Chinese Law Prof Blog

More on Yahoo: House Foreign Affairs Committee investigates Yahoo's 2006 testimony

Yesterday I blogged here about new documents that have come to light in the Yahoo/Shi Tao case. These documents, if genuine, seem inconsistent with the congressional testimony of Yahoo's general counsel in February 2006. Now the House Committee on Foreign Affairs (CFA) is investigating. According to the Committee's August 3rd press release, the Committee is concerned that whereas Yahoo stated that when the request for information about Shi Tao was made it "had no information concerning the nature of the investigation," the documents show that the search warrant stated clearly that Shi was under investigation for leaking state secrets.

According to an Aug. 7th report in the Financial Times, a Yahoo spokesman has responded that "the description of the investigation was too vague to give the internet company any clue about its real nature, and that the disclosure of the document therefore supported [general counsel] Mr Callahan's statement before the House committee last year." (I'm quoting the FT, not Yahoo.)

Once again, it seems, the complex structure of Yahoo's East Asian operations is confusing people and diverting attention from an important issue. Forget about the debatable issue of how much information the search warrant really provided. What the CFA's press release does not notice, and what the Yahoo spokesman does not deny, is that the documents (again, if genuine) appear to refute conclusively Yahoo's explicit contention, made elsewhere in general counsel Callahan's testimony, that the Yahoo entity named Yahoo Holdings (Hong Kong), Ltd. (Yahoo HK) had nothing to do with any of this, and that the information demand was made to (and the information supplied by) Yahoo's Chinese-incorporated entity. The documents show that the demands were addressed in one case to Yahoo HK's Beijing representative office, and in another case simply to Yahoo HK generally. They also show that in at least one case, information was supplied by Yahoo HK (or at least the document has a Yahoo HK stamp on it).

This is more than just a technical issue. If Yahoo HK released the information, it may have violated Hong Kong privacy laws. And as I argued in my post yesterday, Yahoo HK is really in no different position vis-a-vis the PRC authorities than the US parent, where many people (including me) have e-mail accounts.

US requests WTO panel in case challenging China's IPR laws

The request was announced in a USTR press release dated Aug. 13, 2007. This means that the required consultations did not produce a solution and that the US has now taken the next step.

Here's the full text:

United States Requests WTO Panel in Case Challenging Deficiencies in China’s Intellectual Property Rights Laws

08/13/2007

WASHINGTON, D.C. – The Office of the U.S. Trade Representative announced today that the United States has requested the World Trade Organization (WTO) to establish a dispute settlement panel, the next step in its WTO case challenging deficiencies in China’s legal regime for protecting and enforcing copyrights and trademarks on a wide range of products.

“The United States and China have tried, through formal consultations over the last three months, to resolve differences arising from U.S. concerns about inadequate protection of intellectual property rights in China.  That dialogue has not generated solutions to the issues we have raised, so we are asking the WTO to form a panel to settle this dispute,” said USTR spokesman Sean Spicer.  “It is in the best interest of all nations, including China, to protect intellectual property rights.  Over the past several years China has taken tangible steps to improve IPR protection and enforcement. However, we still see important gaps that need to be addressed.  We will pursue this legal dispute in the WTO and will continue to work with China bilaterally on other important IPR issues.”

In pursuing this action, the United States is seeking to eliminate significant structural deficiencies that give pirates and counterfeiters in China a safe harbor to avoid criminal liability.  The United States is also seeking to improve enforcement procedures at China’s border, and to give copyright owners more tools to prevent the production of unauthorized copies in China.  The United States requested WTO dispute settlement consultations with China over these issues in April.  The United States and China held consultations in early June.  China has not, however, taken any steps that address these U.S. concerns during this period.

The U.S. panel request will be considered by the WTO Dispute Settlement Body at its next meeting, which is scheduled for August 31.

Background

The United States initiated dispute settlement proceedings over deficiencies in China’s legal regime for protecting and enforcing copyrights and trademarks by requesting consultations with China on April 10, 2007.  Consultations were held on June 7-8, 2007.  Under WTO rules, the WTO Dispute Settlement Body (DSB) will consider the U.S. request for establishment of a panel at its next meeting, which is scheduled for August 31, 2007.

The U.S. panel request alleges violations of various provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) related to three aspects of China’s IPR regime.  First, the request challenges quantitative thresholds in China’s criminal law that must be met in order to start criminal prosecutions or obtain criminal convictions for copyright piracy and trademark counterfeiting.  Wholesalers and distributors are able to operate below these high thresholds without fear of criminal liability, so these thresholds effectively permit piracy and counterfeiting on a commercial scale.

Second, the panel request addresses the rules for disposal of IPR-infringing goods seized by Chinese customs authorities.  Those rules appear to permit goods to be released into commerce following the removal of fake labels or other infringing features, when WTO rules dictate that these goods normally should be kept out of the marketplace altogether.

