WT/DS362/R 
 Page C-1 
 
 
  ANNEX C 
 
ARGUMENTS OF THE THIRD PARTIES 
 
CONTENTS PAGE 
C-1 Executive Summary of the third party submission by Argentina C-2 
C-2 Executive Summary of the third party submission by Australia C-7 
C-3 Oral statement by Australia C-12 
C-4 Executive Summary of the third party submission by Brazil C-13 
C-5 Oral statement by Brazil C-18 
C-6 Executive Summary of the third party submission by Canada C-20 
C-7 Oral statement by Canada C-24 
C-8 Executive Summary of the third pa rty submission by the European 
Communities C-27 
C-9 Executive Summary of the oral statement by the European 
Communities C-30 
C-10 Executive Summary of the third party submission by Japan C-33 
C-11 Executive Summary of the oral statement by Japan C-37 
C-12 Executive Summary of the third party submission by Korea C-42 
C-13 Oral statement by Korea  C-45 
C-14 Third party submission by Mexico C-47 
C-15 Oral statement by Mexico  C-50 
C-16 Executive Summary of the third pa rty submission by Chinese Taipei C-53 
C-17 Oral statement by Chinese Taipei  C-57 
C-18 Oral statement by Thailand C-60 
 
 WT/DS362/R 
Page C-2  
 
  ANNEX C–1 
 
EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION BY ARGENTINA 
I. INTRODUCTION 
1. Argentina has a systemic interest in the pr oper interpretation of the provisions of the 
Agreement on Trade Related Aspects of Intellectual Property Rights - TRIPS Agreement –as it is 
arranged by the Article 3.2 of the Dispute Se ttlement Understanding which establishes that: "… 
Recommendations and rulings of the DSB cannot a dd to or diminish the rights and obligations 
provided in the covered agreements". 
2. Argentina wishes to provide views on three issues related to Articles 61, 41.1, 59, 46 and 9.1 
under the TRIPS Agreement as they are interprete d and applied in the present case.  These are: 
(a) The thresholds for criminal procedures and penalties. 
(b) The disposal of confiscated goods that infringe intellectual property rights under 
TRIPS Agreement. 
(c) The alleged denial of copyright and rela ted rights protection and enforcement to 
works that have not been authorized for publication or distribution within China. 
II. LEGAL ARGUMENTS 
A. C
LAIMS REGARDING THE THRESHOLDS FOR CRI MINAL PROCEDURES AND PENALTIES IN CHINA  
1. China's measures do not appear to be in consistent with China's obligations under 
Article. 61 of the TRIPS Agreement 
3. Respectfully, Argentina offers another interpre tation of the Article 61, according to which 
China's measures would not appear to be inconsiste nt with China's obligations under Article 61 of the 
TRIPS Agreement.  First, it's well established –als o in WTO jurisprudence – that the fundamental 
rules of treaty interpretation are Article 31 "Gen eral rule of interpretation" and Article 32 
"Supplementary means of interpretation" of the Vienna Convention on the Law of the Treaties. 
Pursuant to Article 31.1 of the Vie nna Convention, we have  to interpret in good faith the provisions in 
accordance with the ordinary meaning given to the term s of the treaty in their context and in the light 
of its object and purpose.  So, reading treaty terms in  their context requires that the text of the treaty 
must, of course, be read as a whole.  One cannot simply concentrate on a paragraph, an article, a 
section, a chapter or a part.  It means that, in orde r to establish the real meaning of Article 61 of the 
TRIPS Agreement we need to read all the articles of the Agreement and, besides, its preamble and 
annexes.     
4. In this sense, Argentina states that the TRI PS Agreement does not only impose obligations or 
duties on WTO members, but also grants them an important set of rights. 
5. The TRIPS Agreement is often drafted in ge neral terms.  Members are not bound by an 
inflexible set of rules in implementing them.  On  the contrary, Members have the right to use the 
flexibility inherent in the Agreement, as well th e obligation to meet its minimum requirements. 
6. For example, Article 1.1 of the TRIPS Ag reement obligates Members to give effect  to the 
provisions of the Agreement.  It also provides that  Members shall be free to determine the appropiate 
method of implementing the provisions of this Agr eement within their own legal system and practice .  WT/DS362/R 
 Page C-3 
 
 
  7. In other words, Article 1.1 provides flex ibility for Members to implement the TRIPS 
Agreement in the manner of their own choosing, provided that the specific requirement of the 
Agreement are met.  The implementation of Inte llectual Property Law in national legal systems 
involves choosing between different approaches. 
8. Article 61 of the TRIPS Agreement obligates Members to provide criminal penalties for 
trademark counterfeiting and copyright piracy on a commercial scale, allowing for the possibility of 
imprisonment and/or fines sufficient to provide a de terrent, consistently with  the level of penalties 
applied for crimes of corresponding gravity.  So, an y Member of World Trade Organization, including 
China, has discretion to follow its own tr aditions in matters of enforcement.    
9. Second, because the enforcement rules of the TRIPS Agreement are unique in the multilateral 
context, there is little prior international experience.   The characteristics of legal systems around the 
world as regards procedure in civil enforcement ma tters are rather different, stemming from various 
cultural and legal traditions.  In this sense, uni form methods of implementing the enforcement 
provisions should not be expected.  In other word s, China is clearly permitted to approach civil 
enforcement provisions in a way compatible with  its own legal traditions , and to implement the 
enforcement provisions in a way compatible with its  existing constitutional and regulatory framework.   
10. Third, related to legal traditions, it is useful to remind that criminal law is of exclusive 
domain of sovereign jurisdiction.  This is the reason why governments are exceptionally subject to 
international commitments in this field and th ese exceptional commitments are general obligations 
that permit discretion regarding implementation. 
2. China's measures do not appear to be in consistent with China's obligations under 
Article 41.1 of the TRIPS Agreement 
11. Respectfully, Argentina offers another interp retation of Article 41.1, according to which 
China's measures would not appear to be inconsiste nt with China's obligations under Article 41.1 of 
the TRIPS Agreement.  Again, in order to establis h the real meaning of Article 41.1 of the TRIPS 
Agreement we need to read all the articles of Agreem ent and, besides, its preamble and annexes.     
12. Specially, we need to give attention to Artic le 1.1 of the TRIPS Agreement that obligates 
Members to give effect  to the provisions of the Agreement a nd, besides, provides that Members shall 
be free to determine the appropiate method of impl ementing the provisions of this Agreement within 
their own legal system and practice . 
13. In fact, Article 1.1 of the TRIPS Agreement provides flexibility for Members to implement 
the TRIPS Agreement in the manner of their own c hoosing, provided that the specific requirement of 
the Agreement are met.  The implementation of In tellectual Property Law in national legal systems 
involves choosing between different approaches. 
14. Besides, pursuant to Article 41.2 of the TRIPS Agreement, Members are obligated to ensure 
that enforcement procedures are fair and equitable. 
15. Finally, Article 41.5 of the TRIPS Agreement esta blishes:  "It is understood that this Part does 
not create any obligation to put in place a judicial system for the enforcement of intellectual property 
rights distinct from that for the enforcement of la w in general, nor does it affect the capacity of 
Members to enforce their law in general.  Nothing in this Part creates any obligation with respect to 
the distribution of resources as between enfo rcement of intellectual property rights and the 
enforcement of law in general."   WT/DS362/R 
Page C-4  
 
  16. Respect of this particular point, Argentina desi res to highlight the relative character of the 
obligation contained in Article 41.1.  In fact, this obligation is not an absolute obligation.  In order to 
attend the enforcement of intellectual property ri ghts, the Members do not have the obligation of 
neglect the enforcement of their law in general.  Th is point is particularly important for Argentina, 
and other countries that, sometimes, suffer limitations  of resources to enforce the law in general.  
During the negotiations of the TRIPS Agreement and foreseing exigencies like that of the United 
States, we insisted in the inclusion of this particular limit containe d in Article 41.5.   
17. During the negotiations of TRIPS, developing countries said that they could not accept to 
commit scarce law enforcement resources.  Argentin a and other countries held that enforcement shall 
include administrative and civil remedies and, in  appropiate cases, penaltie s under criminal law and 
shall be provide within the limits of its administrative resources and capabilities .
1  
B. CLAIMS REGARDING THE DISPOSAL OF CONFIS CATED GOODS THAT INFRINGE INTELLECTUAL 
PROPERTY RIGHTS UNDER THE TRIPS  AGREEMENT  
1. Customs' donations of infringing goods to social welfare organizations do not appear to 
be inconsistent with China's obligations under Articles 59 and 46 of the TRIPS 
Agreement 
18. The second set of US claims refers to how th e Chinese customs authorities must deal with 
infringing goods seized at the border.  
19. On this issue, Argentina is concerned about ca rrying out a proper interpretation of Article 59. 
As mentioned in this subsmission, this interpreta tion should consider, not only the analysis of this 
Article per se , but a whole understanding, performed in the context of the TRIPS Agreement. 
20. As supported by the United States, in Argentin a's view, the interpretation of the mentioned 
provisions set out two equally viable options for customs officials: these are the "disposal" and the 
"destruction" option.2 
21. Notwithstanding that, it must be highlighted that Article 46, while stating the first above 
mentioned option (the possibility of "dispos[ing] of  [the infringing goods] outside the channels of 
commerce in such a manner as to avoid any harm caused to the right holder… "), vests Member's 
Customs authorities with considerable discretion  to determine what method is the most appropriate on 
a case-by-case basis .  
22. However, despite the discretion granted by firs t option of Article 46, that Article requires 
necessarily the fulfillment of two conditions so as to be fully applied.  In the first place, the infringing 
merchandise "…must be disposed of outside the ch annels of commerce", and secondly, that disposal 
of infringing goods must be carried out "…in such a manner as to avoid any harm caused to the right 
holder…". 
23. Furthermore, as mentioned in the preceding para graphs, in Argentina's point of view, the 
Articles in detail analysed cannot be understood in is olation.  The proper criterion must consider these 
Articles in conjunction with the other TRIPS prov isions; specially, letter (c) of its Preamble, 
Article 1.1 (in Part I, "Nature and Scope of obliga tions), Article 8.1 (in Part I, "Principles") and 
Article 41.5 (in Part III, Section 1, "General Obligations"). 
                                                      
1 Communication from Argentina, Brazil, Chile, China,  Colombia, Cuba, Egypt, India, Nygeria, Peru, 
Tanzania, and Uruguay, Negotiating Group on Trade Related Aspects of Intellectual Property Rights, including Trade in Countefeit Goods, MTN.GNG/NG11/W71, circulated 14 May 1990, p. 12. 
2 United States' first submission, para. 177.  WT/DS362/R 
 Page C-5 
 
 
  24. As a result, it must be underlined that th e TRIPS Agreement considers as an essential 
objective, not only the reinforcement of trade-re lated intellectual property rights but also the 
accomplishment of other subjects;  such as the need of improving the standards of living of the Members, especially of the less-developed ones, w ith special attention to their public health and 
nutrition concerns.  Likewise, it is considered ess ential to take into account the differences among 
national legal systems; the consideration that Memb ers are not constrained to adopt specific measures 
as regards the enforcement;  as well as the fact that  they are not obliged to apply more extensive 
protection than the accepted in the Agreement.  
25. Having said this, Argentina shall develop one of the possible alternatives pursuant to 
Article 59 and Article 46:  customs' donation of infri nging goods to social welfare organizations.   
26. In the case at issue ("donation"), the first [1] requirement of Article 46 ("the disposal outside 
the channels of commerce") would be fulfilled, as the donation of the infringing merchandise implies 
itself a disposal of goods outside the channels of  commerce.  On the other hand, the accomplishment 
of the second [2] requirement of that provision ("th e avoidance of harm to the right holder") would 
need to be determined by customs authorities on a case-by-case basis.  
27. For instance, given a particular case, customs should necessarily determine both the 
suitability of the merchandise for social welfare and the quality of the goods (goods that pose health 
or safety threats should be rejected).  After adop ting such a determination, customs officials should 
diligently exercise its supervising authority, by ensu ring that those donated goods were used by social 
welfare organizations and for social welfare purposes.
3 Given this screening activity, it would be 
groundless to assert, as the United States did, a hypoth etical harm to the ri ght holder's reputation, 
since "shoddy" "defective" or "d angerous" goods" would not be donated to welfare institutions.4 
28. On the other hand, in Argentina's point of vi ew, it is totally baseless the assertion of the 
United States in the sense that "nothing appears to prevent public welfare organizations from selling 
the infringing goods they receive […], thus movi ng these goods back into commerce". Since we are 
referring to social welfare organizations, and by defi nition they do not develop a lucrative activity, to 
support that assertion would be totally erroneous. 
29. Finally, the United States, while analysing the viability of this measure, support that only one 
formulation would be satisfactory: "[…][w]here the donation to charity is an option, and the donation has the right-holder's consent […]".
5  As supported by China, Argentina believes that "[…]this 
assertion vastly exaggerates the scope of the TRIPS obligation to avoid harm to the right-holder[…]".6 
C. CLAIMS REGARDING THE DENIAL OF COPYRIGHT AND RELATED RIGHTS PROTECTION AND 
ENFORCEMENT TO WORKS THAT HAVE NOT B EEN AUTHORIZED FOR PUBLICATION WITHIN 
CHINA  
1. China's measures could be inconsistent with China's obligations under Article 9.1 of the 
TRIPS Agreement. 
30. In Argentina's point of view, the text of Article 4 creates a relationship between the 
prohibition of publication or distribution and the pr otection provided by the Chinese Copyright Law. 
                                                      
3 China's first submission, para. 160. 
4 United States' first submission, para. 186. 
5 United States' first submission, para. 185. 
6 United States' first submission, para. 185. WT/DS362/R 
Page C-6  
 
  31. The text of Article 4 of the Chinese Copyright Law is straightforward, and creates doubts 
about its consistency with the Artic le 9.1 of TRIPS Agreement.  Proba bly, Article 4 could need to be 
re-redacted in order to avoid, in certain cases, the possibility of being interpreted as a disguised 
restriction on international trade.  
32. In fact, the TRIPS Agreement substantive provisions on copyright involve incorporated 
provisions of the Berne Convention – Article 1 th rought 21 and the Appendix.  And, China and the 
United States are Members of the Berne Convention. 
33. The Berne Convention rests on three basic princi ples.  Firstly, there is the principle of 
national treatment.  Secondly, there is the principle of automatic protection.  Thirdly, there is independence of protection. 
34. The principle of national treatment is stablishe d in Article 5(1) of the Berne Convention: 
"(1) Authors shall enjoy, in respect of  the works for which they are protected 
under this Convention, in countries of the Union other than the country of origin, the rights which their respective laws do now or may hereafter grant to their nationals, as 
well as the rights specially granted under this Convention ." 
35. Because of the second principle of automatic protection national treatment is not dependent 
on any formality.  Articles 5(2) of the Berne Conve ntion are quite straightforward:  Protection is 
granted automatically and is not subject to the forma lity of registration, deposit, authorization, or the 
like.  In relevant part, Article 5(2) states: 
"(2) The enjoyment and the exercise of these rights shall not be subject to any 
formality…" 
36. Notwithstanding, the first sentence of Article 4 of the Chinese Copyright Law provides as 
follows:  
"Works the publication or the distribution of  which is prohibited by law shall not be 
protected by this Law". 
37. So, this Article appears to deny to works whic h are prohibited or not permitted, the protection 
stablished in Article 10, 46 and 47 of the Chinese Co pyright Law. It is necessary to remember that 
Article 10 of the Chinese Copyright Law contains the rights enumerated by the Berne Convention, 
and Articles 46 and 47 provide civil, administrative and criminal liability for copyright infringement. 
38. So, Article 4 of the Chinese Copyright Law excludes from Copyright Protection the works 
whose publication or distribution is prohibited by law.    
39. Anyway, this does not imply that China has no right, under the TRIPS Agreement or the 
Berne Convention, to prohibit the publication or di stribution of certain kind of works.  In fact, 
Article 17 of the Berne Convention contemplates such possibility.    
III. CONCLUSION 
40. Argentina wishes that the preceding observations wi ll prove useful in the deliberations of the 
Panel and reserves its rights to make further observations in the oral hearing.  WT/DS362/R 
 Page C-7 
 
