WT/DS362/R 
 Page B-1 
 
 
  ANNEX B 
 
SUBMISSIONS OF CHINA 
 
CONTENTS PAGE 
B-1 Executive Summary of the first written submission of China B-2 
B-2 Executive Summary of the oral statement of China at the first 
substantive meeting B-16 
B-3 Closing oral statement of China at the first substantive meeting B-21 
B-4 Executive Summary of the rebuttal submission of China B-23 
B-5 Executive Summary of the oral statement of China at the second 
substantive meeting B-39 
B-6 Closing oral statement of China at the second substantive meeting B-44 
 
 WT/DS362/R 
Page B-2  
 
  ANNEX B–1 
 
EXECUTIVE SUMMARY OF THE FIRST WRITTEN SUBMISSION  
OF CHINA 
 
I. INTRODUCTION 
1. The United States falls far short of meeting its burden of showing that China is noncompliant 
with its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights  
("TRIPS").  In its first written submission, th e United States has consistently mischaracterized 
Chinese law and practice.  The United States has also sought to expand significantly the scope of 
Members' obligations under TRIPS; and it has disreg arded the very first paragraph of the Agreement: 
"Members shall be free to determine the appropriate  method of implementing the provisions of this 
Agreement within their own legal systems." 
2. In its Claim One (Section IV of the US Submission) , the United States has failed to 
demonstrate that China's criminal law is inconsiste nt with China's obligations under TRIPS.  The US 
argument is based on a formulation of TRIPS Article 61 that was expressly rejected at the time TRIPS 
was negotiated.  Contrary to the US claim, China faithfully complies with its obligations under TRIPS 
by providing criminal procedures and penalties for willful counterfeiting and piracy that are 
appropriate within the commercial c ontext and legal structures of China. 
3. In its Claim Two (Section V of the US Submission), the United States misstates China's 
TRIPS obligations, mischaracterizes Chinese Cust oms' practices, and accordingly, has failed to 
demonstrate that Chinese Customs deals with seized in fringing goods in a manner that is inconsistent 
with TRIPS Article 59. 
4. In its Claim Three  (Section VI of the US Submission), the US argument is based on 
fundamental errors in the understanding of Chinese co pyright law.  The United States' chief concern 
in its third claim – and its central misunderstanding – is that China's laws do not provide automatic 
and immediate copyright protection.  The US cl aim collapses when this error is corrected.   
5. Further in regard to its Claim Thre e, the United States fails to make a prima facie  case as to 
assertions in its pleadings relating to TRIPS Article  3 (national treatment) and Article 14 (related 
rights).  
II. CHINA'S CRIMINAL THRESHOLDS ARE CONSISTENT WITH CHINA'S 
OBLIGATIONS UNDER TRIPS ARTICLES. 61 AND 41.1 
A. C
HINA 'S INTELLECTUAL PROPERTY ENFORCEMENT REGIME  
6. China has three legal regimes for the enforcemen t of intellectual property rights:  criminal, 
administrative and civil enforcement.  China empl oys all three regimes in its efforts to combat 
counterfeiting and piracy.  Criminal measures are u sed against counterfeiting and piracy when those 
acts are undertaken on a sufficient scale to exceed China's thresholds  for criminal enforcement and 
China also takes government action against activit y through its administrative law enforcement 
system.  Alongside these two forms of government action, China makes civil enforcement rights available to intellectual property rights holders.  WT/DS362/R 
 Page B-3 
 
 
  1. China has imposed criminal sanctions on willful trademark counterfeiting and 
copyright piracy on a commercial scale  
7. China presents a detailed description of its crim inal law regime for intellectual property.  
China explains each of the criminal laws that c oncern intellectual property infringement, the specific 
thresholds of activity that trigger criminal san ctions under each law, and the calculation of these 
thresholds.  China further explains that criminal  penalties are available in instances of unfinished 
products or indicia of commercial scale infringe ment; and that Chinese law allows for private 
individuals to initiate criminal action.   
8. In the course of describing this legal regime, China endeavors to address and correct 
numerous US misstatements and mischaracterizations.  In describing Chinese criminal law, the United 
States has misrepresented the scope of China's "illegal business operation volume" threshold for 
criminal activity, ignoring the fact that Chinese authorities include evidence of infringing goods at 
other warehouses, in transportation, and already so ld.  The United States has disregarded China's 
cumulative calculation of criminal thresholds over th e multiple years of the cr iminal activity.  It has 
ignored the alternative nature of the thresholds und er several of China's laws, which is to say that 
infringement triggers criminal enforcement if it meet s any one of the criminal thresholds.  Finally, the 
United States has wrongly claimed that China may not administer criminal penalties for unfinished 
products and indicia of infringement, when Chinese law clearly provides otherwise. 
2. China employs an administrative enforcement regime that imposes significant 
deterrence on Intellectual Property infringement beneathcCriminal thresholds 
9. China describes the government administrative enforcement regime that operates separately 
from the criminal law, and is not subject to the minimum thresholds of criminal law.  China's 
administrative enforcement system is a unique featur e of China's legal structure that does not have a 
parallel in most Western systems, including the US legal system.  Contrary to the US assertion that 
the thresholds in Chinese criminal law create "a  safe harbor" for low-level intellectual property 
infringement, China in fact operates a government-led  enforcement system to which infringement on 
any scale is subject.  Low-level intellectual propert y infringers do not operate free of government-led 
enforcement in China.  
3. The US assertions on infrin gement trends are unfounded 
10. China addresses the US allegation that a high pr oportion of copyright infringement cases fall 
beneath the numerical thresholds and that infringers  reduced their volume of copies to avoid criminal 
liability when the criminal thresholds were lowere d.  The dataset on which the United States relies 
comes from administrative raids carried out at the request of the right-holders themselves: its 
probative relevance is unclear, and in any event,  the data does not support the US assertions of 
statistical trends. 
B. THE UNITED STATES BEARS AN ESPECIALLY HIGH BURDEN OF PROOF IN ADVANCING THE 
CLAIM THAT CHINA FAILS TO MEET ITS ARTICLE 61 OBLIGATION  
11. As the complaining party, the United States bears the burden of proof in advancing the 
argument that China's criminal enforcement regime does not comply with the obligation articulated in 
TRIPS Article 61.  In this particular instance, however, the United States bears a significantly higher 
burden than it would normally encounter.  That is because the United States is advancing a claim – 
that Members of TRIPS must enact criminal laws that meet highly specific international standards – that cuts decisively against the tradition and norms of international law.    WT/DS362/R 
Page B-4  
 
  12. International organizations accord great defe rence to national authorities in criminal law 
matters.  A review of international law shows that states have traditionally regarded criminal law as 
the exclusive domain of sovereign jurisdiction;  where sovereign governments are subject to 
international commitments concerning criminal la w, these commitments afford significant discretion 
to governments regarding implementation;  and inte rnational courts have been exceedingly reluctant 
to impose specific criminal standards on states.   
13. In light of prevailing international law, the United States must not merely show that its 
proposed interpretation of the TRIPS Article 61 obliga tion is correct by ordinary standards.  It must 
also persuade this panel that the parties to TRIPS ag reed to an obligation to reform their criminal laws 
of such specificity that it is a sharp departur e from the practice of every country in every other 
international forum that relates to national criminal laws.   
C. TRIPS
 ARTICLE 61 REQUIRES THAT MEMBERS SET FORTH CRIMINAL THRESHOLDS FOR 
COUNTERFEITING AND PIRACY WITHIN THE BROAD AND DISCRETIONARY MEANING OF 
"COMMERCIAL SCALE " 
14. TRIPS Article 61 declares that "Members shall provide for criminal procedures and penalties 
to be applied at least in cases of willful trademar k counterfeiting or copyright piracy on a commercial 
scale."  The core of the dispute between the Unite d States and China is the meaning and scope of 
"commercial scale".  The United States advances a pr oposed definition that is inconsistent with the 
ordinary meaning and that was expressly rejected by the TRIPS negotiators. 
15. The obligation set forth in Article 61 is that  Members impose criminal penalties for willful 
infringement that involves a significant magnitude of  activity, as  appropriate within the commercial 
context and legal structures of the Member.  China meets this obligation. 
1. The ordinary meaning of "commercial scale" is  not any scale of activity undertaken for 
financial gain 
16. The United States sets forth a deeply flawed definition of "commercial scale".  The United 
States argues that the ordinary meaning of "commercial scale" may be adduced by combining the 
ordinary meaning of "commercial" ("interested in financial return") and "s cale" ("magnitude, extent, 
or degree").  By this synthesis, the United States claims, the term "commercial scale" has two distinct 
meanings and would capture two classes of activity:  first, "commercial scale" would capture any 
activity that has the purpose of financial return.  (T hat is, the single sale of an item for one US cent 
would constitute commercial scale activity).  S econd, "commercial scale" would also capture 
activities, "regardless of motive or purpose" that "are of a sufficient extent or magnitude to qualify as 
'commercial scale' in the relevant market."  
17. The US interpretation is inconsistent with the plain meaning of Article 61.  The interpretation 
violates the principle that Article 61 must be read so as to give full effect to all words of the provision.  
The US definition also wrongly presumes that th e meaning of the phrase "commercial scale" is 
nothing more than the sum of "commercial" and "scale".   
18. In fact, a careful review of the common u sage of the phrase shows that "commercial scale" 
refers to a significant magnitude of infringeme nt activity.  The World Intellectual Property 
Organization Committee of Experts on Measures Against Counterfeiting and Piracy set forth a definition of "commercial scale" in February 1988 that made abundantly clear that the phrase was intended to be a broad and flexible standard and al so that it was designed to cover more than simply 
the "will to make profit".  Other uses of "comme rcial scale" in GATT documents and by the United 
States Government itself support this interpretation of the phrase.  WT/DS362/R 
 Page B-5 
 
 
  2. The context of Article 61 shows that Members never intended to bind themselves with 
specific, concrete standards for National Criminal Law 
19. Following the Vienna Convention on the Law of Treaties  ("Vienna Convention"), TRIPS 
Article 61 must be read in accordance with its context.  Several elements of this deserve 
consideration. 
20. First, TRIPS does not define what constitutes substantive infringement.  Where both the scope 
of rights and the definition of the act that constitutes infringement is left to each country to define, it 
strains reasonable interpretation to find a specific, concrete threshold at which this undefined act must 
constitute a crime.  At a minimum, there should be clear evidence that the par ties agreed to such an 
odd structure.  No such clear evidence exists. 
21. Second, the lack of specificity in the language of Article 61 stands in sharp contrast to the 
specific provisions that are laid out in Articles. 42 th rough 48 of TRIPS.  It also stands to contrast to 
the specific provisions set forth in the Agreement on Implementation of Article VI of the GATT  and 
Agreement on Subsidies and Countervailing Measures.   Where the negotiating parties wished to 
impose detailed and concrete obligations, they expressed that requirement of specificity in clear terms.  
22. Finally, Article 61 must be understood in th e context of Article 1.1, which sets out the 
"Nature and Scope of Obligations" for the entire agreement; and Article 41.5, which sets forth the 
"General Obligations" for "Enforcement of Intell ectual Property Rights" in Part III of TRIPS.  
Articles 1.1 and 41.5 demonstrate that Members re fused to accept TRIPS as an agreement that would 
force them into legal harmonization.  On the contrary, they insisted on their rights to carry out enforcement in accordance with their own legal traditi ons and subject to the specific context – such as 
constraints on enforcement resources – of their resp ective circumstances.  These Articles underscore 
not only that Article 61 should be read broadly, but  that "commercial scale" was intentionally vague – 
and left undefined – precisely because a large bloc of Members would never have accepted a more 
specific and intrusive obligation. 
3. The proposed US definition is inconsistent with the object and purpose of TRIPS 
23. The Vienna Convention provides that 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 the Agreement, 
are to enhance international trade though the protect ion 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 legal systems across Members or to disregard Members' 
interests in developing criminal measures that reflect its own legal norms and public interests. 
4. The subsequent actions of Members – including the United States – reveal that they 
understood "Commercial Scale" to impose only a broad and high standard  
24. Members have consistently fa iled to interpret "commercial scale" to mean any activity 
undertaken for a commercial purpose.  The expe riences of the Canadian Government and the 
European Community show that they did not u nderstand "commercial scale" to simply cover any 
activity undertaken for a commercial purpose.   
25. The practice of the United States in its subsequent  bilateral free trade agreements has been to 
define carefully "commercial scale" to cover any ac tion for financial gain.  There would be no reason 
to negotiate this definition with countries that al ready are subject to the TRIPS obligations, if the 
terms already had this meaning in TRIPS.  On the c ontrary, the US insistence on developing a stricter 
definition in the bilateral context underscores that "commercial scale" as set forth in TRIPS is a broad 
concept that permits considerable national discretion.  It is an ack nowledgement that the United States WT/DS362/R 
Page B-6  
 
  failed to secure in the TRIPS Article 61 negotiations  the obligation that it nonetheless seeks to impose 
here.   
5. The negotiating record shows that the parties understood "Commercial Scale" to set 
forth a broad standard to cover significant infringement activity 
26. The negotiating record of TRIPS demonstrates convincingly that the "commercial scale" 
standard was proposed and adopted as a clear alte rnative to the formulation now advanced by the 
United States.  The real TRIPS standard was underst ood to be broad and flexible and also to target 
counterfeiting and piracy of a significant scale.  The negotiating parties, on multiple occasions, considered and rejected the formulation that crim inal penalties apply to any counterfeiting or piracy 
conducted for commercial gain.   
D. C
HINA HAS IMPLEMENTED ITS ARTICLE 61 OBLIGATION TO IMPOSE CRIMINAL MEASURES 
AGAINST WILLFUL COUNTERFEITING AND PIRACY ON A COMMERCIAL SCALE  
27. The "commercial scale" standard under TRIPS Article 61 is a broad standard, subject to 
national discretion and local conditions.  The Panel,  in considering whether China has fulfilled its 
obligation, should judge whether the criminal th resholds employed by Chinese law fall within the 
legitimate range of "commercial scale" and within th e legitimate scope of sovereign discretion.  Given 
the broad nature of the "commercial scale" sta ndard and the importance of  deference to national 
discretion, China respectfully proposes that th e Panel determine whether China's law imposes 
criminal penalties for willful infringement that involv es a significant magnitude of activity and that is 
appropriate within the commercial context and lega l structures of China.  China imposes criminal 
penalties for infringement activity th at exceeds the thresholds set fort h in its law.  This leaves two 
issues for the Panel's consideration:  are the crimin al thresholds appropriate within the structure of 
Chinese law?  And are the thresholds reasonabl e in the context of commerce within China? 
1. The Panel should conclude that China's crimi nal thresholds are appropriate in light of 
the structure of China's criminal law 
28. China employs thresholds across a range of commercial crimes, reflecting China's allocation 
and prioritization of criminal enforcement, prosecuti on and judicial resources.  Consistent with its 
obligations under Article 61 and its  rights under Article 41.5, China has set forth criminal measures 
for intellectual property infringement that are proportional to other commercial crimes.  
29. The United States would require China to up-end its criminal law regime.  It would require 
that China all but eliminate thresholds – according to the US formulation of "financial gain," the 
threshold would be RMB1 – and consequently create an unworkable regime of criminal law 
enforcement, and prioritize the criminal enforcem ent of intellectual property offenses over that of 
other extremely serious crimes, such as currency counterfeiting and bribery.   This would be an 
audacious departure from the defere nce to national law and respect for the allocation of enforcement 
resources envisioned in TRIPS. 
30. China has acted in good faith to implement its  Article 61 obligation.  China's criminal 
thresholds for counterfeiting and piracy are reasona ble and appropriate in th e context of its legal 
structures and its other laws on commercial crimes.   
2. China's criminal thresholds are appropriate in  light of the scale of commerce within 
China 
31. The criminal thresholds are reasonable not just in  terms of China's legal structure, but also in 
terms of the scale of commerce in China, a reasonable reference point for gauging a Member's  WT/DS362/R 
 Page B-7 
 
