WORLD TRADE
ORGANIZATIONIP/C/W/371
29 August 2002
(02-4604)
Council for Trade-Related Aspects
of Intellectual Property RightsOriginal:  English
TRANSITIONAL REVIEW MECHANISM OF CHINA
Communication from the European Communities and their member States
By means of a communication from the Permanent Delegation of the European Commission
dated 2 August 2002, the Secretariat has received the following contribution.
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The Transitional Review Mechanism (TRM) for China is provided by paragraph 18 of
China's Accession Protocol.  The European Communities and their member States have identified the
following overall themes which ar e submitted to the TRIPS Council.
I. TRANSPARENCY
1. The European Communities and their Member Stat es (hereinafter referred to as the "EC")
take the view that the protection of intellectual property is one of highest priorities for the European
Union in its trade relations with the People's Republic of China (hereinafter referred to as "China").
China therefore is encouraged to report in a transparent way on all progress made towards
implementing WTO obligations.
2. China recently notified its main dedicated intellectual property laws and regulations
(Copyright Law, Patent Law, Trademark Law, Regulation on Computer Software protection,
Regulation on protection of Layout-Designs and Regulation on Protection of New Plant Varieties) as
well as responses to the "checklist of issues on enforcement".  The EC have posed questions in the
light of China's review of legislation and look forward to receiving a reply.
3. The EC looks forward to receiving supplementary notifications of relevant intellectual
property laws and regulations as soon as they become available.  In particular, the EC would be
interested in viewing China's Implementing Regulations of the Copyright Law and of the Trademark
Law.  In addition, the EC would be most interested to learn how China provides for protection of
undisclosed information (Article 39.3 of the TRIPS Agreement) and how China intends to comply
with the provisions regarding the protection of geographical indications (Articles 22-24 of the TRIPSAgreement).
II. TRANSPOSITION
4. Over recent years, China has carried out considerable work to revise its intellectual property
rights laws and administrative regulations to bring these into line with the TRIPS Agreement.  The EC
welcomes the efforts made by the Government of China.IP/C/W/371
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5. While the framework of legislation protecting intellectual property is now -  generally
speaking - in line with international standards, the EC expresses its concern that there is a continued
need for additional enforcement efforts by the Government of China.  China needs to further
strengthen its legislative framework for the enforcem ent of intellectual property rights and ensure the
vigorous application of its enforcement legislation in order to reduce the existing high levels of piracyand counterfeiting.
6. The appropriate enforcement of the law remains erratic for several reasons:  corruption of
local authorities, high burden of proof for the plaintiff, low compensation in situations of proved
infringement, rarely imposed prison terms and judges who tend to use minimum fines for cases
relating to intellectual property rights infringeme nt.  The EU industry repeatedly complains about the
fact that the damages and remedies are not a strong enough deterrent to efficiently combat the
problem of counterfeiting and piracy.
7. The EC's technical co-operation and assistance programmes with the Chinese authorities on
intellectual property matters will heavily be focussed on the issue of enforcement in the coming years.
III. UNEXPECTED DIFFICULTIES
8. Counterfeiting and piracy are well-established and hugely profitable industries in China.
Both local and foreign intellectual property owners continue to suffer from widespread IPR violations.The EC is particularly worried by a relatively new trend of counterfeited pharmaceutical drugs.  In
addition to lost revenue for genuine industry, this issue has very serious implications in the area of
public health and safety.
9. The EU industry encounters numerous difficulties in dealing with the problem of
counterfeiting and piracy.  And yet, no real curb on the problem is expected in the short term.  This isdue to two main reasons.  First, the scale, capabi lity and techniques of the counterfeiting industry have
almost outstripped any official punitive action.  Indeed, they are sometimes even better made then the
originals and therefore harder to detect.  Second, the piracy industry in China has grown into a vital
shadow economy.  By some estimates, piracy directly or indirectly employs between 3-5 million
people, and brings in between $40 and $80 billion.  At a time when unemployment is rising, expertssay it is simply impossible to put a quick end to the piracy industry for reasons of social stability.
10. The EC believes that the importance is to progress to public awareness of the counterfeiting
and piracy problem in China and to provide adequate training for police, customs and judges on
enforcement of IPRs.  The EC contends that the Chinese Government should strive for the elaboration
of a comprehensive strategy for the enforcement of intellectual property rights, including but perhaps
not limited to:
- increase resources for training of police and local officials;
- set up better co-ordination between the police and administrative enforcers;- establish clear guidelines on sentencing, including compulsory jail terms for repeat
offenders;
- order the destruction of discovered hauls of counterfeit products and the closure of
manufacturing facilities that produce them;
- organise wider media campaigns to raise public awareness of IPR issues.IP/C/W/371
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IV. SUCCESS STORIES
11. The fact that China has succeeded in such a relatively short term to align its intellectual
property legislation with the minimum standards of  protection of the TRIPS Agreement is already
remarkable on its own.  In some instances the newly promulgated intellectual property laws even go
beyond WTO commitments.  Two examples of this are:  (i) the possibility by Chinese customsauthorities to enforce anti-counterfeiting measures upon import and export whereas Article 51 of the
TRIPS Agreement only provides in the obligation to adopt procedures for suspension of importedgoods, and (ii) despite Article 41.5 of the TRIPS Agreement, China chooses to create specific
intellectual property courts with specialised judges.
12. Moreover, China is undeniably making enormous efforts to raise awareness of WTO
principles amongst Chinese officials, business and the legal profession and to encourage Chinese local
authorities to adapt to the new environment.  In th e field of intellectual property, for instance, the
Beijing and Shanghai city governments' attempts to  make sure that their staff use only legal software
products is certainly a step forward.
13. Newspaper reports regularly inform us of significant seizures of counterfeit or pirated goods.
Recently we learnt - and it would appear that this is not an isolated event - that some 150 individual
booksellers in the Shandong province organised an anti-piracy union to fight copyright infringementactivities.  Such initiatives clearly demonstrate awareness of the problem within the Chinese
population.
14. The EC recognises China's legislative achievements over the last decade in promulgating
numerous intellectual property laws and regulations and welcomes the recent creation of the National
Anti-Counterfeiting Office.  Furthermore, as Ch inese industry is developing its own basis of
intellectual property and, with greater attention being devoted to this issue in the mass media, there is
growing recognition amongst Chinese companies of the importance of strong intellectual property
rights enforcement.  Taken as a whole, China clearly is making progress.
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