WORLD TRADE  
ORGANIZATION  IP/C/W/481 
6 October 2006 
 
 (06-4781) 
Council for Trade-Related Aspects 
of Intellectual Property Rights Original:  English 
 
 
 
TRANSITIONAL REVIEW MECHANISM OF CHINA 
 
Communication from the European Communities  
 
 
 By means of a communication from the delegation of the European Communities, dated 2 October 2006, the Secretariat has received th e following contribution in the context of the 
transitional review mechanism under Secti on 18 of China's Protocol on Accession. 
 
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 1. The European Communities (hereinafter refe rred to as the "EC") wish to thank the 
People's Republic of China (hereinafter referred to as "China") for its commitment to the TRM 
process and appreciate the efforts deployed by Chin a to answer the questions during the previous 
TRM exercises.  The EC is transmitting comments a nd questions in advance of the meeting of the 
TRIPS Council, in order for the Chinese authoriti es to reply to and complete any outstanding 
information. 
2. Since the 2005 TRM exercise some positive developm ents on IP have occurred in China, such 
as: 
- the adoption of a National Action Plan on IP (2006) – released on 8 March 2006, in which 
China has included some legislative revisions a nd the adoption of measures that would aim to 
help in enhancing the fight agai nst counterfeiting and piracy.  In this respect, the launch of the 
Third Revision of the Patent Law, in consultation with the foreign community, is also a positive way forward; 
- the adoption of Regulations for the prompt transfer of criminal cases of IP infringements to 
criminal prosecution on 26 January 2006 that aim at improving co-operation between 
administrative bodies in charge of IP enforcement and the police/prosecutors; 
- the free online access to the trademark data base, allowing easy checks on the trademark 
registry data.  This is in particular intere sting for Administrations for Industry and Commerce 
that now have means to refuse the registration of a trade name on the basis of pre-existing 
trademarks; 
- the publication of judicial decisions on a website. 
3. However, despite these positive developments and China's initiatives to address a number of 
problems in its IP system and to reduce counterfe iting and piracy levels, IPR infringements in China 
remain a matter of great concern for the EC.  European companies operati ng in the Chinese market 
continue to suffer from weak IPR enforcement.  Fu rthermore, sanctions often lack deterrence, and 
procedures against counterfeiting and piracy activities remain expensive and time consuming.  At the 
border, controls should be more effective in order to prevent the export of counterfeit and pirated 
products. IP/C/W/481 
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  4. On the basis of the co-operation established betw een the EC and China in the context of their 
IP Dialogue and IP Working Group and in the lig ht of the above-mentioned developments, the EC 
would like to take the opportunity of the TRM 2006 to complement its information on the Chinese IP 
regime and ask questions on some of the remaining sources of concern. 
I. IP PROTECTION 
A. P
ATENTS AND TECHNOLOGY TRANSFERS AND PROTECTION OF CONFIDENTIAL DATA 
1. Patent exploitation 
5. The EC welcomes China's support for the contract ual freedom between en terprises in the field 
of technology transfers under the condition of fairness, reason and non-discrimination as expressed at the Ninth EU-China Summit on 9 September 2006.  The EC expects China to encourage Chinese 
companies to play by market rules for the use of other companies' technologies. 
2. Approval procedures for technology transfer 
6. The Patent Law requires that approval be grante d by MOFCOM for the transfer of patents or 
technology to non-Chinese entities.  Additionally, co mplex and cumbersome approval and registration 
formalities are required by the Technology Impor t and Export Regulations (TIER) governing 
cross-border technology transfer and the assignment of patents.  Contradictions and duplication in 
administrative procedures arise frequently, with practi ces varying from city to city within China.  Can 
China explain how it intends to clarify and simplify these procedures? 
3. Protection of test data for pharmaceutical products 
7. The implementation of the principle of data exclusivity in Chinese law is a source of concern, 
in particular the lack of clarity as regards the scope  of products covered by this protection, including 
