Elizabeth Ferris Bettina Garabelli ITRN 603 International Trade Relations

April 10th 2007: The United States requested consultations with China concerning certain measures pertaining to the protection and enforcement of intellectual property rights in China. Later that month Japan, the European Communities, Canada and Mexico request to join the consultations. China subsequently accepts each request.

 Annual US losses on a global basis for copyright violations alone have been estimated at between $2.5 billion and $3.8 billion.  In 2004, China accounted for 63 percent of the total value of infringing products seized by US Customs and Border Protection.

27 September 2007, the DSB composed a Panel. Argentina, the European Communities, Japan, Mexico and Chinese Taipei reserved their 3 rd party rights. Subsequently, Australia, Brazil, Canada, India, Korea, Thailand and Turkey followed. On 16 July 2008, the Chairman of the Panel informed the DSB that due to the complexity of issues presented in this case, the Panel would not be able to complete its work within six months from the date of the Panel's composition.

The thresholds that must be met in order for certain acts of trademark counterfeiting and copyright piracy to be subject to criminal procedures and penalties; Goods that infringe intellectual property rights that are confiscated by Chinese customs authorities, in particular the disposal of such goods following removal of their infringing features; The scope of coverage of criminal procedures and penalties for unauthorized reproduction or unauthorized distribution of copyrighted works; and The denial of copyright and related rights protection and enforcement to creative works of authorship, sound recordings and performances that have not been authorized for publication or distribution within China. Source:

The lack of criminal procedures and penalties for commercial scale counterfeiting and piracy in China as a result of the thresholds appears to be inconsistent with China's obligations under Articles 41.1 and 61 of the TRIPS Agreement. Article 61 of the TRIPS Agreement states: “Members shall provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright piracy on a commercial scale. “

The requirement that infringing goods be released into the channels of commerce under the circumstances set forth in the measures at issue appears to be inconsistent with China's obligations under Articles 46 and 59 of the TRIPS Agreement. Article 46 (Remedies) of the TRIPS Agreement States: “In order to create an effective deterrent to infringement, the judicial authorities shall have the authority to order that goods that they have found to be infringing be, without compensation of any sort, disposed of outside the channels of commerce in such a manner as to avoid any harm caused to the right holder, or, unless this would be contrary to existing constitutional requirements, destroyed..”

Authors of works whose publication or distribution has not been authorized appear not to enjoy the minimum standards of protection specially granted by the Berne Convention. In addition, the rights of authors of works whose publication or distribution is required to undergo pre-publication or pre-distribution review appear to be subject to the formality of successful conclusion of such review. Article 9 of the TRIPS Agreement States: “Members shall comply with Articles 1 through 21 of the Berne Convention (1971) and the Appendix thereto. However, Members shall not have rights or obligations under this Agreement in respect of the rights conferred under Article 6 bis of that Convention or of the rights derived therefrom.”

To the extent that willful copyright piracy on a commercial scale that consists of unauthorized reproduction — but not unauthorized distribution — of copyrighted works, and vice versa, may not be subject to criminal procedures and penalties under the law of China, this would appear to be inconsistent with China's obligations under Articles 41.1 and 61 of the TRIPS Agreement. Article 41.1 of the TRIPS Agreement states: “Members shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements.”

 Criminal procedure and punishment offered by China are not sufficient.  Needs to be a change in criminal thresholds.  Illegal goods released into the market inconsistent with TRIPS.  Public auction of private goods.

 The protection for authors and composers are minimal  Copyright laws seem inconsistent  There is more protection for Chinese authors than for foreigners. However, none of the protection is adequate.

 Production of copyrighted material illegal, but the distribution is not always subject to criminal law.  Chinese administrative system is flawed:  Safe harbor for low level IP violations  Rarely transfer cases from administrative system for criminal prosecution.

 U.S. has not met burden of proof  U.S. mischaracterizing Chinese law and practice  Expanding obligations of TRIPS  China provides laws and punishment appropriate to commercial context of their country as required by TRIPS

 U.S. misunderstands Chinese copyright laws  3 effective forms to enforce IPR rights:  Criminal  Administrative  Civil Violations at all levels are subject to administrative regulations.

 Data does not support assertion that violators produce certain numbers of reproductions to avoid criminal prosecution.  Concrete standards of national law not required by TRIPS Article 61  An emphasis on the U.S. increasing the scope of the TRIPS agreement in this respect.

 The United States is trying to get China to remove criminal thresholds which goes against deference to Chinese National Law  TRIPS does not forbid public auction as method of disposal

 WTO Issued its decision late January,  WTO found a “number of deficiencies” in China’s IPR regime, and they are incompatible with its WTO obligations.  The panel determined that is was “impermissible” for China to allow public auction of counterfeit goods seized by Chinese Customs authorities.

 The United States failed to persuade the WTO panel on one main point of its case: Chinese copyright pirates and counterfeiters have no fear of criminal prosecution because the government’s threshold for bringing a case is too high. However, the panel did not admit that China currently meets international standards in this respect.

 As a result of the WTO’s rulings:  Sovereignty of Chinese laws and practices come into question  The United States will be able to protect its national authors, recording artists and companies from infringement of rights. There needs to be cooperation within the international arena to protect copyrights Investment and ingenuity could be negatively affected without sound laws

 Increase protections for Chinese companies  Many do not currently enjoy IP protection.  More joint ventures between China and American companies  Fostering partnerships could result in newfound mutual respect for products, ideas, etc. As a last resort the United States could always consider sanctions, though they are not desirable.

  “MPAA’s Glickman comments on WTO decision in China IPR case.” Business of Cinema. 27 January  “WTO Issues Report on US-China Dispute Over Intellectual Property Rights”. 27 January  “Berne Convention for the Protection of Literary and Artistic Works.”  “Intellectual Property Rights.” Peterson Institute. Institute for International Economics. 27 February 2009.