 
  ANNEX C-2 
EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION BY AUSTRALIA 
 
I. INTRODUCTION 
1. This submission addresses some issues relevant to  the interpretation of the provisions of the 
TRIPs Agreement at issue.  The submission focuses on:   
• the meanings of "criminal", "wilful", "trade  mark counterfeiting", "copyright piracy", 
"commercial scale" and "sufficient to provide  a deterrent" in, and the character of the 
obligations created by, TRIPs Article 61;   
• the meaning of "the channels of commerce" in  TRIPs Article 46, and how it relates to TRIPs 
Article 59;  and  
• the meaning of "any formality" in Article 5(2) of the Berne Convention.   
2. Australia reserves its position in relation to an y issue not addressed in this submission.   
II. TRIPS ARTICLE 61 
3. Article 61 requires (1) that a WTO Member "shall provide for criminal procedures and 
penalties to be applied at least in cases of wilful  trade mark counterfeiting or copyright piracy on a 
commercial scale", and (2) that the "remedies avai lable shall include imprisonment and/or monetary 
fines sufficient to provide a deterrent …".  To under stand the character of the obligations intended to 
be created by Article 61, this submission first cons iders the meanings of "criminal", "wilful", "trade 
mark counterfeiting", "copyright piracy", "commercial scale" and "sufficient to provide a deterrent".   
4. Australia considers "criminal procedures " to mean procedures initiated by or on behalf of the 
state1 to punish offences against the common well-bei ng.  Depending on the gr avity of the offence, 
such proceedings may lead to punishment in the fo rm of imprisonment and/or a fine, although other 
forms of punishment may be available in some circumstances.   
5. "Wilful ", in context, establishes that any intent ional action that results in trade mark 
counterfeiting or copyright piracy is potentially  encompassed by the scope of Article 61.   
6. Although "trade mark counterfeiting " is not defined in the TRIPs Agreement, its meaning can 
be determined having regard to:   
• the nature of a trade mark in accordance with TRIPs Article 15.1;   
• the right required to be granted to the owner of a registered trade mark in accordance with 
TRIPs Article 16.1;   
• the ordinary meanings of the word "counte rfeit", the relevant verb, in context;  and  
• the meaning of "counterfeit trade mark goods" in  footnote 14(a) to the TRIPs Agreement.   
                                                      
1 Australia notes that, in some WTO Members, criminal  procedures can be initiated by or on behalf of 
"the state" at sub-national level.   WT/DS362/R 
Page C-8  
 
  7. In Australia's view, "trade mark counterfeiting"  should be understood to be the unauthorised 
use in the course of trade of a sign, or a combinati on of signs, that is identical to or that cannot be 
distinguished in its essential aspects from a registered trade mark when the sign is applied in relation 
to goods or services for which the trade mark is validly registered.   
8. "Copyright piracy
" is not defined in the TRIPs Agreemen t, but its meaning can be determined 
having regard to:   
• the rights required to be granted in literary and artistic works in acco rdance with the Berne 
Convention as incorporated by TRIPs Article 9.1;   
• the rights required to be granted in com puter programs and compilations of data in 
accordance with TRIPs Article 10;   
• the rental rights required to be granted at least in respect of computer programs and 
cinematographic works in accordance with TRIPs Article 11;   
• the rights of performing artists in their perfo rmances in accordance with TRIPs Article 14.1, 
of producers of phonograms in their phonogram s in accordance with TRIPs Article 14.2 and 
of broadcasting organizations in their broadcast s, in accordance with TRIPs Article 14.3 (the 
"related rights");   
• the ordinary meaning of the word "piracy" in context;  and  
• the meaning of "pirated copyright goods" in footnote 14(b) to the TRIPs Agreement.   
9. In Australia's view, "copyright piracy" concer ns any copyright or related right.  Copyright 
piracy includes at least the unauthorised reproduction and/or distribution of copies of material in which copyright or a related right exists.   
10. Article 61 applies to wilful trade mark counte rfeiting or copyright piracy on a "commercial 
scale ".  Historically, "commercial scale" in relation to counterfeiting or piracy has been understood to 
mean generally a level of activit y involving multiple copies of protected signs or material, undertaken 
for the purposes of financial reward.  However, th e advent of digital technology has facilitated the 
unauthorised copying and distribution of protected signs and material, leading to the emergence of 
different types of infringing activity:   
• for financial reward, such as where multiple count erfeit or pirated copies are made and sold in 
pursuit of profit;   
• for commercial advantage, such as where a bus iness exceeds its software licence conditions in 
terms of numbers of copies of, or employees granted access;  and  
• that has a substantial prejudicial impact on th e copyright owner, for example, where digital 
copyright material is uploaded and then shared using peer-to-peer file sharing technology.   
11. There is no express dictionary definition of "commercial scale".  That said, Australia notes the 
ordinary meaning of the word "commercia l" incorporates within its scope matters affecting  a 
commercial activity in pursuit of a financial reward.  Australia notes too that the ordinary meaning of 
"scale" in context incorporates the no tion of a comparative assessment.   
12. In Australia's view, the ordinary meanings of  the individual words "commercial" and "scale" 
require that "commercial scale" be understood in context as encompassing any act or series of acts of  WT/DS362/R 
 Page C-9 
 
 
  trade mark counterfeiting or copyright piracy that a dversely affects the financial rewards available to 
a right holder within a Member's territory.2  The ordinary meanings of the words "commercial scale" 
considered in context either individually or together do not:   
• implicitly restrict the indicators that may be used to assess whether infringing activity is on a 
commercial scale;  or  
• compel a requirement that a person engaging in an  infringing activity must receive a financial 
return from that activity, or a financial return of a particular magnitude;  or  
• compel a requirement of multiple infringing acts.   
13. Moreover, having regard to the different typ es of infringing activity set out above, it is 
Australia's view that the issue of whether wilful counterfeiting or piracy is "on a commercial scale" 
can only be determined case-by-case in a criminal pr ocedure that can take account of all relevant 
circumstances, including the potential impact of digitally-based technologies.   
14. Australia considers "sufficient to provide a deterrent ", in context, to mean adequate to 
actively discourage others from acting (in a particul ar way) because of the likely consequences.   
15. Having considered the meanings of some the i ndividual terms of Article 61 in their context, 
we now turn to the character of the obligations created by TRIPs Article 61 .   
16. Article 61 establishes extraordinary obligations on a Member in cases of enforcement actions 
concerning "wilful trade mark counterfeiting or copy right piracy on a commercial scale".  It obliges a 
Member to make intentional acts of counterfeiting or piracy that substantially affect a right holder's 
financial interests in a protected sign or material in relation to that Member's territory subject to criminal procedures and penalties.
3   
17. Article 61 obliges a Member to include impr isonment and/or monetary fines among the 
available remedies that may be imposed as a result of  a criminal procedure in cases of "wilful trade 
mark counterfeiting and copyright piracy on a comme rcial scale".  Article 61 also requires that a 
Member ensure that the terms of imprisonment and/or  levels of monetary fines that can be imposed 
are adequate to deter similar future activity.  A fu rther requirement of Article 61 is that the penalties 
that are imposed are consistent with the level of penalties applied for crimes of a corresponding 
gravity.   
18. Article 61 creates an obligation of result, i.e., a Member must put in place penalties that are 
sufficient to actively discourage others from engagi ng in acts of wilful trade mark counterfeiting and 
copyright piracy on a commercial scale.  Moreover,  a Member must actively prosecute and punish 
such acts, or the effectiveness of the available pena lties as a deterrent will be diminished.  Whether 
the available punishments "are sufficient to provide  a deterrent" within the meaning of a Member's 
obligation under Article 61 is an assessment to be made by the Member having regard to the 
circumstances prevailing in its territory.  Neverthele ss, it is open to another Member to challenge the 
                                                      
2 In that regard, Australia endorses the statement that "… the concept of ‘commercial scale’ extends 
both to those who engage in commercial activities in order to make a ‘financial return’ in the marketplace, and 
who are, by definition, therefore operating on a commercial  scale, as well as to those whose actions, regardless 
of motive or purpose, are of a sufficient extent or magn itude to qualify as ‘commercial scale’ in the relevant 
market."  (United States first submission, para.110). 
3 Australia notes that it is open to a Member to provide for a higher standard of protection to be applied 
in other cases of infringement of intellectual property rights  pursuant to the final sentence of Article 61 and/or to 
TRIPs Article 1.1.   WT/DS362/R 
Page C-10  
 
  adequacy of a Member's remedies to achieve th e deterrent effect requi red by Article 61 under the 
dispute settlement provisions of the TRIPs Agreement.   
III. "THE CHANNELS OF COMMERCE" AND TRIPS ARTICLE 59 
19. Article 59 provides that, in relation to th e cross-border movement of goods, competent 
authorities are to have "the authority to order th e destruction or disposal of infringing goods in 
accordance with the principles set out in [TRIPs] Article 46".  In Australia's view, the "principles set 
out in Article 46" include that infringing goods be disposed of "outside the channels of commerce in 
such a manner as to avoid any harm caused to the right holder".   
20. The ordinary meanings of the individual word s "channels" and "commerce" are sufficiently 
broad in scope that the phrase "the channels of commerce
" should be understood in context as 
meaning any activity relating to the supply or transf er of goods in pursuit of financial reward.  Such 
activities can be connected with any aspect of the s upply chain, from manufacture to point of sale.  
Australia notes that "the channels of commerce" can include the Internet, for example, for the 
distribution of both digitally-based and physical products.   
21. Australia notes that the first sentence of TRIPs Article 44 requires that the judicial authorities 
of a Member have the authority "… to prevent the entry into the channels of commerce in their 
jurisdiction of imported goods that involve the in fringement of an intellectual property right, 
immediately after customs clearance  of such goods."  In Australia's  view, that obligation establishes 
that, as a minimum requirement, the boundaries of "t he channels of commerce" in relation to a 
Member's territory must be considered to co mmence "immediately after customs clearance".   
22. Understanding the meaning of "the  channels of commerce" to be any activity relating to the 
supply or transfer of goods in pursuit of financial reward within a Member's territory is consistent 
with the final sentence of Article 46, which concer ns a Member's obligations  in relation to infringing 
activity within its territory.  The fact that the si mple removal of a counterfeit trade mark is rarely 
likely to be sufficient to permit release of the und erlying goods into "the channels of commerce" 
confirms the scope of the meaning to be given to that expression.  Those goods can still cause harm to 
a right holder within a Member's territory, for exam ple, by saturating the market and reducing demand 
for the genuine article.   
23. Moreover, Australia considers that the final sen tence of Article 59 supports its view of the 
meaning of "the channels of commerce" in Article  46.  Other than in exceptional circumstances, a 
Member is obliged not to allow the re-export of infr inging goods in an unaltered state but is not, for 
example, precluded from allowing the re-export of infringing goods from which a counterfeit sign has 
been removed.  The difference in a Member's obligations concerning treatment of the underlying 
goods according to whether the infringing goods are being dealt with within a Member's territory or at the border reflects that goods being re-exported are not  entering "the channels of commerce" in that 
Member's territory.   
24. Having regard to the principles set out in Article 46, Article 59
 requires that a Member's 
customs or other competent authorities concerned w ith border measures have the authority to order 
the destruction of infringing goods, or the disposal  of those goods in such a manner as to avoid any 
harm being caused to the right holder in "the channels of commerce".   
25. Article 59 requires, in effect, that a Member's  competent authorities be able to order that 
infringing goods be destroyed or be disposed of in such a manner that the goods do not enter "the 
channels of commerce" within that Member's te rritory.  Such disposal methods could include 
recycling or donation to a charity within a Member's  territory, provided the infringing goods are not 
likely to enter "the channels of commerce" as a result.    WT/DS362/R 
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  IV. THE MEANING OF "ANY FORMALITY" IN ARTICLE 5(2) OF THE BERNE 
CONVENTION 
26. By virtue of TRIPs Article 9.1, WTO Members are required to comply with Article 5(2) of 
the Berne Convention.  Article 5(2) provides in releva nt part that "[t]he enjoyment and the exercise of 
these rights shall not be subject to any formality;  …".   
27. Article 5(2) prohibits the enjoyment and exercise of rights in a protected work being subject 
to any prior legal or administrative procedure, such as registration of the work or approval of its content.  Australia notes, however, that Article 17 of the Berne Convention expressly reserves to a 
Member the right to permit, control or prohibit the circulation, presentation or exhibition of a work or 
production.  WT/DS362/R 
Page C-12  
 
  ANNEX C-3 
 
ORAL STATEMENT BY AUSTRALIA 
1. Thank you for this further opportunity for Australia to present its views on the issues raised 
by this dispute.   
2. For the first time in respect of several of th e enforcement provisions of the TRIPs Agreement, 
this panel will have to clarify t hose provisions in accordance with customary rules of interpretation of 
public international law, as required by Article 3.2 of  the DSU.  In this regard, Australia notes that the 
Appellate Body has previously observed:   
"…  The ordinary meaning of a treaty term must be ascertained according to the 
particular circumstances of each case.  Im portantly, the ordinary meaning of a treaty 
term must be seen in the light of the inten tion of the parties 'as expressed in the words 
used by them against the light of the surrounding circumstances'.
[…]"1   
3. Australia has set out in its written submission its views on how some of the terms in the 
provisions at issue should properly be interpreted.   
4. In particular, Australia has noted that Article  61 of the TRIPs Agreement establishes more 
onerous obligations in respect of "wilful trad e mark counterfeiting or copyright piracy on a 
commercial scale".  Australia does not consider that the scope of a Member's obligations in respect of 
such activity is limited or otherwise tempered by Articles 1.1 or 41.5 of TRIPs.  Those provisions 
relate to a Member's rights in relation to the me thod of implementation of its obligations under the 
TRIPs Agreement, but do not affect the character  of a Member's obligations under Article 61, or 
indeed any other provision.   
5. Australia would of course be pleased to provide responses to any questions that the Panel may 
have.  
                                                      
1 EC –Chicken Cuts , Appellate Body Report, WT/DS269/AB/R, WT/DS286/AB/R, paragraph 175.    WT/DS362/R 
 Page C-13 
 
 
  ANNEX C-4 
 
EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION  
BY BRAZIL 
I. INTRODUCTION 
1. Brazil's comments in this dispute will be provided in view of its systemic interests concerning 
the issues raised by the parties and the findings to be  developed by the Panel.  Being the first dispute 
focused on Part III of the Agreement on the Trade-Related Aspects of Intellectual Property Rights  (the 
"TRIPS Agreement"), this Panel's c onclusions could have a significant impact on the balance of rights 
and obligations inherent to the TRI PS Agreement.  Brazil is of the view that nothing in this dispute 
should alter TRIPS' finely negotiated ba lance or expand its current coverage.  
II. ARGUMENTS 
A. CONSIDERATIONS ON THE FLEXIBILITIES OF THE TRIPS  AGREEMENT  
2. In its first written submission, the United States opts for a selective approach to the TRIPS 
Agreement provisions that seems to  ignore overarching provisos, such as Articles 1.1, 7, 8, 41.5 and 
the preamble itself, which provide the broade r framework under which the TRIPS Agreement is 
meant to be implemented. 
3. Additionally, the United States apparently seeks, through the use of the World Trade 
Organization ("WTO") dispute settlement mechanism in  this case, to expand the scope of certain 
treaty terms and provisions, suggesting that the Pa nel should adopt expansive interpretations of the 
treaty, thereby extrapolating actual coverage, a nd encroaching upon Members' room for regulating 
these particulars through their national legislations.  From a systemic perspective, this gives rise to 
several concerns, particularly  to developing Members.  
4. The interpretations and thresholds that th e United States asks the Panel to follow seem 
intended to alter the scope of the TRIPS Agreemen t, eliminating flexibilities that were deliberately 
embedded in the TRIPS Agreement by a decision of Me mbers, and that constitute an integral part of 
the negotiating process and agreed outcomes of the Uruguay Round single undertaking.  In Brazil's 
view, the Panel's role is to clarify  the existing provisions, as limited and mandated by Article 3.2 of 
the Dispute Settlement Understanding ("DSU"), and not to go beyond, filling in and establishing 
parameters that are intentionally not provided in the TRIPS Agreement exactly because they were left 
to be defined by domestic legislations, in light of each Members' specificities.  
5. Where the TRIPS Agreement does not settle certain  issues or further defines specific terms, 
that is because Members so intended.  From Brazi l's perspective, acceptance of certain United States' 
arguments would add to Members' current obligatio ns under TRIPS.  The Panel should not concede to 
arguments that are based on extrapolations or e xpansive interpretations of the negotiated TRIPS 
Agreement text, and should make every effort to preserve the overall integrity of the Agreement, 
including its balance of rights and obl igations and built-in flexibilities. 
6. The fundamental and overarching tenet that pe rmeates the TRIPS Agreement is Article 1.1, 
by which Members (i) are not obliged to implement in their law more extensive protection than is 
required by the TRIPS Agreement and (ii) are free to determine the appropria te method to implement 
the provisions of the TRIPS Agreement within thei r own legal system and practice.  Along similar 
lines, Article 41.5 also establishes that under Part III there is no obligation to put in place a judicial 
system for the enforcement of intellectual property ri ghts distinct from that for the enforcement of law 
in general.   WT/DS362/R 
Page C-14  
 