 
  "commercial scale" thresholds.  It is appropriate – in light of the meaning of "commercial scale" under 
TRIPS – for a Member to set thresholds that are re lated to the indicators of a sustainable commercial 
enterprise. 
32. China has set forth an illegal business volume th reshold – just one of several alternative 
criminal thresholds – that is significantly below the level at which even the smallest commercial 
enterprises operate in China.  Ch ina has chosen its criminal thresholds not so as to minimize its 
obligations under TRIPS, but because in its sove reign judgment these thresholds best capture the 
points at which intellectual property infringement imperils the public order and warrants criminal 
enforcement. 
3. The Panel should not consider the novel obli gations that the United States seeks to 
impose on China 
33. In assessing whether China has implemented its leg itimate obligations to set forth appropriate 
criminal laws, the Panel should disregard the unfou nded obligations that the United States seeks to 
impose on China.  First, China does not have an obligation to consider the commercial impact of 
infringement.  Under TRIPS, criminal enforcemen t is required if the infringing activity is on a 
commercial scale, not if the impact of th e infringing activity is on a commercial scale. 
34. Second, China does not have an obligation to rela x or change its evidentiary standards.  The 
United States argues that because  certain evidence of infringement – such as the volume of goods 
stored in warehouses or already sold – may not alwa ys be available to Chinese authorities, then, for 
that reason, the criminal thresholds are overly hi gh.  In fact, China fully complies with its TRIPS 
obligation by setting forth a reasonable "commercial scal e" standard for the application of criminal 
procedures and penalties.  TRIPS imposes a substantive legal obligation and China meets it.  The 
evidentiary procedures that China employs in determining whether or  not certain infringement meets 
this commercial scale have no legal relevance.  
E. CHINA FULFILLS ITS OBLIGATIONS UNDER THE SECOND SENTENCE OF ARTICLE 61 AND 
ARTICLE 41.1  TO AFFORD REMEDIES AND PROCEDURES PURSUANT TO THE FIRST SENTENCE OF 
ARTICLE 61 
35. The United States argues that China also brea ches the second sentence of Article 61 and 
Article 41.1.  However, both these provisions are conditional on the first sentence of Article 61.  
Unless the United States can demonstrate that China breaches its obligations under the first sentence 
of Article 61, it cannot demonstrate that China also  breaches its obligations under the second sentence 
of Article 61 and Article 41.1.  Having failed at th e former task, the United States fails at the latter. 
III. CHINA'S MEASURES FOR THE DISPOSITION OF INFRINGING GOODS SEIZED 
BY CUSTOMS ARE CONSISTENT WITH CHINA'S OBLIGATIONS UNDER TRIPS ARTICLE 59 
36. In its Claim Two,  the United States alleges that Chin ese Customs' legal framework for 
dealing with seized infringing goods is inconsistent  with TRIPS.  Specifically, the United States 
argues that Chinese Customs does not have the aut hority to order the disposal of infringing goods 
outside the channels of commerce in such a way as to avoid harm to the right-holder ("disposal 
authority"), or to order the destruction of such good s ("destruction authority").  The US argument is 
based , in part , on a misstatement of China's law concerning the disposition of infringing goods; and, 
in part, on the faulty premise that Chinese Customs lacks the authority to destroy infringing goods if 
destruction is not the government's  preferred method of disposition. WT/DS362/R 
Page B-8  
 
  37. China fully satisfies its TRIPS obligations:  Chinese Customs has the required disposal 
authority, reflected in its power both to allow the donation of infringing goods to social welfare organizations as well as to allow the sale of such go ods to their right-holders .  Chinese Customs also 
has destruction authority, as evid ent in its discretionary power to  determine whether infringing goods 
qualify for destruction.  China notes that, while TRIPS requires that Chinese Customs have the 
appropriate disposition authority, TRIPS does not li mit Customs to dealing with infringing goods only 
by the means set forth in TRIPS. 
A. C
HINESE CUSTOMS ' DISPOSITION OF INFRINGING GOODS  
38. China presents detailed descriptions of the f our alternative disposition methods available 
under Chinese law to the General Administration of  Customs of the People's Republic of China 
("Customs").  First, Customs has the authority  to donate infringing goods to social welfare 
organizations, if it determines that the goods are su itable for such purposes and do not pose health or 
safety risks;  Customs has the legal responsibility of  ensuring that donated goods are exclusively used 
by social welfare organizations and that they ar e exclusively used for social welfare purposes.  
Second, Customs has the authority to enter into a voluntary sale of the infringing goods to their right-
holders.  Right-holders may choose to purchase infringing goods where, for example, these seized 
goods are determined to be overruns illicitly produced  by a licensed manufacturer, and are therefore 
identical to the licensed goods.  Third, Customs has the authority to publicly auction infringing goods, if Customs has decided that the first two dispositio n methods are not available, and also if it has 
formally solicited comments from the right-holders, determined that the goods do not pose health or 
safety risks, and concluded that the auction is co st-effective, and removed all infringing features.  
Finally, Customs has the authority to destroy infri nging goods, if it has determined that the other 
disposition methods are not available. 
B. C
HINA COMPLIES WITH TRIPS  ARTICLE 59 BECAUSE IT PROVIDES BOTH DISPOSAL AND 
DESTRUCTION AUTHORITY  
39. TRIPS Article 59 (which incorporates the first sen tence of  Article 46) requires that China's 
Customs have the authority to order that infringi ng goods be "disposed of outside the channels of 
commerce in such a manner as to avoid any harm ca used to the right holder, or… destroyed."   
40. Article 59 does not require that China limit Cust oms' disposition methods to disposal outside 
the channels of commerce and to destruction.  Cu stoms must have the auth ority to use both such 
methods, but Article 59 does not impose the obligation to use solely those authorities.  The standard 
for compliance with Article 59 is that, first, Cust oms has the authority to dispose of infringing goods 
outside the channels of commerce in such a way as  to avoid harm to the right-holder and, second, 
Customs has the authority to destroy infringing goods.  China's Customs, contrary to US allegations, possesses both disposal authority an d destruction authority.   
1. China's Customs has the authority to dispose of  infringing goods outside the channels of 
commerce while avoiding harm to the interests of the right-holder 
41. China's Customs has the authorit y to order that infringing goods be "disposed of outside the 
channels of commerce in such a manner as to avoid an y harm caused to the right holder," by virtue of 
its power to sell infringing goods to their right-holde rs and, independently, by virtue of its power to 
donate infringing goods to social welfare organiza tions.  In both circumstances, Customs has the 
authority to dispose of the infringing goods outsid e the open market while paying due regard to 
interests of the right-holders.  WT/DS362/R 
 Page B-9 
 
 
  2. China's Customs has the authority to destroy infringing goods 
42. China's Customs possesses the authority to or der the destruction of infringing goods, as 
referenced in TRIPS Article 46 and incorporated in Article 59.  Chinese law sets forth criteria for the 
disposition of infringing goods by Customs.  These crite ria reflect an official preference for the use of 
other disposition methods, but Customs has the legal discretion to determine whether the criteria are 
met and therefore which dispos ition method is appropriate.  
43. The US first written submission itself, as well as US and other Member practice, makes it 
clear that "authority" was never intended to be  absolute and unconditional.  The sequencing of 
disposition methods, coupled with Cu stoms' discretion to determine wh ether the relevant criteria have 
been met, is consistent with a grant of destruction authority. 
44. Indeed, Customs chose to destroy 58 per cent of  the total value of infringing goods between 
2005 and 2007.  This is demonstrative proof that the putative hierarchy of disposition options does not 
hinder Customs' ability to order d estruction of infringing goods.  
C. CHINESE CUSTOMS ' USE OF PUBLIC AUCTION IS WHOLLY CONSISTENT WITH ITS OBLIGATIONS 
UNDER TRIPS   
45. The United States alleges that Chinese Customs'  public auction of infringing goods breaches 
Article 59.  While TRIPS Article 59 requires th at Customs have both disposal authority and 
destruction authority, it does not limit Customs to those two methods of disposition.  TRIPS does not forbid the use of public auction. And in practice, Customs rarely uses public auction. This method of 
disposition accounts for only 2 per cent of the total value of infringing goods.    
1. TRIPS Article 59 does not require Members to limit the disposition of infringing goods 
to disposal outside the channels of commerce or destruction 
46. The plain meaning of "authority," plus Member  practice on the disposition of infringing 
goods, and the negotiating history of Article 59, a ll underscore the fact that although Members must 
afford to their customs agencies both disposal aut hority and destruction authority, they are in no way 
required to limit their customs agencies to disposal outside the channels of commerce and to 
destruction.  Customs' authority to publicly au ction infringing goods is wholly consistent with 
Article 59. 
2. Public Auction is consistent with the guiding principles of Articles 46 and 59 
47. The two stated principles of Article 46 (and therefore Article 59) is "to create an effective 
deterrent to infringement" and to "avoid any harm caused to the right holder."  Public auction is 
consistent with both these principles.  First, infri ngers whose goods are auctioned are left in exactly 
the same position as if the goods had been destroye d: in both instances the infringers lose the goods 
without any compensation.  Moreover, Customs' use of a reserve price at the auctions ensures that 
infringers do not have the opportunity to purchase the seized goods at the public auction at an unreasonably low cost and use these goods in furthe rance of counterfeiting activity.  Second, right-
holders have a legal, formal right to comment pr ior to any public auction; this procedure helps 
Customs to determine that a good would be inapprop riate for public auction, and thereby helps avoid 
harm to the right-holders.  WT/DS362/R 
Page B-10  
 
  D. C
HINA DISCHARGES ANY LEGAL OBLIGATIONS ASSOCIATED WITH THE FOURTH SENTENCE OF  
TRIPS  ARTICLE  46 
48. The United States contends that China also breaches TRIPS in so far as Customs' use of 
public auction – one of four available disposition met hods – "is inconsistent with the principle in the 
fourth sentence of Article 46."  While the United St ates appears to advance two different versions of 
this argument, neither is credible.   
49. If the United States argues, as it does in the "Intro duction" to its first written submission, that 
the fourth sentence of Article 46 means that Custom s must have the authority to keep infringing goods 
outside the channels of commerce, the foregoing secti ons demonstrate that Customs has this authority. 
50. If the United States argues that the fourth sente nce of Article 46 imposes a ban on the return 
of trademark-infringing goods to the channels of commerce, then it fails to show that the fourth 
sentence of Article 46 is incorporated into Ar ticle 59 and (therefore imposes an obligation on 
Customs), and further fails to show that Custom s has breached the obligation expressed in the first 
sentence of Article 46.  
1. The fourth sentence of Article 46 is not inco rporated into Article 59 and therefore does 
not apply to China's Customs 
51. The plain text of TRIPS suggests that the fourth sentence of Article 46 does not apply to 
Article 59.  The parties to TRIPS considered the treatment of counterfeit trademark goods by customs 
authorities and dealt with it specifically in Article 59.  If the parties had intended further obligations 
they would have listed them there. 
2. If the fourth sentence of Article 46 is incorporated into Article 59 and does impose an 
independent obligation, China is compliant 
52. Even if the fourth sentence of Article 46 were incorrectly read to set  forth an independent 
obligation on Customs authorities, China's Customs would fulfill this obligation.   
53. First, Chinese Customs has an obligation to remove all infringing features, not just the 
trademarks, from the seized goods.  Second, in ad dition to removing the trademark, Customs must 
formally solicit comments from the right-holder.  Fo rmal comment is a meaningful step, which allows 
right-holders to identify specific concerns – such as any safety threats that the goods pose, or the 
presence of proprietary design features that cannot be removed – and allows  Customs to determine 
that an auction would not be appropriate.  Custom s has the legal discretion to reject public auction 
after consulting with the right-holders.  
IV. CHINA'S MEASURES FOR THE PROT ECTION AND ENFORCEMENT OF 
COPYRIGHT AND RELATED RIGHTS ARE CONSISTENT WITH CHINA'S 
CBLIGATIONS UNDER TRIPS 
A. OVERVIEW  
54. China maintains government review and approva l processes with respect to the publication 
and distribution within China of a variety of work s, 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 power – acknowledged by international law as 
referenced in Article 17 of the Berne Convention for the Protection of Literary and Artistic Rights  WT/DS362/R 
 Page B-11 
 
 
  ("Berne Convention"), and expressly incorporated in to the WTO structure through Article 9.1 of the 
TRIPS Agreement.  
55. The US Claim Three, which deals with th ese mechanisms, is based on a fundamental 
misstatement of Chinese law.   
56. First, the vast majority of the US claim is based on the erroneous allegation that works that 
have not completed government c ontent review, including works not yet submitted for review and 
works awaiting review, are denied copyright protection.  They are not denied copyright protection.  Chinese law protects copyright from the time a work is created.  Article 2 of the Copyright Law of the 
People's Republic of China ("Copyright Law"),  which goes unmentioned in the US first written 
submission, grants full copyright protection both prio r to and during authorization review.  It does so 
by expressly incorporating into Chinese law the rights conferred under inte rnational agreements 
including both the Berne Convention and the TRIPS Agreement. 
57. Second, the United States contends that works that fail content review are denied copyright 
protection under Article 4.1.  This also is false.  The content review process operates independently of 
Copyright Law Article 4.1.  The only result of a finding of prohibited content through the content 
review process is a denial of authority to publish.  Such a finding does not lead to a denial of 
copyright, and China is not aware that a finding in a c ontent review process has ever led to a denial of 
copyright protection.  The remainder of the US claim fails for this reason. 
B. T
HE US CLAIM RESTS ON A MISSTATEMENT OF CHINESE LAW  
1. Contrary to the US claim, copyright pr otection under Chinese law attaches to works 
upon creation, and is not dependent upon content review  
58. While publication for certain types of works w ithin China requires content review, copyright 
in such works vests upon creation and is independent  of publication.  While such works are pending 
review they enjoy the full panoply of copyright.  
59. Under Article 2 of China's Copyright Law, foreign authors from TRIPS Member states enjoy 
automatic protection of copyright upon completion of a work, as does any Chinese citizen.  This 
protection applies equally to works that have not been submitted for review and to works that are 
pending review, and indeed regardless of whether the wo rk is officially published in China at all.  The 
US contention that copyright protection is in any way contingent on content review is simply wrong 
as a matter of law. 
2. Contrary to the US claim, prohibition of publication as a result of content review does 
not trigger denial of copyright  
60. The second principle error of the United States lies in its contention regarding the legal effect 
of denial of a license to publish or distribute a work .  The United States asserts that such denial leads 
also to a denial of copyright under Article 4.1 of the Copyright Law.  In fact, this is not the case.  The content review process operates independently of Ar ticle 4.1, and the only result of a finding of 
prohibited content in that process is a denial of aut hority to publish.  Nothing in that finding leads to a 
denial of copyright. 
61. The administration of content review, on th e one hand, and the administration of the 
copyright laws, on the other hand, are separate, i ndependent processes.  Content review is conducted 
by administrative agencies under the State Council, not the courts.  In contrast, copyright is enforced 
by the Chinese judicial system, and by the National Copyright Administration of China ("NCAC") WT/DS362/R 
Page B-12  
 
  and its local affiliates.  Neither of these bodies r esponsible for copyright is bound by administrative 
agency findings in the content review processes.    
62. The United States erroneously tries to link th e vesting of copyright with the successful 
completion of review.  But the result of content revi ew is a license enabling distribution, not an award 
of copyright.  Under Article 2 of the Copyright Law of the People's Republic of China, in full 
compliance with Berne Article 5(2), copyright vests automatically and is recognized without 
administrative formality.  
63. Content review is an independent and unrelated process that does not determine whether a 
work is copyrighted. 
C. C
HINA PROTECTS COPYRIGHT IRRESPECTIV E OF CONTENT REVIEW PROCESSES  
64. The United States draws four conclusions from its erroneous interpretation of Chinese law.  
The United States alleges that China does not protect  copyright for (1) works that have not been 
submitted for content review, (2) works that are pending content review, (3 ) unedited versions of 
works that have been edited to pass content review, and (4) works that have failed content review.  In 
reality, none of these assertions is correct.  China in fact protects works regardless of a work's status 
under content review.  
1. China's right to conduct content review is not in question  
65. The United States does not challenge China's ri ght to conduct content review, and such a 
challenge would not be successful.  The sovereign right of governments to regulate and even prohibit 
the content of works clearly authori zes China's content review mechanisms. 
66. Berne Article 17 provides: 
"The provisions of this Convention cannot in any way affect the right of the 
Government of each country of the Union to control, or to prohibit by legislation or 
by regulation, the circulation, presentation, or exhibition of any wo rk or production . . 
. ." 
67. Thus, all rights granted to authors under the Berne Convention are limited by Berne 
Article 17.  The plain meaning of Berne Article 17,  and of official WIPO commentary, as well as 
every treatise on the topic, supports this view.  Th is recognition is carried into TRIPS Article 9.1, 
which adopts Berne Article 17. 
68. Moreover, the power to protect the public wellbeing is inherent and incidental to sovereignty.  
Article 17 of the Berne Convention is not an exhaus tive codification of the sovereign right to censor, 
but instead merely references this power, stating that the Convention's provisions cannot in any way 
limit this sovereign privilege. 
2. China protects copyright in works that h ave not been submitted for review and works 
that are currently pending content review  
69. The first two points of contention raised by the United States involve works that have not 
been submitted for content review, and works that are pending content review. 
70. Copyright vests in a work prior to any consider ation being given to content review processes, 
and is not delayed to await the c onclusion of those processes.  This conclusion is demonstrated not 
only by legal analysis, but also by actual practice in China.     WT/DS362/R 
 Page B-13 
 
