us vs china ds362— measures affecting the protection and enforcement of intellectual property...

8/12/2019 US vs China DS362 Measures Affecting the Protection and Enforcement of Intellectual Property Rights

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US vs China (DS 362)

Measures Affecting the

Protection andEnforcement of Intellectual

Property Rights

Case Analysis

International Economic Law Class

2013/2014

Presented by:

Muhammad Faiz Aziz (P72110)

Noor Farahani Binti Norizan (P72105)


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Contents

I

I

IV

III

1. Brief Information

2. Issues

3. Arguments4. Findings

5. Current Status

6. Conclusion

7. References


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BRIEF INFORMATIONShort title China Intellectual Property Rights

Complainant United States

Respondent China

Third Parties Argentina; Australia; Brazil; Canada; European Communities;

India; Japan; Korea, Republic of; Mexico; Chinese Taipei;

Thailand; Turkey

Agreements cited:

(as cited in request for

consultations)

Intellectual Property (TRIPS): Art. 3.1, 9.1,14, 41.1, 46, 59, 61

Request for

Consultations

10 April 2007

Panel Established &Composed

25 September 2007 & 13 December 2007*

Panel report circulated 26 January 2009

Adopted by DSB 20 March 2009*

Implemented by China 26 February 2010*

Source: WTO (with modifications)
http://wto.org/english/docs_e/legal_e/27-trips_03_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_04_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_04_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_05_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_04_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_04_e.htmhttp://wto.org/english/docs_e/legal_e/27-trips_03_e.htm


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ISSUES

1. Thresholds for criminal procedures and penalties

2. Disposal of goods confiscated by Customs Authorities

that infringe Intellectual Property Rights

3. Denial of copyright and related rights protection and

enforcement to works that have not been authorized for

publication or distribution within China


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ISSUES1. Thresholds for criminal procedures and penalties

China

Criminal

Law*

Provision Inconsistent

with TRIPS

Agreement

Art 213 "if the circumstances are serious" or "if the circumstances are

especially serious." Article 41.1 &

Article 61

China

implements

threshold with

concept of

ILLEGAL

BUSINESS

VOLUME

Art 214 "if the amount of sales [of commodities bearing counterfeit

registered trademarks] is relatively large" or "if the amount of salesis huge."

Art 215 "if the circumstances are serious" or "if the circumstances are

especially serious."

Art 217 "if the amount of illegal gains is relatively large, or if there are other

serious circumstances" or "if the amount of illegal gains is huge or

if there are other especially serious circumstances."

Art 218 "if the amount of illegal gains is huge."

Art 220 By Unit as opposed to by natural persons

With is interpretation by the Supreme People's Court and the Supreme People's Procuratorate


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ISSUESArticle 41.1 of TRIPS Agreement:

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. These procedures shall be applied in

such a manner as to avoid the creation of barriersto legitimate trade and to provide for safeguards

against their abuse.


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ISSUESArticle 61 of TRIPS Agreement

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. Remedies available shall

include imprisonment and/or monetary fines sufficient to provide a

deterrent, consistently with the level of penalties applied for crimes of a

corresponding gravity. In appropriate cases, remedies available shall

also include the seizure, forfeiture and destruction of the infringing

goods and of any materials and implements the predominant use of

which has been in the commission of the offence. Members may

provide for criminal procedures and penalties to be applied in other

cases of infringement of intellectual property rights, in particular wherethey are committed wilfully and on a commercial scale.


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ISSUESILLEGAL BUSINESS VOLUME

The calculation methodology based on the prices through which the

counterfeit goods undercut legitimate merchandise. Thus, the value of

"illegal business volume" for a quantity of counterfeit merchandise can

be far less than the value of an equivalent quantity of legitimate

merchandise.

This concept creates barriers to prosecution of commercial scale

counterfeiting and piracy (whether carried out by businesses or others)

because it is not a calculation of the value of the legitimate non-

infringing goods with which the counterfeit goods compete.


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ISSUES2. Disposal of goods confiscated by Customs Authorities

that infringe Intellectual Property Rights

China Custom Law* Provision

Inconsistent

with TRIPS

Agreement

Customs IPR

Regulations 2003 Set forth a hierarchy of requirements for thedisposal of goods that infringe intellectual

property rights and that are confiscated by

Chinese customs authorities.

Under that hierarchy, the Chinese customs

authorities are required to give priority to disposal

options that allow such goods to enter thechannels of commerce (for instance, through

auctioning the goods after removing their

infringing features ). Only if the infringing features

cannot be removed must the goods be destroyed

.

Article 46 &Article 59

Customs IPR

Implementing Measures

2004

General Administration

of Customs

Announcement No. 16

(2 April 2007)


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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. The judicial authorities shall also have the authority to order thatmaterials and implements the predominant use of which has been in the creation

of the infringing goods be, without compensation of any sort, disposed of outside

the channels of commerce in such a manner as to minimize the risks of further

infringements. In considering such requests, the need for proportionality between

the seriousness of the infringement and the remedies ordered as well as the

interests of third parties shall be taken into account. In regard to counterfeit

trademark goods, the simple removal of the trademark unlawfully affixed shall not

be sufficient, other than in exceptional cases, to permit release of the goods into

the channels of commerce.