  7. The concept of "enforcement" in the TRIPS Agreem ent is – to a considerable extent – to be 
understood as making available, for exam ple, "fair and equitable" proceedings
1, which take place 
entirely within the ambit and rule of the national legi slations of Members.  Accordingly, Brazil is of 
the position that the Panel's task should be to anal yze China's compliance with  the minimum standards 
embodied in the TRIPS Agreement, refraining from a pplying its provisions without due consideration 
to the Agreement's overall context, object, purpose a nd flexibilities.  Such crucial elements must be 
borne in mind, because the TRIPS Agreement it self recognizes that the treaty's implementation 
(i) does not take place in a void or in a single uniform legal, economic or social space2, indicating that 
the implementation of TRIPS is to be shaped by sp ecificities of national contexts, subject only to the 
test of consistency with the treaty provisions and (ii) is framed by the general principles, rules, 
disciplines, exceptions, limitations and flexibilities provi ded for by the Agreement.  This is in keeping 
with the territorial nature of intellectual property ri ghts and the sovereignty of  States to legislate and 
enforce.  
8. Therefore, in analysing China's measures vis-à-vis the TRIPS Agreement, the Panel should 
not lose sight of the fact that China (i) is not requi red to grant more extensive protection than the one 
foreseen in the Agreement, (ii) has discretionary authority to choose - in view of its legal system and 
practice - the appropriate method to implement the pr ovisions of TRIPS and (iii) is neither obliged to 
put in place a judicial system for the enforcement of  intellectual property rights distinct from that for 
the enforcement of law in general;  nor to distri bute resources as between enforcement of intellectual 
property rights and the enforcement of law in general.   
B. THE TRIPS  AGREEMENT IS NOT ONLY ABOUT INTELLECTUAL PROPERTY RIGHTS PROTECTION 
AND ENFORCEMENT  
9. The United States' arguments seem to contend that the TRIPS Agreement is all (or only) 
about protecting intellectual property rights.  This is half true.  
10. From a broader perspective, the TRIPS Agreemen t does not deal exclusively with intellectual 
property rights protection .  Rather, it is built upon several balances, in which intellectual property 
rights protection is one of the elements.  Indeed , provisions related to development, competition, 
transfer of technology, limitations and exceptions to  rights, flexibilities, and a finely negotiated level 
of "legal permissiveness" in areas where Members retain their legislative policy space are also an 
integral part of the TRIPS Agreement. 
11. One of the reasons for such architecture is the special nature of intellectual property rights.  
As a general rule, intellectual property is protected by a wide array of national laws, including civil, 
administrative and criminal procedures, in which Members' domestic legislation play a fundamental 
role.  This is why, ever since the early stages of the negotiations, Brazil was of the position that 
enforcement measures under a new agreement s hould take the form of general principles3 and "should 
take fully into account the specific nature of inte llectual property rights, in that they constitute a 
matter of regulation by national legislations. (…)  It should be accepted, as a principle, the recognition 
of countries' geographic, political, legal, and economic conditions, among others, under which their 
national enforcement system operates.  In particul ar, the difficulties of developing countries in terms 
of fulfilling possible obligations should be recogni sed.  Possible final commitments should not result 
in excessive material burden for th e agencies responsible for the en forcement of intellectual property 
rights in those countries".4 
                                                      
1 TRIPS Agreement, Articles 41.2 and 42. 
2 TRIPS Agreement, Articles 7 and 8. 
3 China's first written submission, paragraph 93, footnote 97. 
4 Exhibit CHN-53.  WT/DS362/R 
 Page C-15 
 
 
  12. In Brazil's standpoint, (i) the mandate under which the TRIPS Agreement was negotiated, 
(ii) the wide divergence of views during those negotiations as to what the new agreement should amount to, and (iii) the need to recognize countries' specificities and to preserve the singular nature of intellectual property rights protection led to the c onception of a multilateral instrument that can be 
characterized as a "framework agreement". 
13. It is for no other reason that the TRIPS Agreem ent – especially Part III - bears provisions that 
are not always strict or prescriptive. Instead, it h as built-in flexibilities, wh ich allow for Members to 
implement the Agreement through discretionary measu res at the national level.  Thus, the lack of 
definition of some concepts - such as "commerc ial scale", "copyright piracy" and "trademark 
counterfeiting" - referred to by the TRIPS Agreemen t was not unintentional.  Such absence should be 
interpreted in light of the flexibilities permitted by the TRIPS Agreement.  Being a "minimum 
standard" instrument, there is no obligation under TRIPS Agreement for a Member to adopt higher 
levels of protection. 
14. In other words, Brazil considers that the claims  made in the present dispute and the provisions 
involved therein – i.e., Articles 9.1, 14, 41.1, 46, 59 and 61 – should be analysed in light of the 
overarching principles and provisions governing th e TRIPS Agreement.  The specific obligations 
claimed by the United States are subsumed in the overall balance negotiated by Members and subject 
to the other aspects of intellectual property rights.  
C. TRIPS
 AGREEMENT 'S MINIMUM STANDARDS ON CRIMINAL THRESHOLDS  
1. The scope of "commercial scale" in Article 61 of the TRIPS Agreement  
15. Both the United States and Chin a have identified two relevant elements for the definition of 
the expression "commercial scale", i.e. the agent's motivation (subjective element) and the amount or 
value of merchandises involved (objective element). 
16. The United States' approach seems to be that if either of the elements is present in the context 
"of wilful trademark counterfeiting or copyright pi racy", the conduct shall be subject to criminal 
procedures and penalties.  China disagrees and seems to argue that the subjective aspect, i.e. the 
agent's motivation, is irrelevant. 
17. Brazil would like to submit a third possible approach.  First of all, it is useful to recall once 
again that the TRIPS Agreement provides minimu m standards that Members shall adopt for the 
enforcement of intellectual property rights.  In  Brazil's opinion, both the subjective and objective 
elements are relevant for the determination of  which conduct the TRIPS Agreement requires WTO 
Members to criminalise.  The wording of Article 61 seems to leave little room for the argument that 
the agent's motivation alone shall suffice for its  conduct to be considered "wilful trademark 
counterfeiting or copyright piracy on a commercial scale ".  On the one hand, the word "scale" 
inevitably invokes notions such as those of "order of magnitude" or "quantitative parameter".  The 
provision should not be constr ued as demanding that WTO Members criminalise profit seeking 
infringement that involves the possession or sale of any amount of counterfeited or pirated goods.  
Both the text and the negotiating history of Artic le 61 suggest that profit seeking infringement of a 
non-significant magnitude is not part of the universe of conducts which are requir ed to be criminalised 
pursuant to the TRIPS Agreement.  
18. On the other hand, the expression "commercial scale" cannot be plausibly interpreted as 
including non-commercial, large-scale infringement of  copyrights or trademarks either.  The Panel 
should avoid embracing an interpretation of Article 61 that would disregard the term "commercial" 
and would not be faithful to the text of this pr ovision.  The word "commercial" cannot be properly WT/DS362/R 
Page C-16  
 
  understood without due consideration to the idea of pr ofit.  The purpose of obtaining financial gains is 
the core of its meaning and should not be neglected.   
19. In conclusion, Brazil considers that Articl e 61 establishes a two-pronged minimum standard, 
where both the subjective and objective elements must be factored in.  What Article 61 requires is that 
WTO Members provide criminal procedures and penalti es at least for wilful trademark and copyright 
infringements that involve profit seeking motivati on and significant amounts of infringing goods.  
Neglecting either the word "commercial" or "scal e" would not be supported by the "effectiveness 
principle", according to which meaning and effect  must be given to all the terms of a treaty
5. 
2. Remedies that provide a deterrent 
20. Both the United States and China seem to re strict the debate about penalties to the 
appropriateness of thresholds for criminal prosecu tion and imprisonment.  However, the text of 
Article 61 itself makes it clear that imprisonment is only one of the penalties that shall be made available and shall be able  to deter illegal conduct.  
21. Since the second sentence of Article 61 includ es "monetary fines" as one of the possible 
remedies for the conduct WTO Members are required to  criminalise, it could be argued that the key 
issue concerning low-level infringement, regardless of  the formal definition the Member ascribes to 
the procedures involved (criminal or administrative) , is whether the remedies available provide a 
deterrent against further infringement or not. 
22. Brazil submits that, pursuant to this reasoning, th e Panel should incorporate to its analysis an 
examination of whether first, the monetary fin es and other remedies available under Chinese law for 
below-threshold wilful trademark counterfeiting and copyright piracy are able to discourage further 
infringement; and, second, the remedies other than imprisonment established for trademark 
counterfeiting and copyright piracy are similar to those applied for infrac tions of a comparable 
gravity. 
23. The ultimate objective of Article 61, and Part III of the TRIPS Agreement, is that intellectual 
property rights be protected.  If protec tion is afforded by remedies that are less costly and less socially 
disruptive than imprisonment, it would be nonsensical to require a Member to re-label its procedures 
and to consider that it is not in compliance simply  because, according to its own legal system, certain 
WTO-prescribed remedies are available under provis ions that are domestically characterized as 
administrative (and not criminal). 
D. TRIPS
 AGREEMENT 'S MINIMUM STANDARDS ON THE DISPOSAL OF INFRINGING GOODS  
1. Principles of Article 46 incorporated by Article 59 
24. In Brazil's view, Article 59, read together with  Article 46, establishes the obligation that WTO 
Members grant their competent authorities the power  to dispose of infringing goods outside the 
channels of commerce or order their destruction.  The treaty does not establish that such authority has 
to be unconditional. 
25. Further, it should be underscored that Article 46 indicates that harm to the right holder must 
be avoided.  This provision shoul d not be construed as requiring a WTO Member to ensure that 
absolutely no harm ever happens to the right hol der following disposal of infringing goods.  What it 
                                                      
5 See, e.g., Appellate Body Report, Japan – Alcoholic Beverages II , WT/DS8/AB/R, WT/DS10/AB/R, 
WT/DS11/AB/R, p. 12, Panel Report, US - Gasoline , WT/DS2/R, p. 23.  WT/DS362/R 
 Page C-17 
 
 
  requires is that infringing goods are disposed of in  a manner that is commensurate to the objective of 
preventing harm to the right holder from arising.  
26. Therefore, in addition to the disposal methods  described in Article 46, first sentence, WTO 
Members are allowed to make use of an unspecified range of disposal options that can be authorized, 
provided that first, the disposal option be employed in a way that avoids harm to the right holder;  
and, second, "[i]n regard to c ounterfeit trademark goods, the simple removal of the trademark 
unlawfully affixed shall not be sufficient, other th an in exceptional cases, to permit release of the 
goods into the channels of commerce."  
27. In light of the above, Brazil respectfully submits that WTO Members may allow their 
competent authorities to release infringing goods in to the channels of commerce, provided that:  
(a) these authorities also have the authority to destro y or dispose of such goods outside the channels of 
commerce;  (b) the authorities avoid harm to the right holder, irrespectively of disposing of the 
infringing goods into or outside the channels of  commerce;  and (c) the limitation set forth in 
Article 46, last sentence is observed.  
2. Conditional authority to order the destruction of infringing goods 
28. In this dispute, the United States seems to e qual "authority to destroy" to "obligation to 
destroy" and yet defines "authority" as requiring a significant degree of discretion.  Indeed, the United States' arguments with regard to this issue appear to be somewhat paradoxical.  In general, the less 
discretion a public agent enjoys, the closer its aut hority will be to a legal obligation.  Conversely, 
more discretion means the authority has more leew ay to choose not to follow the prescribed conduct 
in light of specific circumstances.  
29. Brazil notes, however, that "discretion" and "authority" are not synonyms nor is the former a 
precondition for the latter.  Non-discretionary acts by public agents can also be regarded as derived 
from their authority under the law.  From an ad ministrative law perspective, discretionary and 
non-discretionary acts are equally within the scope of the public authority that ultimately stems from 
the Member's Constitution.  
30. The facts presented by both parties seem to s uggest that the competent Chinese agency has 
the authority, yet conditional, to order the destruction of seized infringing goods.  In Brazil's view, even if the degree of discretion were minimal, the au thority to destroy would still exist, provided that 
it is so established in the appropr iate legal rules.  The level of discretion enjoyed by competent 
authorities, along with possible conditions attached to  the application of its powers, do not concern the 
existence of authority itself, but pertain to the way authority is exercised.  Article 59 of TRIPS does 
not prescribe (i) which competent authorities must  be entitled with the mentioned authority and 
(ii) how exactly such authority should be exercised.   This is so because th e Agreement left to the 
Members the necessary flexibility to de termine how such a provision sha ll be implemented, in light of 
the respective national le gislation and practice. 
III. CONCLUSION 
31. Brazil appreciates the opportunity to comment  on some of the issues at stake in this 
proceeding, and hopes the viewpoints furthered in th is submission may assist the Panel in its decision.WT/DS362/R 
Page C-18  
 
  ANNEX C-5 
 
ORAL STATEMENT BY BRAZIL 
1. Brazil appreciates the opportunity to present this oral statement as a third party in the current 
proceedings.  In its third party submission, Brazil stressed the systemic relevance of this dispute and 
presented its views on the importance of the overarc hing principles and flexibilities that govern the 
intellectual property protection regime under the WTO.  In addition, Brazil's submission analysed issues relating to TRIPS' minimum standards on crimin al thresholds and on the disposal of infringing 
goods.  
2. Brazil's oral statement will address one aspect of the present dispute that was not dealt with in 
our written submission, i.e., the notion of "autom atic and immediate protection of copyrights" 
allegedly mandated by the Berne Convention for the Protection of Literary and Artistic Works .  
3. Before addressing the "automaticity" issue, allow me first to make a general remark 
concerning an observation made by the United States  in its first written submission.  In paragraph 
195, the United States affirms that "copyright ari ses immediately upon a work's creation".  It is the 
Brazilian view that such affirmation should be in terpreted with caution, since it gives the false 
impression that copyright protection is unconditiona l and absolute and depends on one exclusive 
factor:  the creation of a work.  This is not so.  
4. Copyright may not arise immediately upon a work's creation.  Indeed, countries can - and 
some do - condition the granting of the copyright prot ection.  Article 2.2 of the Berne Convention, for 
instance, allows national legislation to prescribe that protection will be granted upon fixation  to some 
material form, rather than upon the creation  of the work. 
5. This caution note being registered, Brazil would like to focus its statement on the notion that - 
despite accruing "upon the creation of a work", un derstood with the caveat made before - such 
protection does not take pl ace in the void, by an automatic  application of the Berne Convention alone, 
irrespective of countries national legislation.  
6. The United States purports that, according to Artic le 5(2) of the Berne Convention, a work 
would acquire copyright protection "immediately and automatically".
1  China, by its turn, does not 
dispute such a characterization.  Rather, it complements that, under its Copyright Law, " in full 
compliance with Berne Article 5(2) , copyright vests automatically  and is recognized without 
administrative formality".2  
7. China has specifically based the notion of "automaticity" of rights, not upon the Berne 
Convention directly, but upon its own national law:  "under Chinese law".3  However, the United 
States references to automaticity  and immediateness  of rights are general in nature, paving the way for 
an interpretation that the Berne Convention provid es for rights that are automatic and immediate, 
irrespective of national legislations. 
8. Although Brazil would agree with the United Stat es that protection of literary and artistic 
works under the Berne Convention are not to be conditioned by "formalities", Brazil cannot acquiesce 
                                                      