 
  71. China presents actual cases demonstrating that its law operates unequivocally to grant 
copyright protection to works that are pending content review, and for works that have not yet been submitted for content review, and for wo rks that do not require such review. 
72. China respectfully notes that the US first writte n submission provides neither a legal analysis 
nor any valid examples to support its claim with respect to the supposed lack of protection of 
copyright in works that have not been submitted or that are currently pending review.  In contrast, 
China has provided both. 
3. China protects the copyright in unedited versi ons of works that have been edited in 
content review, and in works th at have failed content review  
73. The third and fourth elements of the US allegati on are that copyright is denied to the unedited 
version of works that are found, in the publication review process, to contain prohibited content, and 
that copyright is denied to  works that have failed the content review process.   
74. Neither US allegation is correct.  On the contrary, China demonstrates that, in the case of 
films, for example, works that fail content review, works that were edited to pass content review, and 
works that are un-reviewed are all protected by co pyright enforcement actions initiated by the NCAC.  
75. The United States has neglected to offer any le gal analysis to support its interpretation of 
Chinese law, and also has failed to offer any exam ple of copyright being denied to an unedited 
version or to a work that has failed content review .  The United States has not provided to the Panel a 
single example of a case where a defendant in a copyright infringement action successfully has 
asserted a defence that the work did not enjoy copy right because it failed a content review process.  
China respectfully submits that its Supreme People's Court is not aware of a single instance in which 
such a defense has successfully been asserted.   
D. S
INCE CHINA DOES NOT FAIL TO PROTECT COPYRI GHT IN THE INSTANCES ALLEGED BY THE 
UNITED STATES , CHINA DOES NOT FAIL TO COMPLY WITH ITS OBLIGATIONS UNDER TRIPS 
76. The entire second part of the US argument on Cl aim Three details the supposed international 
rights that are denied by China's alleged failure to protect copyright.  As demonstrated above, the US 
allegations of copyright denial are false, bei ng founded on a major error in understanding Chinese 
law.  Since copyright is not denied, none of the rights enumerated in the second part of the US argument are in fact violated.  
77. At paragraphs 215-219 of its fi rst written submission, the United States alleges that a denial 
of copyright protection under Copyright Law Article 4.1 is an unauthorized "exclusion" of a class of 
works from copyright protection, and that such de nial abrogates certain rights specified in those 
paragraphs that are guaranteed to authors by the Berne Convention.  This claim does not survive the 
argument presented by China in its first written s ubmission, which demonstrates that Article 4.1 
simply does not act in the manner alleged by the Un ited States.  China respectfully submits that the 
US case fails because of a complete misapprehension of Chinese law in this regard.  China further 
notes that to the extent that Article 4.1, independent ly of the content review process, might act to deny 
copyright protection to a work found by a court to be  "prohibited by law" – a case the United States 
has not attempted to make – this act of prohibition is protected by Berne Convention Article 17.  The 
denial of copyright protection in such a case, i. e. taking from an author the right to limit the 
distribution and use of a work whose distribution is co mpletely banned, is a legal and material nullity.  
The economic rights accorded to authors and artists  under the Berne Convention equate to a private 
right of censorship – rights that are preempted when there is supervening public prohibition as 
expressly authorized by Berne Article 17.  The United  States has not demonstrated that the failure to WT/DS362/R 
Page B-14  
 
  protect copyright in such works further reduces any rights of authors beyond the act of prohibition 
itself.  
78. At paragraphs 220-225 of its firs t written submission, the United States alleges that a content 
review process imposes a prohibited "formality" on the grant of copyright.  This contention does not 
survive the argument presented by China in its first written submission, which demonstrates that 
recognition of copyright is in fact not contingent upon completion of any content review process, and 
therefore no formality is imposed. 
79. At paragraphs 232-243 of its first written subm ission, the United States alleges that China 
fails to provide enforcement procedures in instances wh en copyright is denied.  This claim also fails 
in light of the arguments presented by China, which show that copyright in fact is not denied as 
alleged by the United States.   
E. T
HE UNITED STATES HAS FAILED TO PRESENT A PRIMA FACIE CASE TO SUPPORT EITHER ITS 
NATIONAL TREATMENT CLAIMS OR ITS RELATED RIGHTS CLAIMS , AND THE PANEL SHOULD 
ACCORDINGLY ENTER A FINDING IN FAVOUR OF CHINA ON THESE MATTERS  
80. In its Panel request, the United States allege d a number of national treatment violations, 
subsidiary to its main allegations that Copyrigh t Law Article 4.1 denies copyright in violation of 
TRIPS.  Similarly, in its Panel request, the United States also alleged, again as a subsidiary matter, 
that Copyright Law Article 4.1 may deny related rights to performers and phonogram producers in violation of TRIPS Article 14.  
81. The United States has failed in its first written submission to make a prima facie case to 
support either its national treatment claims  or its  related rights claims.  China respectfully submits 
that in light of this fact, the Panel should rule  in favour of China on each of these allegations. 
1. The Appellate Body has repeatedly and unambig uously ruled that the initial burden of 
proof in establishing a prima facie case lies with the complaining party 
82. The Appellate Body has been called upon several times to clarify the burden of proof in WTO 
dispute settlement proceedings.  On each of these occasions the Appellate Body has confirmed that 
the burden of proving that a Member's law is non-co mpliant with WTO obligations rests wholly with 
the complaining party.  The compla ining party must both properly asser t and prove its claim.  If such 
proof is absent or deficient, then the respondent has no burden going forward.  
2. The United States has failed to meet its burden 
83. China submits that the Panel should deny the national treatment and related rights claims 
raised by the United States.  
84. With regard to the alleged TRIPS Article 14 re lated rights violations, the United States has 
presented no evidence, and its allegations concerni ng related rights do not even amount to a properly 
pled claim.  The United States admits as much in its submission.  
85. With regard to the national treatment arguments, the US first written submission has 
neglected to assert any claim whatsoever and thus has seemingly abandoned those claims.  
86. Since the United States has failed to establish a prima facie case, China respectfully requests 
that the Panel rule against the United States, findi ng that the United States has failed to make a case 
either that China's measures violate TRIPS Artic le 14, or that they deny national treatment.  WT/DS362/R 
 Page B-15 
 
 
  87. Lastly, China respectfully notes that while  the United States listed numerous separate 
measures its Request for Establishment of a Panel, it appears to have attempted to make a case in its first written submission with respect to only five of  those measures.  China accordingly requests that 
the Panel find that the United States has failed to  assert a prima facie case with respect to the 
remaining measures, and to rule that the United St ates as a procedural matter has failed to establish 
any violation of TRIPS with respect to:  Regulations on the Administration of Broadcasting; 
Regulations on the Administration of Telecommunication;  Measures for the Administration of Import of Audio and Video Products;  Procedures for Ex amination and Approval for Publishing Finished 
Electronic Publication Items Licensed by a Foreig n Copyright Owner;  Procedures for Examination 
and Approval of Importation of Fi nished Electronic Publication Items by Electronic Publication 
Importation Entities;  Procedures for Recording of Imported Publications;  Interim Regulations on 
Internet Culture Administration; and Several Opinions on the Development and Regulation of 
Network Music.  
V. CONCLUSION 
88. For the reasons set forth in this submission, China respectfully requests that the Panel find 
China's measures to be consistent with China's obligations under the TRIPS Agreement.  China 
respectfully submits that the United States has failed to  meet its burden of proof with regard to many 
of China's measures, and has failed to show that any of China's measures are not in compliance with 
China's obligations. WT/DS362/R 
Page B-16  
 
  ANNEX B-2 
 
EXECUTIVE SUMMARY OF THE ORAL ST ATEMENT OF CHINA AT THE FIRST 
SUBSTANTIVE MEETING 
 
 
 
I. INTRODUCTION 
1. Thank you, Mr. Chairman and members of the Panel.  The United States has set forth legal 
theories in this case that are highly flawed and that have little bearing on the intellectual property 
marketplace.  China urges the Pane l to reject all the US claims. 
2. For China, it is not solely a handful of domestic  laws at stake in this dispute – although of 
course this is extremely important.  Beyond that , China believes that the balance of rights and 
obligations in TRIPS is also very much at stake in this dispute. 
3. Developing Members repeatedly and emphatically stated that they would accept the 
obligations of TRIPS only – and only
 – with due deference to their norms, to their legal systems, and 
to their resource constraints.  But the United States would simply ignore all of this.  Willful blindness 
to the plain record of objections by the devel oping Members would ill-serve the WTO community as 
it seeks to negotiate the Doha round of agreements. 
II. CLAIM ONE 
4. Mr. Chairman and members of the Panel:  please allow me to address the first claim by the 
United States.  This first claim is that China's cr iminal law does not fulfill TRIPS Article 61.  TRIPS 
Article 61 declares that "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 ."  
5. The Panel is being urged to read the broad la nguage "commercial scale" very strictly.  China 
urges the Panel to consider this issue carefully in light of the traditional rules of interpretation, which 
recognize that countries do not lightly surrender sove reign powers.  In particular, China urges the 
Panel to ask whether the United States has given it sufficient basis to believe that the parties meant 
"commercial scale" to impose a strict standard of criminal law. 
6. In China, economic crimes are defined by estab lishing a threshold.  Illegal activity that 
exceeds a certain scale is made subject to the crimin al sanction.  China has set the thresholds for 
intellectual property crimes at the same level as for similar commercial crimes.   
7. Two very distinct aspects of the Chinese system have a bearing on how these thresholds are 
set.  First, in China, private parties have the ri ght to initiate criminal actions.  This makes the 
threshold a very important matter in terms of the conservation of criminal enforcement resources.  
Second, China employs an administrative enforcement re gime in parallel to the criminal system.  This 
is an enforcement regime that does not appear to  have a parallel amongst Western countries.  Through 
administrative enforcement, the Chinese authorities can swiftly and effectively target infringement 
activity of any scale.  Low-scale infringers do not have  a "safe harbor".  They are subject to vigorous 
administrative punishment.  These low-scale infringe rs simply do not warrant vastly more time-
consuming and costly criminal proceedings. 
8. The United States reads "commercial scale " to mean commercial intent :  any activity 
undertaken for financial gain.  This is a significan t misstatement.  The negotiating parties explicitly  WT/DS362/R 
 Page B-17 
 
 
  rejected a commercial intent standard when it was offered in the negotiations.  Among the third 
parties, few agree with the US definition. 
9. The US interpretation is not the ordinary mean ing of "commercial scale".  The United States 
never really confronts the ordinary meaning of the overall phrase "commercial scale".  Instead, the United States tries to add together dictionary  meanings of "commercial" and "scale".   
10. The WIPO Committee made it clear that "commerc ial scale" is a broad standard that should 
be based on multiple factors and local circumstances.  It does not delimit a rigid and definite threshold 
of activity.  And "commercial scale" refers to a si gnificant magnitude of activity.  It was designed to 
cover cases where the "manufacture
" of infringing goods should be crim inal.  This directly contradicts 
the US contention.  "Commercial scale" does not mean any activity undertaken for financial gain.  
"The will to make profit" is only one of several  factors to be considered. 
11. This is the ordinary meaning of "commercial scale".  It refers to  a magnitude of activity.  It is 
a broad standard, not precisely defined.  It permits each Member's standard to reflect its own legal 
system and economic reality.  
12. This is the same meaning that is found in ol der GATT documents – and indeed, in US laws.  
It is the meaning that the TRIPS negotiating partie s considered as they debated whether to adopt a 
"commercial scale" standard and as they rej ected the plain "commercial" standard.   
13. China notes that the United States and the third parties have put forward widely divergent 
definitions of "commercial scale".  Each party insists that its is the fair reading of the phrase.  But the 
vast range of meanings itself shows that "commercia l scale" does not refer to a specific standard.  The 
standard is vague and open to interpretation. 
14. The Appellate Body has held that if a term is  vague or ambiguous, the Panel should adopt the 
interpretation that is less onerous and interferes less with a country's sovereignty.  Article 61 touches 
on Members' domestic criminal law – the very core of national sovereignty.  Here, more than any 
other domain, the Appellate Body must not as sume lightly that Members intended the more 
burdensome, more intrusive meaning. 
15. China also wishes to emphasize the particular c ontextual role of Article 1.1 and Article 41.5 
of TRIPS.  During the Uruguay Round negotiations , developing countries objected strenuously to new 
enforcement obligations that would prescribe ri gid standards and would ignore principles of 
sovereignty.  Developing countries prevailed, over opposition from the United States and others, on 
the inclusion of both Article 1.1 and Article 41.5.   
16. This dispute will represent the first interpreta tion by the WTO of Articles 1.1 and 41.5 of the 
TRIPS.  The Panel is being urged to read these pr ovisions as having little or no effect.  China urges 
the Panel to consider the policy balance that led to the incorporation of these provisions.  China does 
not seek to avoid its obligations.  But China urges the Panel to consider whether the United States has 
given it reason to find that these provisions simply have little or no meaning. 
17. These provisions establish the context of Article  61.  TRIPS cannot be read to require a 
Member to distort its legal system or to focus greater resources on intellectual property enforcement 
than on general law enforcement. 
18. The conclusion should be clear.  Article 61 of TRIPS requires that China set forth criminal 
measures against counterfeiting and piracy of a certa in magnitude.  It allows China reasonably to 
define that magnitude within its domestic legal st ructures and resource constraints.  China has done 
precisely that.  China has set forth criminal thr esholds for intellectual property at a low scale of WT/DS362/R 
Page B-18  
 
  commerce in a manner that is consistent with its thresholds across the range of commercial criminal 
law. 
III. CLAIM TWO 
19. Mr. Chairman and members of the Panel, let me now turn to the second claim by the United 
States.  The United States alleges that, under Chines e law, China's Customs ag ency disposes of seized 
infringing goods in a manner that is inconsistent with TRIPS Article 59.  This claim is also without 
merit.   
20. TRIPS Article 46 and 59 together obligate Members to provide their Customs with authority 
to dispose of goods outside the channels of commerc e in such a manner as to avoid harm to the right-
holder, or to destroy the goods.   
21. China's Customs has disposal authority in tw o different ways:  by donating infringing goods 
to social welfare organizations and, alternatively,  by entering into the voluntary sale of infringing 
goods to their right-holders.  The United States rests its argument on whether these procedures are conducted in such a manner as to avoid harm to the right-holder. 
22. While the United States repeatedly implies
 possible harms from China's donations to charity, 
its written submission does not identify so much  as a single instance where the donation of an 
infringing good harmed a right-holder.  The evid ence before the panel is that Chinese Customs 
successfully donates infringing goods to social welfar e organizations without any harm to the right-
holders. 
23. In the case of the sale of infringing goods to ri ght-holders – which is far less frequent than 
donation of goods – the right-holder has an entirely voluntary choice as to whether to purchase the 
goods if doing so advanced  its interests.  China respectfully submits that this cannot harm the right-
holder, and the United States offers no evidence to the contrary.   
24. In regard to the destruction authority, Chin ese Customs has the needed  authority to destroy 
infringing goods.  Chinese law sets forth a discre tionary sequence of disposition methods that is 
entirely consistent with TRIPS.  Chinese law prefers that infringing goods be donated or sold to their 
right-holders.  And if those methods are not ava ilable, Chinese law prefers that infringing goods be 
sold at public auction.  And if none of those methods is available, Chinese law provides that 
infringing goods be destroyed.  Chinese Customs are fully vested with the authority to order destruction, and frequently exercise that authority.  Indeed, the evidence befo re the panel makes clear 
that destruction frequently takes place – by value,  58 per cent of the seized infringing goods in China 
were destroyed over the most recent three year period. 
25. The United States objects to the rare instances where Chinese Customs u ses a public auction 
to dispose of infringing goods.  The United States cont ends that public auction is inconsistent with 
China's obligation under Article 59 to provide both disposal authority and destruction authority.  But 
this argument clearly fails because, under TRI PS, Chinese Customs must have the authority
 – but not 
the obligation – to dispose infringing goods or to destroy them.  The text of Article 59 does not say 
"shall" order destruction or dispo sal, rather it expressly says "shall ha ve the authority to" so order. 
26. The United States also advances that China's lim ited use of public auctions violates the fourth 
sentence of Article 46.  This sentence states that th e simple removal of a counterfeit trademark is not 
sufficient to release goods back into the channels of commerce,  other than in exceptional cases. 
27. China questions whether the fourth sentence of Article 46 is incorporated into Article 59 – 
and therefore whether it applies to Chinese Customs.    WT/DS362/R 
 Page B-19 
 
