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Innovation and copyright protection in the USA and China: a model for cooperation.

Introduction

With the Internet penetrating all aspects of human society, developed countries like the USA and developing countries such as China find it imperative to launch and enforce relevant policies concerning the effective protection of their IPR both at home and abroad, online and offline. However, there have been issues with the imbalance between the protection of copyrighted IPR and the promotion of innovation. There also exist problems with the implementation of the one-size-fits-all international IPR policies between highly industrialized countries like those members of the Organization for Economic Cooperation and Development (OECD) and those less developed countries. For instance, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires that all developing-country members of the World Trade Organization (WTO) agree to observe the stringent WTO norms of IPR protection established by the US-led developed countries. Such one-size-fits-all requirement has brought about negative impacts in the effective enforcement of TRIPS (Bosworth & Yang, 2000; Land, 2012; Sun, 2004; Yu, 2011a, 2011b, 2005). Thus, the General Assembly of the World Intellectual Property Organization (WIPO) (2005) launched the "Geneva Declaration on the Future of the World Intellectual Property Organization." The declaration calls for "a rethink of the current intellectual property regime of expanding monopoly privileges being promoted by WIPO, and advocates instead one that strikes a proper balance between the public domain and the realm of property" (p. 1). The declaration also calls for an emphasis of WIPO on "the needs of developing countries, and to view intellectual property (IP) as one of the many tools for development-not as an end in itself" (p. 1). The list of the signatories on the declaration runs more than 11 pages long in two columns, including international organizations, developing countries and scientists, economists, legal experts in strong support of the declaration. As OECD (2007) claimed, "over the recent years the balance has been shifting more in favor of rights holders," and "the key policy question remains how to strike a balance between providing incentives and rewards to innovators and providing access to new knowledge for users" (p. 12).

What the General Assembly of WIPO and OECD are advocating can shed light on understanding the nature of and seeking a possible solution to the recurring disputes between the USA and China over the latter's ineffective protection of the former's copyrighted IPR. China has been identified as the "Center of Counterfeiting," and "International Capital of Piracy" (Yang, Sonmez, & Bosworth, 2004, p. 460). Since the implementation of China's policy of economic reform and opening up to the outside world in 1979, there have been repeated IPR, especially copyright disputes between China and the USA (Morrison, 2015; Yang, 2005; Yang, Sonmez, & Bosworth, 2004; Yu, 2001, 2004, 2011a). Copyright is one type of IPR protection, which protects creations, such as books, paintings, music, films, and software, in the fields of literature and the arts (The other major types of IPR protection are patents, which protect technological inventions and trademarks, which protect such distinctive features as words, symbols, and shapes, etc. that distinguish one type of product or service from the other.) (International Chamber of Commerce [ICC], 2005, p. 6). For years, the USA repeatedly threatened trade wars or economic sanctions if China failed to improve its IPR protection status (Priest, 2014; Yu, 2005). However, till 2015, China still remains on the Priority Watch List and Section 306 Monitoring in the Special 301 Report of the United States Trade Representative (USTR). The Special 301 Report and its relevant concepts will be explained in detail in the Background section below. Similarly, the European Commission also placed China as Priority 1 in its report on IPR protection because "66.12% of the goods detained in 2013 at European Union borders due to suspected IPR-infringement originate from mainland China" (European Commision, 2015, p. 8).

According to the "US/China Legal Overview," "The US/China conflict in intellectual property is a typical case of international dispute. China represents the developing countries that protect IPR weakly and the USA represents the developed countries that protect IPR well" (p. 1). To address the U.S.-China IPR dispute, which bears international characteristics, there have been three major academic approaches or models: the historical and cultural (e.g.: Alford, 1995; Boyle, 2003; Gomez-Arostegui, 2013; Lehman, 2006; Lessig, 2004; Perles, 2012; Swanson, 2005; Shaw, 2006; Yang, 2005; Yu, 2001, 2011a, 2011b), the legal and administrative (e.g.: Bosworth & Yang, 2000; Han, 2012; Priest, 2014; Wu, 2015; Yu, 2005), and the developmental and innovative (e.g.: Chen & Puttitanun, 2005; Croix & Konan, 2002; Perles, 2012; Samuelson, 1998). Most of the above-mentioned scholars are world-famous IPR experts, especially with regards to the U.S.-China IPR disputes. They are categorized into the three major approaches just for the convenience of discussion in this study though their researches may go beyond the designated categories. While comparing and contrasting the three major approaches, this study analyzes the copyright laws of the USA and China to introduce a model of cooperation in the settlement of their recurrent IPR disputes. To this end, two research questions are raised as follows:

RQ1: How is the interrelationship between innovation and copyright protection interpreted in the USA and China?

RQ2: Which of the three approaches can work as a possible solution to the U.S.-China IPR dispute and how?

Review of Literature

The purposes of this study call for definitions of innovation and copyright, an introduction to the background of the U.S.-China disputes over IPR protection and a review of the three common approaches to the understanding of the recurring disputes with a focus on keeping the balance between IPR protection and innovation motivation.