1 United States' first written submission, para. 195. 
2 China's first written submission , para. 253, emphasis added. 
3 China's first written submission, paras. 237, 245.  WT/DS362/R 
 Page C-19 
 
 
  to the view that the Berne Convention prescribes that copyrights shall arise "automatically" and 
"immediately", regardless of what countries' national legislation will rule on the matter.4  
9. Brazil disagrees with such a characterization.  The letter of the Convention and its negotiating 
history clearly evidence that the principle of automatic protection , as the World Intellectual Property 
Organization defines it, should be understood and lim ited to the fact that copyright protection is not 
conditional upon compliance with any formality5, such as registration, deposit and the like.6  T h e  
Berne Convention bears no such "automaticity".  Actu ally, no form of the word "automatic" appears 
in any of its substantive articles.  
10. Quite the opposite, in several opportunities in this same Organization and elsewhere the 
United States itself has firmly asserted that "automaticity" in intellectual property-related issues runs 
counter to the "foundational notion that intellectual pr operty rights are territorial and that rights have 
to be established and asserted under the laws of the country where protection is being sought".7  
Consistent with this line, the Director of the United States Patent and Trademark Office has stated that   
"there is no such thing as an 'international c opyright' that will automatically protect an 
author's works in countries around the world. Instead, copyright protection is 
'territorial' in nature, which means that copyright protection depends on the national 
laws where protection is sought".8 
11. Therefore, in Brazil's opinion, the Panel should no t concur with the parties' interpretation of 
Berne Convention Article 5(2), to the extent they im ply that there may be "automatic and immediate" 
rights accruing from the Convention independently of wh at national legislations may dispose.  Equal 
caution, as previously indicated, should be used when  dealing with the assertion that "copyright arises 
immediately upon a work's creation".9 
12. This concludes Brazil's oral statement. We w ill be pleased to answer any questions the Panel 
may have. 
                                                      
4 United States' first written submission, paras. 195-225. 
5 See http://www.wipo.int/treaties/en /ip/berne/summary_berne.html#f2, last visited on 8 April 2008. 
6 See Handbook on Intellectual Property/WIPO, at  
http://www.wipo.int/about-ip/en/iprm/pdf/ch5. pdf#berne, last visited on 8 April 2008. 
7 See United States' intervention at the TRIPS Co uncil in Special Session , document TN/IP/M/14. 
8 See http://www.uspto.gov/web/offices/dcom/olia/c opyright/copyrightrefresher.htm, last visited on 
8 April 2008. 
9 United States' first written submission, paras. 11 and 195. WT/DS362/R 
Page C-20  
 
  ANNEX C - 6 
 
EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION  
BY CANADA 
I. INTRODUCTION  
1. Canada is participating in this proceeding b ecause of its role as a significant producer of 
intellectual property and because of its systemic interest  in the interpretation of TRIPS.  It is Canada's 
position that:  (1) China's Criminal Law and its December 2004 and April 2007 judicial 
interpretations are inconsistent with TRIPS Ar ticles 61 and 41.1;  (2) Article 27 of China's 
Regulations for Customs Protection of Intellect ual Property Rights and Article 30 of China's 
Implementing Measures are inconsistent with TRI PS Articles 46 and 59;  and (3) China's measures 
denying copyright-related rights protection to works that have not been authorized for publication or distribution in China are inconsistent with TRIPS Articles 9.1, 14, 41.1 and 61.  
A. T
HRESHOLDS FOR CRIMINAL PROCEDURES AND PENALTIES  
1. First sentence of TRIPS Article 61  
2. China's Criminal Law, as judicially interprete d, is inconsistent with the first sentence of 
TRIPS Article 61.  It sets arbitrary thresholds that  incorrectly assume that the term "commercial scale" 
means high-scale, industrial production.  Given that th e drafters of TRIPS did not use this term, it can 
be inferred that the term "commercial scale" has a broader meaning.  
3. The term "commercial scale" relates to counte rfeiting and piracy undertaken with a view to 
profiting.  This interpretation gives meaning to both the words "commercial" and "scale".  It 
recognizes that profit is the objective of commerce and can be achieved by reproducing or selling 
large quantities, or by reproducing or distributi ng small quantities with high margins, in many cases 
using laptop computers.  Factory assembly-lines are not needed.  China overlooks these economic realities by associating the term "commercial scale" with industrial-scale production.  
4. The World Intellectual Property Organization has indicated that quantity and the will to make 
a profit are factors to be taken into consideration in determining whether counterfeiting or piracy is on 
a commercial scale.  China's arbitrary quantitative th resholds confer no discretion on the authorities to 
make a qualitative determination based on the circumstances of each case.  
5. A person who wilfully reproduces or distributes hundreds of counterfeit or pirated copies for 
thousands of dollars in sales revenue and profits would, by any objective measure, be infringing on a 
commercial scale, especially in China where annu al Gross Domestic Product per capita is just 
US$2,500 and 57 million people earn less than US$125 per year.  Yet Article 217 of China's Criminal 
Law, as judicially interpreted in April 2007, for example, only allows the Chinese authorities to apply 
criminal procedures and penalties where the ille gal gains exceed RMB 30,000 (US$4,155), illegal 
business volume exceeds RMB 50,000 (US$6,925), mo re than 500 pirated copies have been 
reproduced and distributed, or there are undefined "other circumstances of a serious nature".  A 
person caught with 499 pirated copies worth RM B 49,999 (US$6,924) –more money than most 
Chinese earn in a year – cannot be prosecuted in China.    
6. As China's thresholds are meant to be app lied cumulatively, the Chinese authorities would 
need to keep track of a person's inventories, id entity and activities, and share information across 
Chinese jurisdictions.  Knowing this, infringers ma y evade the law by keeping up to 499 pirated 
copies worth no more than RMB 49,999, in several locations or at different times.  Thus China's 
thresholds may inadvertentl y facilitate wilful infringement on a massive scale.   WT/DS362/R 
 Page C-21 
 
 
  7. Canada empathizes with China's concern about scar city of enforcement resources, but the first 
sentence of TRIPS Article 61 does not go so far as to require Members to prosecute every case of 
wilful trademark counterfeiting and copyright piracy  on a commercial scale.  It does require Members 
at least to be in the position to prosecute such case s.  The problem with China's thresholds is they 
totally preclude the Chinese authorities from ever bei ng able to exercise prosecutorial discretion in a 
given case of wilful infringement on a commercial scale.   
2. Second sentence of TRIPS Article 61  
8. China's thresholds are inconsistent with the second sentence of TRIPS Article 61.  Rather 
than deterring commercial-scale infringement, China's thresholds provide infringers clear parameters 
for committing wilful trademark counterfeiting or copyright piracy with immunity.  
3.  TRIPS Article 41  
9. China's thresholds make it impossible for the Chinese authorities to apply criminal procedures 
and penalties in many cases of wilful counterfeiting a nd copyright piracy on a commercial scale.  The 
fact that a plethora of counterfeit and pirated goods continues to be produced, reproduced and 
distributed in China, and exported from China, ma kes it clear that China does not provide effective 
action against wilful acts of infringement on a co mmercial scale and does not provide remedies that 
deter further infringements, contrary  to TRIPS Article 41.1.     
B. DISPOSAL OF CONFISCATED GOODS  
1. TRIPS Article 59 and the first sentence of TRIPS Article 46  
10. To meet the obligation of TRIPS Article 59, Members must give their competent authorities 
the powers set out in TRIPS Article 46 as soon as  it has been established that the goods infringe 
intellectual property rights.  Yet China's competen t authority acquires the requisite powers only after 
other disposal options have  been explored or, in some cases, not at all.   
11. Article 27 of the Regulations of China for Cu stoms Protection of Intellectual Property Rights 
and Article 30 of China's Implementing Measures es tablish a general hierarchy of requirements for 
the Chinese customs authority to dispose of infri nging goods.  At each step, the Chinese customs 
authority lacks the power to order the destruction of the infringing goods or their disposal outside the 
channels of commerce, or both.    
12. In the case of infringing goods that could serve  social welfare purposes, China's measures 
generally preclude the Chinese customs authority from ever having the power to order their 
destruction. Instead, China's measures generally requ ire the Chinese customs authority to donate the 
goods to social welfare bodies, which might in turn  sell the goods to raise proceeds for their social 
welfare activities and, in so doing, release the goods into the channels of co mmerce where they will 
harm the right holder.   
13. In the case of other infringing goods, the Ch inese customs authority only acquires the power 
to order their destruction after other disposal options  harmful to the right holde r have been exhausted.  
The Chinese customs authority must first offer the g oods for sale to the right holder, failing which the 
Chinese customs authority may generally dispose of the goods by way of auction if the infringing 
feature can be easily removed.  This puts the right holder in an impossible situation because 
purchasing the goods causes it financial harm and refusal  to purchase them runs the risk that the goods 
will be released into the channels of commerce.   WT/DS362/R 
Page C-22  
 
  14. China has not demonstrated a constitutional impe diment to conferring the power to order the 
destruction of infringing goods on its competent au thorities from the outset.  Also, China's measures 
do not empower competent authorities to order the di sposal of infringing goods in a manner that will 
not harm the right holder, such as empowering them to give the infringing goods to the right holder for no charge.  
2. TRIPS Article 59 and the fourth sentence of TRIPS Article 46  
15. The TRIPS Article 46 prohibition on releasing counterfeit goods after simply removing the 
infringing feature directly and unambiguously relates to  the disposal of infringing goods.  As such, it 
is a principle of disposal of infringing goods that, by way of TRIPS Article 59, competent authorities must follow.  Yet China's measures provide that, once the right holder refuses to purchase infringing 
goods that could not be used for a social welfare purpose, the Chinese customs authority must auction 
the goods if the infringing feature can easily be remo ved.  The auction may proceed even if the right 
holder strenuously objects.   
C. D
ENIAL OF COPYRIGHT -RELATED PROTECTION AND ENFORCEMENT  
1.  TRIPS Article 9.1  
16. China's Copyright Law is inconsistent with Artic le 5(1) of the Berne Convention. Article 4 of 
China's Copyright Law expressly provides that "Wor ks the publication and dissemination of which is 
prohibited by [Chinese] law shall not be protected by this Law".  China admits that this refers to 
works, including those of the Berne Copyri ght Union, that the Chinese authorities find 
unconstitutional or immoral, and that these works are not protected in China.   
17. Article 2 of China's Copyright Law provides that a foreigner's copyright under an 
international treaty between the foreigner's country  and China shall be protected "in accordance with 
this Law" (i.e., China's Copyright Law).  Clearl y, China's commitments under the Berne Convention 
have no direct effect, but instead are available only to the extent provided for by China's Copyright Law.  Thus Article 4 of China's Copyri ght Law seems to take precedence.    
18. China's measures are inconsistent with Article 5( 2) of the Berne Convention.  China seems to 
have laid down in its national laws the administra tive obligation for exporters or importers to obtain 
approval to publish and distribute the work in China su ch that, if not fulfilled, it will lead to the loss of 
copyright or copyright-related protection.  In particular, Article 2 of China's Copyright Law provides copyright protection irrespective of publication to "Chinese citizens, legal entities or other 
organizations", not those from other countries.   
2.  TRIPS Article 14  
19. For the same reasons, China's Copyright Law is also inconsistent with  TRIPS Article 14.1 and 
14.2 in relation to performances and sound recordings.   
3. TRIPS Article 41.1  
20. Given that China's Copyright Law does not apply to banned works, none of the enforcement 
procedures required under TRIPS Article 41.1 can apply.    WT/DS362/R 
 Page C-23 
 
 
  4. TRIPS Article 61  
21. By operation of Article 4 of China's Copyright Law, criminal procedures and penalties in 
cases of copyright piracy do not a pply to banned foreign works.  The right holder has neither civil nor 
criminal recourse.  
II. CONCLUSION  
22. Canada respectfully submits that the Chin ese measures are inconsistent with TRIPS. 
 WT/DS362/R 
Page C-24  
 
  ANNEX C-7 
 
ORAL STATEMENT BY CANADA 
I. INTRODUCTION 
1. Mr. Chairman, distinguished Members of the Pa nel, I would first like to express Canada's 
appreciation to the Panel and the Secretar iat for their work in this dispute. 
2. Canada will briefly address in its oral submission all three issues in dispute: China's criminal 
thresholds, disposal methods, and denial of copyright to prohibited works.  These arguments are set out fully in Canada's written submission. 
II. CRIMINAL THRESHOLDS 
3. Regarding China's criminal thresholds, China and two third parties have contended that 
criminal law is the exclusive domain of sovere ign states, and that TRIPS Article 1.1 provides 
Members with flexibility in implementing TRIPS.  This is  true, but beside the point.  It is one thing to 
choose the appropriate method of implementing an ob ligation to which a sovereign state has agreed, 
and another to implement such obligation.  Canada ec hoes the view best articulated by Korea that this 
dispute is not about discretion, but about deviation from a treaty obligation. 
4. In Canada's view, the crux of this part of th e dispute is the proper interpretation of the term 
"commercial scale" in TRIPS Article 61.  China's cr iminal thresholds rest upon an assumption that the 
term relates to quantity – the quantity of illegal copies, illegal gains, and so forth.  China has 
explained its view that "commercial scale" mean s industrial production; th at is, it seems, large 
quantities such as one would find coming off a factory assembly-line.  
5. China's interpretation of "commercial scale" is not tenable for at least two reasons.  
(a) The drafters of TRIPS did not choose to use the term "industrial scale" or "industrial 
production".  Evidently they meant something else.  
(b) China's interpretation focuses on "scale" without regard for "commercial".  
6. Canada shares the view of the United States and many of the third parties that the word 
"commercial" relates to the concept of striving for financial gain.  Thus, the term "commercial scale" 
relates to infringement of such magnitude that the motive of the infringer is to carry on a profitable 
business.  As the World Intellectual Property Organization has observed, infringement on a 
commercial scale cannot simply be determined by large quantities.
1  Profit can be achieved by 
producing and selling small quantities at high margin s.  This is especially true today with non-
industrial, personal digital technology.   
7. Indeed, there may be few illegal copies and/or  only small gains but also non-quantitative 
indicia of wilful infringement for the purpose of profiting.  Such indicia may include the use of the internet or other means of mass dissemination, th e presence of equipment and input materials for the 
creation of additional copies, a previous history of  infringement by the infringer, the involvement of 
organized crime, the marketing and soliciting of business, and so forth.  In the circumstances, the 
existence of one or more of these qualitative factor s, notwithstanding few copies or small gains, may 
convince the Chinese authorities that there is wilf ul infringement on a commercial scale.  However, 
the authorities cannot prosecute.    
                                                     
