the export 
     of pirated products from China, threatens, if gone unchecked, 
     to deluge markets in the region and around the world with 
     cheap, illegal copies of American products.
       Despite these threats, many American companies continue to 
     invest in the Chinese market. I believe that this is 
     indicative of the business opportunities in China. Thus, I 
     see both a crisis of piracy and great opportunity. H. Res. 
     576 eloquently captures a balanced and realistic assessment 
     of the situation in China and the Copyright Office supports 
     it and hopes that it will be adopted. It is important for the 
     Chinese Government to understand that the United States 
     recognizes that much has been done, but also that it sees how 
     much remains to do and how important it is to finish the job.
       Please feel free to contact me again on this or any other 
     copyright matter.
           Sincerely,
                                                  Marybeth Peters,
     Register of Copyrights.
                                  ____

                               Entertainment Software Association,


                                Washington, DC, July 12, 2004.

     Hon. Diane Watson,
     Hon. Henry J. Hyde,
     Hon. Tom Lantos,
     House of Representatives,
     Washington, DC
       Dear Representatives, On behalf of the Entertainment 
     Software Association (ESA), our member companies, and the 
     thousands of individuals employed in our industry who are 
     impacted by the scourge of worldwide intellectual property 
     piracy, I would like to take this opportunity to voice our 
     appreciation and to pledge our strong support for your 
     leadership on H. Res. 576, an important measure addressing 
     the need for stronger intellectual property protection and 
     market access in China.
       Entertainment software--including video and computer games 
     for video game consoles, personal computers, handheld 
     devices, and the Internet--is a rapidly growing industry with 
     $7 billion in U.S. sales in 2003 and a $20 billion global 
     market for games. There is a large and growing demand for 
     entertainment software in China. As an example, in China's 
     more than 200,000 Internet cafes, where the vast majority of 
     the Chinese people obtain online access, it is estimated that 
     60 percent of the activity involves game play. However, also 
     China has a serious entertainment software piracy problem. We 
     estimate that 97 percent of all personal computer 
     entertainment software is pirated, while 75 percent of all 
     console products, such as those for the Sony 
     Playstation' and 99 percent of all handheld 
     products, such those for the Nintendo Gameboy' are 
     also pirated. Piracy at these extreme levels makes it 
     extraordinarily difficult to build legitimate distribution 
     and sales.
       Addressing these myriad piracy problems will require high-
     level leadership so that china can adhere to its 
     responsibilities as a WTO member and depart from its past 
     history of piracy problems. Criminal enforcement, including 
     raids, must include fines and imprisonment severe enough to 
     serve as a deterrent to copyright crimes. There must also be 
     criminal enforcement against criminal associations engaging 
     in elaborate enterprises in copyright crimes. China should 
     adopt measures similar to Hong Kong's Organized and Serious 
     Crime Ordinance (OSCO) and should treat copyright crimes 
     similarly to other forms of criminal activity. Internet 
     piracy issues should also be addressed, and China should 
     adopt the WIPO treaties, including their effective 
     prohibitions against the circumvention of technological 
     protection measures (TPMs).
       At the same time, entertainment software publishers who 
     enter the market are hindered in their ability to compete 
     with pirates. They face growing threats of import quotas and 
     other market restrictions. Protracted censorship reviews, 
     often requiring several months to complete, give pirates the 
     opportunity to sell unapproved pirated product long before 
     legitimate games are released. Policies such as these only 
     fuel the demand for pirated product.
       Again, we want to thank you for your leadership on this 
     issue and we look forward to continuing to work with you and 
     your staffs to shed further light on the I.P. piracy problem 
     in China and on the need to improve the situation in that 
     country.
           Sincerely,
                                               Douglas Lowenstein,
                                                        President.