Definitions of Innovation and Copyright

The word innovation comes from the Latin noun innovatio, derived from the verb innovare, meaning to introduce something new. The OECD (2005) defined innovation as "the implementation of a new or significantly improved product, or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations" (p. 46). With this generic definition, the OECD emphasizes the implementation of something new or significant improvement in an existing product, process, or service.

According to the American economists Scherer and Ross (1990), innovation refers to the process of inventing or creating something new and better, or providing cheaper and better goods and services, which includes entrepreneurship, investment, development, and diffusion. To Kraemer-Mbula and Wamae (2010), innovation means "the process of converting new or existing knowledge to value for the benefit of individuals, groups, or communities" (p. 31). In the context of copyright, innovation means the complicated process in which the expression of a new idea is fixed and brought to the market to provide incentives for the copyright owners for further creative works and to ensure future creativity from the public domain.

As part of IPR, "copyright protects the rights of creators of literary and artistic works, and of those who purchase or otherwise obtain those rights" (Becker & Vlad, 2003, p. 3). On the one hand, copyright protection safeguards the exclusive rights of the authors and, on the other hand, it keeps enriching the public domain to guarantee sustainable innovation. Innovation is based on previous creative works, and all inventors are indebted to those before them. Copyright protection is meant to foster this kind of virtuous cycle of innovation. Just as the Congressional Budget Office [CBO] of the Congress of the United States (2004) declared, "copyright law is thus characterized by the balance it seeks to achieve between private incentives to engage in creative activity and the social benefits deriving from the widespread use of creative works" (p. 1).

Background

For nearly three decades, there have been recurring disputes over IPR protection between the USA and China (Morrison, 2015; Yang, 2005; Yang, Sonmez, & Bosworth, 2004; Yu, 2001, 2004, 2011a). The two governments initiated on-going IPR consultations since 1986, and the U.S. government began carrying out a special 301 investigation of IPR situation in China since 1989. Under the special 301 provisions of the U.S. Trade Act of 1974, the U.S. Trade Representative (USTR) releases an annual special report to assert the international trade rights of the USA and to identify its trading partners including China that deny the adequate and effective protection of IPR (USTR, 2006, p. 1). The USTR Special 301 decisions on China for the past decades can be seen in Table 1.

Table 1 shows that China is on the Priority Watch List, Section 306 Monitoring, Priority Foreign Country, or WTO Dispute Settlement Pursuit almost every year from 1989 to 2015. According to the USTR Special 301 Report (2006), Watch List nations have particular problems with respect to IPR protection, enforcement, or market access for U.S. individuals or businesses relying on IP. The Priority Watch List singles out those countries, which have the same problems as those on the Watch List but are the focus of increased bilateral attention concerning the problem areas. Under Section 306 of the U.S. legal act, the USTR monitors a country's compliance with bilateral intellectual property agreements. If the country fails to satisfactorily implement an agreement, the USTR may apply trade sanctions. Priority Foreign Country refers to a foreign country that has the most onerous acts, policies, or practices that deny the adequate and effective IPR and fair and equitable market access to the U.S. nationals relying upon IP protection.

In the same vein, the USTR devoted a special attention to the growing issue of Internet piracy in China and put China under Section 306 in its 2002 Special 301 Report, which means that the USTR monitored China's compliance with bilateral intellectual property agreements and would apply trade sanctions if China did not satisfactorily implement the bilateral agreement (USTR Special 301 Report, 2002). Even in its most recent Special 301 Report, the USTR (2015) urged all levels of the Chinese government, as well as state-owned enterprises (SOEs), to use only legitimate, licensed copies of software because losses by software companies due to piracy at SOEs and other enterprises in China remain very high, who reap a cost advantage relative to competitors paying for legally acquired software. (p. 37)

Considering the size of China and the potential amount of piracy, the USTR tends to single China out due to copyright piracy. In addition, China boasts of the largest number of Internet users of about 650 million and mobile web users of nearly 560 million. There has been "widespread piracy affecting industries involved in the distribution of legitimate music, motion pictures, books and journals, video games, and software" (p. 37). All this demonstrates the severity of China's IPR infringement issues in both the physical world and the cyberspace

To deal with the issues raised in the annual special 301 reports, the two governments held the regular bilateral negotiations mainly to make China upgrade its IPR laws and strengthen the enforcement. With the regular complaints from U.S. businesses in and outside China, the U.S. government "repeatedly threatened the Chinese government with either economic sanctions or trade wars" (Yu, 2001, pp. 133-135). The Chinese government responded with tactful compromises and some obvious IPR accomplishments. Regular anti-piracy campaigns were initiated. Police raided and seized pirated goods at customs and stores and closed factories and stations that were engaged in the manufacture and distribution of illegal merchandize. China has also made obvious progress in joining international IPR conventions, passing domestic IPR laws and regulations, and establishing registration, enforcement, and training programs.

