entitled, "Rules of Supreme Court on Several Issues Concerning the Application of Law in Adjudication of Civil Disputes Related to Infringement of Right of Communication Over Information Networks," which, according to industry, has led to an unexplained drop in online infringement lawsuits. As of mid-2012, there were more than 500 million Internet users in China. Despite national campaigns and the leadership of the Leading Group, widespread piracy affects industries involved in the distribution of legitimate music, motion pictures, books and journals, video games, and software. For example, industry reports that in 2010 the value of digital music sales in China was $48.8 million, compared to $178.4 million in South Korea, and $68.9 million in Thailand, which is a country with less than five percent of China's population and a roughly equivalent per capita GDP. Similarly, over 90 percent of the revenue generated by U.S. films in China comes in the form of box office revenues, compared to 25-30 percent in the United States. This difference is partly due to widespread piracy of motion pictures over the Internet and on optical discs. Online piracy extends to scientific, technical, and medical publications as well.
Parties in China are also facilitating online infringement, in China and third countries, through media box piracy. Manufactured in China and exported abroad, media boxes can be plugged directly into televisions. They enable the user to stream and download infringing online audio and visual content. The vast majority of the infringing websites to which media box users connect are reportedly located in China. The United States urges China to continue efforts to improve IPR protection and enforcement in this area.
Counterfeit Goods
Despite increased enforcement efforts, problems with counterfeiting in China remain widespread. A partial list of commonly counterfeited goods includes food and beverages; apparel, footwear, and accessories; consumer electronics, computers and networking equipment; entertainment and business software; batteries; chemicals; appliances; and auto parts. Impacts are not limited to lost sales volumes and damage to the reputation of the trademark owner. For example, higher defect and failure rates among counterfeit semiconductors may cause malfunctions in the equipment in which they are incorporated, which may include medical devices, vehicle safety and braking systems, and other critical applications. As one measure of the scale of the problem, products from China accounted for 72 percent of the value of the IPR infringing products seized by U.S. Customs in fiscal year 2012.
Rights holders report increased enforcement activities, mostly but not exclusively on behalf of local brands. Rights holders also report a limited, although noticeable, reduction in counterfeiting, demonstrated in part by the reduced visibility of counterfeit products in some major retail and wholesale markets. Enforcement efforts have not, however, slowed the sale of counterfeits online. Rights holders report that local Administrations for Industry and Commerce (AICs) typically confine their efforts to physical markets. While both the State Administration for Industry and Commerce and local AICs have called on online trading websites to improve notice-and-takedown procedures, these measures have not significantly deterred repeat and large-scale offenders who, after postings are removed because of a takedown notice, quickly place new postings offering the same infringing goods. It is reported that, shortly after the Trademark Law is revised, the Supreme People's Court may issue a judicial interpretation to address these concerns.
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