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Without prejudice to other rights of action open to the right holder and

subject to the right of the defendant to seek review by a judicial

authority, 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. In regard to counterfeit trademark

goods, the authorities shall not allow the re-exportation of the

infringing goods in an unaltered state or subject them to a different

customs procedure, other than in exceptional circumstances.


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ISSUES


enforcement to works that have not been authorized forpublication or distribution within China

There are 10 regulations allegedly inconsistent:

(1) the Copyright Law, in particular Article 4;

(2) the Criminal Law; the Regulations on the Administration of Publishing Industry; the

Regulations on the Administration of Broadcasting; the Regulations on the Administration of

Audiovisual Products; the Regulations on the Administration of Films; and the Regulations on

the Administration of Telecommunication;

(3) the Regulations on Administration of the Films Industry;

(4) the Administrative Regulations on Audiovisual Products;

(5) the Administrative Regulation on Publishing;

(6) the Administrative Regulations on Electronic Publications;

(7) the Measures for the Administration of Import of Audio and Video Products;(8) the Procedures for Examination and Approval for Publishing Finished Electronic

Publication Items Licensed by a Foreign Copyright Owner;

(9) the Procedures for Examination and Approval of Importation of Finished Electronic

Publication Items by Electronic Publication Importation Entities;

(10) the Procedures for Recording of Imported Publications.


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ISSUES




Allegedly Inconsistent with Article 5(1) of the BerneConvent ion for the Protect ion of Li terary and Art ist ic Wo rks

(1971) (the "Berne Convention") . It provides that foreign authorsof protected works shall enjoy all the rights granted to domestic

authors, as well as all the rights specially granted by the Berne

Convention.

Moreover, these rights may not be made subject to any formality(Berne Convention Article 5(2)). Article 9.1 of the TRIPS

Agreement requires all WTO Members, inter alia, to comply with

Articles 1 through 21 of the Berne Convention.


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ISSUES




Article 4 of the China Copyright Law provides as follows:

"Works the publication or distribution of which is prohibited bylaw shall not be protected by this Law."

Therefore, authors of works whose publication or distribution inChina is prohibited (such as those works whose publication ordistribution has not been authorized in China) appear not to

enjoy the protection specially granted by the Berne Convention inrespect of those works (and, it appears, may never enjoy suchprotection if the work is not authorized, or is not authorized fordistribution or publication in the form as submitted for review).


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ARGUMENTS1. Thresholds for criminal procedures and penalties

USA CHINA

The first sentence of Article 61 of the TRIPS

Agreement provides that :

"Members shall provide for criminal procedures

and penalties to be applied at least in cases ofwilful trademark counterfeiting or copyright

piracy on a commercial scale."

"provide for" means to "take appropriate

measures in view of a possible event; make

adequate preparation."

The phrase "Members shall provide for . . ." thus

means that Members have an obligation to

include in their law criminal procedures and

penalties that apply in cases of wilful

commercial scale trademark counterfeiting and

copyright piracy.

TRIPS Agreement Article 61 must be read in

accordance with Vienna Convention.

A treaty must be interpreted "in the light of its

object and purpose." The object and purpose of

TRIPS, laid out clearly in the Preamble to theAgreement, are to enhance international trade

though the protection of intellectual property

within the framework of Members' legal norms

and resource constraints.

The object and purpose underscore that TRIPS

Article 61 should not be read to harmonize legalsystems across Members or to disregard

Members interests in developing criminal

measures that reflect its own legal norms and

public interests


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ARGUMENTS2. Disposal of goods confiscated by Customs Authorities

that infringe Intellectual Property RightsUSA CHINA

Article 27 of the Customs IPR Regulations and Article

30 of the Customs IPR Implementing Measures

mandate a compulsory sequence of steps (or "items")

that Chinese Customs must take in deciding how to

treat goods determined infringe intellectual property

rights.

Neither of the two components of the compulsory first

"item" accords with Article 46 principles. The first item

contains two parts. Customs ascertains whether the

infringing goods can be used for "public good"; if so,

Customs gives the goods to the relevant "public

welfare organization". Where a donation to a charity is

an option, and the donation has the right-holder'sconsent, this may be a socially beneficial disposition

of infringing goods that also observes the principles of

Article 46. On the other hand, allowing counterfeit

goods to be used, even for "public good," can be

harmful to a right holder in certain cases.

Customs may also allow the right holder to purchase

the goods "for compensation" . The option under

which a right holder can buy the infringing goods isnot disposal.