Nevertheless, the results of protecting U.S. IPR in China are far from satisfactory to the U.S. side. In its Special 301Report, the USTR (2015) stressed: Despite laudable policy objectives and a welcome ongoing reform effort, foreign rights holders in China continue to face a complex and challenging IPR environment.... A wide range of U.S. stakeholders in China continues to report serious obstacles to effective protection of IPR in all forms, including patents, copyrights, trademarks, trade secrets, and protection of pharmaceutical test data. (32)

Thus, we see that China recognizes the significant role of IPR to spur nation-wide innovation, and it makes concerted efforts reforming and updating its IPR regime, but the U.S. side is still not satisfied. There are various factors that account for the dissatisfactory results of IPR protection in China. There also exist very complicated reasons for the recurring U.S.-China disputes over the balance of IPR protection and motivation of innovation. For example, Yang, Sonmez, and Bosworth (2004) listed three reasons for China's nickname of "the International Capital of Piracy": first, China has become a center of global business; second, high levels of imitation results from the booming of international business; and third China has attracted extensive global media attention. Yang, Fryxell, and Sie (2008) also contributed three broad categories of anti-piracy strategies: administrative supports, judicial actions, and corporate approaches. London (2011) emphasized the triple threat of China's online copyright infringement due to its "very different legal, cultural, and economic traditions" (p. 2). By way of summarizing the relevant researches and for the convenience of discussion, the present study has categorized three major academic approaches to clarifying the various factors and complicated reasons for the U.S.-China copyright disputes.

The Historical and Cultural Approach

According to Bosworth and Yang (2000), it is unlikely for countries

which predominantly use externally generated IP to protect IPR as it is done by countries that are producers of the IP. Perles (2012) found that "the progression of cultures and nations from technological imitators to technological innovators is a well-documented phenomenon" (p. 266). Benjamin Franklin made his inventions based on what we would consider copyright piracy today, and Samuel Slater, father of the American Industrial Revolution, imitated British designs to such an extent that would be IP infringement nowadays. However, the founding fathers "refused to extend IP protections to foreigners" (p. 266). This is why Lessig (2004) claimed that the USA was born a pirate nation and even the U.S. copyright law was copied from Britain with some improvement (pp. 63-130). In the subsequent years, the USA has been updating its copyright law within the framework of its constitution and reinforcing it more and more tightly by making repeated revisions in 1831, 1870, 1909, 1976, and 1998 to meet the rapid changes and challenges in technology. Although the First Congress of the USA passed its first national Copyright Act in 1790, foreign copyrights were not officially recognized for over 100 years from 1790 to 1891 (Sirois & Martin, 2006). During the 100 years, "U.S. publishers were completely free to reprint whatever foreign texts they thought would sell" (Anderson, 2007, p. 14). Besides, technology piracy in the USA at the time was "often undertaken not only with the full knowledge, but also frequently with the aggressive encouragement of officials of the federal and state governments" (Ben-Atar, 2004, p. 1).

The main reason is that the USA was a developing country in the 19th century, and it was "hardly surprising that it [the USA] found it attractive to free ride on the intellectual products of other, more advanced countries (Varian, 2005, p. 124). It was not until when the American bestseller novel Uncle Tom's Cabin was massively reprinted overseas, accompanied with the development of technology, did the USA begin strengthening its international IPR laws. Gradually, the USA began tightening the international IPR regulations. Leading a group of developed countries, the USA forced IPR provisions onto the General Agreement on Tarrifs and Trade (GATT) in 1994, resulting in the TRIPS agreement.

As a capitalist country always giving the priority to the interests of individuals and private enterprises, "the United States has been very aggressive in pushing for a universal intellectual property protection regime, which offers information and high-technology goods uniform protection throughout the world" (Yu, 2001, p. 132). Consequently, as Lessig (2004) wrote, "the U.S. government is leading the country toward a kind of feudalism of maximum control and concentration with regard to copyright protection" (p. 267). Gross (2007) seconded, "the USTR policy smacks of imperialism by forcing countries to change their laws and social practices to conform to U.S. interests" (para. 9). In fact, it is doubtful that the USTR policy really reflects the true U.S. interest, "but rather a narrow special interest of mainly the U.S. movie and recording companies together with the pharmaceutical industry" (para. 9). Although the "one-size-fits-all" IPR standards "sometimes produce too much IPR protection and too early in some developing countries" (Croix & Konan, 2002, p. 759), China has to shape its IPR regime in accordance with the standards of the TRIPS due to its membership commitment to the WTO.