 
1 See Exhibit CHN-43.  WT/DS362/R 
 Page C-25 
 
 
  8. Hypothetically, if China's interpretation of "commercial scale" were indeed correct and 
infringement on a "commercial scale" relates – the w ill to profit aside – simply to infringement in 
large quantities, as defined by China, China's th resholds would still be inconsistent with TRIPS 
Article 61.  The thresholds are so high that even  infringement in quantities that an objective observer 
would deem large is not subject to criminal pro cedures and penalties.  For example, China does not 
consider the sale of 499 pirated videos worth over US $6,000 – which is more than twice as much as 
the average Chinese citizen earns in an entir e year – to be sufficiently large scale.  
9. As set out in the United States' first writte n submission, there are massive quantities of 
counterfeit and pirated goods  available for purchase in China.  This massive infringement is facilitated 
by China's thresholds, which create safe har bours for persons to carry out commercial-scale 
infringement with immunity from criminal procedur es and penalties.  Not only are these thresholds 
inconsistent with TRIPS Article 61, they are al so inconsistent with the obligation of TRIPS 
Article 41.1 to effectively remedy and deter infringement.   
III. DISPOSAL OF CONFISCATED GOODS 
10. TRIPS Article 59, read with TRIPS Article 46, incorporates the requirement to give 
competent authorities (1) the power to order the di sposal of goods outside the channels of commerce 
in a manner that avoids harm to the right holder;  or (2) the power to order the destruction of the goods. China's competent authority lacks these powers in certain situations.    
11. Where the goods could serve a social welfare purpose, China's competent authority is 
compelled to give them to a social welfare body.  Where they cannot serve a social welfare purpose, 
the competent authority has two options: either it mu st sell the goods to the right holder or, if the 
infringing feature can be easily removed and an aucti on is feasible, it must auction them – even if the 
right holder objects.  The competent authority can or der their destruction only as a last resort when 
nobody wants to buy them or the infring ing feature cannot be easily removed. 
12. Besides destroying them, obvious ways to dispo se of goods outside the channels of commerce 
without harming the right holder are to give them to  the right holder or to recycle them.  However, 
these are not options for China's competent authority for at least three reasons:  
(a) Donating goods to social welfare bodies fo r their own use may provide assistance to 
those bodies.  However, it also gives rise to the risk that these bodies will not use the 
goods themselves, but rather sell them, thereby releasing them into commerce. 
Indeed, the Chinese law identified in US Exhibit 59 expressly permits the social 
welfare recipient to sell the goods to rai se income.  Not only is the law on its face 
inconsistent with TRIPS, the Chinese have deemed it necessary in the case of at least 
one donation to establish a side agreem ent making the donation conditional on the 
social welfare body not releasing the goods in to the channels of commerce (I refer to 
the donation to the Red Cross discussed in paragraph 165 of China's first written 
submission.).  Unfortunately, once rel eased into commerce these counterfeit goods 
will compete with the right holder's goo ds and undermine its reputation.   
(b) China's competent authority's next option, namely selling the goods to the right 
holder, imposes an unjustified financial burden on the right holder.  
(c) Selling the goods by way of auction or otherwise to third parties would, by definition, 
mean releasing them into the channels of commerce where, again, they will harm the 
right holder by competing with its legitimate goods.  WT/DS362/R 
Page C-26  
 
  13. Destroying the goods or giving them to the right holder would be more appropriate than any 
of these Chinese options and would meet the TRIPS requirement of not causing harm to the right holder.   
14. Canada also observes that the fourth sentence of TRIPS Article 46 is a principle of disposal.  
Thus it is incorporated into TRIPS Article 59.  In  this regard, China has not demonstrated how the 
auctioning of counterfeit goods after removing the in fringing feature is applied only in exceptional 
cases, as is required by TRIPS Article 46.  
IV. DENIAL OF COPYRIGHT PROTECTION 
15. Lastly, Canada agrees that Members can prohibi t the publication and distribution of works. 
However, Members do not have a right to deny copyright protection to them.  The problem with 
Article 4 of China's Copyright Law is that it denies  copyright protection to prohibited works, contrary 
to TRIPS Article 9.1. 
V. CONCLUSION 
16. In conclusion, Mr. Chairman, Canada shares th e view of the United States that China's 
measures do not conform with TRIPS and must be brought into conformity with it.  I would be 
pleased to answer any questions that the Panel might have later.  WT/DS362/R 
 Page C-27 
 
 
  ANNEX C-8 
 
EXECUTIVE SUMMARY OF THE TH IRD PARTY SUBMISSION BY  
THE EUROPEAN COMMUNITIES 
I. INTRODUCTION 
1. The European Communities makes this third pa rty written submission because of its systemic 
interest in the correct interpretation of TRIPS Agreement  and the DSU .  
II. INTERPRETATION OF ARTICLE 61 TRIPS 
2. The European Communities disagrees with a num ber of China's arguments relating to the 
interpretation of Article 61 TRIPS.  The Eur opean Communities does not see any reason why the 
interpretation of Article 61 TRIPS should follow a different standard than the one which the DSU 
foresees in Article 3.2, 2nd sentence DSU for the interpretation th e covered agreements.  The European 
Communities notes that neither Article 61 TRIPS no r any other provision in the WTO Agreements 
provide for an exception to Article 3.2, 2nd sentence DSU.  Nor is the European Communities aware 
of the existence of a customary rule of treaty inte rpretation that provides for a divergent interpretation 
standard when it comes to obligations relating to criminal procedures or penalties.  The European 
Communities fails to see any relevance of China's re ferences to the Hague Convention, the Brussels 
Convention, issues relating to inte r-state cooperation on criminal matte rs within the United States, the 
Rome Statute of the International Criminal Cour t, UN Security Council Resolution 1373 or an ECJ 
judgment on the scope of the EC competence for dete rmining the type and level of criminal penalties 
for the establishment of such a customary rule of treaty interpretation.  None of these acts evidences a 
general practice  or opinio iuris  relating to treaty interpretation. 
A. NO CONDITIONALITY OF THE OBLIGATION UNDER ARTICLE 61 TRIPS 
3. Article 61 TRIPS explicitly leaves WTO Members flexibility with regard to certain  
obligations. Article 61, 2nd and 3rd sentences TRIPS, for example, enable WTO Members to provide 
for sufficiently deterrent imprisonment or monetary  fines "consistently with the level of penalties 
applied for crimes of a corresponding gravity" and to provide for certain other remedies "in 
appropriate cases".  Article 61, 1st sentence TRIPS, however, does not contain any such limitation 
when it comes to the definition of criminal activit y.  It unequivocally sets out that WTO Members 
"shall provide for criminal procedures and penalties to be applied at least in cases of wilful trademark 
counterfeiting or copyright piracy on a commercia l scale".  With regard to Article 1.1, 2nd sentence, 
TRIPS gives WTO Members flexibility in determining the appropriate implementation method , but 
does not limit the scope  of TRIPS provisions by subjecting th em, as China suggests, to Members' 
"priorities with respect to public order".  Th e European Communities also fails to see how 
Article 41.5 TRIPS, which clarifies that Part III does not require dedicated judicial systems for IPR enforcement or any shifts of resource allocati on, should subject Article 61 TRIPS to any of the 
conditions put forward by China.  Even if the prop er interpretation of Article 61 TRIPS came to the 
conclusion that the terms "on a commercial scale"  required criminalising only a relatively narrow 
range of activity, nothing would supp ort the conclusion that this obligation is subject to the potentially 
unlimited and unpredictable conditions proposed by Ch ina.  The European Communities would like to 
highlight that all these conditions, i.e. China's co mmercial context and legal structure, its priorities 
concerning public order and its resource constraints, relate to factors that are internal to China.  
Similarly to the well established principle of intern ational treaty law that "[a] party may not invoke 
the provisions of its internal law as a justification fo r its failure to perform a treaty" (Article 27 of the 
Vienna Convention ), one cannot expect that the treaty obligations themselves are – absent any express 
provision to the contrary – conditio ned upon such internal factors. WT/DS362/R 
Page C-28  
 
  B. S
UBSEQUENT PRACTICE  
4. The draft EC proposal for a directive on crim inal measures for IPR enforcement, as it 
presently stands, does not provide for any definition of what is "on a commercial scale". 
III. INTERPRETATION OF ARTICLE 59, 1ST SENTENCE TRIPS IN CONNECTION 
WITH ARTICLE 46 TRIPS 
5. In Article 46 TRIPS, the European Communiti es identifies the following principles relevant 
for the destruction or disposal of infringing goods: 
(a) The goal of these remedies is "to create an effective deterrent to infringement". 
(b) There shall not be "compensation of any sort" to the infringer. 
(c) Authorities "shall have the authority" to order two remedies: 
(i) Disposal "outside the channels of co mmerce":  This must be achieved "in 
such a manner as to avoid any harm caused to the right holder";  or 
(ii) Destruction (unless this is excluded by the constitution of the WTO 
Member). 
(d) When considering whether to order any of  these two remedies, authorities shall take 
into account "the need for proportionality be tween the seriousness of the infringement 
and the remedies ordered as well as the interests of third parties". 
(e) When authorities choose not to order either  of the two remedies, simply removing the 
unlawfully affixed trademark from counterfe it trademark goods is not sufficient to 
permit release of the goods into the channels of commerce, unless there is an exceptional case. 
6. The European Communities disagrees with Ch ina's position that the fourth sentence of 
Article 46 is not incorporated into Article 59 and therefore does not apply to customs authorities.  
First, Article 59, 1
st sentence refers to "the principles set out in Article 46" in their entirety, and not 
only to those contained in the first sentence of Ar ticle 46.  Secondly, the European Communities is 
not persuaded by China's argument that Article 59, 2nd sentence constitutes a lex specialis  for 
Custom's treatment of counterfe it trademark goods derogating the ge neral provision of Article 46, 
4th sentence. 
7. The disposal must be "in such a manner as to avoid any harm caused to the right holder" 
(emphasis added).  The use of the word "any" clearly suggests that even a slight degree of harm is too 
much. 
IV. DENIAL OF COPYRIGHT PROTECTION 
8. China acknowledges that Article 4.1 of its Copyright Law denies copyright protection for 
works with certain illegal ("unconstitutional or  immoral", "reactionary, pornographic, or 
superstitious") content.  The European Communities is not persuaded by China's legal argument that 
Article 17 of the Berne Convention allows the denial of copyright protection or limiting exclusive 
rights of copyright holders.  Article 17 of the Berne Convention allows governments to control the 
dissemination of works, but does not exempt work s from protection or limits exclusive rights of 
copyright holders.  China's denial of copyright prot ection pursuant to Article 4.1 of its Copyright Law  WT/DS362/R 
 Page C-29 
 
 
  is not permitted by Articles 2 and 2bis of th e Berne Convention which allow exempting certain 
categories of works (e.g. official text of a legisla tive, administrative and legal nature) from protection.  
There is no provision allowing exempting works of " illegal content" from copyright protection.  Nor 
is it covered by the provisions in the Berne Conve ntion, such as Articles 9(2), 10 or 10bis, that 
provide for limited exceptions to certain  exclusive rights , or by Article 13 TRIPS. 
V. CONCLUSION 
9. This dispute gives the Panel the opportunity to  preserve the rights and obligations of the 
parties under the TRIPS Agreement by clarifying seve ral TRIPS provisions.  Part III of the TRIPS 
Agreement strikes a delicate balance between the ne ed for "effective and appropriate means for the 
enforcement of trade-related intellectual property ri ghts" and the respect for "differences in national 
legal systems".  Therefore, it is imperative to careful ly clarify this balance through a strict application 
of the customary rules of interpretation of pub lic international law as required by Article 3.2, 
2nd sentence DSU, and not through recourse to alle ged "powerful default norms" or by subjecting 
obligations to what WTO Members may find "appropr iate" or in line with their "priorities".  The 
European Communities hopes that its comments ar e of assistance to the Panel in this task. WT/DS362/R 
Page C-30  
 
  ANNEX C-9 
 
EXECUTIVE SUMMARY OF THE ORAL STATEMENT BY  
THE EUROPEAN COMMUNITIES 
I. INTERPRETATION OF ARTICLE 61 OF THE TRIPS AGREEMENT 
1. The European Communities makes the following observations relating to the definition of 
trademark counterfeiting or copyright piracy "on a commercial scale". 
2. With regard to the ordinary meaning , the term "on a commercial scale" has two elements. 
"Commercial" refers to matters "p ertaining to, or bearing on commerce" or "likely to make a profit".  
"Scale" means a "relative magnitude or extent; de gree, proportion".  There is no indication that the 
"magnitude or extent", "degree" or "proportion" to  which the term "scale" refers can only be assessed 
on the basis of "countable" elements, such as the am ount of turnover or profit.  The "scale" of an 
activity could also be determined through other el ements indicating a certain degree or dimension, 
such as the circumstances surroundi ng the activity.  Read together, the terms "commercial" and 
"scale" would therefore denote activities of such a di mension that they pertain to a business or to the 
generation of profits.  The ordinary meaning of "on a commercial scale" does not limit the scope of 
Article 61 to activities that involve certain quantities – be it in value or numbers – of counterfeit or 
pirated goods. 
3. Concerning the context , Article 61, 1
st sentence contains, in contrast to the more flexible 
sentences 2, 3 and 4, the strict obligation – indicated by the use of the terms "shall" and "at least" – to 
provide for criminal enforcement in case of certa in activities.  There is no subsequent practice 
fulfilling the conditions of Article 31(3)(b) of the Vienna Convention .  There is no EC legislation on 
criminal IPR enforcement defining "on a commerc ial scale".  Directive 2004/48/EC on civil and 
administrative IPR enforcement defines "on a comme rcial scale" through other than quantifiable 
elements, i.e. as acts "carried out for direct or i ndirect economic or commercia l advantage;  this would 
normally exclude acts carried out by end-consumers acting in good faith". 
4. As regards the object and purpose , Part III of the TRIPS Agreement aims at the provision of 
"effective and appropriate means for the enforcemen t of trade-related intellectual property rights" 
while respecting "differences in national legal systems" .  Article 61 reflects this balance.  Its sentences 
2, 3 and 4 emphasise flexibility, for example with rega rd to the level of imprisonment or the inclusion 
of certain other remedies.  Article 61, 1st sentence, on the other hand, contains a hard-and-fast rule 
obliging WTO Members to provide for criminal en forcement against at least two types of IPR 
infringements.  The purpose of Article 61, 1st sentence is to single out these two types of 
infringements because they have a particular poten tial of harming right holders.  This purpose is 
reflected in the term "on a commercial scale".  It refers to activities that tend to be particularly 
harmful because they pertain to a business or the ge neration of profits which means that they typically 
occur as part of a larger plan, repeatedly, systemat ically or in larger dimensions.  Activities "on a 
commercial scale" are potentially more harmful th an "occasional" infringements by private persons. 
5. In the light of this object and purpose, the term "on a commercial scale" must comprise all 
activities with a particular potential of harm which results from them pertaining to a business or profit generation.  Quantitative thresholds, for example based on the numbers or value of infringing goods, 
may capture "commercial scale" activities in some  circumstances.  There may be, however, other 
circumstances in which they do not.  Japan gave the good example of a case in which a person sells a 
relatively small number of low value counterfeit pr oducts, but in which the professional organization 
of the activity, for example systematic cooperation with other persons, indicates a business dimension.  
In our view, this would be an activity which has a particularly high potential of harming right holders  WT/DS362/R 
 Page C-31 
 