 
  28. But even if the fourth sentence of Article 46 were read to apply, Chinese Customs complies 
fully.  The fourth sentence of Article 46 does not bar the release of seized counterfeit goods – it simply provides that the mere removal of the count erfeit mark is not normally sufficient.  The purpose 
of Article 46 is to avoid a circumstance where in fringers could cheaply reaffix counterfeit marks and 
continue their infringement activity.  As China expl ained in its written submission, Customs does not 
merely
 remove the counterfeit mark:  it removes all the infringing features; it formally solicits 
comments from the right-holders to provide proced ural protection; and, most importantly, Customs 
uses a reserve price at a public auction to ensure  that infringers do not have the opportunity to 
purchase the seized goods at an unreasonably low cost and reaffix counterfeit marks. 
29. In sum, the public auction of seized infringing  goods – a procedure that China uses for two 
percent of the value of such goods – is  entirely consistent with Article 59.  
IV. CLAIM THREE 
30. Mr. Chairman and members of the Panel, I will now address the third claim of the United 
States.  The United States claims that China breaches TRIPS by failing to provide automatic and 
immediate copyright protection to works, most particularly films and DVDs.  On this claim, the point 
of dispute is not the interpretation of TRIPS.  This  is largely a dispute about the operation of Chinese 
law. 
31. Under Chinese law, copyright in a work vests upon its creation.  Copyright protection is not 
contingent on publication.  Article 2 of China' s Copyright Law explicitly incorporates the Berne 
Convention's protections and exte nds automatic protection of copyright to all authors from Berne 
Member states.   
32. The United States failed to account for Article 2 in its written submission.  Rather, the United 
States claims that Article 4.1 denies copyright pr otection to works until those works pass content 
review.  China respectfully points out that this is not correct.  China in fact does recognize and protect copyright in works as soon as those works are created. 
33. China enforces several regulations that provide for content review of works, and in some 
cases does not permit publication until content has b een approved.  The United States does not dispute 
China's right to do this.  Content review, and the ri ght to prohibit the publication or distribution of 
works, is a sovereign privilege that is recogni zed by Article 17 of the Berne Convention.   
34. As a result of the protections of Article 2, works that have not been submitted for content 
review still enjoy copyright protection.  Works that  are pending content review also enjoy copyright 
protection.  For works that have been edited to pass content review, China will protect the copyright 
in the edited version of the work.  This protec tion will include enforcement against copies of the 
unedited
 version of the work, which infringe the copy right in the edited version.  The unedited 
versions also will be subject to enforcement for vi olation of the regulations governing publication and 
distribution, such as Film Regulations.  For works that have failed content review, the extent of 
copyright protection in this case is an issue th at does not commonly arise under Chinese law.   
35. As a consequence, China respectfully submits that  Article 4.1 is a legal instrument that has 
limited marketplace effect.  Even in the event that a work is found to be prohi bited by law, the denial 
of copyright protection is unlikely to deny any meaningful value to a copyright holder.  The work is entirely prohibited and attempts to publish or distri bute the work are subject to legal enforcement.  
The author's private right to censor what is already entirely banned would have little value. 
36. Lastly, China also asks that the Panel note that sev eral aspects of the US claim, as stated in its 
Panel request, were not briefed or substantiated by the United States in its first written submission.  WT/DS362/R 
Page B-20  
 
  These are the claims related to TRIPS Article 14 and the claims related to national treatment.  
Likewise, the United States failed to offer argument with respect to a number of Chinese measures that it referred to in its panel request.  The Appella te Body has made clear that the complaining party 
bears the burden to support all claims by making a prima facie case in its written submission.  China respectfully notes that the United States has failed to meet this burden in these instances.  China 
respectfully asks the Panel to rule  against the United States on its Article 14 and national treatment 
claims, and on the measures for which no support was offered. 
V. CONCLUSION 
37. In conclusion, China respectfully submits th at the United States has failed to present a 
compelling case on any of its three claims.  China very  much hopes that this dispute will be laid to 
rest, and that China can return to working with al l its trading partners to promote the beneficial 
protection of intellectual property. 
  WT/DS362/R 
 Page B-21 
 
 
  ANNEX B-3 
 
CLOSING ORAL STATEMENT OF CHINA AT  
THE FIRST SUBSTANTIVE MEETING 
 
 
 
1. Mr. Chairman, members of the Panel:  China would like to preface its formal closing 
statement by making a brief point of law regarding th e interpretation of Article 61.  Yesterday, some 
third parties expressed concern that China might ask this Panel to depart from the customary rules of 
interpretation of international agreements in the in terpretation of TRIPS Article 61.  China is making 
no such request, and believes that it can allay these c oncerns with a simple statement of its views. 
2. China's point regarding the interpretation of Ar ticle 61 is as follows:  First, China asks the 
Panel to recognize that the obligation in Article 61 involves criminal law, which is a core sovereign 
function.  This is the first time that a WTO panel has been asked to interpre t an obligation regarding 
criminal law.   
3. Second, China asks the Panel to note that the st andard in Article 61 is  vague, and subject to 
interpretation.  The wide variety of potential definitio ns that the Panel has heard in the last two days is 
striking evidence of this fact. 
4. Third, China asks the Panel to not e the well-accepted interpretive canon in dubio mitius .  This 
canon holds that when a treaty standard is vague or ambiguous the Panel should choose the 
interpretation that imposes the least imposition on a country's sovereignty.  The Panel should choose a 
more intrusive interpretation only where there is clear and specific evidence that a more intrusive 
interpretation was meant.   
5. The logic behind this canon is that countri es should not be assumed lightly to concede 
sovereignty.  The Panel accordingly must find speci fic support for an interpretation that does involve 
an intrusive concession of sovereignty.  China notes that the WTO Appellate Body expressly has 
adopted this canon of interpretation. 
6. The international criminal law cited in China' s first written submission makes clear that this 
canon has particular justification in the realm of criminal law.  The United States has argued for a 
strict, intrusive application of Article 61.  To support such a reading the United States must offer 
specific evidence that the parties intende d that interpretation, as the canon of in dubio mitius  requires.  
The United States has not done this, and in light of  TRIPS provisions like Article 1.1 and 41.5, it is 
clear that the United States will be unable to do so.   
7. This is the "burden" that China has described as resting on the United States.  China is not 
referring to a factual burden of proof, but rather to  the inability of the United States to provide the 
evidence to support its legal interpretation of Article 61.   
8. China hopes that this puts to rest any possible misunderstanding of its argument on this point. 
* * * 
9. Mr. Chairman, members of the Panel:  The Peopl e's Republic of China wishes to express its 
deep gratitude for your willingness to serve in this  dispute and for the evident diligence with which 
you have approached your task.  China also wishes very much to thank the WTO Secretariat Staff. WT/DS362/R 
Page B-22  
 
  10. China takes this dispute very seriously.  It  has brought to Geneva a sizeable and senior 
delegation of officials; and it has prepared thoroug hly for this meeting.  China intends to devote 
considerable attention and energy to addressing the Panel's questions. 
11. For China, it is not solely a handful of domestic  laws at stake in this dispute – although of 
course this is extremely important.  Beyond that , China believes that the balance of rights and 
obligations in TRIPS is also very much at stake in this dispute. 
12. China considers that the Panel faces several ve ry important tasks, including tasks for which 
there are few precedents. 
13. One task is the first interpretation by the WTO of an obligation involving criminal law.  The 
Panel is being urged to read the broad language "commercial scale" very strictly.  China urges the 
Panel to consider this issue carefully in light of the traditional rules of interpretation, which recognize 
that countries do not lightly surrender sovereign power s.  In particular, Chin a urges the Panel to ask 
whether the United States has given it sufficient b asis to believe that the parties meant "commercial 
scale" to impose a strict standard of criminal law. 
14. Another task is the first interpretation by th e WTO of Articles 1.1 and 41.5 of the TRIPS.  
The Panel is being urged to read these provisions as having little or no effect.  China urges the Panel 
to consider the policy balance that led to the inco rporation of these provisions.  China does not seek to 
avoid its obligations.  But China urges the Panel to consider whether the United States has given it reason to find that these provisions simply have little or no meaning. 
15. Another task is to determine whether Article 46 of the TRIPS is drafted so as to require 
Members to afford their customs agencies unfettered authority to destroy infringing goods before they 
can be donated, without any harm to a right holder, to a charity.  China continues to be perplexed by 
the US position.  On the one hand, the United States  appears to believe that Chinese Customs ought to 
have absolute and unconstrained au thority on matters of destruction.  On the other hand, the United 
States criticizes Chinese Customs as  insufficiently constrained on ma tters of disposal outside the 
channels of commerce.   
16. The United States desires that China condition donation to charity on, for example, the 
determination that the goods are not defective.  Ch ina in fact provides such a condition by law.  But 
the Panel no doubt recognizes that the condition that goods only be donated if they are non-defective 
is a constraint on Customs authority.  It is a constr aint in exactly the same wa y that the condition that 
goods only be destroyed if they fail to meet certain criteria.  Similarly, th e United States provides in 
its own law – and commends to China – that donatio n of seized goods be conditioned on the approval 
of the right-holder.  The United States gives the a ppearance of approving the conditions for authority 
that it likes and rejecting the conditions for authority that it does not. 
17. A final task for the Panel is to assess Chinese co pyright law in light of the Berne Convention 
and the TRIPS.  Here there are two very important issues that the Panel should consider.  First is the 
protection of copyright provided by Article 2 of China's copyright law.  This provision incorporates 
into Chinese law the protections of Article 5 of the Berne Convention.  Proper consideration of 
Article 2 will resolve most of the dispute over Chinese law.  Second, the Panel should consider 
carefully the right to prohibit publication that is recognized by Article 17 of the Berne Convention.  The Panel should ask whether there is any logic to require protection of copyright where a work has 
been completely prohibited by government action that is authorized by international law.   
18. Mr. Chairman, members of the Panel: this concludes our statement.  China thanks you again 
and looks forward to responding to your questions in writing. WT/DS362/R 
 Page B-23 
 
 
   
ANNEX B–4 
 
EXECUTIVE SUMMARY OF THE REBUTTAL  
SUBMISSION OF CHINA 
 
I. INTRODUCTION 
1. In this dispute, the United States has asked this  Panel to dramatically expand the scope of 
legal obligations under TRIPS, creating obligatio ns to which the drafters never agreed and 
encroaching on areas of sovereignty which Members never ceded.  This submission demonstrates the 
proper interpretation of TRIPS in accordance with  the rules for interpretation under the Vienna 
Convention. 
2. At the same time, the United States has consiste ntly mischaracterized China's legal regime.  
In many cases, the United States has failed to make a prima facie  case that China's laws are 
inconsistent with TRIPS. 
3. In its Claim One, the United States has failed to recognize the scope of China's criminal 
enforcement against intellectual property infringem ent; and it has failed to demonstrate that TRIPS 
Article 61 imposes on Members an obligation to appl y criminal measures to low-level infringement.  
In fact, China's criminal law regime, properly understood, fully complies with TRIPS Article 61, properly understood. 
4. In its Claim Two, the United States has failed to  demonstrate that China's legal framework for 
Customs' disposal of seized goods is inconsistent  with TRIPS Arts. 46 and 59.  Chinese Customs has 
the power to dispose of seized goods outside the ch annels of commerce in such a way as to avoid 
harm to the right-holder; and it has the appropriate  authority to destroy seized goods, recognizing that 
authority was never envisioned in TRIPS to be ab solute and unconditional.  Chinese Customs also 
meets the obligation of the 4
th sentence of Article 46 – if indeed it applies to Article 59 at all – by 
taking substantial steps to ensure that infringers  cannot cheaply recover their infringing goods. 
5. In its Claim Three, the United States has failed to present a prima facie  case that Article 4.1 of 
China's Copyright Law does not protect the copyrights of works at various stages of content review.  
The United States has only the flawed argument that Article 4.1 violates TRIPS on its face, but this argument fails: international law, and in partic ular Article 17 of the Berne Convention, clearly 
recognizes the sovereign power to prohibit works. 
II. CLAIM ONE: CHINA'S CRIMINAL THRESHOLDS ARE CONSISTENT WITH 
CHINA'S OBLIGATIONS UNDER TRIPS 
6. The United States claims that China breaches TRIPS Article 61 by failing to apply criminal 
procedures and penalties to willful counterfeiting and infringement on a commercial scale.  The 
United States fails to understand China's criminal law regime;  it fails to pr operly interpret the legal 
obligation set forth by TRIPS Article 61; and, conse quently, it fails to recognize that China's criminal 
law regime has faithfully implemented the incumbent Article 61 obligation. 
7. Throughout these proceedings, the United States has demonstrated a limited understanding of 
China's legal system.  China identified a series of US  errors in China's first written submission.  While 
the United States appears to have corrected certain er rors that it had earlier made – such as the scope 
of the illegal business volume threshold or the altern ative nature of criminal thresholds – it has WT/DS362/R 
Page B-24  
 
  repeated certain errors and introduced new ones.  Certain third parties also  have mischaracterized 
Chinese law. 
A. C
HINA 'S INTELLECTUAL PROPERTY ENFORCEMENT REGIME  
8. China addresses a series of US mischaracteriza tions of Chinese law with respect to its 
intellectual property regime, including elements of it s substantive criminal law, general (derivative) 
criminal law and administrative law.   
1. Chinese criminal law sets forth flexible and wide-ranging thresholds for criminal 
prosecution 
(a) China's substantive criminal laws regarding Intellectual Property  
9. China presents a detailed description of its crimin al laws governing intellectual property.  The 
United States and other parties have routinely misc haracterized Chinese substantive criminal law.   
10. First, China's criminal thresholds are not rigid,  but cover a wide range of activity.  Chinese 
criminal law employs alternative thresholds, which serve to capture different metrics.  The illegal 
business operation volume threshold, in particular, is a flexible standard that potentially captures both 
a small number of high-value products and a large number of low-value products – just as certain 
third parties request.  Moreover, Chinese criminal law has adapted to new technology, such as by 
deeming internet dissemination to  constitute reproduction or dist ribution under Article 217 of the 
Criminal Law. 
11. Second, China calculates its criminal thres holds by considering evidence over the entire 
duration of the infringing act, which might last several  years.  Most of the hypothetical examples used 
by the United States and third parties improperly condense the period of infringement.  There is 
scarcely an example that the United States has o ffered in these proceedings that does not depend on 
ignoring the appropriate period of infringement.  Relatedly, China registers its surprise that the United States would complain that the application of admi nistrative penalties wipe the slate clean – since the 
only alternative for China would be to forego  administrative enforcement against low-scale 
infringement. 
12. Third, Chinese criminal law considers unfinis hed products and reliable indicia of criminal 
infringement.  China further explains two cases prev iously provided, which demonstrate that courts 
took notice of semi-finished or unfinished component s and also materials and implements indicative 
of infringement. 
(b) China's General (Derivative) Criminal Laws regarding Intellectual Property  
13. The United States and other parties to this dis pute have disregarded China's general criminal 
laws, which might be characterized in western comm on law as "derivative" criminal laws.  These laws 
include inchoate crimes, such as preparation and a ttempt, and vicarious liability crimes, such as joint 
crimes and criminal group activity. 
14. These general criminal laws apply to the specifi c section on intellectual property crimes and  
expand the scope of China's criminal measures ag ainst counterfeiting and pi racy.  These general 
criminal laws take into account  unfinished products, non-quantita tive factors and organizational 
elements.   WT/DS362/R 
 Page B-25 
 