Actually, China has not been alien to IPR in its history. For instance, publishers in the Song Dynasty (A.D. 960-1279) have already known the idea of copyright protection. As Mr. Cheng published a book by the name of the Stories of the East Capital. He printed on the copyright page "Printed by Cheng of Meishan, who applied protection from the superior. Any reproduction is prohibited" (Wu, 2004, p. 241). However, according to O'Connor and Lowe (1996), the concept of IPR has always been at odds with the Chinese traditional teaching of Confucianism. While the IPR policies of the developed countries forbid free copying, Confucianism considers that learning results from copying and imitation. As a socialist country shifting from a planned economy to a market economy, China has been slow in establishing its copyright law. Until 1990, China was still resistant to the copyright enforcement for both historical and ideological reasons. As Swanson (2005) indicated, "historically, the act of copying hasn't necessarily had negative connotations: In painting and calligraphy, Chinese artists sought to mimic acknowledged masters" (p. 2). The Confucian ideology "encourages loyalty to the Master, subordination of individual interests to the social good and discourages the self-motivated pursuit of money" (Yuan, 2001, p. 14). Almost throughout the Chinese history, the act of copying has been encouraged, and an author usually feels honored when his or her work is copied. Yang (2005) found that the Chinese culturally "perceived copying and imitation as an effective way of learning in a transformative way ...; monopoly of such knowledge was therefore disagreeable to the moral standards in China" (p. 286). Shao (2006) also noted, contrary to the guild monopoly of IPR in Europe in the 16th and 17th centuries, the IP practices in pre-modern China "start not merely from protecting the IP owners but from protecting both the interests of the IP owners and the users of the intellectual works" (p. 1). Thus, the U.S. failure in its coercive conversion of China in the effective protection of U.S. IPR mainly results from its ignorance of the significant historical and cultural differences between China and the USA and the deep-seated Chinese historical and cultural resistance to global copyright enforcement (Alford, 1995; Lu & Weber, 2008; Yu, 2001).

Even today, "many Chinese see strict intellectual property rights enforcement as a zero-sum game in which foreigners benefit and Chinese lose" (Swanson, 2005, p. 2). Consequently, "local protectionism, official corruption, less-trained officials, inefficient judicial system, and inadequate resources" all contribute to the ineffective enforcement of the copyright protection (Yuan, 2001, p. 17). There is "a consensus among educated modern Chinese that IPR as currently defined by the West or as imposed on developing countries, are unjust (Lehman, 2006, p. 7). Shaw (2006) confirmed that the international frameworks and the IP policies of the developed countries in the rest of the world have been vehemently criticized because the interests of the poor are not treated equally. Lu and Weber (2008) also noted, besides the 20th-century piracy of unauthorized copying and selling of DVDs and CDs, China has to face the new challenge of the 21st-century piracy of Internet file-sharing. Therefore, China needs real supports and solid assistance instead of mere pressure in the process of its IPR protection.

The Legal and Administrative Approach

Scholars (e.g.: Balz, 1975; Bosworth & Yang, 2000; Liu, 1996; O'Connor & Lowe, 1996; Wheare, 1998; Yang, Sonmez, & Bosworth, 2004; Yang, Fryxell, & Sie, 2008; Yu, 2005) found that legal IPR protection has been practiced in most Western countries since the British Statute of Anne in 1710. IPR protection has been experimented on a number of occasions in China during the Westernization movement of the latter half of the 19th century and recent years. For instance, Yang, Sonmez, and Bosworth (2004) found that IPR enforcement in China is "relatively lenient and administrative in nature" (p. 462), and "what is lacking are criminal convictions" (p. 463). In addition, the Chinese legal system protects the interests of the state and society as a whole rather than those of the individual and private enterprises. As a result, there is no independent system of administering and enforcing the law, and there is an aversion to adversarial conflicts and public disruptions due to the Chinese emphasis on harmony and self-government.

According to Yang (2003), serious legal and administrative practices of IPR laws in China since 1949 can be briefly divided into two major phases: pre-1979 evolutionary phase and post-1979 revolutionary phase. The first phase features a reward system based on the former Soviet Certificates of Authorship for inventions and publication under stringent administrative control of the Chinese central government. The second phase witnesses the construction and revisions of the Chinese IPR regime under both the domestic incentive of attracting direct foreign investments and the Western pressure of joining the WTO.

Since 1991, the U.S. government has been threatening China with "a series of economic sanctions, trade wars, non-renewal of Most Favored Nation status, and opposition to entry into the WTO" (Yu, 2001, p. 133). The Chinese government responded by signing the World Intellectual Property Organization in 1980, the Paris Convention in 1984, the Madrid Protocol and the Washington Convention in 1989, and the Berne Convention and the International Copyright Convention in 1992, Patent Cooperation Treaty in 1994, Protocol Relating to the Madrid Agreement Concerning the International Registration of Marks in 1995, and World Intellectual Property Organization Copyright Treaty in 2007. According to the USTR (2015), since 2012, China has undertaken revisions to its existing laws on civil procedure, patents, copyrights, trademarks, and scientific achievements. The China's amended Civil Procedure Law became effective on January 1, 2013. A revised Trademark Law and implementing regulations went into effect on May 1, 2014. In addition, China is also reviewing and making amendments to its Patent Law and Copyright Law. All the revisions "address concerns identified by the United States and industry, and the amendments may introduce new provisions of substantial additional concern" (pp. 33-34).