 
  because it is part of a business and which should theref ore be considered "on a commercial scale".  In 
order to capture all infringements "on a commercial scale", WTO Members would need to enable their 
criminal law enforcement authorities to take into  account not only quantitative thresholds but also 
additional elements indicating the business dimension of the activity. 
6. Given the clear interpretation result pursuant to Article 31 of the Vienna Convention , there is 
limited interest in recurring to supplementary means of interpretation within the meaning of  
Article 32  of the Vienna Convention .  The 1988 WIPO Memorandum confirms the above 
interpretation since it refers to both quantitative a nd non-quantitative factors and is clearly not meant 
to be exhaustive.  It may be that some delegati ons suggested formulations such as "commercial" or 
"for commercial purposes" during the TRIPS negotia tions, but the negotiating record does not tell why 
negotiators finally chose the term "on a commercial scale".  The insertion of the term "scale" does not 
limit the scope of Article 61, 1st sentence to activities to be assess ed on purely quantitative factors. 
7. In sum, the term "on a commercial scale" denot es activities of such a dimension that they 
pertain to a business or to the generation of profits .  Activities can have this business dimension even 
if they do not meet quantitative thresholds based  on numbers or values of infringing goods.  
Additional factors can be indications of business organization or profit orientation. 
II. INTERPRETATION OF ARTICLES 59 AND 46 OF THE TRIPS AGREEMENT  
8. A core interpretation question raised by the second US claim is whether or to what extent the 
obligation in Article 59 permits WTO Members to s ubject the "authority to order the destruction or 
disposal of infringing goods" to conditions. 
9. The ordinary meaning  of the terms "shall have the authority to order" in Articles 59 and 46 is 
that customs authorities must have the power to avail themselves of these remedies.  It does not 
clarify in which circumstances they must be able to do so. 
10. From a contextual  point of view, the language used in Article 44 ("judicial authorities shall 
have the authority to order …" – "Members are not obliged to accord such authority in respect of …") 
could indicate that WTO Members knew how to expressly qualify the obligation to provide a certain 
authority if they wanted to. Another example is  the clause in Article 46 exempting WTO Members 
from the obligations to grant destruction authority if this is "contrary to existing constitutional 
requirements".  One could argue that in the absence of such express qualifications, WTO Members should fully and unconditionally accord the authorities in question. 
11. With regard to the object and purpose , Article 46 sets out that the goal of providing 
destruction and disposal authorities is "to create an effective deterrent to infringement".  In the view 
of the European Communities, this purpose could be undermined if these remedies only existed in 
theory and customs authorities were effectively unable to order them.  This could be the case if they 
were available only under overly rest rictive conditions.  In the end, this will be largely a question of 
degree involving factual assessments, such as the scope of discretion of customs authorities. 
III. DENIAL OF COPYRIGHT PROTECTION 
12. China's denial of copyright protection for work s of "unconstitutional" content is inconsistent 
with Article 9.1 of the TRIPS Agreement in conn ection with Article 5(1) of the Berne Convention 
(1971) since it denies authors of the relevant works the exclusive rights granted by the TRIPS Agreement and the Berne Convention (1971). 
13. Article 4.1 of China's Copyright Law could also be inconsistent with Article 9.1 of the TRIPS 
Agreement in connection with Article  5(2) of the Berne Convention (1971) .  This would be the case if WT/DS362/R 
Page C-32  
 
  the enjoyment and exercise of copyright were c ontingent upon the dissemination approval by Chinese 
censorship authorities, i.e. a "formality". 
14. The United States claims that such a nexus ex ists under Chinese law referring to the wording 
of both the Copyright Law and the censorship laws .  China denies any link between the operation of 
Article 4.1 of the Copyright Law and the content re view process and refers to instances in which 
copyright was allegedly enforced while content review was still pending.  Without commenting upon 
these factual questions, the European  Communities would be reticent to give such instances too much 
weight in the assessment of an "as such" claim that  appears to be based on the plain wording of the 
Chinese law.  If the copyright enforcement practice  played a role in the assessment of the US claim, 
one would need to explore more systemati cally how decisions of the Chinese censorship 
administration affect Chinese copyright enforcement authorities.  WT/DS362/R 
 Page C-33 
 
 
  ANNEX C-10 
 
EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION  
BY JAPAN 
I. THE MEANING OF "ON A COMMERCIAL SCALE" IN ARTICLE 61 TRIPS1  
A. THE ORDINARY MEANING OF "COMMERCIAL SCALE " SUGGESTS AN ASSESSMENT OF A 
VARIETY OF QUANTITATIVE AND QUALITATIVE ELEMENTS    
1. The starting point of an analysis under Article 31 of the Vienna Convention on the Law of 
Treaties ("VCLT") is still the ordinary of the meaning  of the text.   
1. Syntax and dictionary definitions 
2. The term "commercial scale" consists of two parts: a noun  ("scale"), and an adjective  
("commercial").  The adjective "co mmercial" modifies the noun "scale".  
3. The interpretation of the noun "scale " is relatively straightforward.  By its dictionary 
meaning, the term "scale" denotes a certain relativ e magnitude, an indicator of graduated size or 
proportion.  
4. The question then is when  that "scale" becomes "commercial" .  The Shorter Oxford English 
Dictionary (Fifth edition, 2002, p. 459) defines the English  word "commercial" as "Engaged in 
commerce; of, pertaining to, or bearing on commerce . . . Interested in financial return rather than 
artistry; likely to make a profit; regarded as a me re matter of business".  The OED further defines 
"commerce" as: " 1. a.   Exchange between men of the produc ts of nature or art; buying and selling 
together; trading; exchange of merchandise".  
5. The French versions of the TRIPS Agreement shed further light on the meaning of 
"commercial".  The French  version of Article 61 TRIPS refers to "une échelle commerciale".  The 
French word "commercial" is defined by the Petit Robert, Dictionnaire de la Langue Française 
(ed. 2004), as "1. Qui a rapport au commerce", and "c ommerce" is: "1. Opérati on, activité d'achat et 
de revente (en l'état ou après transformation) d' un produit, d'une valeur ... commercialisation, 
distribution; achat, circulation, échange, négoce, vente."  "Commerce" in French also has an 
"organisational" meaning and indicates the shop or sales point of a company: "3.Un commerce: point 
de vente tenu par un commerçant, fonds de commerce. => boutique ..."2 
                                                      
1 Article 61 TRIPS provides for a minimum obligation ("at least") for WTO Members to provide for 
criminal procedures and penalties for trademark co unterfeiting and copyright piracy, whenever such 
counterfeiting or piracy reaches "a commercial scale".  In this regard, Japan notes that China argues that the 
United States bears a "significantly higher burden" in ad vancing its Article 61 claim since it requires a Member 
to enact a criminal law that meets with specific inte rnational standards (China's first written submission, 
para.49).  Japan does not agree with this statement of  China.  Japan believes that the United States bears a 
conventional  burden to establish a  prima facie  case as it does in advancing other claims, for a WTO Member is 
required to comply with any obligation enshrined in the WTO Agreements as it is agreed in the text, regardless 
of whether the obligation relates to the Member's criminal  law or not.  In examining the TRIPS Article 61 claim 
advanced by the United States in this dispute, the Panel should discharge its task first by clarifying the meaning 
of the provision, including the meaning of the term "on a commercial scale", and thus by clarifying the specific 
obligation on which the WTO Members have agreed under the provision, and then by concluding whether China complies with the obligation or not. 
2 The Spanish definition of "comercial" rese mbles that of "commercial" in French. WT/DS362/R 
Page C-34  
 
  6. In sum, the word "commercial" indicates cer tain qualitative elements.  The term "scale" 
denotes a certain relative magnitude, an indicator of graduated size or proporti on.  The combined term 
"commercial scale" denotes that there must be a buying and selling of products, or some sort of market-based action (denoted by "commercial") and that these actions must be of certain level in 
some relative way (be of some "scale").  In additio n, certain definitions of the word "commercial", 
particularly in French, suggest that some sort of organizational or representational element may be 
relevant as well.  In other words, the combinati on of "commercial" (i.e., a transaction defined by 
buying and selling) and "scale" (i.e., the relative scal e of a transaction) suggests that the numbers of 
infringing goods involved, the overall value of an o ffer or a transaction, or organizational elements, 
and thus the repetition of the action (repeated sales, repeated infringements), can each play a role in a 
finding that a certain infringement achieves "commercial scale". 
2. Examples of "commercial" and "commercial scale" sales transactions 
7. First, if trademark counterfeit goods are sold in a store, even in relatively small quantities at a 
time, this would logically constitute "commercial" activity.  This is of course clear when that store is a 
grocery store that sells hundreds of tubes of toothpa ste, dozens of bottles of beer and other similar 
goods.  But consider also a small store with a b eautiful showroom in which two counterfeit high-end 
luxury cars are offered for sale.  Nobody would seriously dispute that the store is operating on a commercial scale.  Indeed, the value of the goods (inf ringing or infringed) may be one reason to arrive 
at the presumption that this offer represents counterfeiting on a "commercial scale".  Other factors, such as the professional organization needed to set up such a storefront and the operation of producing and selling these high-end luxury cars, render this presumption irrebuttable.  Expressed differently, 
"scale" denotes a relative size or quantity, the assessmen t of which is further informed by the term 
"commercial", which covers additional, more qualita tive elements.  In these examples factors such as 
the organizational structure and the simple optics of the transaction (selling it in a store) all demonstrate the "commercial" nature of the scale.   
8. Now consider a person on the street in Geneva who is found with five packets of counterfeit 
cigarettes that he is offering for sale to tourists passing by for, say, CHF 1,- per packet.  Despite the 
relatively small number of products and the low valu e of the counterfeit items we can not immediately 
conclude that this person is not operating on a "commercial scale".  Ot her questions need to be asked: 
did he happen to have found some cigarettes on the st reet and is trying to sell them?  Do the cigarettes 
look as if they have been professionally counterfeite d?  Does he have a friend around the corner with 
dozens or hundreds more cigarette packs ( i.e., the organizational element)?  What if the same person 
pulls open his coat and also has five counterfeit luxu rious watches for sale, a nd offers a list of other 
products that one can custom-order from him?   
9. If one encounters offers or transactions invol ving significant quantities of counterfeit goods, 
even of modest value, the likely conclusion is th at this represents counterfeiting on a "commercial 
scale".  Similarly, offers or transactions representi ng substantial value, even if covering only a few 
counterfeit items, will also amount to counterfeiting on a "commercial scale".  However, as the above 
examples illustrate, these two instances do not  exhaust the possibilities of commercial scale 
counterfeiting.  Even much smaller quantities of goods, and smaller values involved can still represent 
"commercial scale" infringements because of additi onal circumstances (such as indications of a 
professional organization, or of easy repetition).  Accordingly, while quantitative thresholds may 
identify many instances of "commercial scale" coun terfeiting, mere quantification of "commercial 
scale" does not capture all instances of commercial scale counterfeiting, and when smaller quantities 
are at stake further – qualitative – elements may need to be considered.   WT/DS362/R 
 Page C-35 
 
 
  3. Conclusion 
10. It is clear that a mere quantitative standard cannot capture all counte rfeit operations taking 
place on a "commercial scale".  While "commercial scal e" can justifiably be assumed in the case of 
high quantities, small quantities do not necessarily signif y that an operation is not "commercial".  We 
showed examples above of situations where despite  small quantities, certain infringements can be 
considered as being on a "commercial scale".  Thus , "commercial scale" suggests a test that, while 
accepting that higher quantities (volume, value) suggest  "commercial scale", will also require to take 
into account the specific circumstances of each i ndividual infringement, such as the organizational 
characteristics of the infringer, and so forth in or der to establish whether such "commercial scale" is 
reached.   
11. The examples above further indicate that a singl e quantitative standard generally applicable to 
any kind of infringing goods may not capture certain  infringements "on a commercial scale" in light 
of the fact that the prices and the numbers of commercially-distributed goods are various in actual markets.  For example, a quantitative standard that is low enough to effectively work in dealing with 
trademark counterfeit cars may be too high to be equally effective in dealing with trademark 
counterfeit toothpaste, whether or not the standard at issue is based on the number of infringing goods 
or revenue gained through selling goods.  The meani ng of the term "commercial scale" thus needs to 
be determined, taking into acc ount relevant facts pertinent to infringing goods at issue. 
B. P
REPARATORY WORK CONFIRMS THAT VARIO US QUANTITATIVE AND QUALITATIVE FACTORS 
CAN BE RELEVANT TO THE DETERMINATION OF "COMMERCIAL SCALE " 
12. The term "commercial scale" appears almost immediately in the discussions on counterfeiting 
of the GATT Negotiating Group on trade-related aspects of intellectual property rights.  Participants 
were reported to have referred to  a WIPO document where the same term was used.  This appears to 
have been a reference to a 1988 Memorandum prepar ed by WIPO's International Bureau, where the 
requirement of "commercial scale" was formulated both in respect of counterfeiting and of piracy.  
The Bureau Memorandum stated: 
"Commercial scale is a notion which will have to be applied taking into consideration 
the circumstance accompanying the ma nufacture. The quantity of the goods 
manufactured, the way in which they were, are or are intended to be used and the will to make profit are among the factors that  the courts will have to take into 
consideration." 
13. This definition confirms the interpretation of "commercial scale" as a notion that can only be 
determined on an ad hoc  basis, taking into account a number of factors, such as quantity, organization 
and profit.  
14. Thus, the preparatory work of the TRIPS Agreemen t offers further, albeit indirect, insight in 
what the drafters of Article 61 TRIPS might have  had in mind.  The WIPO International Bureau 
Memorandum confirms the interpretation derived from the ordinary meaning of the words that 
"commercial scale" entails an assessment of a variet y of quantitative and qua litative elements taking 
into consideration the particular circumstances of each case and not a single-quantitative-threshold 
approach.  WT/DS362/R 
Page C-36  
 
  II. RELATIONSHIP BETWEEN CHINA'S QUANTITATIVE THRESHOLDS AND 
CERTAIN COMMERCIAL SCALE INFRINGEMENTS  
15. China's Criminal Law and relevant judicial inte rpretations set a series of single, specific and 
fixed quantitative thresholds that determine whethe r criminal procedures and penalties are effectively 
available regardless of case-specific facts pertaining infringing goods at issue.  
16. In view of above general interpretative observa tions, it appears that there are two main points 
to make with regard to China's current threshol ds.  First, the Panel should examine whether the 
thresholds established in China's Criminal Law ar e based on single quantitative thresholds that do not 
allow prosecutors to take into account all circumst ances that may be relevant to a determination of 
commercial scale.  Second, the Panel should exam ine whether comparison of these single quantitative 
thresholds to the actual market values of various trademarked goods demonstrates that the quantitative 
standards in China's Criminal Law are so high as to automatically exclude many instances of 
"commercial scale" trademark infringement.  In light  of the various prices and the numbers of goods 
distributed in a market, it is necessary to examin e whether these single quantitative standards provide 
criminal procedures for infringements on a "commerc ial scale".  Moreover, quantities of thresholds 
are considered to be substantial am ounts, particularly if one takes into  consideration that the value of 
the illegal business volume refers to the value of the counterfeit goods, rather than the retail value of 
the legitimate goods.  
17. However, even if the thresholds were based  on the value of the trademarked goods – as 
opposed to the value of the infringing product  – many instances of "commercial scale" infringement 
could remain excluded.  The example of cigarette sales  discussed above is a case  in point.  In the case 
of a store selling cigarettes, such an assessment would begin with the quantities involved.  Someone 
selling thousands of packets of cigarettes (the numb ers needed for cigarettes to reach China's current 
"commercial scale" thresholds) is clearly operating a commercial scale business.  However, even if a 
store offers substantially smaller quantities of c ounterfeit cigarettes (say, a few hundred packages of 
brand X), the organizational element (a store), or the relative frequency (regular supplies) would still 
point to "commercial scale".   
18. In sum, any system based on a single quantitative standard by definition will run the risk of 
exempting certain "commercial scale" trademark infringements from prosecution and penalties, unless 
that quantitative threshold becomes so low as to be effectively meaningless.  Such a single standard is 
bound to create a safety area for certain commercia l scale infringements as demonstrated by the 
examples provided above.  China's Criminal Law th resholds are problematic for a second reason as 
well.  They do not seem to take into account that prices and value of goods vary widely from very low 
(e.g., a packet of cigarettes) to very high ( e.g., a high-end luxury car).  As a result of China's single 
value- or earnings-based thresholds, and the high le vel of such thresholds, a number of categories of 
counterfeit products can be automatically excl uded from criminal prosecution and penalties. 
   WT/DS362/R 
 Page C-37 
 