Customs have the authority to order that infringing goods be

"disposed of outside the channels of commerce in such a

manner as to avoid any harm caused to the right holder,

or destroyed. Article 59 does not require that China limit

Customs' disposition methods to disposal outside the

channels of commerce and to destruction.

Therefore, Customs has the authority to donate infringing

goods to social welfare organizations and has the legal

responsibility of ensuring that donated goods are exclusively

used by social welfare organizations and that they are

exclusively used for social welfare purposes.

Infringers whose goods are auctioned are left in exactly thesame position as if the goods had been destroyed: in both

instances the infringers lose the goods without any

compensation.

In addition, Right holders have a legal, formal right to

comment prior to any public auction; this procedure helps

Customs to determine that a good would be inappropriate

for public auction, and thereby helps avoid harm to the right-

holders


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ARGUMENTS3. Denial of copyright and related rights protection and enforcement

to works that have not been authorized for publication or

distribution within China

USA CHINA

By denying copyright protection to works that

should have it, Article 4 allows copyright

infringers to profit at the expense of the

legitimate rightholder, without fear of beingsubjected to enforcement procedures and

remedies for copyright infringement..

Article 9.1 of the TRIPS Agreement provides that

all WTO Members shall comply with Articles 1

through 21 of the Berne Convention, except that

WTO Members do not have rights or obligations

under the TRIPS Agreement in respect of therights conferred under Article 6bis of the Berne

Convention or of the rights derived there from.

China is a party to the Berne Convention.

China maintains government review and approval

processes with respect to the publication and

distribution within China of a variety of works,

including films and DVD releases.

In general terms, a work subject to these processes

may be published or distributed only if the required

authorization is obtained. The United States does not

object to the existence of these processes, nor could

it.

This sovereign right is an inherent, reserved poweracknowledged by international law as referenced in

Article 17 of the Berne Convention for the Protection

of Literary and Artistic Rights ("Berne Convention"),

and expressly incorporated into the WTO structure

through Article 9.1 of the TRIPS Agreement.


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RESULTS(a) the Copyright Law, specifically the first sentence of Article 4, is inconsistent

with China's obligations under:(i) Article 5(1) of the Berne Convention (1971), as incorporated by Article 9.1 of the

TRIPS Agreement; and

(ii) Article 41.1 of the TRIPS Agreement;

(b) with respect to the Customs measures:

(i) Article 59 of the TRIPS Agreement is not applicable to the Customs measures

insofar as those measures apply to goods destined for exportation;(ii) the United States has not established that the Customs measures are

inconsistent with Article 59 of the TRIPS Agreement, as it incorporates the

principles set out in the first sentence of Article 46 of the TRIPS Agreement;

(iii) the Customs measures are inconsistent with Article 59 of the TRIPS

Agreement, as it incorporates the principle set out in the fourth sentence of

Article 46 of the TRIPS Agreement.

(c) the United States has not established that the criminal thresholds are

inconsistent with China's obligations under the first sentence of Article 61 of the

TRIPS Agreement.


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RESULTSUnder Article 3.8 of the DSU, in cases where there is an infringement of the obligations

Assumed under a covered agreement, the action is considered prima facie to constitutea case of nullification or impairment. China did not succeed in rebutting that presumption.

Accordingly, the Panel concludes that, to the extent that the Copyright Law and the

Customs measures as such are inconsistent with the TRIPS Agreement, they nullify or

impair benefits accruing to the United States under that Agreement.

In light of these conclusions, the Panel recommends pursuant to Article 19.1 of the DSU

that China bring the Copyright Law and the Customs measures into conformity with itsobligations under the TRIPS Agreement.

In this dispute, the Panel's task was not to ascertain the existence or the level of

trademark counterfeiting and copyright piracy in China in general nor to review the

desirability of strict IPR enforcement. The United States challenged three specific alleged

deficiencies in China's IPR legal system in relation to certain specific provisions of the

TRIPS Agreement. The Panel's mandate was limited to a review of whether thosealleged deficiencies, based upon an objective assessment of the facts presented by the

parties, are inconsistent with those specific provisions of the TRIPS Agreement.


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As of 26 February 2010, China has implementedthe recommendations and rulings of the DSBwith respect to the Copyright Law.

However, The United States and China agree to

use mechanism of "Agreed Procedures underArticles 21 and 22 of the Dispute SettlementUnderstanding"

No further announcement regarding ComplianceProceeding of DS362 case

CURRENT STATUS


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REFERENCES

TRIPs (Trade Related Intellectual Property Rights) Agreement The Berne Convention for the Protection of Literary and Artistic

Works (1971)

Copyright Law of the People's Republic of China 1990 (as

amended in 2001 and 2010)

ChinaMeasures Affecting The Protection And Enforcement OfIntellectual Property Rights: Request for Consultations by the

United States, WT/DS362/1, 16 April 2007

ChinaMeasures Affecting The Protection And Enforcement Of

Intellectual Property Rights: Request for Consultations by the

United States, WT/DS362/R, 26 January 2009


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