Besides adopting the legal measures in conformity with the international practices, China has also applied its administrative power at the state and local levels to protect the copyrights. As noted by the USTR (2015) in its 301 Special Report, China has established the National Copyright Administration within the State Council and Copyright Administration Office in all the provinces, autonomous regions, and municipalities. The State Council established a permanent office of the national leading group on combating IPR infringement. In 2014, the Leading Group continued to coordinate enforcement actions and undertake special campaigns, including online markets and cross-border infringement cases. The Leading Group makes sure that the relevant adminstration at various levels takes concrete actions to address IPR enforcement, enhances public awareness, and requires strict legal compliance with respect to trade secrets. Actually, there has been empirical evidence that both "administrative supports and judicial actions are positively related to the effectiveness of countering piracy" (Yang, Fryxell, & Sie, 2008, p. 336).

However, Smith (2005), the president of International Intellectual Property Alliance (IIPA), remarked, "there is a real question whether the Chinese government as a whole can muster the political will to take these absolutely necessary actions" (p. 9). The U.S. reaction provoked criticism from the Chinese side. For example Yu (2001) criticized the U.S. approach to China by saying: "The existing American foreign intellectual property policy was ineffective, misguided, and self-deluding" (p. 133). In addition, Yang (2005) noted, there are four major ways of settling IPR disputes in China, which are consultation, mediation, arbitration, and litigation, but multinationals tend to choose other ways rather than ligation "due to its lengthy and costly nature" (p. 3). Han (2012) explained, the Chinese have a deep-rooted historical preference for informal and non-adversarial means of dispute resolution, so administrative channels are more frequently adopted over the judicial system. Thus, the administrative proceedings are found effective to end infringing activities but ineffective in imposing punishment for lasting effects.

The Developmental and Innovative Approach

According to the International Chamber of Commerce (ICC, 2005), there has been a long-cherished correlation between innovation investment and economic growth. Studies also show the relationship between IPR and innovation in developed and developing countries. For example, Acemoglu, Aghion and Zilibotti (2002) found that "Countries at early stages of development benefit from strategies that encourage technology adoption, while countries closer to the world technology frontier benefit from switching to strategies that encourage innovation" (p.2). Based on the research results of Primo, Fink, and Paz (2000), and Acemoglu, Aghion, and Zilibotti (2002), Chen and Puttitanun (2005) have established a theoretical model by using a panel of data from 64 developing countries during a period from 1975 to 2000. Their model was developed to study IPR protection and innovation in developing countries. The model shows that a rational developing country will choose an optimal level of IPR, depending on its level of economic development. Their empirical evidence suggests that IPR protection indeed impacts innovation positively and significantly in developing countries. The levels of IPR in these countries usually exhibit a U-shaped relationship in accordance with their per capita gross domestic product (GDP). With the protection of IPR, innovation in a developing country may first decrease and then increase depending on its level of economic development and technological capacity. Becker and Vlad (2003) seconded this theory by saying: "It is difficult to assert that developing countries are very enthusiastic about introducing strong intellectual property right protection. Only after reaching a certain level of development in a certain industry is there motivation to implement strong regulations" (p. 8). The content of the model is illustrated in Figure 1:

[FIGURE 1 OMITTED]

Research Methods

First, an extensive collection of the relevant raw materials and secondary literature have been searched for. The raw materials include the IPR legal documents, especially copyright laws, international treaties and bilateral agreements between the USA and China, as well as a series of cases concerning innovation and copyright protection in both countries. The secondary literature consists of the relevant works of scholars on the U.S.-China IPR disputes mainly from the three categories of approaches as discussed in the review of literature. While the presentation and interpretation of the first two categories of literature serve as a necessary academic background for the issue under discussion, the presentation of and discussion about the third category of literature provide a theoretical framework for the following discussion.

Second, the research method of textural analysis was adopted. First, the term "text" refers to both the traditional written literary or historical sources and other socio-cultural artifacts like films, pieces of music, and even group behaviors. In our case, text refers to the IPR legal documents, including the copyright laws, international treaties and bilateral agreements of or between the USA and China. According to Burnett (1995), "the aims of textual analysis are to isolate a set of discrete units," which "are visual traits, syntax, sentences, diction, imagery, figures of speech, structure, and points of view" (pp. 72-79). This format allows the researcher to understand not only what meaning the text holds but also how those meanings are produced, what purposes they serve, what effects they have, and what the text "hides." In short, without textual analysis, social research would not find out the "underlying ideologies" and implied meanings of texts.

Results and Discussion Interpretation of the Interrelationship between Innovation and Copyright Protection

Both the USA and China have their respective copyright laws. A comparison between the major similarities and differences of the two laws with regard to the interrelationship between innovation and copyright protection facilitates the understanding and settlement of the U.S.-China IPR disputes. The legal basis for the copyright in the USA is Article 1, Section 8 of the U.S. Constitution, which empowers the Congress "to promote the progress of science and the useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries" (Congressional Budget Office (CBO), 2004, p. 9). The Department of Commerce Internet Policy Task Force (2013) reiterated the legal basis and consititutional goal while stressing that "the law strikes some important balances so that all stakeholders benefit from the protection afforded by copyright" (p. iii).