 
  ANNEX C-11 
 
EXECUTIVE SUMMARY OF THE ORAL STATEMENT  
BY JAPAN 
I. BURDEN OF PROOF AND SCOPE OF OBLIGATION 
1. China has argued that the United States bears a "significantly higher burden" in advancing its 
Article 61 claim since it requires a Member to enact a criminal law that meets with specific 
international standards.1  The burden of proof in WTO dispute settlement has generally been 
interpreted to require the complaining party to est ablish a prima facie case of violation.  The burden 
then shifts to the responding party to show that in fact such a violation did not occur.  Thus, what the 
United States would ordinarily have to show is a prima facie case that China's legal system does not 
"provide for criminal procedures and penalties to be  applied at least in case s of willful trademark 
counterfeiting or copyright piracy on a commercia l scale" and that the remedies required to be 
available in the second sentence of Article 61 are not available.   
2. Whether Article 61 envisions a particular burde n of proof must be determined through an 
interpretation of Article 61 pursuant to customary rules of treaty interpretation as laid down in the 
Vienna Convention on the Law of Treaties.   
3. In this regard, Japan notes first of all that there is nothing in the ordinary meaning of 
Article 61 TRIPS, as read in its context and in light  of the object and purpose of the agreement, that 
would suggest any particular burden of proof.  In deed, by its ordinary meaning, Article 61 TRIPS 
establishes an explicit standard for WTO Members to comply with.  It provides 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 comm ercial scale.  Remedies available shall  include 
imprisonment and/or monetary fines sufficient to pr ovide a deterrent, consistently with the level of 
penalties applied for crimes of a corresponding grav ity" (our emphasis).  WTO Members agreed to 
this standard and, indeed, agreed to make in par ticularly binding by using the word "shall" for both 
requirements set forth.  Thus, the ordinary meaning of Article 61 in no way suggests any particular 
burden and, in fact, the language used suggests that the legal standard set forth is a strict one (demonstrated particularly by the words "shall" and "at least").  
4. China's principal argument why Article 61 woul d require an especially "high" burden of 
proof, is that this provision relates to criminal law.   In particular, China points to other international 
agreements that it argues show certain levels of defe rence to parties to the agreements in the area of 
criminal law.  Japan fails to see how this would cha nge the burden of proof or the particular obligation 
provided for under Article 61 TRIPS.  Even if China is right that other treaties that set out international agreements concerning issues relating to a country's criminal laws impose only general 
obligations, affording extensive di scretion regarding implementation
2, that some countries do so with 
regard to their state-level laws, and that intern ational courts have been exceedingly reluctant to 
impose specific criminal standards on sovereign states3, this only means that the parties to those 
treaties agreed so and does not in any way affect  the expressly agreed obligation provided for in 
Article 61 TRIPS.  Indeed, the customary rules of  treaty interpretation as laid down in the Vienna 
Convention on the Law of Treaties nowhere provide that  the approach to a certain  issue in a particular 
treaty would in any way have bearing on the interpretation of a provision in another, entirely unrelated, treaty.   
                                                     
 
1 China's first written submission, para. 49. 
2 China's first written submission, para 55. 
3 China's first written submission, para. 58. WT/DS362/R 
Page C-38  
 
  II. DEFINITION OF "COMMERCIAL SCALE" IN ARTICLE 61 OF TRIPS 
A. T
HE ORDINARY MEANING OF "COMMERCIAL SCALE " AND ACTUAL EXAMPLES OF 
"COMMERCIAL SCALE " INFRINGEMENTS  
5. China has suggested that the in terpretation of the term "commercial scale" presented by the 
United States does not give sufficient weight to the term "scale".  Its own definition, however, appears 
to replace the word "commercial" by "significant".4 Japan agrees that it is important that sufficient 
weight is given to both words in the expression "comme rcial scale".  As we have set out in our written 
submission, we believe that an interpretation of  Article 61 TRIPS demonstrates that a variety of 
factors may have to be taken into account in or der to determine whether an infringement achieves 
"commercial scale".  As the interpretation laid out in Japan's written submission shows, Japan would 
certainly agree that when the "scale" of infringeme nts is significant or large such infringements would 
usually be commercial.  However, the examples of "commercial" activity that Japan presented in its 
written submission also show that "commercial scale" does not necessarily mean that quantities 
(values or volumes) have to be of any particular si ze and, indeed, that such quantities can be relatively 
small.  Thus, Japan believes that the precise " quantitative level" that will constitute "commercial 
scale" can only be established taking into account a number of quantitative and qualitative factors.  
6. Indeed, Japan has already noted that the word "scale" denotes a certain relative magnitude, an 
indicator of graduated size or proportion.5  It does not simply equal "large" or "a lot".  It is also 
important to note that the word "commercial" does not necessarily signify "significant" or "a 
significant magnitude of activity", as China suggests.6  Instead, Article 61 TRIPS specifically uses the 
word "commercial", not "significant" , or "substantial" or "large".  The precise scale required is thus 
only defined by the word "commercial".   
7. In this context, Japan would like to re-e mphasize the ordinary meaning of the word 
"commercial".  A review of the dictionary meani ng of this word in English, French and Spanish 
shows that "commercial" denotes that there must be a buying and selling of products, or some sort of 
market-based action (denoted by "c ommercial").  Definitions of the word "commercial", particularly 
in French and Spanish, also suggest that some so rt of organizational or representational element may 
be relevant.  This confirms that it is not a particular value or a particular volume as such that makes 
something "commercial", but that a number of qua litative and quantitative factors together determine 
when the "scale" is such as to r each the level of "commercial".   
8. In our written submission, we have shown that an examination of facts in light of the ordinary 
meaning of "commercial scale" shows that in circ umstances where the quantiti es (volumes or values) 
involved are relatively high, "commercial scale" w ill usually be present.  For example, someone 
offering for sale 500 bottles of laundry detergent is clearly operating on a commercial scale.  Thus, 
certain minimum thresholds are an appropriate way to capture at least such presumed situations of 
commercial scale.  
9. On the other hand, Japan has also explained th at much smaller quantities (volumes or values) 
can still constitute "commercial scale" depending on the circumstances of the case.  Thus, for 
example, when counterfeit goods are sold in a st ore, even relatively small quantities would likely 
constitute "commercial" scale.7  Similarly, a street vendor, who is caught with just a few designer 
handbags that he is offering to passers-by, may also be considered to operate on a "commercial scale".  
Similarly, even when a shop offers for sale only on e or a few of such bags, "commercial scale" can 
                                                      
4 China's first written submission, para. 72. 
5 Japan's third party submission, para. 8. 
6 China's first written submission, para. 72. 
7 Japan's third party submission, para. 13.  WT/DS362/R 
 Page C-39 
 
 
  nevertheless be presumed, based on the professional na ture of the operation.  Conversely, there are 
clearly circumstances where the number (volume) of  goods alone, or the value of such goods, may not 
of themselves be sufficient to demonstrate the "comme rcial" nature of the "scale".  However, in such 
cases, a more complete assessment of the circum stances could still lead to the conclusion that 
"commercial scale" is achieved.   
B. THE NEGOTIATING HISTORY C ONFIRMS THIS READING OF ARTICLE 61 TRIPS 
10. In our written submission, we pointed to the discussion of the term "commercial scale" in the 
GATT Negotiating Group on trade-related aspects of in tellectual property rights where reference was 
made to a WIPO document where the same term was used.8  
11. Japan is glad to note that China appears to argue  that this document confirms the need for an 
ad hoc, case-by-case assessment of whether "commercial scale" has been achieved.9  However, even 
if one follows this line of interpretation, Japan w ould note that this does not mean that Members are 
provided full discretion as to whether they comply w ith the standard set out in Article 61.  There is 
nothing that suggests that this standard is su ch that a WTO panel could not review whether a 
Member's decisions on when "commercial scale" is reached, or how to formulate its laws in a way 
that would cover situations where such "commercial scale" is reached, are consistent with the express 
requirement laid down in Article 61 TRIPS.  
12. Japan also refers to China's position that the reference to the WIPO document, as well as use 
of the term in certain other context, would in some way suggest that "commercial scale" would be 
"akin to ongoing, industrial production".10  Most importantly, the ordinary meaning of the word 
"commercial" confirms that Members did not agree to  a standard of "industrial scale".  If they would 
have, they would not have used the word "comme rcial" which, as we discu ssed above, is a broader 
term that refers to actions of buying and selling, organizational elements and the like.  If Members had 
agreed upon a narrower standard, the text would ha ve referred to "industrial scale" or "ongoing 
operations".  The ordinary meaning of "commercial" is broader than that. 
13. Japan also does not see how the use of the word "manufacturing" in the WIPO document 
would change this interpretation.  The TRIPS Agr eement deals with the use and sale of counterfeit 
products.  When the WIPO committee discussed "comme rcial scale" in the particular context of 
"manufacturing", it in no way suggested that the counterfeit activity would have to take place on a 
scale "akin to ongoing, industrial production".11  Instead, it merely happened to be discussing the 
concept of "commercial scale" in relation to manufacturing activity.  
14. Indeed, elsewhere in the same document, the WIPO Committee takes a broader approach and 
refers to the concept of "commercial scale" as releva nt in determining whether certain acts in the form 
of packaging, exportation and importation, the offeri ng for sale, rental, lending or other distribution 
and other forms of transaction constitutes a fo rm of counterfeiting under the WIPO Model 
Provisions.12  Thus, other than China seems to s uggest, there is no necessary link between 
"manufacturing" and "commercial scale".   
                                                      
8 Japan's third party submission, para. 22; MTN.GNG/NG11/7, at para. 35 (21 June 1988). 
9 China's first written submission, para. 74. 
10 China's first written submission, para. 76. 
11 China's first written submission, para. 76. 
12 WIPO Committee of Experts on Measures Agains t Counterfeiting and Piracy, Model Provisions for 
National Laws, C&P/CE/2, circulated on 18-19 February 1998, para. 34.   WT/DS362/R 
Page C-40  
 
  III. RELEVANCE OF OTHER PRINCIP LES IN THE TRIPS AGREEMENT 
15. Japan notes first of all that in the case of Article 61 TRIPS, Members have agreed on a 
specific standard that all WTO Members have to comply  with.  Indeed, Article 61 contains an explicit 
obligation ("shall") for Members to provide for cr iminal procedures and penalties "at least" when 
infringements reach a "commercial scale".  Japan do es not believe that the provisions referred to by 
China as context are such as to change the meaning of that expressly agreed provision or standard.  
Japan also notes that, based on the principle of eff ective treaty interpretation, such provisions in any 
event could not be read in a way that effectivel y reads out of the agreement the standard expressly 
agreed to by Members in Article 61.   
A. A
RTICLE 1.1 TRIPS 
16. Japan begins by noting that almost the entire discussion of Article 1.1 TRIPS in China's first 
written submission (paragraphs 93 through 97) actually relates to the general negotiating history of 
the TRIPS Agreement – not to the specific interpre tation of Article 1.1 TRIPS.  Japan notes that it 
does not see how general statements made by certain  Members with regard to the TRIPS Agreement 
as a whole would change the legal meaning of par ticular provisions of the TRIPS Agreement agreed 
to by all Members that provide expressly for certain  obligations for WTO Members.  In Japan's view, 
it is not appropriate to attribute this kind of broa d relevance to general statements by certain Members 
in the negotiating history of an agreement in the in terpretation of individual, express provisions of the 
agreement.  It would not be right to change th e meaning of language explicitly agreed to by all 
Members based on the general negotiating statements of some.  
17. Japan also notes that a review of the full text of Article 1.1 TRIPS shows that, as a whole, it 
should be read to require Members to "give eff ect" to the express obligations elsewhere in the 
Agreement – i.e., to implement the agreement into domestic law.  Thus, Article 1.1 TRIPS reads, in 
full:  
"Members shall give effect  to the provisions of this Agreement.  Members may, but 
shall not be obliged to, implement  in their law more extensive protection than is 
required by this Agreement, provided that  such protection does not contravene the 
provisions of this Agreement.  Members sh all be free to determine the appropriate 
method of implementing  the provisions of this Agreement within their own legal 
system and practice." (our emphasis) 
 
18. In other words, Article 1.1 deals principally with  the obligation for Members to put into effect 
– i.e., implement in domestic law – the provisions of th e TRIPS Agreement ("shall give effect to the 
provisions of this Agreement").  The first sentenc e of the provision provides the general obligation for 
Members to do so.  The second sentence provides that  Members may, but do not have to, go further in 
the protection they accord, as long as such additional pr otection is not required u nder the provisions of 
the Agreement.  The third sentence – which China refers to – provides that "Members shall be free to 
determine the appropriate method of  implementing the provisions of th is Agreement within their own 
legal system and practice".  As the Appellate Body  has explained, "Members, therefore, are free to 
determine how best to meet their obligations under the TRIPS Agreement  within the context of their 
own legal system."13  Yet this provision cannot be read in any way to imply that Members are free to 
modify their TRIPS obligations when they impl ement these obligations in their domestic legal 
systems.  
                                                      
13 WTO Appellate Body, India — Patents (US) , at para. 59 (WT/DS50/AB/R, 16 January 1998).  WT/DS362/R 
 Page C-41 
 
 
  19. Moreover, a different interpretation of Article  1.1 TRIPS – that is, one that would allow 
Members not to impose criminal procedures and penalties in certain cases of "commercial scale" counterfeiting – would run counter to the principle of  effective treaty interpretation.  If the last 
sentence in Article 1.1 TRIPS were read so as to change the explicit requirement in Article 61 TRIPS 
– to provide for criminal procedures and penalties – to a discretionary ability for Members to provide 
for other kinds of procedures and penalties (or indeed, for none at all), this would effectively read the 
express obligation contained in Article 61 TRIPS out of the Agreement.   
B. A
RTICLE 41.5  TRIPS 
20. According to its terms, Article 41.5 is not concerned with the question of criminalization as 
such that concerns us here, i.e., with the qu estion whether a WTO Member has properly established 
criminal procedures and penalties for commercial scale counterfeiting and piracy as envisaged by 
Article 61.14  If anything, the principles of Article 41.5 TRIPS tell us something about the amount of 
resources a WTO Member has to devo te to the enforcement of such criminal procedures and penalties 
for commercial scale counterfeiting, as opposed to the la w in general.  However, whatever its general 
principles mean, Article 41.5 cannot be read to cont radict the specific requirement of Article 61 that 
certain infringements must be criminalized.  Of course, whenever a particular behavior is 
criminalized, this means extra work for public pr osecutors or criminal courts.  The WTO Members 
who drafted Article 61 TRIPS were certainly awar e of this, yet agreed nonetheless to criminalize 
certain forms of counterfeiting and piracy accordi ng to a common standard ("commercial scale").  
21. China appears to suggest that in deciding when to criminaliz e willful trademark counterfeiting 
or copyright piracy) a WTO Member, ultimately, is  free to assess whether such infringements pose a 
threat to its public order,15 or how their criminalization would fit in with its treatment of other 
commercial offenses.16  This approach ignores the explicit wording and obligation of Article 61, 
pursuant to which the critical question in deciding when to criminalize willful trademark counterfeiting (or copyright piracy) is whether such  infringements have reached "commercial scale".  
This commonly defined minimum requirement is to be interpreted according to the principles of the 
Vienna Convention, not according to a WTO Memb er's unilateral apprecia tion of its public order 
requirements or of the relationship with othe r commercial behaviour which it has decided to 
criminalize (without their being any requirement in WTO law to do so).  
IV. CONCLUSION 
22. For the reasons set out above and in our writte n submission, Japan believes that the term 
"commercial scale" in Article 61 should be inte rpreted as imposing an obligation on Members to 
provide for criminal procedures and penalties not on ly in cases involving relatively large numbers of 
counterfeited goods or where such goods represent substan tial value, but also in situations that, while 
involving smaller numbers of goods  or lower value, still amount to counterfeiting on a commercial 
scale because of particular qualitative circumstan ces (e.g., organizational elements, frequency). 
  