 
  2. The Administrative Regime addresses low- scale (non-commercial scale) infringement 
15. China describes the administrativ e enforcement procedures that apply against intellectual 
property infringement that falls beneath the criminal  thresholds.  These procedures are quick, efficient 
and well-suited to a high volume of low-scale infringement cases.  China takes vigorous measures to ensure that infringers beneath the criminal thr esholds in no way have "safe harbor," and that 
administrative enforcement leads to significant penalties for infringers. 
16. China disputes the contention that administrative enforcement is not an effective deterrent.  
Administrative enforcement may impose somewhat less severe punishment, but it is far more likely to 
be applied to low-scale intellectual property infringem ent than the comparable criminal laws in the 
United States.  Contrary to US assertions, China considers administrative enforcement an effective 
remedy, not its "preferred remedy". 
B. L
EGAL STANDARD FOR INTERPRETATION OF COMMERCIAL SCALE STANDARD  
17. China respectfully submits that the Panel s hould apply the Article 61 "commercial scale" 
standard in light of the well-accepted interpretive canon in dubio mitius .  The WTO Appellate Body 
has expressly adopted this canon, which has particular justification in the realm of criminal law.   
18. The United States has argued for a strict and intrusive application of TRIPS Article 61.  To 
support such a reading, the United States must s how that the "commercial scale" standard in 
Article 61 clearly and precisely has the meaning that the United States attributes to it.  To the extent 
that "commercial scale" is somewhat unclear or vague, the canon of in dubio mitius  holds that the US 
interpretation cannot prevail.  Article 61 must be read to regulate Members' domestic criminal laws 
only to the limit that Members expressly and unequivoca lly consented.  It is the responsibility of the 
United States to show that Members expressly an d unequivocally consented to accept the legal 
obligation of applying criminal measures to counterfeiting and piracy of a low scale.  The United States has not fulfilled this responsibility. 
C. T
HE TRIPS  ARTICLE 61 OBLIGATION  
19. The foremost task before the Panel in the di spute over TRIPS Article 61 is to determine the 
meaning of "commercial scale".  Contrary to the st atements of the United States, China has strictly 
followed the rules of the Vienna Convention on th e Law of Treaties in explaining the meaning of 
"commercial scale".   
1. Ordinary meaning of "commercial scale"   
20. The United States has failed to set forth a r easonable and supportable ordinary meaning of 
"commercial scale". Its contention that commercial s cale covers any activity undertaken for financial 
gain does not withstand scrutiny.  The United Stat es has also failed to effectively rebut China's 
contention that "commercial scale" is a broad sta ndard that refers to a significant magnitude of 
activity. 
(a) The United States fails to set forth a reas onable definition of "commercial scale" 
21. The United States sets forth inconsistent definiti ons of the term "commercial scale".  In its 
previous submissions, the United States set forth a definition of "commercial scale" that includes any 
activity undertaken for financial gain.  However, it has also made statements inconsistent with that 
definition, contending that what constitutes a co mmercial scale action can vary from situation to 
situation according to a number of factors. WT/DS362/R 
Page B-26  
 
  22. The definition of "commercial scale" adopted by  the United States also serves to read the 
word "scale" out of the term, rendering the te rm synonymous with "commercial purpose" or 
"commercial".  This definition results in a rewriting of the text of Article 61 with terms that were 
explicitly distinguished and rejected in WIPO and TRIPS discussions.   
23. Contrary to US assertions, dictionary definitions  of individual words of a combined term do 
not conclusively define the "ordinary meaning" un der Article 31.1 of the Vienna Conventions, nor is 
the absence of a dictionary definition of the combin ed term determinative.  The essential test of 
ordinary meaning is how words are commonly used.  China has provided multiple examples of "commercial scale" being used to refer to a signifi cant magnitude of activity, while the United States 
has not furnished a single example of the use it proposes. 
24. The Panel should further note the wide variety of  definitions advanced for "commercial scale" 
during these proceedings.  This variance highlights th at the phrase was intended to be a flexible one, 
susceptible to different interpretations, and undersco res the salience and importance of the statutory 
canon of in dubio mitius .  In the face of these conflicting inte rpretations, and the apparent underlying 
ambiguity or vagueness, "commercial scale" should be read conservatively and so as to intrude 
minimally on Members' sovereignty. 
(b) The ordinary meaning of "commercial scale" is  – broadly – significant magnitude of activity 
25. China submits that the essential test of the meaning of "commercial scale" should be how the 
term is actually used, and sets forth a definition of  "commercial scale" that is consistent with all 
available evidence.  Examples pr esented by China demonstrate th at governments have tended to 
understand "commercial scale" to refer to a significant magnitude of activity – not
 low-scale 
economic activity.   
26. China presents a clarification of the legal status  of the definition of "commercial scale" set 
forth by the Word Intellectual Property Organi zation Committee of Experts on Measures Against 
Counterfeiting and Piracy ("WIPO Committee").  Th e WIPO Committee definition is not merely part 
of the negotiating record under Article 32 of the Vi enna Convention; it is not a "special meaning" 
under Article 31.4 of that Convention; and it is no t a formal part of TRIPS.  Rather, the WIPO 
Committee definition is a noteworthy example of th e common usage of the phrase, which reveals its 
"ordinary meaning " of the treaty under Article 31.1 of the Vienna Convention.   
27. The WIPO Committee's Model Provisions for Nati onal Laws contradicts the US assertion that 
any act undertaken for financial gain constitutes co mmercial scale:  it states that the "will to make 
profit" is only one of several factors.  The WIPO Committee sets forth a definition that is flexible, 
where the United States apparently seeks to im pose a specific standard.  The WIPO Committee 
definition also contradicts the US contention that "commercial scale" covers even very small-scale 
activity. 
28. The United States accuses China of replacing "co mmercial scale" with "industrial scale" and 
argues that had the drafters of TRIPS wished for TRIPS Article 61 to apply only to industrial scale 
activity, they would have used that phrase.  Howeve r, the US mischaracterizes China in two respects: 
China does not  believe that "commercial scale" sets out as high a standard as "industrial scale," and 
has never described the phrase in those terms;  and China submits that "commercial scale" is a 
substantially broader standard than  "industrial scale," and was likely chosen quite specifically because 
it has this character.  WT/DS362/R 
 Page B-27 
 
 
  (c) Clarification of the "commercial scale" standard : the impact of infringement, the price of the 
infringed good and the role of technol ogy are not proper considerations 
29. China further clarifies three particular elements of the "commercial scale" standard.  First, the 
plain text of TRIPS Article 61 refers to "commercia l scale" as a measure of infringing activity, not the 
impact of the infringement.  Consequently, to read  "commercial scale" as measuring the impact of the 
infringement on the right-holder would abuse the text of TRIPS. 
30. Second, the United States has not justified its pr emise that the impact of the infringing act on 
the right-holder ought to be considered in measuri ng "commercial scale" activity.  In so far as 
"commercial scale" in Article 61 properly measures the infringing  activity, it is eminently sensible for 
Members to use the infringing price – which meas ures the value of the infringing activity – in 
determining the "commercial scale" threshold. 
31. Third, although several parties have suggested that the definition of "commercial scale" under 
Article 61 should change to reflect changes in tec hnology, China does not believe that any change to 
the legal obligation expressed by Article 61 is eith er appropriate or necessary.  Significant changes 
ought to be addressed in the context of new intern ational agreements.  Moreover, new developments 
in technology have not, in fact, undermined the commercial scale threshold.  As technology has 
improved, a much higher proportion of infringing activ ity has become subject to criminal measures. 
2. The legally relevant context of TRIPS Arti cle 61 underscores that "commercial scale" is 
a broad and flexible standard 
32. According to Article 31.1 of the Vienna Conventio n, a treaty must be interpreted in good faith 
in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in 
the light of its object and purpose.  China sets fort h several contextual factors that undermine the US 
contention that Article 61 imposes a highly specific obligation on Members.   
33. First, contrary to US assertions, China do es not invoke TRIPS Articles 1.1 and 41.5 as a 
defense against the obligation imposed in Article 61.  Instead, China has consistently highlighted 
Articles 1.1 and 41.5 as relevant context for Article  61 in determining the scope of its substantive 
obligation.  Articles 1.1 and 41.5 were key concessions to the developing world, which the United 
States and other developed third parties seek now to dismiss and disregard.  These Articles strongly counsel against interpreting Article 61 as imposing th e obligation to apply criminal measures against 
any act undertaken for financial gain, as this standard  would be inconsistent with China's legal system 
and would require the diversion of enforcement resources. 
34. Second, one of the third parties argues that the 2
nd, 3rd and 4th sentences of Article 61 use 
flexible language, whereas the 1st sentence contains a hard-and-fast rule obliging WTO Members to 
provide criminal enforcement against willful co unterfeiting and infringement, implying that the 1st 
sentence allows no flexibility.  This argument fails  because Article 61 does not set forth a "hard-and-
fast rule" as to the scope of "commercial scale".  Further, the 2nd sentence provides flexibility in 
determining the choice of punishment.  If the 1st sentence were read to require a Member to apply 
criminal measures to low-level infringement, the acknowledged flexibility of the 2nd sentence – which 
would suggest that in some criminal law systems a low level crime need not be subject to any punishment – would create a conundrum.  The 2
nd sentence of Article 61 thus is indeed relevant 
context: its very flexibility demonstrates the error of interpreting Article 61 to impose an exacting and 
specific standard. 
35. Third, China presents further contextual factors that warrant consideration in any examination 
of the meaning of "commercial scale".  Neither TRIPS nor the Berne Convention sets forth complete 
definitions of "trademark counterfeiting" or "copyri ght piracy".  In addition, the broad and vague WT/DS362/R 
Page B-28  
 
  phrasing of TRIPS Article 61 stands in stark contrast  to the highly detailed provisions set forth in 
TRIPS Articles 42-49, as well as in relevant parts of the AD Agreement and ASCM.  When the drafters of WTO instruments intended to set forth precise standards, they did so unambiguously.  The 
lack of such clarity in Article 61 suggests that there was no such intent.  These examples counsel against interpreting "commercial scale" to set forth a rigid and precise standard, yet the United States 
has yet to address either of these factors. 
3. The object and purpose of TRIPS confirms that "commercial scale" is a broad and 
flexible standard 
36. Article 31.1 of the Vienna Convention provides that  in addition to the context, the "object and 
purpose" of the treaty should be considered in dete rmining the meaning of the treaty.  The purpose of 
TRIPS was to balance the protection of intellectual property rights with deference to Members' legal 
systems and public policy objectives.  This ba lance – between effective intellectual property 
enforcement and deference to Memb ers – is consistent with inte rpreting "commercial scale" in 
Article 61 to set forth a broad and flexible standard. 
4. The subsequent practice of Members of TRIPS demonstrates that commercial scale is a 
broad standard that refers to a sgnificant magnitude of activity 
37. Article 31.3 of the Vienna Convention provides that parties should take into account any 
subsequent practice in the application of the tr eaty which establishes the agreement of the parties 
regarding its interpretation.  The subsequent practice of Members of TRIPS provides further 
confirmation that "commercial scale" was neve r generally understood to refer to any activity 
undertaken for financial gain.   
38. First, US practice in implementing its TRIPS Article 61 obligation demonstrates that it has 
implicitly understood "commercial scale" to refer to  significant magnitude, as is evidenced by a US 
Department of Justice manual and from US intellect ual property prosecutions.  Article 61 requires that 
Members "shall provide for criminal pr ocedures and penalties to be applied
."  A review of a sample of 
US federal prosecutions demonstrates that in all of the 60 cases featuring copyright piracy for which 
there is information as to the value of the goods, US authorities applied criminal procedures to acts 
associated with at least $2,000 of infringement .  Given that the US practice is to apply  its IPR 
criminal laws against large-scale counterfeiti ng and piracy, US practice demonstrates that 
infringement "on a commercial scale" is large-scale infringement.  
39. Second, Canada has explicitly defined the "comme rcial scale" standard to refer to large-scale 
infringement.  Notwithstanding its weak protests to the contrary, Canada's practice, pursuant to its 
Copyright Enforcement Policy, has been to only a pply criminal measures to large-scale offences.   
40. Third, the United States has yet to address China' s argument that in a series of free trade 
agreements (FTAs) subsequent to TRIPS, the Unit ed States has included an explicit definition of 
"commercial scale" as "wilful infringements for th e purpose of commercial advantage or gain," a 
significant departure from the standard of "commercial scale".   
5. The negotiating record of TRIPS confirms th at "commercial scale" was intended to set 
forth a broad standard referring to a significant magnitude of activity 
41. Article 32 of the Vienna Convention provides th at supplementary means of interpretation may 
be utilized to confirm the meaning resulting from the application of Article 31.  This may include the 
preparatory work of the treaty and the circumstan ces of its conclusion.  The negotiating record is 
appropriate to confirm the meaning resulting from the application of Article 31, yet the United States 
has yet to address it.  WT/DS362/R 
 Page B-29 
 
 
  42. The WIPO Committee definition of "commercial scale" was the basis for the ultimate phrase 
in TRIPS Article 61.  Delegations to the WIPO plenary session explicitly distinguished "commercial 
scale" from "for commercial purpose" and "for commercial gain."  The TRIPS negotiating parties rejected efforts by both the United States and Canada to replace "commercial scale" with 
"commercial".  Thus they clearly understood the terms to have diffe rent meanings, and the negotiating 
parties clearly did not embrace the meaning of "commercial". 
D. C
HINA HAS FULLY IMPLEMENTED ITS TRIPS  ARTICLE 61 OBLIGATION  
43. China has met its obligation under Article 61 by setting forth criminal measures against 
"commercial scale" infringement.  Notwithstanding the United States' arguments to the contrary, 
China has done so in a manner that is appropria te within its legal and commercial context.   
1. China has implemented Article 61 in China's legal and commercial context 
44. The Panel must first consider whether China's IP R criminal thresholds are appropriate within 
the structure of Chinese law.  China sets forth criminal thresholds for intellectual property 
infringement parallel to those for other illicit activities.   Members have the legal right to implement, 
as far as possible, their Article 61 obligation within their own legal systems and practice (Article 1.1), 
and in such a way as to avoid diverting general la w enforcement resources (Article 41.5).  Moreover, 
the 2nd sentence of Article 61 directs Members to apply cr iminal punishment that is comparable to that 
for other crimes.  Thus contrary to US assertions , how China's IPR criminal laws fit within the 
broader structure of China's legal structure is cr itical to determine whether China implements the 
"commercial scale" standard in good faith. 
45. The second question is whether China's threshol ds are appropriate within the context of 
Chinese commerce.  China's 50,000 RMB (US$6,900) threshold for illegal business volume is less 
than one per cent of the annual revenue of industri al enterprises that are o fficially "small size" and 
less than 25 per cent of the annual revenue of th e individual or household business operation (the 
smallest economic unit that China tracks).  China has set forth criminal thresholds that capture 
intellectual property infringement of any reasonable sc ale.  In addition, the per capita income measure 
proposed by the United States is an inappropriate me tric of commercial scale activity.  "Commercial 
scale" is a not a measure of how much individuals earn – it is a measure of business activity.  Per capita GDP is not a measure related to commercial activity, much less "commercial scale" activity. 
2. Article 61 does not require that Members' authorities be given highly discretionary 
Standards to enforce 
46. The phrase "commercial scale" is a broad and flexible standard;  and the WIPO Committee 
definition of the phrase suggested that a variety of f actors might be considered in applying it.  This 
does not
 mean that Members have an obligation under  TRIPS to implement a highly discretionary 
standard, but simply that Members have flexibility in implementing it.   
47. The WIPO Committee definition of "commercial scale" is a preeminent example of the 
common usage of the phrase and it was relied upon by the negotiating parties to TRIPS.  However, 
the WIPO Committee definition is not a formal part of  TRIPS.  Therefore, the Panel should reject any 
exhortations to incorporate the WIPO  Committee definition into TRIPS. 
48. Under TRIPS Article 1.1, Members have the ri ght to implement obligations in accordance 
with their own legal system and practice.  Acting within their sovereign discretion and in accordance 
with their legal system, Members may have legitim ate interests in the uniform regulation of illicit 
activity across markets, products, operators and re gions.  Members' legal systems may also be 
incompatible with foreign notions of judicial di scretion.  Thus while the concept of "commercial WT/DS362/R 
Page B-30  
 