As far as the Chinese side is concerned, the Chinese government expressed its position and goals of protecting copyright and promoting innovation in the first article of its copyright law. In Article 1 of Chapter I of the Copyright Law of the People's Republic of China (2010), we read:

This law is enacted, in accordance with the Constitution, for the purpose of protecting the copyright of authors in their literary, artistic and scientific works and the rights and interests related to copyright, encouraging the creation and dissemination of works conducive to the building of a socialist society that is advanced ethically and materially, and promoting the progress and flourishing of socialist culture and sciences. (p. 3)

It is clear that both the USA and China strive for the balance between the protection of copyright and the promotion of innovation in their respective copyright laws. Compared with the USA, China has a similar purpose provision in its copyright law to promote innovation. Specifically, the on-going innovation is also facilitated in such areas as the "idea-expression distinction, creativity-based originality standards for copyright protection, and the limitations on the rights of copyright owners" (Samuelson, 1998, p. 4).

According to Gomez-Arostegui (2013), the U.S. Copyright Act was passed in 1976 by following the model of the English Statute of Anne published in 1710. The copyright law has been repeatedly revised to adjust to the challenges of new technology and to provide wider ranges of rights to copyright holders. For instance, in 1997 and 1998, Congress passed three major copyright laws respectively. They are the No Electronic (NET) Theft Act, the Sonny Bono Term Extension Act (SBCTEA), and the Digital Millennium Copyright Act (DMCA). The NET Act established penalties for certain types of sharing or distribution of copyrighted materials over the Internet. SBCTEA extended the term of copyright by 20 years to match that of the European Union, so that the basic term of copyright is now the life of the author plus 70 years. The DMCA was passed to implement the 1996 World Intellectual Property treaties, which make it a crime to circumvent technological protections by the copyright owner. For another example, in 2002, the Technology, Education, and Copyright Harmonization Act (TEACH) and Small Webcaster Settlement Act were passed. The former exempts infringement for some uses of digital copyrighted materials used in distance learning, and the latter has established guidelines and requirements for the payment, collection, and distribution of fees paid by small commercial entities for the use of copyrighted works on the Internet.

To keep with the constitutional goal of promoting science and the arts and guarantee innovation, the U.S. copyright law keeps revising so as to better protect the exclusive rights of the copyright owners for private incentives and, at the same time, to place constraints on the rights of the owners by granting copyright for a limited time. In addition, there are two other limitations on the exclusive rights of the copyright owners, which are the "first sale" doctrine and "fair use" standards. According to CBO (2004), the first sale doctrine allows the buyer of a copy of a copyrighted work to "sell or otherwise dispose of the possession of that copy without the authorization of the copyright owner," and "certain unauthorized uses of the copyrighted material may also be exempt from copyright infringement if they satisfy fair use criteria" (p. 10).

In the academia there has been some sharp criticism on certain changes in the U.S. copyright law, especially with regard to copyright protection on the Internet. For instance, Yu (2003), professor at Drake University Law School, remarked, "the enactment of the Digital Millennium Copyright Act (DMCA) by the U.S. Congress "raised serious concerns about free speech, privacy, academic freedom, learning, culture, democratic discourse, competition, and innovation" (p. 129). Litman (2001) made his critique that the DMCA "seeks for the first time to impose liability on ordinary citizens for violation of provisions that they have no reason to suspect" (p. 145). Boyle (2003) equated the encroaching effect of the DMCA and other relevant laws of the public domain to the English enclosure movement of the 15th century when common land was turned into private property. He said: "We are in the middle of a second enclosure movement" or the "enclosure of the intangible commons of the mind" (p. 37). The sharpest criticism of the DMCA is that it has violated the very spirit of the copyright law first by "upsetting the balance between the copyright holders' interests and the general public's access to protected materials," and, second, "by preventing people from engaging in actions that have been traditionally considered fair use" (Yu, 2004, p. 912).

As for China, according to Yang (2003), although "China was an innovative country and was for a time more advanced than most Western countries, rules and regulations to protect new inventions and creations failed to emerge" (p. 133). Samuelson (1998) also stated that there has been no copyright law for thousands of years in the Chinese history for historical and ideological reasons. Economic globalization and internal impetus for innovation, however, make China realize the necessity to establish such a law. On September 7, 1990 the National People' Congress of China passed the first copyright law and put it into force on June 1, 1991. According to Xue (2005), China drafted its copyright law over 20 times in accordance with the international standards of TRIPS and under the pressure of the USA. As a product of the 1992 USA-China Memorandum of Understanding, the International Copyright Treaties Implementing Rules require that China "grant foreign works a higher level of copyright protection than Chinese works" (p. 303). By integrating China into WTO, the USA managed to "bring China's copyright law in line with the WTO TRIPS Agreement and the U.S. DMCA" (p. 304).

