Well, China is a very special case, and your article sort of explains why I think World War III is inevitable.
With China it's not just about video games, but about pretty much everything. Anything they can steal, protect, and sell they will. There is no protection for not only intellectual properties, but also for patents filed in other countries.
A lot of the companies that have gone to China for cheap manufacturing, have had to reveal trade secrets to see that manufacturing performed. This has lead to China as a whole having factoties built up elsewhere producing knock offs of the same thing and selling it, and sometimes very publically when a company decides to leave all together.
In many cases where there aren't any real secrets involved, China just analyzes and knocks off whatever they can. What's more the Chinese are also infamous for counterfeit labeling and such. Doing things like not only producing Denim Jeans, but also putting labels like "Levi's" or "Calvin Klein" on them and then passing them off as the genuine, brand name article.
The reason why this is going to spark a war is because China is a "robber economy" that owes pretty much all of it's prominance and rising domination to theft. If it was to stop, all of the money that it's making would disappear. On the other hand other nations are losing tons of money through their citizens/businesses due to the Chinese violating the rules.
The world is however slow to react to such things, and while people are playing the diplomatic game and bellyaching China is building up a massive military so it can project it's power (people don't fear China right now because they believe China can't mobilize it's troops or protect them en-route, but that is changing... as is the fact that WMD insure MAD and prevent war, China has already made progress in laser-based technologies that can blind satellites needed for aiming long range ICBMs).
In the end war is the only outcome since economically it either comes to China stopping it's practices and sinking back into horrendous poverty, or the rest of the world letting their economies be drained sine they won't be able to protect any innovation, and everyone being replaced by China.
Then of course one has to consider that China's manufacturing is so cheap because of the inhumane conditions (think of the Apple factories) and people being paid so little for their work. Something that the people endure because the goverment pretty much tells them that they will wind up ruling the world. Enduring this now and producing those cheap goods means a big military which will pay off when they conquer other countries and so on.... if you've ever caught any Chinese speech/rallies that make it to the US through backdoor channels it's pretty scary stuff.
At any rate, all of this rambling aside is simply leading up to the point that this isn't some new and shocking thing, or limited to video games. China pretty much steals everything it can. It's just that people spend more time looking at what are currently bigger businesses like drugs. China knocking off Viagra for example causes Pfizers billions of dollars alone (to say nothing of their other drugs), money which of course is not taxed by the countries playing host to their facilities (they are multinational, but the US plays host to a lot of their labs and such) not to mention the issue of investors which can include goverments that are entitled to a percentage of the profits for drugs they helped finance the research for.
Really, some Chinese shop burning video games isn't all that shocking. It's just like some Chinese chem lab cooking up Viagra and then selling it internationally over the internet or whatever.
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On the other hand I'll also say that while the pirates are by no means right, I also think such arguements, in a general sense, tend to overlook the practices of the video game companies to begin with.
Getting past China, I think it's like the old "Yin Yang" symbol here where piracy and industry corruption are irrevokably intertwiened. You cannot address one problem without effectively addressing the other. Both groups in this are crooks, albiet in differant ways. Pirates steal directly, but the industry robs it's customers by engaging in cartel behavior, avoiding direct competition, and fixing prices. While a billion dollar industry (and thus hardly worthy of pity) it only gets away with being just as criminal as the pirates in it's own way because unlike other industries that have been "called" on this (like gas companies) the goverment has yet to really notice.
All DRM aside, to beat piracy the industry needs to have the support of it's consumer base. That isn't going to happen while we're abused, dehumanized, and impersonally wrung for every cent. The pirates are wrong, but with the way the industry treats the consumers it's not like many people are going to care. This is why piracy spawns so many discussions with people coming up and rather bluntly saying "I support piracy". Simply put the games industry is not exactly wearing a white hat. It's like beating and insulting a slave, and then being shocked when the guy doesn't want to come to the defense of his master when a group of bandits break into his castle and start looting his stuff. Oh sure, the bandits might not be doing anything that will benefit the slave, and perhaps even hurting him indirectly (how does the master continue to pay for the slave's upkeep in-between beatings?) but he's not going to stick his neck out, and is probably going to be happy to see the guy who beats him taking a beating instead.
So basically, for all talk of economics, and countries that can't be influanced short of violence (I mean honestly, if your China why pay anything if you don't have to?, heck I'm not even entirely sure if they would LET game companies make decent money down there looking at the whole issue with Blizzard in the region, and the limitations on how much foreigners can take out of their economy), when you look entirely at markets where things can be controlled I think the first thing that needs to happen is that the industry needs to win the support of the consumers back by reforming it's policies even if it's less profitable overall. THEN the issue of piracy can be addressed more effectively with grassroots support.
The thing is that right now, all arguements aside, this is not about one game developer, or even a team of them, who all might be great guys. It's about an industry... a faceless collective automaton that has gone bad, and become akin to the mafia... and really, it's hard to feel sympathy for the mob if it's asking for help with a bunch of gang bangers cutting into it's profits.