the definition of new chemical entity referred to in  Article 35 of the Implementing Regulation of the 
Drug Administration Law adopted in 2002.  Does China intend to clarify these concepts in order to give companies guarantees as to how the test data will  be handled by regulatory authorities?  If so, can 
China indicate how and when this will be done? 
4. Additional protection for products subject to marketing authorization 
8. As some specific products require long additiona l periods for their development and in order 
to obtain marketing authorizations, a number of  countries have decided to compensate for these 
periods during which the patent ca nnot be exploited by an additional protection mechanism (e.g. in 
the EC with the creation of Supplementary Protec tion Certificates for pharmaceutical products and for 
plant protection products). Does China plan to gran t additional protection – in the form of patent 
restoration or supplementary protection certificates – to products that cannot be marketed before a 
specific marketing authorization has been  given (such as pharmaceutical products)? 
B. T
RADEMARKS  
1. Counterfeiting at retail markets 
9. On 7 June 2006, three major retail markets in Beijing and a coalition of trademarks owners 
signed a Memorandum of Understanding (MoU) whic h includes an agreement to insert specific 
clauses related to selling of counterfeit goods into the lease contracts between landlords and vendors 
in retail markets. These clauses aim at expelling vendors of counterfeit and pirated goods from the 
markets.  Can China indicate how Chinese public au thorities intend to support the implementation of  IP/C/W/481 
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  this MoU on the ground?  For instance, does China envisage promoting these clauses in model 
contracts between landlords and vendors?  How much police or the administration of industry and commerce support will be granted to ensure that mark et order is respected when these clauses will be 
implemented by landlords? 
2. Duration of procedures 
10. There is an increasingly alarming backlog of cases pending at the Trademark Office (TMO) 
and Trademark Review and Adjudication Board (TRA B).  An application, which today takes an 
average of two years before it can be published and mature to registration, can be delayed by many 
years in the case of a dispute.  In certain cases, such lengthy litigation r esults in a denial of justice, and 
is detrimental to all parties concerned.  How does Ch ina intend to resolve this issue?  Is it considering 
to increase the number of examiners and members of TRAB and/or to review the detailed 
organization of the procedures in the context of the revision of the Chinese Trademark Law? 
3. Opposition procedures 
11. Article 30 of the Chinese Trademark Law allows any party, without limitation, to file an 
opposition against a trademark application, even th ose who have no substan tiated grounds for taking 
such action.  Sophisticated infringers frequently oppose preliminary granted and published trademarks 
to threaten applicants with a full opposition procedure.  Th ese have the potential to last three years or 
force a withdrawal of the opposition for payment.  This has led to some a pplicants opposing their own 
marks and withdrawing at the last minute to keep  others from doing the same.  Does China plan to 
clarify the situation in the context of the revision of the Trademark Law? 
4. Refusal to accept trademarks cases where an  administrative procedure is pending 
12. According to a recent draft Judicial Interpreta tion of the Supreme People's Court, the Courts 
should not accept a trademark infringement case when an administrative dispute is pending before the 
Administrative Authority.  Such refusal deprives th e plaintiff of the possib ility of seeking provisional 
remedies and/or of assessing and claiming financial compensation from the outset.  Given the excessive duration of administrative procedures, this may represent a denial of justice.  Can China 
explain how it intends to solve this issue? 
II. IPR ENFORCEMENT 
A. L
EGALIZATION OF POWERS OF ATTORNEYS AND DOCUMENTARY EVIDENCE  
1. Legalization of powers of attorneys 
13. At present, foreign companies which wish to initiate legal proceedings in China but do not 
have a registered branch office or an investment presence in China are require d to produce a notarized 
and legalized power of attorney in favour of a regi stered practising Chinese lawyer.  They also need to 
notarize and legalize any document justifying their in corporations.  This is onerous, cumbersome and 