It is also reported in the Special 301 Report, since early 2015 China has already started to amend its copyright and patent laws again by inviting comments on the drafting of Interpretations of the Supreme People's Court on Issues Related to the Application of Laws in Reviewing Act Preservation Cases of Disputes over Intellectual Property Right and Competition (USTR, 2015). To guarantee sustainable economic development, China has the motivation to update its copyright law in accordance with the international standards and enforce its IPR protection in conformity with the international practices. It joined almost all the major international IPR conventions. Nevertheless, a close examination reveals that there are also major differences between the two copyright laws of the USA and China.

First, individual rights, as clearly indicated by the copyright law and the Constitution of the USA, are not inferior to the interests of the State in the USA. Title 17 of the U.S. copyright law endows the owner of a copyright "the exclusive rights to reproduce the copyrighted work, to distribute copies of the copyrighted work, to perform the copyrighted work publicly and by means of digital audio transion" (Copyright Law of the United States, 2011, pp. 16-17). The Chinese copyright law, however, evolved from a Constitution that puts a reverence for the community over the individual. For instance, a Chinese author's exercise of his or her copyright cannot override the public interests. The government can eliminate an author's monopoly on his or her works for state or public interests.

Second, except for visual works of art, protection of the author's moral rights has no statutory provision in the USA. In China both the legal tradition and cultural heritage lead to the fact that the protection of moral rights is more important than the protection of economic rights. The reason is that Confucianism, a deeply-rooted and dominant ideology among both the ordinary intellectuals and the governmental officials, greatly values the honor and reputation of an author and the spiritual interests of the general public. What's more, the term of copyright protection in China is the lifetime of the author plus 50 years, which is 20 years shorter than that of the USA. This is why Kalscheur (2012) posited that it is an effective means to improve copyright enforcement in China through "the development of the moral rights concept of copyright protections" (p. 514).

Third, judicial enforcement in the USA is the only way for a copyright owner to protect himself or herself. In contrast, there are three different copyright enforcement systems in China: judicial, administrative, and private. Interestingly enough, private enforcement is the most commonly used proceeding to settle copyright cases. One reason is that this practice is in conformity with the Confucian disfavor of litigation. Another reason is that it is traditionally considered a virtue to seek harmony with other people including even rivals. Therefore, private remedies and administrative penalties are usually adopted for copyright infringement in China rather than statutory remedies and criminal penalties as often seen in the USA (Yuan, 2001, pp. 12-18). For example, Yang, Sonmez, and Bosworth (2004).contributed three strategies to settle IPR disputes and hopefully the U.S.-China IPR disputes. Their strategies are: first, the Budweiser strategy, the partnership strategy via contractual surveillance, and the Coca Cola strategy via narrowing the price page. What is worth special mention here is the Budweiser strategy, which is thus named because the Budweiser firm has been very successful in using the strategy. Via technical solutions, Budweiser maintained an effective way of labeling and featured packaging for its customers to identify authentic products easily. Among the three, Budweiser is "the most commonly adopted anti-piracy strategy" (p. 464). Nevertheless, this strategy is "effective against less-proficient pirates," and it often "fails against more sophisticated counterfeiters with the expertise to replicate authentic marks" (p. 465).

A Stage-Oriented Strategy Based on the Developmental and Innovative Approach

The above are just some of the major differences, but they suffice to call the attention of the U.S. government to reconsider its one-size-fits-all approach to settling IPR disputes with China. Although China's economic growth averages about 7.5% for more than two decades, the average Chinese per capita income was $7,590 in 2014, while the U.S. was $54,629.5 (World Bank, 2015). The difference is so obvious that China naturally prefers different IPR standards for different industries at different stages of the development. Chen and Puttitanun's (2005) developmental and innovative approach provides a possible solution, because the two scholars have already demonstrated theoretical validity and provided empirical proof. Besides, there have been supportive signs in both the USA and China.

In fact, the first stage is already in existence. The USA has been persuading China to update its copyright law and IPR protection measures. As mentioned above, the construction of such legal infrastructure in China has been generally satisfactory, but the enforcement measures prove ineffective. Therefore, at the next stage, instead of simply criticizing and putting pressures on the Chinese government to make its enforcement effective, the U.S. IPR officials and experts need to sit down and talk with their Chinese counterparts about some in-depth investigations into the problem areas. Only when the problems in the major areas are detected, the nature of the problems is understood, and the causes are analyzed, can real solutions be finally worked out. The platform for this stage has been established as well. Since April 2009, the China-US Strategic and Economic Dialogue has been held annualy. It is the highest-level bilateral forum for the two countries to discuss a broad range of issues, including IPR protection. At the stage following this, the USA may generously supply China with the necessary assistance in technology, especially in its fight against Internet copyright infringement.