Third, the panel request addresses the apparent denial of copyright protection for works poised to enter the market but awaiting Chinese censorship approval.  It appears that Chinese copyright law provides the copyright holder with no right to complain about copyright infringement (including illegal/infringing copies and unauthorized translations) before censorship approval is granted.  Immediate availability of copyright protection is critical to protect new products from pirates, who – unlike legitimate producers – do not wait for the Chinese content review process to be completed.

This is one of five WTO cases the United States has brought against China and the third case against China where the United States has requested a WTO dispute settlement panel.  The United States requested a panel in September 2006 to examine China’s regulations imposing local content requirements in the auto sector through discriminatory charges on imported auto parts; panel proceedings in that dispute are underway.  In July 2007, the United States requested a panel regarding several subsidy programs the United States believes are prohibited under WTO rules; the panel request in that dispute is pending before the DSB.   In the market access dispute , which concerns Chinese market access barriers affecting copyright intensive industries (movies, music, home entertainment videos, publications), the United States has just completed  supplemental consultations with China and is considering next steps.  China settled the fifth case, concerning discriminatory taxes on semiconductors, during WTO consultations in 2004.   

Yahoo really in the soup now?

I previously blogged here and elsewhere about the case of Shi Tao, the Yahoo subscriber whose account information was turned over to the Chinese authorities by a Yahoo-affiliated entity (exactly which one is still apparently disputed), resulting in his prosecution and imprisonment. In April, Shi and others filed suit against Yahoo! Inc. and Yahoo! Holdings (Hong Kong), Ltd. ("Yahoo (HK)"). This (and the passage of time) has resulted in the coming to light of interesting evidence.

In particular, the role of Yahoo (HK) now seems undeniable. The original PRC court judgment stated that the information regarding Shi Tao had been supplied by Yahoo (HK) - i.e., not by the Chinese-incorporated Yahoo entity, which I shall call Yahoo China. But in Feb. 2006 testimony before Congress, Yahoo! Inc.'s general counsel Michael Callahan categorically denied Yahoo (HK)'s involvement:

Let me take this opportunity to correct inaccurate reports that Yahoo! Hong Kong gave information to the Chinese government. This is absolutely untrue. Yahoo! Hong Kong was not involved in any disclosure of information about Mr. Shi to the Chinese government. In this case, the Chinese government ordered Yahoo! China to provide user information, and Yahoo! China complied with Chinese law. To be clear - Yahoo! China and Yahoo! Hong Kong have always operated independently of one another. There was not then, nor is there today, any exchange of user information between Yahoo! Hong Kong and Yahoo! China.

Mr. Callahan also stated, "When Yahoo! China in Beijing was required to provide information about the user, who we later learned was Shi Tao, we had no information about the nature of the investigation."

So was the PRC court judgment just wrong when it said the information came from Yahoo (HK)? The Dui Hua Foundation has now posted some interesting documents on its web site. Among them is a copy of search warrant (literally, "evidence collection notice"; I'm just roughly translating here) dated  April 2004 provided by the Beijing Municipal State Security Bureau demanding "Email account registration information for huoyan1989@yahoo.com.cn, all login times, corresponding IP addresses, and relevant email content from February 22, 2004 to present." The addressee? Not Yahoo China, but Yahoo (HK)'s Beijing representative office. Moreover, the warrant clearly states that the search was for evidence of suspected unlawful provision of state secrets to a foreign entity.

Here are some more relevant documents:

• Dui Hua web site post discussing the search warrant (July 25, 2007)
• Dui Hua web site post discussing additional evidence of Yahoo's role in Chinese internet cases (July 30, 2007)
• April 2002 "evidence collection notice" addressed to Yahoo (HK) in the Wang Xiaoning case
• Yahoo (HK)'s August 2002 response providing evidence in response to another request in the Wang Xiaoning case

The evidence of Yahoo (HK)'s involvement seems pretty conclusive, assuming of course that these documents are authentic. If it was Yahoo (HK) that provided the information, then while one can understand that it may have been under pressure, its position is really no different relative to the PRC from Yahoo! Inc., the US parent. Does the US parent propose to hand over information on its users to the security authorities of any country that puts pressure on its operations or employees in that country? Yahoo! Inc. has not to my knowledge ever clearly answered this question.

Thanks to the Dui Hua Foundation for providing these documents.

China Financial Markets blog

For those interested in - you guessed it - Chinese financial markets, I highly recommend Michael Pettis's blog, China Financial Markets. Pettis is a former New York-based investment banker and adjunct professor at Columbia who now teaches full time at Beijing University's Guanghua School of Management. The blog also comments frequently on issues in US-China financial relations such as the valuation of the Renminbi and the bilateral trade balance. I think it's an excellent antidote to much of the complete nonsense that passes for common knowledge in both Beijing and Washington. See, for example, the series of posts entitled "Good for the US, Less Good for China."