time consuming and can constitute an obstacle to a ny urgent proceeding.  Can China explain how it 
intends to simplify these formalities? 
2. Legalisation of documentary evidence 
14. At present, all documentary evidence produced in administrative or judicial litigation needs to 
go through the same procedure of notarization and legalization when they originate from a foreign 
country.  This is not only time consuming and costly, but also seems to be an unnecessary 
administrative routine.  How does Ch ina intend to solve this issue? IP/C/W/481 
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  B. C
RIMINAL PROSECUTION OF IP INFRINGEMENTS :  LOWERING THRESHOLDS  
15. Prime Minister Wen publicly announced on 6 September 2006 that China would continue to 
improve the relevant laws and regulations, and lower the thres holds for prosecuting IPR-related 
offences.  Can China give further details on its in tention with regard to the lowering of criminal 
thresholds deriving from the Interpretation by the Supreme People's Court and the Supreme People's 
Procuratorate on Several Issues of Concrete Appli cation of Laws in Handling Criminal Cases of 
Infringing Intellectual Property of Decem ber 2004 ("the Judicial Interpretation") ?  On this matter, the 
EC would like to highlight in particular the following questions. 
1. Price evaluation system 
16. Despite the existence of the current Judicial Interpretation, most administrative enforcement 
agencies apply other price evaluation systems.  As  a result, large seizures of counterfeit goods are 
often considered at an unreasonable low value, wh ich is an obstacle to any serious and effective 
action.  These problems arise from confusion and lack  of clarity of the Interpretation.  Can China 
indicate whether it intends to clarify the situation? 
2. The three-time rule 
17. The Judicial Interpretation maintains the rule that the threshold should be three times higher 
for a unit than for an individual.  This leads to en couraging infringers to collectively invest and set up 
companies, rather than work as individuals, th ereby increasing the economies of scale of their 
unlawful activity.  This approach is difficult to unde rstand in particular as such entities tend to have a 
greater production capacity than individuals, and thus , cause more damage.  Does China plan to delete 
the distinction between unit and individual (as is al ready provided for in Article 140 of the Criminal 
law of the PRC, with respect to fake and shoddy goods)? 
3. Repeat offenders 
18. The Judicial Interpretation does not provide su fficient deterrence to counterfeiters already 
caught and punished by an administrative agency or civil court from repeating their offences.  A 
graduation of punishment is key to  effective deterrence.  Can China indicate whether it intends to 
implement a system specifically designed to deal with repeat offenders? 
4. Criminal thresholds for manufacturing and/ or supplying of dangerous counterfeit goods 
19. The criminal threshold is also applied in cases in which offenders are found manufacturing 
and/or supplying counterfeited goods that represent a danger to health, public safety and/or the 
environment.  The EC consider that cases in wh ich infringers are found manufacturing or supplying 
counterfeited goods that represent a risk to hea lth, public safety and/or the environment should 
immediately qualify for criminal prosecution irrespec tive of the volume of goods provided, amount of 
sales or illegal profit.  Does China intend to rem ove the criminal threshold for those manufacturing 
counterfeit products that pose a threat to health, public safety and/or the environment? 
C. RIGHT OF INFORMATION  
20. Whether the action against an infringer is taken at the administrative or at the criminal level, 
the IP owner under the current system in China has no binding legal right to demand participation in 
the enforcement of their IP rights.  How does Chin a intend to improve the participation of the right 
holders in the proceedings?  IP/C/W/481 
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  D. IP INFRINGEMENTS ON THE INTERNET  
21. Unauthorized use of copyright and trademar ks on the Internet is becoming increasingly 
common and widespread.  Unauthorized downloads of  music, software and literary works are widely 
available, and there are endless possibilities to obta in pirated and counterfeit ed goods via Internet 
portals by phone or mail order.  Can China indicat e which kind of measures it intends to take to 
remedy this situation? 
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