Signs of Model Application

According to Chen and Puttitanun (2005), the two widely used measures of innovation are: Research and development (R&D) expenditures, which measure the input of innovation, and the number of patents applied and granted, which measures inventive output (p. 13). With its continuous economic growth from 1979 to 2013, China has been increasing its investment in R&D since the 1990s. According to international organizations (e.g.: KPMG International, 2013; OECD, 2014), in 2011 China passed Japan, Britain and Canada to the second place in the world for total R&D spending. In 2012, China's R&D intensity (1.98%) caught up with that of the European Union (EU) (1.97%). In absolute terms, China's R&D is equivalent to 72% of EU's total gross domestic expenditures on R&D (GERD) and 88% of total R&D expenditures in enterprises (BERD). The equivalent comparative numbers with the USA are 54% and 59% respectively. Based on current R&D growth trends, China is on track to overtake the USA in about 10 years. Actually, China has already surpassed the US and is the world's most attractive destination for R&D investment.

In terms of the number of patents filed by Chinese inventors, according to Wu (2015), there has been a significant increase as well. In 2011, China became the second-ranked economy in the whole world. Judging from the perspective of the Patent Cooperation Treaty, it is found that inventors based in China filed more patents than those based in Germany and EU, only next to Japan and the USA. In 2014, Wu (2015) reported that "China recorded 928,000 invention patent applications, more than that of any other country" (para. 1). This means that Chinese patent applications now lead the world. It is clear that there has been an increase in the amount of effective measures on the Chinese side for more innovation.

Besides measures for innovation, there has been a statistical increase in legal and administrative copyright cases in China. As USTR (2015) reported, in 2014 China carried out the 10th "Sword-Net" campaign focused on protecting digital copyright. Authorities at varius levels investigated 4,400 online piracy cases, made 66 referrals to criminal organizations, and took regular and irregular actions against pirate websites. In June 2014, the Shenzhen Market Supervision Administration imposed a record $42 million fine against QVOD, a video streaming website, for making available pirated movies and TV shows to its subscribers. The National Copyright Administration of China (NCAC) also executed administrative penalties against Yyets and Shooter.cn for illegal camcording. Apart from all this, China and the USA have strengthened their cooperation on IPR border enforcement and cross-border IPR cases, which facilitated both sides in their fights against counterfeit goods not only in the trafficking processes but also in the manufacturing procedures.

Conclusion

The function of copyright protection is to keep the balance between providing incentives to the copyright owners to produce new creative works and to enrich the public domain to guarantee a steady stream of innovation. The copyright infringement robs the interests of the copyright owners and the general public, which is detrimental to the maintenance of the balance. This study is aimed at introducing a model of cooperation between the USA and China in the settlement of their recurrent IPR disputes.

This study found that neither the historical and cultural approach nor the legal and administrative approach provides a satisfactory way to resolve the U.S.-China IPR disputes. Instead, a stage-oriented strategy based on the developmental and innovative model could provide an alternative way for solving the problem. According to the developmental and innovative model, although lower IPR protection may temporarily facilitate the imitations of foreign technologies, a developing country like China is willing to gradually update its IPR protection mechanism to meet the international standards and to encourage the domestic innovation from a long-term point of view. With the implementation of IPR protection, innovation may first decrease, but will increase gradually as the economy grows and the national technological capacity expands.

Both the USA and China intend to promote innovation via the effective copyright protection. Therefore, while helping China in the construction of a complete legal infrastructure, the USA should adopt a stage-oriented strategy to resolve the IPR issue by considering China's economic growth and its average per capita GDP as a whole, and by maintaining the balance between effective copyright protection and rigorous innovation motivation.

Correspondence to:

Dexin Tian, Ph.D.

N503 Duxing Building

School of Foreign Languages Yangzhou University

196 West Huayang Road, Hanjiang District, Yangzhou

City, Jiangsu Province, 225127

P.R. China

E-mail: dxtian@yzu.edu.cn

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9/30/2016

Dexin Tian, Yangzhou University, P.R. China
Table 1. USTR Special 301 Decisions on China

Years   Decisions

1989    Priority Watch List
1990    Priority Watch List
1991    Prirority Foreign Country
1992    Not on the List
1993    Priority Watch List
1994    Prirority Foreign Country
1995    Not on the List
1996    Prirority Foreign Country
1997    Section 306 Monitoring
1998    Section 306 Monitoring
1999    Section 306 Monitoring
2000    Section 306 Monitoring
2001    Section 306 Monitoring
2002    Section 306 Monitoring
2003    Section 306 Monitoring
2004    Section 306 Monitoring
2005    Priority Watch List; Section 306 Monitoring
2006    Priority Watch List; Section 306 Monitoring;
        Considering WTO Dispute Settlement
2007    Priority Watch List; Section 306 Monitoring;
        Pursuing WTO Dispute Settlement
2008    Priority Watch List
2009    Priority Watch List; Section 306 Monitoring
2010    Priority Watch List; Section 306 Monitoring
2011    Priority Watch List; Section 306 Monitoring
1012    Priority Watch List; Section 306 Monitoring
1013    Priority Watch List; Section 306 Monitoring
2014    Priority Watch List; Section 306 Monitoring
2015    Priority Watch List; Section 306 Monitoring
2016    To be published

Source: USTR Special 301 Reports, 1989-2015
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