Two senators, armed with a new report on piracy and counterfeiting in China, urged Beijing on Monday to step up efforts to protect American movies, software and other goods from illegal copying.

China continually fails to protect and enforce American intellectual property rights and discriminates against American businesses, Senate Finance Committee Chairman Max Baucus said in a statement accompanying the U.S. International Trade Commission study.

Baucus and Senator Charles Grassley, who requested the report earlier this year, timed its release to coincide with high-level U.S.-China talks taking place in Washington.

Small steps and empty promises won't cut it when American jobs are on the line. This week's U.S.-China trade talks are the perfect opportunity for China to make serious commitments to address these issues. It is time for action, Baucus said.

Chinese Vice Premier Wang Qishan is leading a delegation of nearly 100 officials in the U.S.-China Joint Commission on Commerce and Trade meeting, led on the U.S. side by Commerce Secretary Gary Locke and U.S. Trade Representative Ron Kirk.

The report is the first of two the ITC is doing for the Senate Finance Committee.

In the second one, due in May, the ITC will try for the first time to estimate the damage done to the U.S. economy by Chinese piracy and counterfeiting.

It will also try to quantify the impact of China's indigenous innovation policies, a set of regulations designed to promote innovation within China and to reduce the country's dependence on foreign technology and companies.

Those policies could require foreign companies to transfer ownership and development of intellectual property to China in order to participate in that country's huge government procurement market, the ITC said.

China has committed to protect U.S. intellectual property. But this report shows that China isn't living up to its commitments. It's a serious problem, Grassley said.

The ITC report found serious problems with the enforcement of intellectual property rights laws throughout China.

The low number of criminal prosecutions and relatively small damage awards in civil cases contributes to widespread piracy of software, music and movies, both over the Internet or in physical form such as CDs and DVDs, the ITC report said.

Similarly, trademarks for goods and service of all kinds are routinely counterfeited; from luxury goods to high-volume commodities, few products are immune from illegal imitation in China. The patents and trade secrets of U.S. firms are also infringed in China, the report said.

U.S. companies see China's indigenous innovation policies as potentially reducing business opportunities in China's fast-growing economy, it said.

The polices, in the works since last year, are often embedded in government procurement, technical standards, anti-monopoly, and tax regulations or laws.

The indigenous innovation 'web of policies' is expected to make it difficult for foreign companies to compete on a level playing field in China, the report said.

(Editing by Doina Chiacu)

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