US Requests WTO Dispute Settlement Panel Re PRC Failure to Protect IPR
August 13, 2007. The United States (US) submitted a request [8 pages in PDF] for the establishment of a Dispute Settlement Panel (DSP) to the World Trade Organization (WTO) that alleges that the People's Republic of China (PRC) has violated its obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in connection with its failure to protect copyrights and trademarks in books, music, videos and movies.
This is another step in an ongoing process. On April 10, 2007, the OUSTR submitted two related requests for consultations with the WTO on this subject. See, story titled "US to Complain to WTO Regarding PR China's Failure to Protect IPR" in TLJ Daily E-Mail Alert No. 1,562, April 9, 2007. See also, the WTO's web page for DS362 and web page for DS363.
The US's April 10 request for consultations (DS362) identified four areas: (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 the PRC, and (4) unavailability of criminal procedures and penalties for a person who engages in either unauthorized reproduction or unauthorized distribution of copyrighted works.
Consultations were held on June 7-8, 2007. The PRC addressed the US's concerns on the fourth item. Hence, the just filed DSP request references three items.
The OUSTR described the three issues in a release. "First, the request challenges quantitative thresholds in China's criminal law that must be met in order to start criminal prosecutions or obtain criminal convictions for copyright piracy and trademark counterfeiting. Wholesalers and distributors are able to operate below these high thresholds without fear of criminal liability, so these thresholds effectively permit piracy and counterfeiting on a commercial scale."
"Second, the panel request addresses the rules for disposal of IPR-infringing goods seized by Chinese customs authorities. Those rules appear to permit goods to be released into commerce following the removal of fake labels or other infringing features, when WTO rules dictate that these goods normally should be kept out of the marketplace altogether."
Third, the OUSTR release states that "the panel request addresses the apparent denial of copyright protection for works poised to enter the market but awaiting Chinese censorship approval. It appears that Chinese copyright law provides the copyright holder with no right to complain about copyright infringement (including illegal/infringing copies and unauthorized translations) before censorship approval is granted. Immediate availability of copyright protection is critical to protect new products from pirates, who -- unlike legitimate producers -- do not wait for the Chinese content review process to be completed." (Parentheses in original.)
In addition, Sean Spicer, Assistant USTR for Public and Media Affairs, explained the disposition of the fourth item in the April filing in an e-mail to TLJ.
He wrote that "We have been concerned for a long time that copyright infringers could not be prosecuted under a key provision of Chinese criminal law unless they both ``reproduced´´ and ``distributed´´ infringing items. In other words, we were concerned that Chinese copyright law included a loophole that would let manufacturers off the hook (if they didn't distribute), and would let distributors off the hook (if they didn’t make the fake copies). In April, a few days before we filed our consultation request at the WTO, China issued a new judicial interpretation that we later confirmed addressed this issue. China clarified that infringing ``reproduction´´ and infringing ``distribution´´ can be prosecuted separately." (Parentheses in original.)
Spicer added that "We included this issue in our consultation request and discussed it with China during the consultations. Based both on the judicial interpretation that China issued in April and on the discussion we had with the Chinese delegation during consultations, it appears that China has resolved this issue. We will, however, continue to monitor this aspect of China’s criminal law carefully."
Spicer also stated in the OUSTR release that "The United States and China have tried, through formal consultations over the last three months, to resolve differences arising from U.S. concerns about inadequate protection of intellectual property rights in China. That dialogue has not generated solutions to the issues we have raised, so we are asking the WTO to form a panel to settle this dispute".
He also argued that "It is in the best interest of all nations, including China,
to protect intellectual property rights. Over the past several years China has taken
tangible steps to improve IPR protection and enforcement. However, we still see important
gaps that need to be addressed. We will pursue this legal dispute in the WTO and will
continue to work with China bilaterally on other important IPR issues."