  Both letters have offered unqualified support for the resolution and 
for the resolution's recognition that much remains to be done with 
respect to addressing the need for stronger intellectual property 
protections and greater market access in China.
  Mr. Speaker, I represent the 33rd Congressional District of Los 
Angeles and Culver City, which contains a number of major entertainment 
companies, including Sony Studios, Capitol Records, Raleigh Film and 
Television Studios, and the American Film Institute. Each one of these 
companies, as well as countless residents throughout the greater Los 
Angeles area, are directly impacted by the scourge of IPR infringement.
  The protection of U.S. intellectual property rights abroad and at 
home is especially crucial to the health and the vitality of the U.S. 
entertainment sector, which brings in an estimated $535 billion to the 
U.S. economy and remains one of the Nation's largest export sectors. 
The loss of revenues from IPR infringement affects the income levels 
and pocketbooks of not only my constituents but countless other 
Americans across our Nation.
  In the case of China, U.S. companies continue to lose more than $2.5 
billion a year due to the piracy of copyrighted materials. Amazingly, 
counterfeit products account for 15 to 20 percent of all products made 
in China, approximately 8 percent of its GNP. Counterfeit and pirated 
items that originate in China include, but are not limited to, movies, 
recorded music, published products, software, pharmaceuticals, 
electrical equipment, industrial products, apparel, auto parts, and 
automobiles.
  With respect to entertainment software, one of the most explosive 
sectors of growth, the Entertainment Software Association estimates 
that 97 percent of all personal computer entertainment software is 
pirated in China, while 75 percent of all console products, such as 
those for the Sony PlayStation, and 99 percent of all handheld 
products, such as those for the Nintendo Gameboy, are also pirated. 
That is 99 percent.
  As the Entertainment Software Association knows, ``Piracy at this 
extreme level makes it extraordinarily difficult to build legitimate 
distribution and sales.''
  Moreover, many of these counterfeit products end up reentering our 
domestic U.S. market in ever-increasing quantities. In fact, the Office 
of U.S. Immigration and Customs Enforcement estimates that over 60 
percent of all pirated goods it seizes originate in China. This is a 
staggering and sobering statistic; and as anyone can see, IPR theft has 
reached epidemic levels in China, and its adverse impact is being 
directly felt by American producers, consumers, and workers in terms of 
loss of revenues and wages.
  Mr. Speaker, in closing, I want to briefly note the recent 
commitments made by the government of China during the April meeting of 
the U.S.-China Joint Commission of Commerce and Trade. While the 
government of the People's Republic of China is to be commended for the 
steps it has committed to taking to reduce significantly the incidence 
of piracy by the end of this year, H. Res. 576 most importantly puts 
Congress on record that it will continue to monitor closely China's 
commitment and adherence to its action plan and IPR protection and 
enforcement and that it will work with the administration to further 
encourage China's efforts to bring its framework of laws, regulations 
and implementing rules into compliance with international law.
  Mr. Speaker, I thank the gentleman for the time.

[[Page H5686]]

  Mr. LANTOS. Mr. Speaker, I am delighted to yield 5 minutes to my good 
friend, the distinguished gentleman from Oregon (Mr. DeFazio).
  Mr. DeFAZIO. Mr. Speaker, I thank the gentleman from California for 
his time and the gentlewoman from California for her excellent work on 
this legislation.
  To echo the words of the gentleman from Indiana who preceded me in 
the well, this is a good step but it is not an adequate step. I would 
differ only in that he said we need more laws. We do not need more 
laws. We need to enforce the existing laws.
  I was one who voted against Permanent Most Favored Nation status for 
China because I thought the only leverage we had over them to stop them 
from this piracy was the annual renewal of that trade status. The 
argument of the prevailing side was, well, now they will be in the WTO 
and they will have to follow the rules; and in fact, that has been 
pursued successfully once.
  One time the administration has filed one complaint against the 
largest pirate of U.S. copyright patents and materials in the world, 
China, which was on a tax benefit extended to semiconductors; and, in 
fact, that worked. China backed off, although they are going to phase 
out this subsidy. I think they should have them immediately end it, but 
in any case that step did yield some results.
  The administration is now raising concerns about Viagra, but it is 
not raising concerns about Videx. What is Videx? Videx is a little 
dream company in my district, started by a former Hewlett-Packard 
employee, started up in his garage, now employs directly more than 60 
people and hundreds of other people in the production of his product, 
all done in the United States of America. Videx produces two different 
systems, a coding system that is not based on bar codes, but a 
different system, which is very successful, and now a new electronic 
locking system.
  One day they got a call from their distributor in China. They had 
filed for Chinese patent protection, Chinese trademarks, had done 
everything according to Chinese law, and they got contacted by their 
distributor in China. They were very concerned and they did not 
understand why they had chosen to have another distributor. They 
thought they had exclusive rights. They said, what are you talking 
about? They found out that their entire company had been cloned in 
China, including the Web site. In fact, the Chinese went one better. 
They had little tiny American flags waving up on top of the building on 
the phony Videx Web site.

