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Historical Context: Why it matters? US engaged in talks for two decades – 81% of counterfeit goods are from China – 1.4 billion US dollars lost annually.

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Presentation on theme: "Historical Context: Why it matters? US engaged in talks for two decades – 81% of counterfeit goods are from China – 1.4 billion US dollars lost annually."— Presentation transcript:

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2 Historical Context: Why it matters? US engaged in talks for two decades – 81% of counterfeit goods are from China – 1.4 billion US dollars lost annually – Discourages innovation – Poor quality

3 Historical Context: Culture/ Political Influences Reliance on administrative vs. criminal measures Learning by copying Government corruption Communist roots Confucianism

4 Historical Context: US Retaliates Special 301 Hit List – China becomes a “Priority Foreign Country” Issues that prompted action: – Low sales of IPR intensive goods and services – Theft of trade secrets – IPR transfers from foreign to domestic entities

5 Historical Context: Round #1 January 1992: First Bilateral Agreement – Adhere to certain levels of IP protection – Accede to international intellectual property treaties (Berne Convention) – Provide effective border control procedures and remedies – US agrees to terminate Special 301 investigation

6 Historical Context: Round #2 July 1994 – China fails to deliver/ US threatens Special 301 – China provides new legislation – China’s piracy levels still remain high Next Sino- U.S. Agreement; The 1995 Memorandum of Understanding – Required China to reduce piracy, improve enforcement, and open its markets for U.S. computer software, sound recordings, and movies

7 Historical Context: Pre-TRIPS Year Cases Avg Fine15,32114,21616,93822,001 Avg Damages[US]$679[US]$699[US]$754[US]$794 Criminal[US]$40[US]$41[US]$40[US]$19 Prosecutions57 total or 1 in 268 cases 35 total or 1 in 406 cases 21 total or 1 in 806 cases 45 total or 1 in 489 cases

8 Historical Context: China post-TRIPS China joins WTO in 2001 – Fights for development status to receive special concessions Post-TRIPS no better than Pre-TRIPS – 2004: 96/ 51,851 trademark infringement cases handled – 2005: >0.3% trademark cases prosecuted

9 Historical Context: China Seeks Development Status Special & Differential Trading provisions include: – Longer time periods for implementation of agreements and commitments – Safeguards of trade interests Opposition from US & EU countries – More FDI than developing/developed countries – 3 rd largest trading nation; 4 th largest economy Key areas China did not accede as a developed country: – Subsidies, countervailing duties, and intellectual property rights

10 Historical Context: Perspective Most countries have history of commercial piracy – Ex: US was the leading nation in the 19 th century China is still in early stages of development

11 Issue Brought to WTO Short TitleChina – Intellectual Property Rights ComplainantU.S. RespondentChina Third PartiesArgentina; Australia; Brazil; Canada; European Communities; India; Japan; Republic of Korea; Mexico; Chinese Taipei; Thailand; Turkey Agreements at IssueTRIPS Art. 3.1, 9.1, 14, 41.1, 46, 59, 61, Berne Convention

12 Timeline EventDate Request for Consultations Received10 April 2007 Panel Report Circulated26 January 2009 Implementation Agreement15 April 2009 Implementation Notified by Respondent 19 March 2010 Total Time: 3 Years

13 Issue Brought to the WTO Thresholds for criminal procedures and penalties Disposal of goods confiscated by Customs authorities that infringe intellectual property rights Denial of copyright and related rights protection and enforcement to works that have not been authorized for publication or distribution within China Unavailability of criminal procedures and penalties for a person who engages in either unauthorized reproduction or unauthorized distribution of copyrighted works*

14 WTO Issue #1 CHINESE LAW Chinese Criminal Law – Articles 213, 214, 215, 217, 218 INTERNATIONAL LAW TRIPS Articles 41.1 and 61 Thresholds for Criminal Procedures and Penalties