  scale" would permit
 highly discretionary standards, TRIPS does not require it, but instead counsels in 
favor of standards that are consistent with Members' reasonable discretion and in accordance with their legal system and practice. 
3. Hypothetical examples do not show that Chin a has failed to implement TRIPS Article 61 
49. The United States and several other parties have advanced a bewildering array of hypothetical 
examples in an attempt to show that China do es not comply with TRIPS Article 61.  These 
hypothetical examples prove no such thing.  The United States, as the complaining party, must 
provide evidence that Chinese laws actually function to  exclude a category of infringement that meets 
the "commercial scale" standard.  Hypothetical examples do not qualify as sufficient evidence.  
Moreover, the hypothetical examples that have b een advanced during these proceedings are deeply 
flawed and mischaracterize Chinese law. 
III. CLAIM TWO: CHINA'S MEASURES FOR THE DISPOSITION OF SEIZED GOODS 
ARE CONSISTENT WITH CHINA'S OBLIGATIONS UNDER TRIPS 
50. The United States has failed to demonstrate that Chinese Customs' legal framework for 
handling seized goods is inconsistent with TRIPS.  The United States has failed to show that Chinese 
Customs lacks the proper authority to dispose infri nging goods outside the channels of commerce in 
such a manner as to avoid harm to the right-holder; or that Chinese Customs lacks an appropriate level 
of destruction authority under TRIPS.  The United States has also failed to show that Chinese 
Customs' use of public auction – undertaken in c onjunction with removing all infringing features and 
using a reserve price so as to prevent any economic benefit to the infringer – is inconsistent with the 
4
th sentence of Article 46.  China has implemented its TRIPS obligations regarding seized goods fully 
and in good faith. 
A. CHINA COMPLIES FULLY WITH THE 1ST SENTENCE OF ARTICLE 46 AS APPLIED TO CHINESE 
CUSTOMS BY ARTICLE 59 
51. The 1st sentence of Article 46, as incorporated  by Article 59, imposes two obligations on 
Members.  First, they must vest  their customs agencies with the authority to dispose infringing goods 
outside the channels of commerce in such a manner as to avoid harm to the right-holder.  Second, 
Members must vest their customs agency with the authority to d estroy infringing goods.  China has 
fulfilled the first obligation by granting its Custom s appropriate authority to donate seized infringing 
goods to social welfare organizations or to en ter into a voluntary sales transaction with the 
right-holder that wishes to purchase the goods.  It has fulfilled the second obligation by endowing its 
Customs with appropriate authority to destroy infringing goods.  Having fully satisfied these two 
obligations, China is not barred under TRIPS from permitting its Customs to employ additional forms 
of disposition. 
1. The United States has failed to establish that customs lacks disposal authority 
52. The United States has failed to show that Chin ese Customs lacks the authority to dispose of 
infringing goods outside the channels of commerce in su ch a way as to avoid harm to the right-holder.  
As long as Customs has available to it an option that does  avoid harm to the right-holder, it has the 
genuine authority to dispose of infringing goods out side the channels of commerce in such a manner 
as to avoid harm to the right-holder, consistent with TRIPS. 
(a) Donation to social welfare organizations reflects TRIPS disposal authority 
53. Chinese Customs has the authority to donate sei zed goods to the Red Cross Society of China 
("Red Cross") as well as to other social welfare orga nizations in such a manner as to avoid harm to the  WT/DS362/R 
 Page B-31 
 
 
  right-holder.  Customs may only donate goods that are appropriate for social welfare purposes (no 
luxury or defective goods);  and Customs has a le gal responsibility to ensure that the donated goods 
are properly and exclusively used by social we lfare organizations.  Chinese law stipulates that 
donations to other social welfare organizations must  remain outside the channels of commerce.  The 
United States has provided the Panel with no eviden ce of harm to the right-holders from Customs' 
regime of donations to the Red Cross and other charities.    
54. Under Chinese law, social welfare organizations  are not allowed to sell the infringing goods 
donated by Customs.  Therefore, Customs' donation of all such goods avoids harm to the right-holder. 
55. Moreover, the legally binding memorandum betw een Customs and the Red Cross ensures that 
donated goods are used exclusively for social welf are purposes.  Customs clearly has the power to 
order the donation of infringing goods to the Red Cro ss, and, thus, by definition, authority to order 
that these goods be disposed outside the channels of  commerce in such a manner as to avoid harm to 
the right-holder. 
(b) Transfer to the right-holders reflects TRIPS disposal authority 
56. Chinese Customs also has the author ity to sell seized goods to an interested right-holder.  This 
disposition method plainly avoids any harm to th e right-holder because the right-holder would not 
voluntarily purchase the goods unless it benefited from the transaction.   
2. The United States has not established that customs lacks destruction authority 
57. The United States has also failed to show that  Chinese Customs lacks the authority to order 
the destruction of infringing goods.  China has vest ed Customs with appropriate destruction authority 
within the meaning of TRIPS Arts. 46 and 59. 
(a) TRIPS does not require absolute authority 
58. The United States asserts that the "authority" required under TRIPS must be absolute and 
unconditional.  This assertion is contrary to the practice of the United States and other Members, to the arguments that the United States has advanced  elsewhere in these proceedings, and to a wide 
variety of legitimate government regulations.  The US claim – that China may not condition in any 
manner whatsoever the destruction authority it vests in its Customs – is untenable in light of any 
reasonable interpretation of TRIPS. 
(b) The destruction authority vested in Chinese customs is an appropriate grant of authority under 
TRIPS  
59. All the evidence before the Panel suggests that  "authority" under TRIPS Arts. 46 and 59 may 
be appropriately conditioned.  The United States has not advanced any argument to date as to why 
Chinese Customs' destruction authority is not approp riate under TRIPS.  China offers four factors to 
help inform the relevant analysis. 
(i) Discretion  
60. Customs has considerable discretion to make  the subjective determination of whether
 an 
infringing good meets the criteria for each dispos ition method and therefore, whether it ought to be 
destroyed.  Once Customs determines that an in fringing good meets the criteria for a disposition 
method, it has a legal obligation to carry out that disposition process.   WT/DS362/R 
Page B-32  
 
  (ii) Autonomy 
61. Customs has complete autonomy in making the determinations relevant to whether an 
infringing good ought to be destroyed.  Its decisi ons are not subject to the approval of some third 
party, which might effectively constrain the agency's power. 
(iii) Legitimate Government Interests  
62. Each of the particular priorities have legitimat e government interests consistent with China's 
sovereign discretion afforded by TRIPS Article 1.1, such as preferring that goods be put to socially 
useful purposes through donation to charitable organizations.   
(iv) The Principles of TRIPS Articles 46 and 59  
63. All four disposition methods employed by Cust oms are consistent with the principles of 
TRIPS Articles 46 and 59 because they effectively deter infringement and avoid harm to the right-
holder.   
3. TRIPS allows Members to publicly auction formerly infringing goods in addition to 
disposal and destruction 
64. China has satisfied its obligation under the 1
st sentence of Article 46 as incorporated into 
Article 59 to vest Customs with appropriate dispo sal authority and destruction authority.  Members 
have every right under TRIPS to allow their customs agencies disposition options other  than disposal 
outside the channels of commerce and destruction. 
(a) The United States now concedes that public  auction is compatible with the 1st sentence of 
Article 46 
65. Members clearly have the legal right under TR IPS to allow their customs agencies to conduct 
public auctions.  If a Member provides disposal an d destruction authority, then it may also allow 
public auction, consistent with the 1st sentence of Article 46.  The United States has now conceded 
this point. 
(b) Public auction is consistent with the principles of the 1st sentence of Article 46 
66. The public auction procedure which China's Cust oms employs is fully consistent with the 
principles of Article 46.  First, public auction is no less a deterrent to infringement than donation or 
destruction;  Customs' use of a reserve price at th e auction ensures that infringers lack the opportunity 
to cheaply reclaim the seized goods  and use them in furtherance of any counterfeiting activity.  
Second, public auction of seized goods is no more  harmful to the right-holder than donation or 
destruction.  Customs only undertakes public auction of seized goods once it has removed all 
infringing features to prevent damage to the right-holder.   
B. CHINA COMPLIES FULLY WITH ALL OBLIGATIONS IN THE 4TH SENTENCE OF ARTICLE 46 AS 
APPLIED BY ARTICLE  59 – AND THE UNITED STATES HAS NOT OFFERED ANY CONTRARY 
EVIDENCE  
67. China is in full compliance with Article 59.  Th e United States has failed to show that the 4th 
sentence of Article 46 is incorporated into Article 59 and therefore applies to Chinese Customs.  Even 
if the 4th sentence of Article 46 were read to apply, Chinese Customs measures fulfill that provision.   WT/DS362/R 
 Page B-33 
 
 
  1. The 4th sentence of Article 46 is not incorporated into Article 59  
68. The United States wrongly asserts that the 4th sentence of Article 46 is incorporated into 
Article 59.  The relevant principles of Article 46 – which are incorporated into Article 59 – are those 
related to the authority to order disposal or destruction.  The 4th sentence of Article 46 does not 
provide any authority to dispose or destroy; and it does not elaborate on the requirement of authority.  
Rather, it sets forth the circumstances under wh ich domestic authorities may discharge infringing 
goods within the channels of commerce. 
2. China complies fully with the 4th sentence of Article 46 
69. Even if the 4th sentence of Article 46 were read to be  incorporated into Article 59, China 
would be in full compliance.  Chinese Customs complies with the 4th sentence of Article 46 because it 
takes steps beyond the mere removal of the infringing  mark to prevent the cheap return of the seized 
goods to the infringers.  The US reading of the 4th sentence is inconsistent with the plain text. 
(a) The 4th sentence of Article 46 bars the cheap retu rn of seized goods to infringers that would 
allow them to unfairly profit 
70. The United States wrongly argues that the 4th sentence of Article 46 imposes a categorical bar 
on the discharge of seized counterfeit goods into the channels of commerce, ot her than in "exceptional 
circumstances".  If authorities take measures that ex ceed the mere removal of the infringing mark and 
that thereby prevent infringers from cheaply r eclaiming the seized goods, then authorities may 
discharge such goods into the channels of commerce. 
71. First, the 4th Sentence of Article 46 does not limit the discharge of seized counterfeit goods to 
"exceptional cases".  The United States misreads the plain text of the 4th sentence of Article 46 to limit 
the discharge of seized counterfeit goo ds to exceptional cases only.  The 4th sentence does not impose 
a ban, but rather a threshold, that, when met by measures exceeding the "simple removal of the 
trademark unlawfully affixed," permit the discharge of  the goods into the channels of commerce.   
72. Second, the central focus and plain meaning of the 4th sentence of Article 46, especially the 
term "release," is not the public sale of the seize d good, but the return of the good to the infringer, 
from whom it might continue, once more, into the channels of commerce.   
73. Likewise the "exceptional cases" exemption to the 4th sentence of Article 46 – and the 
restriction on the release of seized goods – refers to  returning the seized goods to the infringer.  If this 
exception pertains exclusively to the return of th e seized goods to the infringers, then so does the 
scope of the restriction  itself. 
74. Third, the 4th sentence of Article 46 is intended to prevent infringers from cheaply reclaiming 
seized goods, with only the marks removed.  The ne gotiating record underscores that the purpose of 
the fourth sentence of Article 46 is to ensure that  authorities deprive infringers of economic benefits 
from the goods, not  to bar the return of seized goods to the channels of commerce. 
(b) Chinese customs satisfies the 4th sentence of Article 46 
75. Chinese Customs complies with any obligation of the 4th sentence of Article 46 because prior 
to public auction, it takes measures that exceed th e mere removal of the infringing mark and that 
thereby prevent infringers from cheaply reclaiming the seized goods:  it eliminates all infringing features and not just the infringing trademark; it formally solicits comments from the right-holder; 
and, most significantly, it establishes a reserve pr ice, based on an expert appraisal, for the public WT/DS362/R 
Page B-34  
 
  auction of the seized goods.  Such measures clea rly meet the sufficiency threshold under the 4
th 
sentence of Article 46 for permitting discharge into the channels of commerce through public auction. 
IV. CLAIM THREE: CHINA'S MEASURES FOR THE PROTECTION AND 
ENFORCEMENT OF COPYRIGHT AND RELATED RIGHTS ARE CONSISTENT WITH CHINA'S OBLIGATIONS UNDER TRIPS   
76. In its Claim Three, the core contention of the United States all along has been that, as a 
consequence of Article 4.1 of China's Copyright Law,  China fails to protect the copyrights of works 
that are at various stages of content review.  In f act, as China has demonstrated, the US attempt to link 
Article 4.1 with China's content review processes is fatally flawed.  
77. China notes that the United States now appears to be advancing an argument that Article 4.1 
on its face is a violation of TRIPS.  This is also a flawed contention.  China has demonstrated that the 
sovereign power to prohibit works, recognized in Article 17 of the Berne Convention, in fact does 
permit TRIPS Members to maintain a provision of la w such as Article 4.1.  China also notes that the 
United States has failed to demonstrate that Article 4.1 has any adverse effect whatsoever on copyright protection in China.   
A. T
HE UNITED STATES HAS FAILED TO MAKE A PRIMA FACIE CASE WITH RESPECT TO 
VIRTUALLY ALL OF THE LEGAL THEO RIES IT ADVANCED IN CLAIM THREE  
78. For the amalgam of US theories relating to cont ent review (collectively referred to in this 
section as the US "Content Review Theories"), th e United States has given the Panel no supporting 
evidence.  In contrast, the Panel received from Chin a significant evidence to th e contrary of the US 
theories.  As a result, the Panel now has before  it a situation where the United States has made 
allegations for which it has advanced no supporting evidence.  Under the rules of the WTO, the 
United States has failed to make a prima facie case.   
1. WTO Law requires a ruling against a complaining party that fails to establish a prima 
facie case  
79. The United States has brought an "as such" challe nge to China's Article 4.1.  The Appellate 
Body has stated that it will "exp ect" that measures subject to "as su ch" challenges will "normally have 
undergone, under municipal law, thorough scrutiny ... to ensure consistency with the Member's 
international obligations" and ther e will be both presumption and strong expectation that a measure is 
"not inconsistent with those obligations."   
2. The United States Content Review Theories  assume that copyright protection is 
contingent upon content review, but the Un ited States has offered no evidence to 
support such a claim 
80. The United States mistakenly alleged in its firs t written submission that China will not protect 
copyright in (1) works that are awaiting the results  of content review, (2) the unedited version of a 
work that has been edited to pass content review , (3) works that have failed content review, and 
(4) works that have never been submitted for review. 
81. The United States, in asserting its Content Re view Theories, has the clear and particular 
factual burden of proving that China's Article  4.1 operates through the prepublication licensing 
system. 
82. At no point does the United States cite a singl e authority for this proposition.  The United 
States apparently supposes that the point is evident from the text.  But the text of Article 4.1 says  WT/DS362/R 
 Page B-35 
 
