Officials: China needs to do more to combat intellectual property theft

The United States made unprecedented strides during the past year in combating what remains a huge problem of piracy in China, federal officials told lawmakers on Tuesday.

Ties between the two countries have frayed lately over China's handling of intellectual property rights, currency policy and access to Chinese markets, prompting the House Ways and Means Committee to hold a hearing on U.S.-China relations.

"In the last year China has made more progress than ever before," said Ambassador Demetrios Marantis, deputy U.S. trade representative, "but the proof is in the pudding" and "piracy rates are unacceptable."

American companies lost $48.2 billion in 2009 from intellectual property theft in China, including digital content stolen through computer break-ins, according to the International Trade Commission. Federal, state and local governments lost $2.6 billion in tax revenue due to online piracy, according to the Institute for Policy Innovation.

But China has taken some measures to prohibit pirated software in government agencies and state-owned enterprises and has instituted a software asset management program, Marantis said. "We are beginning to notice a small uptick in [legal] sales, but again it's a real problem and we don't think China is doing enough," he added.

Officials also are concerned the country is blocking the legitimate trade of U.S. technologies. To address the U.S.-China trade imbalance, the United States has turned to World Trade Organization policies to unlock e-commerce in China, Marantis said.

"Policies in China that limit access to Internet-based services can hinder U.S. companies' ability to effectively compete in that market," he testified. "Invoking China's WTO transparency obligations, we recently formally asked China for detailed information on Chinese measures that affect the supply of services over the Internet to Chinese customers."

Lael Brainard, Treasury undersecretary for international affairs, said at the hearing that her department also is focused on uprooting piracy in China.

China has pledged to ensure agencies are using legitimate software by conducting more inspections of government computers, she said.

"[Intellectual property] goes to the heart of America's competitive advantage," Brainard said. Gains have been made on "the software legalization issue, where we're just going to have to keep at it."