I would be remiss if I did not report on this story, which broke yesterday:

Five U.S. movie studios have won a court case against a Beijing shop accused of selling pirated copies of ‘Mr. & Mrs. Smith,’ ‘War of the Worlds’ and other titles, the Motion Picture Association said Tuesday. The Beijing No. 2 Intermediate People’s Court ruled the Yu Hao Qing DVD store and its parent company, Beijing Century Hai Hong Trading Co. Ltd, were guilty of copyright infringement. It ordered them to stop selling pirated moves and pay $20,100 in compensation. Read more from the AP story here.

A few comments:

1. The judgment is neither important or newsworthy as far as the result goes. I agree with Dan Harris as to this point. His post on this contains some good reminders on China copyright issues.

2. The damages they got in the case are relatively high, so in that sense this is good news. How far this award goes to paying legal fees is not important, although if the Motion Picture Association, which is in charge of this litigation campaign, did this properly, the award could account for roughly half of all local legal costs. If they structured their litigation the "wrong" way, then the costs are much much higher.

3. My firm talked to MPA many years ago and counseled them to adopt just such a litigation strategy. After telling them that they could not recoup a significant amount of their costs, they shot down the idea. Now they are going ahead with it and using other litigators. There is just a trace of bitterness about this whole thing, therefore, to which I am not too proud to admit.

4. The practical effect of this one case will be minimal, but the overall strategy is sound. I disagree with Dan on the ultimate effect, however. He suggests that the price of DVDs may eventually go up. This is sound economics and business, for if you introduce significant costs into the loop of these pirates, then they would eventually have to start charging more to maintain their margins. But I don’t think so. First, their legal costs will be insignificant.  The amount they are paying a local guy to defend a loser case will be shockingly low. Second, let’s wait and see if the MPA successfully enforces this judgment. Third, there are so many pirates out there, that someone else can easily step in and make up for the lost volume, someone who has not been sued. I think this strategy is sound because you introduce an element of fear into the marketplace, fear that someone, anyone, might be the next target. This is not exactly a cost, but it eventually will serve to keep new entrants out of the market and perhaps discourage others into leaving it. This is a long-term strategy, however, and one that must work in conjunction with other government efforts to combat piracy.

5. Copyright protection in China is easy and difficult at the same time. As Dan rightly points out, copyright protection in China vests automatically upon creation of the work in question. This is according to China’s Copyright Law for domestic works, and covered under the Berne Convention for works created abroad. The U.S. is a signatory to the Berne Convention, so this is no problem. I would guess that as part of their litigation strategy, the studios have recorded their copyrights with the Copyright Bureau and obtained copyright certificates. This is not a new right, but prima facie evidence of ownership that is quite useful in copyright litigation. All that being said, copyright is one of the most difficult areas to deal with because of low damage awards, low criminal threshholds, technology issues, local protectionism, etc. You know, the usual stuff.

Overally, kudos to the MPA. You shouldn’t complain about the system unless you are at least trying to use it. With this litigation strategy, they are demonstrating their willingness to enforce their members’ rights and help move things forward.