15 WTO Issue #2 CHINESE LAW Customs IPR Regulations – Article 27 Customs IPR Implementing Measures – Article 30 INTERNATIONAL LAW TRIPS Articles 46 and 50 Disposal of goods confiscated by Customs authorities that infringe intellectual property rights

16 WTO Issue #3 CHINESE LAW China's Copyright Law Administrative Regulations – Publishing – A/V – Electronic Publications INTERNATIONAL LAW Berne Convention TRIPS 9.1, 14, 3.1 Denial of copyright and related rights protection and enforcement to works that have not been authorized for publication or distribution within China

17 Positions United States of America – China needs time to update policies and regulations after accession to the WTO in 2001 – Complaint submitted and request for consultation received in April 2007 – Claimed that China’s criminal measures inadequately managed IP infringements China ‒Claimed protection under Article 1 of TRIPS: “Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.” ‒Claimed the U.S. failed to prove that they were not in compliance with the TRIPS Agreement

18 Inconsistencies… Thresholds – Article 41.1 – Enforcement procedures and remedies to prevent infringements and remedies which constitute a deterrent to further infringements [are present in Member Law]. – Article 61 – Members shall provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale. Disposal of Infringing Goods – Article 46 – Disposal options for infringing goods by seriousness of the infringement. – Article 59 – Competent authorities shall have the authority to order the destruction or disposal of infringing goods in accordance with the principles set out in Article 46. Member Protection and Enforcement – Article 3.1 – Fair treatment and protection – Article 9.1 – Compliance with Berne Convention (1971) – Article 14 – Performers right to authorize or prohibit reproduction of acts

19 …and Decision China must institute more complex laws US “commercial scale” evidence was inadequate (Art. 61) China’s auctioning of goods inconsistent; allows removal of trademark (Art. 59) China failed to protect copyright works (Art. 5(1)) Panel Conclusion: China must bring Copyright Law and Customs measures into conformity with TRIPS

20 Mutually Beneficial Agreement? Benefits – United States Copyright Law – China’s amended law was amended; more inclusive Customs Law – China must remove infringing materials unlawfully affixed Benefits – China Thresholds – U.S. was not able to define “Commercial Scale” – Existing administrative and criminal procedures preserved Customs Law – Distinctions made between import/export protections – Imports: Once counterfeit trademarks are removed, goods may enter commercial channels

21 How is China Doing? Remains on the Priority Watch List – Subject to Section 306 monitoring Continual progress is being made – Greater cooperation with U.S. and Chinese law enforcement U.S. stakeholders continue to report issues with effective IPR protections – Sales of IPR-intensive goods remain disproportionately low Theft of trade secrets remains a significant concern

22 Observations US in talks with China for several years China had lax approach to enforcing Articles of the TRIPS Agreement Mutiple third party members (12 countries) Findings reaffirm significance of adherence to IPR

23 Sources Alford W., To Steal a Book is an Elegant Offense: Intellectual Property Law in Chinese Civilization, Redwood, California: Stanford University Press. Available URL: Harris D., The Honeymoon is Over: Evaluating the U.S.-China WTO Intellectual Property Complaint. Fordham International Law Journal (Web version) Vol. 32 Issue 1 Article 12. Available URL: Office of the United States Trade Representative Special 301 Report. Available URL: https://ustr.gov/sites/default/files/USTR%202014%20Special%20301%20Report%20to%20Congress%20FINAL.pdf https://ustr.gov/sites/default/files/USTR%202014%20Special%20301%20Report%20to%20Congress%20FINAL.pdf World Trade Organization. China Measures Affecting the Protection and Enforcement of Intellectual Property Rights. Available URL: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds362_e.htmhttps://www.wto.org/english/tratop_e/dispu_e/cases_e/ds362_e.htm Yu P. Intellectual Property, Foreign Direct Investment and the China Exception, Drake Law School. Available URL: Yu P. The US-China Dispute Over TRIPS Enforcement, Drake Law School. Available URL:


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