 
  nothing about content review, and the content review  regulations say nothing about copyright.  The 
US Content Review Theories in fact are not supported in any way by the face of the text.   
3. The US claim that China denies copyright protection to works that are not yet licensed 
for distribution within China is demonstrab ly false: The United States has failed to 
establish a prima facie case supporting its claim 
83. China does not have an obligation to prove that  its law is WTO-compliant.  That burden is 
borne by the United States.  A burden in rebutta l does not shift to the r esponding party unless the 
complaining party makes a sufficient prima facie case.  Nonetheless, China has provided the Panel 
and the United States with comprehensive factua l evidence and legal analysis demonstrating the 
operation of its laws. 
(a) China has provided comprehensive legal analys is, with supporting evidence, to demonstrate 
that copyright protection is not contingent upon content review  
84. The process of content review remains, as an ad ministrative matter, separate from copyright.  
As explained by China in detail in its first wr itten submissionand in its response to the Panel's 
questions, content review is conducted by a number  of agencies under the authority of the State 
Council.  The agencies under the State Council r esponsible for content review do not apply 
Article 4.1, or administer the copyright laws in any way. 
(b) The Zheng Haijin opinions confirm that copyright is protected in works irrespective of their 
status with regard to publication approval 
85. The US contention that works that have not b een reviewed are prohibited by law is simply 
wrong.  To illustrate this fact, China offered analysis of the Zheng Haijin  case in its First Written 
Submission.  The central meaning of the Zheng Haijin  case is that even if a work has violated 
publication regulations – e.g., a work being distri buted without a license or without having completed 
mandatory review – it is still protected by the Copyright Law as long as its contents are not illegal.   
(c) The US Contention that the enforcem ent action taken by the NCAC in Shrek II  was not 
authorized under the Copyright Law is demonstrably false 
86. In the US first written submission, the Un ited States proposed a theory that in Shrek II , the 
NCAC took action pursuant to unfair competition la ws and not the Copyright Law.  From this 
incorrect observation, the United States derived a conclusion that the NCAC did not act pursuant to 
the Copyright Law because the Shrek II  work had not yet been reviewed, and therefore could not 
enjoy copyright protection.  China has demonstrated the contrary: the NCAC not only could , but did  
take action pursuant to the Copyright Law.  Chin a clarified this matter in China's first written 
submission. 
B. ASIDE FROM THE BURDEN OF PROOF , CHINA HAS DEMONSTRATED THAT CHINA DOES NOT 
MAKE COPYRIGHT PROTECTION CONTINGENT ON A FORMALITY  
87. Copyright in China vests automatically, free of any formality.  Berne Article 5(2) refers to 
administrative requirements such as the affixing of a ma rk, registration, the deposit or filing of copies, 
or the payment of fees.  China makes no such demand s of Berne authors prior to either the vesting of 
copyright, or prior to the enforcement of copyright.   While for some works, content review may be 
characterized as a formality precedent to publication,  in no sense can it be characterized as a formality 
precedent to copyright.  Copyright matters are not implemented through the content review system.  
As China has illustrated, in the Zheng Haijin  case both the NCAC and the Supreme People's Court WT/DS362/R 
Page B-36  
 
  affirmed that under Chinese law, it is actual illegality
 of content that is at issue in Article 4.1 matters, 
and not the content review process itself. 
C. THE US CONTENTION THAT ARTICLE 4.1 OF THE COPYRIGHT LAW IS A FACIAL VIOLATION OF 
TRIPS  IS FALSE AS A MATTER OF FACT AND LAW  
88. The failure of the United States to support its  Content Review Theories leaves it with only 
one argument: its contention that the text of Article 4. 1, regardless of how it might be applied, violates 
Berne Article 5(1), and in turn denies enforcement under TRIPS Arts. 41.1 and 61.  The United States 
did not clearly engage with this issue in its Firs t Written Submission.  The United States now appears 
to contend that its primary claim all along was facial. 
1. China recognizes and preserves all rights under TRIPS: the scope and operation of 
Article 4.1 is extremely limited and leaves TRIPS rights unmolested 
89. Chinese law recognizes and preserves all TRIPS ri ghts.  China recognizes copyright in all 
categories of literary and artistic works, and Chin ese law guarantees all the substantive rights required 
by TRIPS, and indeed rights above and beyond those.  As conceded by the United States, Article 10 of China's Copyright Law sets forth 17 substantive moral and economic rights that copyright owners 
may enjoy.  And under Copyright Law Article 2, China recognizes copyright for Chinese and foreign-
authored works at the moment of the work's creat ion, without any formality or precondition, whether 
a work is published or unpublished.   
90. China respectfully asks the Panel to  recognize that Article 4.1 is in complete accord with the 
censorship power recognized by Berne Article 17.  It is  both negligible in terms of its implications in 
the marketplace, and in terms of any nullifi cation or impairment of Member benefits.   
(a) China recognizes and preserves all TRIPS rights 
91. TRIPS Article 9.1 incorporates Arts. 1-21 of th e Berne Convention and defers to the Berne 
text for full explication of Member obligations.  Copyright Law Article 2 directly implements an 
author's rights under the Berne Convention into Ch inese law. So long as copyright is granted under 
the Berne Convention, that right is protected by  Chinese law.  China grants to authors all the 
substantive protections of the Berne Convention, in addition to others, through Article 10 of the 
Copyright Law. 
(b) Properly understood, the scope and applicati on of Article 4.1 are extremely limited and 
completely in accord with the sovereign principles recognized by Berne Article 17 
92. Properly understood, Article 4.1 merely recogni zes that copyright protection is meaningless in 
a certain context: its core principle is that Ch inese law will not enforce the protections of the 
copyright law for works the conten ts of which are already illegal. 
93. Accordingly, the scope and operation of Article  4.1 are extremely limited.  Copyright in a 
work vests under Article 2 without any inquiry into whether a work is prohibited by law. 
94. Under Article 4.1, to the extent that any party has a legal right to exploit the work, it is the 
right-holder.  If at any point the work becomes other than "prohibited by law", it is the right-holder 
and his or her assignees who enjoy protection.  WT/DS362/R 
 Page B-37 
 
 
  2. The sovereign right to prohibit works is recognized by International Law, the Berne 
Convention and TRIPS, and is no t limited by those Agreements  
95. Article 17 of the Berne Convention expressl y recognizes a preexisting and supervening 
sovereign domain in which TRIPS may not interfer e.  That domain is the right of sovereign 
governments to control and prohibit the production and distribution of certain works.  Berne Article 
17 recognizes this sovereign interest and effectiv ely denies WTO jurisdiction in this area.  Berne 
Article 17, both in reserving this sensitive aspect of state power to the sovereign, and by its plain-meaning, requires broad cons truction and deference.  
96. TRIPS incorporates the entire Berne structure of substantive rights, together with the express 
recognition in Article 17 that those substantive rights are subject to the sovereign's inherent right to 
prohibit .   Thus when there is any conflict between the author's rights under the Berne Convention and 
the sovereign's censorship privilege under Berne C onvention Article 17, the former gives way to the 
latter. 
3. Berne Article 17 requires broad construction and deference and even under the 
narrowest reading, there are no rights granted to prohibited content that are denied by 
China's Law 
97. Even if Berne Article 17 is parsed as if it limit s and defines a sovereign's right to prohibit 
works – which China submits is an  incorrect reading – China's law still does not violate Berne or 
TRIPS.  This is true for two reasons: all of the economic rights of authors under either agreement are 
limited by Berne Article 17, and the fundamental TR IPS enforcement right is to give authors a power 
of "effective action".  Failure to grant a private right  to restrict publication of content that has already 
been banned by the government does not in any way deny "effective" action. 
(a) All economic rights of authors are limited by Berne Article 17 
98. TRIPS rights are economic rights.  The rights guaranteed in the Berne Convention are rights 
to authorize certain otherwise permissible uses of a work.  All affirmative economic rights may therein be limited in accordance with Berne Article 17.  
99. Given that all economic rights under the Bern e Convention are limited by Berne Article 17, 
the denial of copyright protection to illegal works under Article 4.1 cannot violate Berne Article 5(1), 
and in turn cannot violate Article 9.1 of TRIPS.  
(b) There is no right of availability of enforc ement under TRIPS Part III with respect to 
prohibited works 
100. The United States has failed to demonstrate th at China has any oblig ation to grant TRIPS 
enforcement rights to prohibited works, despite the argument set forth in its first written submission.  
The fundamental obligation under Part III of the TRI PS Agreement is set forth at Article 41.1. That 
Article charges Members to make available under their law procedures "so as to permit effective 
action  against any act of infringement of intellect ual property rights covered by this Agreement  ... ."  
101. The US claim, in light of this provision, falls short on two grounds.  First, enforcement 
procedures must be provided only for rights covered by TRIPS.  If a right is not covered by TRIPS, 
then there is no obligation to enforce it.  Second, the content at issue here has been banned by the 
government.  No person, whether the author or in fringer, is permitted to publish or distribute the 
work.  Thus, rather than grant the author a power to  prohibit publication, the sovereign itself prohibits 
publication – prohibition that is itself rigorously enfo rced.  By definition, then, China has provided a 
procedure for "effective action" against any attempt to publish that content.  It is banned entirely. WT/DS362/R 
Page B-38  
 
  4. Public prohibition completely preempts the private right of censorship 
(a) Neither the Berne Convention nor TRIPS grant a right to publication:  copyright enforcement 
confers a private right to censor works that might otherwise be published 
102. The Berne Convention and TRIPS serve primarily to  secure for the author the right to prohibit 
publication by others.  Access to a market is not guaranteed.  In other words, there is no right to 
publish under international copyright. 
(b) No meaningful private rights of censorship can subsist when a work is completely prohibited 
103. When governments exercise their sovereign powe r to censor, the exercise of private rights is 
moot: unauthorized copying is not permitted.  Copyri ght continues, but enforcement is not needed: the 
content is banned. It may not lawfully be copied, adapted, translated, and certainly not distributed.  
Copyright enforcement thus is meaningless in this context. 
(c) US Prohibition likewise denies effective protections for the rights of authors 
104. The US law similarly subsumes protections for th e rights of authors in obscene works, and in 
particular works of child pornography.  Such a function comports with the overarching authority 
referenced by Berne Article 17.  
D. T
HE UNITED STATES HAS FAILED TO PRESENT A CASE TO SUPPORT ANY OF ITS CONTENT 
REVIEW THEORIES OR ITS OTHER AMAL GAM OF CLAIMS RELATING TO ARTICLE 4.1: THE PANEL 
SHOULD ACCORDINGLY ENTER A FINDING IN FAVOR OF CHINA ON THESE MATTERS  
1. The burden of proof lies with the complaining party 
105. According to well established Appellate Body la w, the complaining party must both properly 
assert and prove  its claim.  If such proof is absent or deficient, then the respondent has no burden 
going forward: the complaining party must present and substantiate its prima facie  case.  In the 
absence of evidence other than that  which has been comprehensively rebutted, it cannot be held that 
the complaining party has met its burden. 
2. The United States has failed to meet its burden 
106. With regard to its Content Review Theori es, the United States has wholly failed to 
demonstrate that China's law makes conten t review a precedent condition to copyright. 
107. With regard to its other claims relating to Article 4.1, the only evidence proffered by the 
United States is the text of the provision itself.  China has offered detailed argument on the nature of 
international copyright law, and of the structure of  the Berne Convention, and has shown that China's 
law and practice in this regard ar e not inconsistent with TRIPS.  WT/DS362/R 
 Page B-39 
 
 
  ANNEX B-5 
 
EXECUTIVE SUMMARY OF THE ORAL  STATEMENT OF CHINA AT  
THE SECOND SUBSTANTIVE MEETING 
 
 
 
I. INTRODUCTION  
1. Mr. Chairman, members of the Panel:  Thank yo u. The United States has advanced three legal 
claims against China in this dispute.  In each of  its claims the United States has mischaracterized 
China's laws and is asking this Panel to dramati cally expand the scope of  legal obligations under 
TRIPS.  
2. China respectfully submits that this Panel must  address several key questions as it confronts 
the meaning of a number of obligations under TRIPS.  Among these questions are the following: What is the appropriate balance of obligations and rights, and of legal constraints and deference to 
local legal systems as provided by TRIPS Articles 1. 1 and 41.5?  What is th e appropriate scope of 
core sovereign functions, such as criminal law enfo rcement and the power to prohibit publication?  
What is the appropriate role of traditional legal principles, such as in dubio mitius ?  
II. CLAIM ONE 
3. China wishes to address the first claim of the Un ited States: that China's criminal law does not 
fulfill TRIPS Article 61, which requires that Members must apply criminal measures to willful 
counterfeiting and piracy on a commercial scale.  
4. First, the definition of "commercial scale" that  the United States has advanced is itself vague 
and ambiguous and fails to establish any clear st andards by which to measure compliance with 
Article 61. 
5. Second, the actual usage of "commercial scale"  suggests that it refers to a significant 
magnitude of activity.  China has offered several examples where "commercial scale" has been treated 
as a distinctive phrase and has referred to a significant magnitude of activity.  By contrast, the United States merely tries to construct a meaning from the definitions of separate words.  But the test of 
ordinary meaning is how that phrase is actually used.  
6. Third, the Panel, at the very least, confront s in "commercial scale" a phrase whose meaning is 
vague and doubtful.  China respectfully submits th at the Panel must consider two crucial legal 
principles in the face of this vagueness.  The first principle is that under Article 31.1 of the Vienna 
Convention, the meaning of "commercial scale" must be understood in context
.  The relevant context 
is principally Articles 1.1 and 41.5 of TRIPS which reflect deference to the norms, legal systems and 
resource constraints of Members, and were crucia l concessions for developing countries in the final 
negotiating rounds of TRIPS.  They suggest that  TRIPS would not have imposed an exacting and 
intrusive regulation of Members' criminal enforcem ent regime.  The second legal principle that this 
Panel should recall here is that of in dubio mitius , which holds that ambi guous legal obligations 
should be interpreted to minimally intrude on Memb ers' sovereignty. This principle suggests that 
although countries have the right to cede their aut hority over domestic criminal law, they should not 
be presumed to do so lightly.   
7. Fourth, the United States demands for itself  significant discretion in its implementation of 
TRIPS Article 61.  The United States is correct that Members have discretion in matters of criminal WT/DS362/R 
Page B-40  
 
  enforcement – but it is wrong as to the source of this discretion in Article 61.  In fact, it is the broad 
and flexible standard of "commercial scale" that grants this discretion. 
8. China now turns briefly to its own legal system.  In addition to misconstruing the 
"commercial scale" standard of TRIPS, the Unite d States has routinely mischaracterized China's 
criminal law regime.   
9. Here the United States makes three principal erro rs.  The first error is that the United States 
frequently ignores the full breadth of  evidence that is legally relevant  to Chinese criminal law.  The 
second error is that the United States disregards China's general criminal laws.  These general 
criminal laws are "criminal procedures and pena lties" applicable to commercial scale counterfeiting 
and piracy within the meaning of TRIPS Article 61.  The third error is that the United States considers 
only a single moment of infringement.  China's criminal law considers the entire period of 
infringement, not a snapshot in time. 
10. China wishes to make one final note with r espect to the China Copy right Alliance ("CCA") 
Report.  The United States wrongly declares that the report shows that the "vast majority of traditional 
retail outlets" operate under Chin a's criminal thresholds.  
11. The CCA Report summarizes administrative
 raids.  The United States extrapolates from these 
administrative raids to the general state of infringe ment.  This is a logical fallacy.  Just as no one 
would try to measure the frequency of murder from a review of traffic police reports, so no one should 
assume that administrative raids portray the full range  of Chinese enforcement, which includes levels 
of activity far beyond that dealt with by the administrative law.   
12. In sum, China respectfully submits that the firs t claim of the United States fails.  The United 
States has demonstrated neither that Article 61 imposes a specific and low-scale standard, nor that 
China's criminal laws fail to capture commercial scale activity. 
III. CLAIM TWO 
13. China now turns to the second claim advanced by the United States.  However, before 
addressing the substantive issues in this claim, China wishes to register an important procedural note: 
the United States has failed completely in these pro ceedings to make the argument that China's laws 
governing the disposition of goods destined for export  are inconsistent with TRIPS.  The United 
States has made clear that it "takes no position" re garding the applicability of Article 59 to such 
goods.  The Panel should therefore hold that China' s measures concerning goods destined for export 
are not subject to the US claim regarding Article 59. 
14. Concerning the substance of the US claim, two distinct components are at issue in this second 
claim:  the proper understanding of the 1st sentence of Article 46, as applied to Article 59; and the 4th 
sentence of Article 46, as applied to Article 59.  The United States has failed to show that China 
breaches TRIPS in either respect. 
15. The first dispute is whether China satisfies its obligation to provide Customs with appropriate 
disposal authority and destruction authority.  With respect to disposal authority, China has 
demonstrated that its Customs has the power to dispose of seized goods outside the channels of 
commerce through donation to social welfare organizati ons and direct sale to interested right-holders. 
The sole point of contention is whether Custom s may conduct these disposition methods in such a 
manner as to avoid harm to the right-holder.   
16. In its first written submission, the United States expressed a completely unsubstantiated 
concern that defective or danger ous goods would be donated, and th at such goods might harm the  WT/DS362/R 
 Page B-41 
 