                              {time}  1330

  Everything. They used the U.S. copyright and even translated U.S. 
copyright patent into Chinese in stealing the software. And they made a 
crappy product.
  So it not only cost them market share because of the counterfeiters, 
the counterfeiters also besmirched the name and quality of their 
product. And now the Chinese fakes are beginning to market this beyond 
China.
  I have contacted everyone I can in the administration, including the 
Commerce Secretary and the Special Trade Representative. I have 
introduced legislation. I have raised this issue many times. It has 
been noted on the Lou Dobbs Report. We have gotten as much publicity as 
we can. And the only result is that Videx, in my district, has been 
contacted by dozens of other United States firms around the country 
saying exactly the same thing happened to us. Our company, our product 
was stolen by the Chinese. We had registered it, we had followed all 
the rules, and the administration will do nothing, nothing to help us.
  And that is the current status we have here. Yes, they have stood up 
for the semiconductor giants and got some concessions from the Chinese. 
They are going to stand up for Pfizer and Viagra, but not for Videx, 
for the American dream, for small business, for dozens of companies 
like Videx around America who need the strong support of the United 
States Government to fight Chinese piracy.
  This resolution is good. It will note the concern of Congress. But 
firmer steps are necessary.
  I have introduced companion legislation to a bill in the Senate by 
Senator Lautenberg that would force the United States Trade 
Representative to file complaints against Chinese piracy. It is one 
thing that we are losing jobs because they have dirt-cheap labor, they 
do not follow environmental rules, and they should fix that, but it is 
another thing when they are outright stealing the intellectual 
property, the copyrights, and putting Americans out of business through 
theft. That has to stop.
  This legislation is a start, but we need to take more action and the 
administration needs to take action in this area.
  Mr. LANTOS. Mr. Speaker, I yield myself such time as I may consume, 
and in closing I urge all my colleagues to support this very important 
legislation.
  Mr. Speaker, I yield back the balance of my time.
  Mr. BALLENGER. Mr. Speaker, I yield myself such time as I may consume 
to close.
  A great deal has been said about the inactivity of our Federal 
government with regard to Customs and the inspection of imports, so I 
would like to deliver a special knowledgeable story that I know about.
  In my own hometown of Hickory, North Carolina, we have 47 hosiery 
mills, and they were being worked against substantially by imports from 
China and South Korea. We also have a little place called Catawba 
Valley Technical Institute, where we invested money to train people as 
to how to take apart a pair of hose and find out what the makeup of 
that hosiery is; in other words, if it is 60 percent cotton and 40 
percent wool, they can find out for sure.
  We started checking the imports being brought into our hometown and 
found none of them matched what they said on the labels. So I called up 
a lady named Ms. LaBuda, who happened to be at that time the new 
Customs person in our Federal government, and told her about this.
  Within several days, I got a panicked phone call from a person that I 
had known for years who happens to own a couple of hosiery mills in 
Hickory, North Carolina. He said, ``Cass, you have to do something for 
me. I am in real trouble.''
  So I asked him what the problem was, and he said, ``Well, Customs has 
seized two containers of my goods coming in.'' So I asked where they 
were coming from. He said, ``Well, we buy a little bit from China, and 
we have hired other people.'' I think personally he hired one or two 
people just so he could say that. But, anyway, they had one or two 
containers held up and he said that they were making them wait until 
they could test the hosiery out.
  So I asked him what the makeup of the hosiery was supposed to be. He 
said, ``I'm not sure about that. But I wonder if you could check them 
and ask them what is the hosiery made of.'' Polyester in China is very 
cheap. So he said, ``And find out what the makeup is, the percentages, 
and so forth, and we will change the labels.'' I said, well, unless I 
am mistaken, that is not quite legal.
  So here we have the Customs agents actually doing something positive. 
This same lady, because of AGOA, went to Kenya, in Africa, and she 
trained the people in Kenya as to how to inspect goods coming through. 
Because AGOA was designed to help African people, not Chinese people, 
shipping goods through Africa. Well, these people were trained by her. 
She reported to me that they caught two container loads of goods coming 
from China going through Kenya. They stopped the goods, they checked 
the goods out, and they dumped them in the ocean.
  What I am trying to say is that our government is doing things. It 
may take a little time, but if there were more people like Gladys 
LaBuda working for Customs, we would be in great shape.
  Mr. Speaker, I yield back the balance of my time.
  The SPEAKER pro tempore (Mr. Miller of Florida). The question is on 
the motion offered by the gentleman from North Carolina (Mr. Ballenger) 
that the House suspend the rules and agree to the resolution, H. Res. 
576, as amended.
  The question was taken.
  The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of 
those present have voted in the affirmative.

[[Page H5687]]

  Mr. LANTOS. Mr. Speaker, on that I demand the yeas and nays.
  The yeas and nays were ordered.
  The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the 
Chair's prior announcement, further proceedings on this motion will be 
postponed.

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