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Music Industry Reacts To USTR Report On Nations With Inadequate IP Protections

**China Still Among Worst Offenders, Baidu Biggest Obstacle To Legitimate Digital Commerce in China, Says RIAA**

**Brunei Shows Progress While Russia, Spain and Canada Still Fail To Adopt Meaningful IP Protections**

WASHINGTON – The Office of the United States Trade Representative (USTR) today released its annual “Special 301” report [http://www.ustr.gov/about-us/press-office/press-releases/2010/april/ustr-releases-2010-special-301-report-intellectual-p] which addresses intellectual property rights issues and practices in 41 nations and highlights the most significant problems facing U.S. intellectual property owners in those foreign markets. The Recording Industry Association of America (RIAA)’s Neil Turkewitz, Executive Vice President, International, offered the following comments on the report.

“This year’s report continues to focus attention on the need for a more robust global response to internet piracy. We hope that U.S. trading partners will indeed take up this critical issue -- particularly some of the most economically developed countries where legislation has failed to keep pace with the requisites of modern society such as Canada and Spain. This past year has witnessed a number of countries moving towards innovative solutions to enhance the level of accountability and security in online commerce, including France, the UK and New Zealand, and we encourage all governments to closely examine their legal and regulatory structures to ensure that all reasonable steps are being undertaken to enhance legitimate commerce and to expand opportunities for the creative community to provide global audiences with access to legal materials. Digital communications media can fuel global cultural production and allow individual creators to reach global audiences. Whether the internet and other digital platforms reach their potential to fuel a renaissance in cultural production is wholly dependent upon whether they operate on the basis of legal market conditions. At present, traffic on the net consists predominantly of infringing materials, thereby undermining rather than fueling cultural production and diversity. This must be reversed.”

The Baidu and China Story

“As has been the case for the past few years, enforcement issues in China remain atop USTR's and our agendas. The physical marketplace for music and other copyrighted materials has been mired in piracy for some time, and we place great importance on avoiding the same situation with respect to the online market. Sadly, all current signs suggest that the online market is replicating the same kind of problems that have affected the physical environment -- poor enforcement, government toleration of open and notorious theft, and a myriad of discriminatory market access barriers that undermine the ability to provide legitimate materials to the Chinese public. The time has come for China to end its history of poor intellectual property enforcement, and to operate in accordance with international standards.

“China has more broadband internet users than the United States. Nevertheless, due to piracy primarily fueled by Baidu and other discriminatory market access barriers -- the online sale of legitimate music in China remains seriously depressed -- reaching only $9 million in 2009. That is a fraction of the approximately $2 billion of legitimate online sales in United States last year. The Chinese government has permitted a fast-growing array of illegal websites, “cyber lockers,” and “deeplinking” search engines which connect users directly to illegal content. Deeplinking services provide an estimated 50 percent of pirate music files in China. By far the largest such Chinese service is Baidu. 

“Amazingly, Baidu does not deny that its activities promote copyright theft.  In various SEC disclosures, Baidu acknowledges that it maintains a music service that is dependent upon providing links to infringing materials.  In its disclosure, Baidu reflects on the importance of its infringing music service to the totality of the company:

A significant portion of our traffic is generated by users of our MP3 search service. According to Alexa.com, 16% of our traffic went to mp3.baidu.com, our MP3 search platform, as of March 31, 2006. Should we face (as a result of the foregoing considerations or otherwise) a need or decision to substantially modify, limit, or terminate our MP3 search service, our business, financial condition or results of operations could be materially and adversely affected.

“This is brazen and notorious theft. Despite the Chinese government’s many public assurances that it is committed to combating copyright piracy, it has thus far chosen to do nothing about Baidu’s admittedly infringing activities. The precise activity in which Baidu is engaged has already been held to be infringing in a decision rendered against Yahoo!cn. Regrettably, a court has recently ruled that Baidu is not jointly liable for the infringement that it facilitates and from which it generates profits. This decision has been appealed, and we encourage the Chinese government to take immediate action to end this obvious injustice that harms U.S. and Chinese creators alike.”

Russia, Canada, Spain and Korea

“In addition to identifying countries whose legal or enforcement regimes are inadequate - most notably China, Russia, Canada and Spain -- this year’s report also identifies some key ‘notorious markets’ which are generally known as hotbeds of piracy but which have not been adequately addressed by host governments. These include virtual markets such as Baidu’s music service, the allofmp3 clones operating in Russia and Ukraine, and the "webhards" or locker services operating in Korea. The allofmp3 clones continue to operate without interference from government, despite the fact that they are commercial operations that claim patently bogus licenses from rogue societies. We hope that the Russian and Ukrainian governments will take immediate action to end these operations. The Korean "webhards" “or “cyberlockers” are a form of closed file sharing system in which pirates store their unauthorized files online and distribute passwords to the storage facilities to would-be downloaders. The downloaders usually “pay” for access through “cybercash” credits administered by the web-hard operator. These are a blight in an otherwise improved online climate in Korea, and we hope that their continued operations in Korea are short-lived.”

Bright Spots

“There are some bright spots to note. Less than a year and half ago, we petitioned USTR to place Brunei on the Priority Watch List for having one of the worst enforcement records in the world. Since that time, the Brunei government has worked closely with the music industry and has done a commendable job in addressing the problem of music piracy -- so much so that we had not recommended that they be placed on any list this year. The Brunei government is to be congratulated for its extraordinary progress. In a similar vein, this year USTR accepted RIAA’s recommendation that the Czech Republic be taken off the 301 list for its work in addressing music piracy at its many border markets, and we congratulate the Czech government for its achievements while we caution that it must be vigilant to ensure that the problem does not return.”

Work of Ambassador Kirk and his team making a difference

“We thank Ambassador Kirk, his dedicated team, and all of those officials at agencies throughout the government who pour their hearts and souls into defending the integrity of intellectual property in global markets. They know that this mission is critical not only in economic terms, but in maintaining the creativity and innovation that forms the very foundation of our country. The production of cultural materials reflects and defines us as a nation, and we express our gratitude to the various officials in the Administration and Congress who understand this, and who fight to preserve and expand our continued ability to drive creativity and innovation."


The Recording Industry Association of America (RIAA) is the trade organization that supports and promotes the creative and financial vitality of the major music companies. Its members comprise the most vibrant record industry in the world. RIAA® members create, manufacture and/or distribute approximately 85% of all legitimate recorded music produced and sold in the United States.

In support of this mission, the RIAA works to protect the intellectual property and First Amendment rights of artists and music labels; conduct consumer, industry and technical research; and monitor and review state and federal laws, regulations and policies. The RIAA® also certifies Gold®, Platinum®, Multi-Platinum™ and Diamond sales awards as well as Los Premios De Oro y Platino™, an award celebrating Latin music sales.

Jonathan Lamy
Cara Duckworth
Liz Kennedy