 
  reputation of the right-holders or lead to unwarrant ed legal claims.  Neither the facts nor applicable 
Chinese law provided any support for this claim, and the US in fact complimented China's Customs 
for its donations to the Red Cross.  In its written re buttal, the United States th en claimed for the first 
time that ordinary  infringing goods could also harm the ri ght-holders' reputation.  Chinese Customs, 
however, already takes steps to prevent such a theoretical harm to a right holder.   
17. The other apparent concern of the United States is that a recipient social welfare organization 
will resell donated goods.  This con cern is equally misplaced.  Chinese law requires that Customs 
must ensure that donated goods are used exclusively by social welfare organizations.  In this regard, 
Customs diligently exercises its legal responsibility.  
18. China would respectfully ask the Panel to note that China satisfies TRIPS fully by ensuring 
that its Customs has the power  to order the donation of seized goods in such a manner as to avoid 
harm to the right-holder.   
19. Under the 1st sentence of Article 46, as applied by Ar ticle 59, China must afford its Customs 
destruction authority as well as disposal author ity.  China fully satisfies this obligation. 
20. The United States affords its own Customs only conditioned  authority and it insists elsewhere 
that China do likewise.  But the United States ha s provided the Panel no arguments as to why its 
favored form of conditioning is appropriat e, but China's sequencing guidelines are not. 
21. China has highlighted several features of Customs' appropriate destruction authority: 
considerable discretion; the exercise of inde pendence and autonomy; the pursuit of legitimate 
government interests; and consistency with the pr inciples of TRIPS Articles 46 and 59.  China has 
explained that Customs has the destruction authority required by TRIPS, as well as the reality that the 
majority  of goods seized by Customs are, in fact, d estroyed by Customs in the exercise of its 
discretion. 
22. In sum, China has vested its Customs with the appropriate power to dispose of seized goods 
outside the channels of commerce in such a way as to  avoid harm to the right-holder.  China has also 
provided Customs with the appropriate power to destroy seized goods.  In so doing, China fully 
satisfies its TRIPS obligations. 
23. The second dispute in Claim Two concerns the 4th sentence of Article 46.  As China has 
explained, Article 59 does not appear to incorporate th is provision.  Article 59 re fers to the "principles 
set out in Article 46."  But these "principles" do not  modify disposal and destruction, as the United 
States has alleged.  These "principles" modify the authority  to order disposal of destruction.   
24. However, even if Article 59 we re read to incorporate the 4th sentence of Article 46, China 
fully complies with this provision.   
25. The United States argues in its written rebuttal that  this sentence means th at seized counterfeit 
goods may only  be released into the channels of commerc e in exceptional cases.  But the US reading 
of the text disregards entirely the term "sufficient".  In fact, "sufficient" clearly sets forth a threshold:  
certain acts (such as merely removing the tradem ark) do not normally permit discharge into the 
channels of commerce; and certain unspecified acts beyond removing the trademark do  so permit. 
26. This plain textual interpretation is buttressed in sev eral respects.  First, there is clear evidence 
– from the negotiating history and commentaries – th at the exceptional cases were understood to refer 
to the return of the seized good to the non-professional  infringer.  WT/DS362/R 
Page B-42  
 
  27. Second, the concern behind the 4
th sentence appears to have been that infringers might 
cheaply recover seized goods, wait for another batch of infringing marks, and continue their counterfeiting operations.   
28. It is proper to read the 4
th sentence to allow public sale when  authorities take needed steps – 
beyond the removal of the counterfeit mark – to prev ent infringers from cheaply reclaiming the seized 
goods and reapplying infringing marks. 
29. China respectfully submits that the record before  the panel is clear:  China Customs would be 
in full compliance with the 4th sentence of Article 46, even if it we re read to apply.  In addition to 
removing the infringing mark from counterfeit goods, Customs eliminates other infringing features, 
solicits comments from the right-holder and – most signi ficantly – sets a reserve price for the auction.  
The reserve price ensures that infringers pay mark et price to recover their goods and that they 
therefore are unable to cheaply con tinue their counterfeiting operations. 
30. The Chinese Customs' option of using an auction does not violate the 1st sentence of 
Article 46, as incorporated into Article 59, becau se it is sufficient that Customs have appropriate 
disposal and destruction authority.  Nor does it violate the 4th sentence of Article 46, even if that were 
to apply to Article 59, because Customs take significant measures beyond simply removing the 
infringing mark. 
IV. CLAIM THREE 
31. China turns now to the third US claim.  This rela tes to Article 4.1 of China's Copyright Law.    
32. The focus of the original US cl aim was China's content review system.  In this regard, the US 
claim was grounded on a complete misunderstanding of Chinese law, and the United States has failed 
to carry its burden of proof.   
33. The failure of the United States to support its  allegations is worthy of review.  At 
paragraph 198 of its first written submission, the United States made  four key false and unsupported 
assertions. 
34. First, the United States asserted that Chinese copyright law "provides no protection to works 
that are awaiting the results of content review in  China."  China has, however, given the Panel a 
specific example of this enforcement:  the Shrek II  enforcement actions by the NCAC, protecting the 
copyright in a work that had not completed the content review process.   
35. Second, the United States asserted that where a work is never submitted for content review, 
China "provides no copyright protection."  China, has provided legal analysis to  show that such works 
in fact do receive copyright protection, and has pr ovided examples of enforcement actions aimed at 
protecting the copyright in such works. 
36. Third, the United States stated that where a wo rk is edited to pass content review, Chinese 
copyright law "provides no copyright protection for the version that was not authorized for distribution in China."  China h as demonstrated that these works do receive copyright protection: 
NCAC Circular number 55 set up procedures to protect 700 US films, without inquiry as to whether 
the films were edited to pass content review. 
37. Fourth, the United States challenged China's conten t review by contending that works that fail 
content review do not receive copyright protection.  China, has shown that it will protect the copyright 
in the legal content of a work, even if th at work fails content review as a whole.  WT/DS362/R 
 Page B-43 
 
 
  38. In its written rebuttal, the United States merely  reiterated its flawed theories, focusing this 
time on the contention that content review imposes a formality on the "enjoyment and exercise" of 
copyright in violation of Article 5(2) of the Berne Convention.  This is not true. 
39. With the failure of the US arguments regarding content review, all that remains of the US 
claim is a facial challenge to Copyright Law Artic le 4.1.  As an initial matter, China wishes to 
highlight that the United States has not been ab le to provide a single example of a case where 
Article 4.1 of the Copyright Law has been applied. 
40. That noted, China respectfully submits that the Panel's analysis of this facial challenge to 
Article 4.1 should begin with Artic le 17 of the Berne Convention. 
41. Article 17 of the Berne Convention recognizes, and does not limit, the sovereign right to 
impose censorship. 
42. The Berne rights that are incorporated in to TRIPS are economic rights.  Under any 
construction of Berne Article 17,  there are no re maining enforceable private economic rights when a 
work is subject to prevailing public censorship. 
43. Finally, as part of its facial challenge to Article 4.1, the United States has argued that 
Article 4.1 denies copyright protection to a cate gory of works, in violation of Article 2 and 
Article 5(1) of the Berne Convention.  This also is  incorrect.  Even when a work has been found to 
contain prohibited content, China continues to recognize the author's copyright in the work's legal content.  And that copyright will be protected if it is found to be infringed by a work that is legally 
circulating within China.   
44. China respectfully asks the Panel to find that th e United States has failed to meet its burdens 
on its Claim Three arguments, and to rule in favor of China.  The United States has failed to offer 
evidence to support its misreading of Chinese law, an d the United States has failed to demonstrate that 
Article 4.1 of China's copyright law violates TRIPS on its face.   WT/DS362/R 
Page B-44  
 
  ANNEX B-6 
 
CLOSING ORAL STATEMENT OF CHINA AT THE  
SECOND SUBSTANTIVE MEETING 
 
 
 
I. INTRODUCTION  
1. Mr. Chairman, members of the Panel:  The Peopl e's Republic of China wishes to thank you 
for your time and attention in this meeting, and fo r your service on this Panel.  The care that you have 
taken to prepare for this dispute has been evident throughout this proceeding.  China also wishes to 
thank the WTO Secretariat Staff for its excellent work. 
2. We have now exchanged two rounds of written submissions  and held two substantive 
meetings.  It is appropriate to cons ider the status of the key issues in this dispute, and to review the 
tasks remaining for the Panel. 
3. In the broadest terms, the United States has fa iled to make its case.  In each of the three 
claims the United States' case depends on legal inte rpretations that run counter to the governing 
agreements and a flawed understanding of Chinese law and practice.  On many issues the United 
States has failed even to advance a prima facie  case. 
4. Let me briefly turn to the specific claims. 
II. CLAIM ONE 
5. The United States has asked this Panel to conclu de that an infringer must be subjected to 
criminal penalties whenever that infringer is "seri ously engaged" in pursuing financial gain.  While 
the United States contends that its proposal is not an "intent" test, it is hard to describe "pursuing financial gain" as anything else.  The discussion of the proposed US definition in this meeting offered 
nothing to dispel that conclusion.  
6. The United States also contends that the rules of treaty interpretation leave "no doubt" about 
the meaning of the "commercial scale" standard.  If by that the United States means that there is no 
doubt regarding it own proposed standard, China resp ectfully submits that the discussion of the US 
proposal at this meeting in fact identified considerable cause for doubt.  
7. China has shown that an intent test like that of the United States was expressly rejected in the 
TRIPS negotiations.  The Panel should also reject an intent test here, however it may be described.   
8. Instead of an intent test, the TRIPS agreemen t adopted an objective test based on the scale of 
infringing operations – the "commercial scale" test.  It is this test that the Panel must apply.  
9. To apply this test, the Panel faces a challenge.  Far from being without "doubt", the test in fact 
needs considerable definition.  The Panel must take  a very broad standard – "commercial scale" – and 
apply it to the very specific implementation of a Member country.  The United States has not 
identified a concrete, principled approach for th e Panel to do this.  Through all the pleadings and 
meetings in this dispute, the United States inst ead has relied on hypothetical examples that assume 
their own conclusion.  These examples follow a pa ttern: they describe a hypothetical infringement, 
allege that it falls beneath China's thresholds, and then assert that operations of that kind are 
infringement at a commercial level.  China already ha s briefed this issue, and will not respond to those  WT/DS362/R 
 Page B-45 
 
 
  examples again this morning.  Instead, China notes that the Panel should adopt a standard that is 
objective and not the creature of hypothetical facts. 
10. China, in contrast, has given the Panel two concrete measures.  First, it has proposed a 
comparison to official statistics that describe th e actual scale of commerce in China.  Second, China 
has compared the thresholds for intellectual prope rty crimes to the thresholds of other commercial 
crimes, and noted the importance of this comparison in light of the second sentence of Article 61, and 
in light of the deference to national syst ems expressed in Articles 1.1 and 41.5.   
11. In defining the commercial scale standard, th e Panel faces an important decision in the 
jurisprudence of TRIPS.  China urges it to apply a standard that respects th e compromises reached in 
the TRIPS negotiations, both in the text of Article 61 itself, and in the broader context of Article 1.1 
and 41.5.  At the same time, the Panel should apply a standard that is capable of principled application 
to a Member's actual implementation. 
12. China is confident that if the Panel applies the correct standard, it will find that China's 
criminal IPR law meets that standard. 
III. CLAIM TWO  
13. With respect to Claim Two, the United States has asked this Panel to conclude that under 
TRIPS Members may not preference donations to ch arity over destruction.  China has already 
explained why its Customs prefer certain dis position methods, such as charitable donation, over 
destruction.  Yesterday, in response to a ques tion from the Panel, the United States again commended 
to China that donation of seized goods be conditioned on the approval of the right holder - just as the 
United States does in its own practice.  The Un ited States appears to approve the constraints on 
authority that the United States itself prefers, but at the same time, reject the conditions, such as 
prioritizing donation to charity, that it does not.  Moreover, the United States continues to wrongly 
assert that Chinese Customs injures right holders thro ugh donations to charities such as the Red Cross.  
China has detailed, with numerous laws and concrete ex amples, precisely how Customs avoids harm 
to the right holder.  When asked during this hearing for actual examples of charitable donations 
causing harm to right-holders in China, the United States declined, as it has in the past. 
14. China was disappointed by the number of incons istencies and factual inaccuracies in the US 
statement yesterday.  For example, the United St ates told the Panel that the circumstances under 
which China's legal regime permit destruction were  "highly limited," but the actual Chinese Customs 
data already provided in this dispute flatly cont radict that assertion.  The data demonstrate the 
extensive use of the destruction option by China Cu stoms.  The United States also provided the parties 
and Panel with a chart purporting to explain China's disposal and destruction regime, but then later 
acknowledged that the chart was incomplete, and di d not cover several relevant laws and options. 
15. Lastly, as the Panel deliberates and prepares its rulings, China would respectfully ask that its 
decision address the complete US failure to argue  that China's laws governing the disposition of 
goods destined for export are inconsistent with TR IPS.  The United States has made clear that it 
"takes no position" regarding the applicability of Article 59 to such goods.  The Panel should 
therefore hold that China's measures concerning goods  destined for export are not subject to the US 
claim regarding Article 59. 
IV. CLAIM THREE 
16. China has set forth in detail the shortcomings of  the US case on Claim Three.  On most of the 
subject matter of its claim, the United States has not made a prima facie case.  On the remainder, the 
US argument falls short, both because it focuses on a highly theoretical concern, and because it is WT/DS362/R 
Page B-46  
 
  contradicted by the best reading of the Berne Conven tion.  China has set these points forth in detail in 
its written submissions, and will not re peat them again this morning. 
17. China must, however, call to the attention of the Panel some misstatements of fact and 
misstatements of China's position that were made in the US oral statement.  This is not a 
comprehensive list of issues, and China will not a ddress many questionable US points, particularly 
those that China already has rebutted.  But toda y China calls attention to several particularly 
egregious misstatements that China believes it mu st identify on the record of this meeting. 
18. First, in the absence of any concrete example of any actual application of Article 4.1, at 
paragraph 69 of its oral statement the United Stat es simply blames Article 4.1 for the existence of 
infringement in China.  China asks the Panel to rec ognize that this is mere allegation, not fact, and 
that the United States has offered no su pport whatsoever for this point. 
19. Second, at paragraph 76 the United States claims  that Article 4.1 denies copyright protection 
to any work where pre-publication review is required and has not been received.  This is simply not 
true.  China has demonstrated to the contrary in its pleadings, and China notes pa rticularly that even at 
this late stage of the proceeding the United States cannot support this statement either with legal 
analysis or with a single example.   
20. Third, at paragraph 77 the United States claims that China "admits" that "regardless of 
whether a particular defendant raises a formal defense, courts and the NCAC must
 determine the 
legality of a work de novo ."  China protests in the strongest terms this misstatement of its position.  
China has made no such admission.  China's statem ent was made in the context of a case where the 
issue in fact was before the court.  Once the issue is before  the court, then, if content review had not 
previously been undertaken, the court would have  to inquire into the legality of the content de novo .  
This is all that China said.  China most assuredly is not of the view that such a court review of content 
must be made in every copyright enforcement actio n.  China also notes that the United States again 
misstates this point in paragraph 78. 
21. Fourth, and finally, in paragraph 79 the United States makes a major misstatement of Chinese 
law.  The United States alleges that content revi ew processes prohibit the publication or dissemination 
of works until the pass content review, and then tries to link this point to the language of Article 4.1.  
China has briefed this point extensively and will not repeat its analysis here, but does ask the Panel to 
recognize the US assertion for what it is – allegation that is simply not credible.  China asks the Panel 
to demand more from the United States – to demand legal analysis and specific examples. 
22. These misstatements, unfortunately, characterize much of the US case before this Panel.  
China respectfully requests the Panel to recognize to th e failures in the US case, and to rule in China's 
favor. 
* * * 
23. This concludes China's closing statement.  China again expresses its gratitude for the hard 
work and attention of the Panel and the WTO staff,  and looks forward to responding to the Panel's 
written questions.