                                                     
 
14 The issue presented in the present dispute is not whether China must put in place a judicial system 
for the enforcement of intellectual property rights which is distinct from that for the enforcement of law in general. 
15 e.g., China's first written submission, para. 40, and para. 137. 
16 e.g., China's first written submission, para. 62, or para. 117 and following. WT/DS362/R 
Page C-42  
 
  ANNEX C–12 
 
EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION  
BY KOREA 
I. INTRODUCTION 
1. This third party submission is presented by the Government of the Republic of Korea 
("Korea") with respect to certain aspects of the first written submissions by the United States dated 
30 January 2008 and by the People's Republic of Ch ina ("China") dated 12 March 2008, respectively, 
in China – Measures Affecting the Protection and Enforcement of Intellectual Property Rights  
(DS362). 
2. Korea has systemic interests in the interpretation and application of various provisions of the 
Agreement on Trade-Related Aspects of Intellectua l Property Rights ("TRIPs").  Therefore, Korea 
reserved its third party rights pursuant to Article 10.2 of the Understanding on  Rules and Procedures 
Governing the Settlement of Dispute ("DSU").  Kore a appreciates this opportunity to present its view 
to the Panel. 
II. LEGAL ARGUEMENT 
A. I
N ORDER TO MAKE A PRIMA FACIE CASE , A MEMBER CLAIMING A VIOLATION MUST PRESENT 
FACTUAL EVIDENCE AND LEGAL ARGUMEN TS SUFFICIENT TO DEMONSTRATE THE 
INCONSISTENCY OF THE CHALLENGED ACTION BY ANOTHER MEMBER WITH A RELEVANT 
WTO  AGREEMENT  
3. In Korea's view, satisfying prima facie standard is to present factual evidence and legal 
arguments "sufficient to demonstrate" the incons istency of the challenged action with the defending 
Member's obligation.  As a basic rule, a Memb er claiming a violation of a provision of WTO 
Agreements by another Member must "assert and pr ove its claim" by putting forward "evidence and 
legal argument sufficient to demonstrate" the inconsistency of the challenged action with the 
defending Member's obligations under the WTO Agreements.  
4. Korea believes that the prima facie  standard is particularly meaningful in this dispute as one 
of the main issues in this dispute is directed at the criminal enforcement mechanism and related 
activities of a Member state.  As China stresses,  an inquiry into and evaluation of the domestic 
criminal enforcement mechanism of a Member shoul d be conducted in a careful manner, so as not to 
infringe upon national sovereignty of the Member. 
5. In order to guarantee that the panel's revi ew only proceeds with sufficient evidence and 
persuasive legal arguments and to avoid unnecessary controversies stemming from the examination of 
the criminal enforcement system of a Member, it is necessary for the Panel to strictly apply the prima 
facie  threshold. 
B. THE CRIMINAL PUNISHMENT THRESHOLD OF CHINA IS ARBITRARY AND THUS CHINA HAS 
FAILED TO IMPOSE EFFECTIVE CRIMINAL SANCTIONS ON WILLFUL TRADEMARK 
COUNTERFEITING AND COPYRIGHT PIRACY ON A "COMMERCIAL SCALE " 
6. As China also acknowledges, in China criminal  punishment is applied to counterfeiting and 
piracy when those acts are undertaken on a suffici ent scale to exceed the mi nimum thresholds for 
criminal enforcement.1  According to China, the purpose of having such a threshold in the criminal 
                                                      
1 China's first written submission, para. 17.  WT/DS362/R 
 Page C-43 
 
 
  system is "to express the point at which – in the c onsidered judgment of China – proscribed activity 
threatens the public order and warrants the relativ ely costly and cumberso me intervention of the 
criminal system with its attendant im plications for the rights of persons."2  As such, the minimum 
thresholds for various IPR violation crimes  vary, ranging from 30,000 RMB to 50,000 RMB 
measured in total volumes of sales.  Any viola tion which comes below the applicable threshold, 
therefore, gets exempted from the criminal punishment. 
7. Although China offers lengthy explanations on its criminal law system and threshold 
mechanism in its first written submission, it is  not entirely clear why the Chinese government has 
come up with the particular amount of money as th e minimum threshold for criminal enforcement.  
Korea believes that China has failed to show any compelling reason and rationale in introducing the 
minimum threshold system and adopt ing particular thresholds.   
8. What is clear, on the other hand, is that a cer tain category of IPR violations, which could be 
potentially significant according to the US claims, si mply go unpunished, at least criminally.  All in 
all, the criminal threshold of China simply arb itrarily carves out some of the IPR crimes from the 
possibility of criminal sanction, which is not consis tent with the TRIPs.  Nowhere in the text of 
Article 61 can one find a legal basis that a Member can categorically exclude a certain group of 
violations based on its own judgment and evaluation.   
9. Also, regarding the term of "commercial scale," Korea does not agree with the general 
proposition of China that a Member has full disc retion in interpreting and applying the term 
"commercial scale".  The term should be interpre ted based on the principles of the 1969 Vienna 
Convention on the Law of Treaties and in Korea's opinion the interpretation offered by the United 
States seems to be more appropriate in this regard. 
10. In Korea's view, the term simply appears to re quire a certain level of magnitude, and the level 
does not necessarily have to be "significant".  Practica lly speaking, Korea believes, "a certain level of 
magnitude" in this context should mean operating or  maintaining a business activity, large or small, 
for the purpose of gaining financial returns through IP R infringement in somewhat systematic fashion.  
In other words, as long as a person or an entity engages in a business activity by infringing IPR of 
another person or entity and realizes a financial return , he or it should be regarded as violating IPR in 
a "commercial scale," regardless of the alleged amount at issue. 
11. Korea also notes that sanction from an administra tive procedure is usually different, both in 
degree and quality, from sanction from the criminal pr ocedure.  Most of the time, criminal sanction 
carries more deterrence effect than an administrativ e procedure.  So, the argument offered by China 
does not seem persuasive in this respect. 
C. THE COMPLAINANT DOES NOT BEAR AN ESPECI ALLY HIGH BURDEN OF PROOF IN ADVANCING 
THE CLAIM UNDER ARTICLE 61 OF TRIP S 
12. It may well be true that a state party to a treat y has discretion in carrying out domestically an 
obligation under the treaty relating to criminal enforcement.3  But the situation would be completely 
different if a certain category of crimes simply go unpunished, even if the relevant provision of the 
treaty explicitly requires the punishment.  In this case, it is not about discretion any more, but about 
deviation from a treaty obligation.  
13. In addition, under the current WTO dispute se ttlement regime, one could not argue that a 
complainant would have a higher burden of proof than in other cases, simply because the complainant 
                                                      
2 China's first written submission, . para. 19. 
3 China's first written submission, paras. 52-57. WT/DS362/R 
Page C-44  
 
  raises an issue about criminal enforcement.  As fa r as Korea is aware, the TRIPs and the DSU do not 
differentiate a standard of burden of pr oof depending on the nature of claims. 
14. Furthermore, in addressing this issue, the rati onale or explanation offered by China with 
respect to the enactment of the legislation and re gulation at issue should not be controlling.  For 
instance, China cannot attempt to justify its allege d violation, if there is any, based on such an 
argument as "Chinese criminal law typically employs threshold system"
4 or "it is necessary to adopt a 
threshold system in China."5   
15. Instead, what should be determinative in this  inquiry is whether the challenged Chinese 
legislation and regulation indeed constitute good fa ith implementation of Article 61 of the TRIPs and 
whether that legislation and regulation fully ca rry out the obligation under the provision.   
III. CONCLUSION 
16. Korea appreciates the opportunity to participat e in these proceedings, and to present its views 
to the Panel. 
   
                                                      
4 China's first written submission, para. 19. 
5 China's first written submission, para. 19 .  WT/DS362/R 
 Page C-45 
 
 
  ANNEX C-13 
 
ORAL STATEMENT BY KOREA 
1. The Republic of Korea ("Korea") appreciates this  opportunity to present its views to the Panel 
as a third party in this important dispute.  Through this statement, Korea provides an overview of the 
key issues included in Korea's third party submission dated March 26, 2008. 
I. IN ORDER TO MAKE A PRIMA FACIE CASE, A MEMBER CLAIMING A 
VIOLATION MUST PRESENT FACTUAL EVIDENCE AND LEGAL ARGUMENTS SUFFICIENT TO DEMONSTRATE THE INCONSISTENCY OF THE CHALLENGED ACTION BY ANOTHE R MEMBER WITH A RELEVANT WTO 
AGREEMENT 
2. In Korea's view, satisfying prima facie standard is to present factual evidence and legal 
arguments "sufficient to demonstrate" the incons istency of the challenged action with the defending 
Member's obligation.  Korea believes that the prima f acie standard is particularly meaningful in this 
dispute as one of the main issues in this dispute is  directed at the criminal enforcement mechanism 
and related activities of a Member state.  As Chin a stresses, an inquiry into and evaluation of the 
domestic criminal enforcement mechanism of a Memb er should be conducted in a careful manner, so 
as not to infringe upon national sovereignty of the Member. 
3. In order to guarantee that the panel's revi ew only proceeds with sufficient evidence and 
persuasive legal arguments and to avoid unnecessary controversies stemming from the examination of 
the criminal enforcement system of a Member, it is necessary for the Panel to strictly apply the prima 
facie  threshold. 
II. THE CRIMINAL PUNISHMENT THRESHOLD OF CHINA IS ARBITRARY AND 
THUS CHINA HAS FAILED TO IMPOSE EFFECTIVE CRIMINAL SANCTIONS ON WILLFUL TRADEMARK COUNTERFEITING AND COPYRIGHT PIRACY ON A "COMMERCIAL SCALE" 
4. As China also acknowledges, in China criminal  punishment is applied to counterfeiting and 
piracy when those acts are undertaken on a suffici ent scale to exceed the mi nimum thresholds for 
criminal enforcement.  Although China offers lengt hy explanations on its criminal law system and 
threshold mechanism in its First Written Submi ssion, it is not entirely clear why the Chinese 
government has come up with the particular amount of money as the minimum threshold for criminal 
enforcement.  
5. What is clear, on the other hand, is that a cer tain category of IPR violations, which could be 
potentially significant according to the U.S. claims, si mply go unpunished, at least criminally.  All in 
all, the criminal threshold of China simply arb itrarily carves out some of the IPR crimes from the 
possibility of criminal sanction, which is not c onsistent with the Article 61 of the TRIPs.  
6. Also, regarding the term of "commercial scale," in Korea's view the term simply appears to 
require a certain level of magnitude, and the leve l does not necessarily have to be "significant."  
Practically speaking, Korea believes, "a certain le vel of magnitude" in this context should mean 
operating or maintaining a business activity, large or small, for the purpose of gaining financial 
returns through IPR infringement in somewhat systematic fashion.  In  other words, as long as a person 
or entity engages in a business activ ity by infringing IPR of another person or entity and realizes a 
financial return, he or it should be regarded as viol ating IPR in a "commercial scale," regardless of the 
alleged amount at issue. WT/DS362/R 
Page C-46  
 
  7. Korea also notes that sanction from an administra tive procedure is usually different, both in 
degree and quality, from sanction from the criminal pr ocedure.  Most of the time, criminal sanction 
carries more deterrence effect than an administrativ e procedure.  So, the argument offered by China 
does not seem persuasive in this respect. 
III. THE COMPLAINANT DOES NOT BEAR AN  ESPECIALLY HIGH BURDEN OF 
PROOF IN ADVANCING THE CLAIM UNDER ARTICLE 61 OF TRIPS 
8. Under the current WTO dispute settlement regi me, one could not argue that a complainant 
would have a higher burden of proof than in other cases, simply because the complainant raises an issue about criminal enforcement.  As far as  Korea is aware, the TRIPs and the DSU do not 
differentiate a standard of burden of pr oof depending on the nature of claims. 
9. Furthermore, in addressing this issue, the rati onale or explanation offered by China with 
respect to the enactment of the legislation and re gulation at issue should not be controlling.  For 
instance, China cannot attempt to justify its alleged viol ation, if there is any, by resorting to such an 
argument as "Chinese criminal law typically employs threshold system" or "it is necessary to adopt a threshold system in China." 
10. Instead, what should be determinative in this  inquiry is whether the challenged Chinese 
legislation and regulation indeed constitute good fa ith implementation of Article 61 of the TRIPs and 
whether that legislation and regulation fully ca rry out the obligation under the provision.   
11. Korea appreciates the opportunity to participat e in these proceedings, and to present its views 
to the Panel. 
    WT/DS362/R 
 Page C-47 
 
 
  ANNEX C-14 
 
THIRD PARTY SUBMISSION BY MEXICO 
I. INTRODUCTION 
1. The Government of Mexico appreciates this opportunity to present its views in this 
proceeding.  Mexico is participating in this dis pute as a third party because Mexican companies have 
been harmed by China's failure to properly impl ement its obligations under the Agreement on Trade-
Related Aspects of Intellectual Pr operty Rights ("TRIPS Agreement"). 
2. Mexico notes that there are disagreements between the United States of America 
("United States") and China regarding the precise cont ent of the pertinent Chinese laws and policies at 
issue.  Mindful of these disagreements, Mexico will focus its comments on the United States' claim 
under Article 61 of the TRIPS Agreement concerni ng the thresholds for criminal penalties and 
procedures.  However, Mexico reserves its right to  comment on the other claims of the United States 
in this dispute. 
II. BURDEN OF PROOF 
3. At paragraphs 49-59 of its first written submi ssion, China argues that the United States bears 
"an especially high burden of proof in advancing th e claim that China fails to meet its Article 61 
obligation".  Mexico disagrees.  In this case, th e normal burden of proof, whereby the complainant 
must present a prima facie case with respect to each of its claims, applies. 
4. The points raised by China regarding the char acter of measures governed by Article 61 may 
be helpful in understanding the context of that prov ision within the TRIPS Agreement and, therefore, 
in interpreting its meaning.  However, they do not,  as argued by China, justify a "significantly higher 
burden than [the United States, as the complainant] would normally encounter".  
III. THRESHOLDS FOR CRIMINAL PENALTIES AND PROCEDURES 
5. As part of its defence to the United States' claim under Article 61 of the TRIPS Agreement, 
China has discussed, among other subjects, the need for the exercise of prosecutorial discretion and 
the associated issue of the allocation of finite govern ment resources to criminal enforcement.  Because 
the United States' challenge under Article 61 is limi ted to the Chinese laws pertaining to criminal 
penalties and procedures, Mexico will restrict its comme nts to this issue.  The prosecutorial discretion 
and the allocation of resources with respect to the ac tual application of these laws and regulations are 
not issues before this Panel. 
6. The United States claims that China's criminal  laws maintain "safe harbors" that allow 
commercial-scale counterfeiting and piracy without  the possibility of criminal prosecution or 
conviction for those acts.  The laws establish safe harbors by prohibiting criminal prosecution or penalties for piracy and counterfeiting unless a case m eets specific quantitative or value thresholds set 
out in China's laws.  According to  the United States, these thresholds provide counterfeiters or pirates 
with a clear roadmap for operating without fear of criminal sanctions for commercial-scale IPR 
infringement.
1  
7. China counters that the United States misundersta nds the applicable laws and that China has 
fully provided for criminal procedures and penalties to be applied at least in cases of wilful trademark 
counterfeiting or copyright piracy on a commercial scale. 
                                                      
1 United States' first written submission, paragraphs 4-5. WT/DS362/R 
Page C-48  
 
  8. The central issue raised in this claim is th e meaning of the term "commercial scale".  The 
United States bases its claim on the following interpretation: 
"the concept of 'commercial scale' exte nds… to those who engage in commercial 
activities in order to make a 'financial re turn' in the marketplace, and who are, by 
definition, therefore operating on a commercial scale".
2 
9. China disagrees with this interpretation, arguing inter alia  that: 
"the United States asserts that if tran sactions are undertaken for a commercial 
purpose, they are necessarily of 'commercial scale.'  This reads the concept of 'scale' 
completely out of the definition.  In eff ect, the United States has suggested that the 
Panel read 'commercial scale' to mean 'commercial purpose'."3 
 China argues that "commercial scale" refe rs to a "significant magnitude of activity"4 and 
"sustainable commercial enterprise".5 
 10. Mexico agrees with the United States that the c oncept of "commercial scale" extends to those 
who engage in commercial activities in  order to make a "financial return" in the marketplace, and who 
are, by definition, therefore operating on a commercia l scale.  In other words, Mexico understands the 
term "commercial scale" to be intended to enco mpass activities that go beyond casual or occasional 
infringements that are not made for the purpose of  generating revenue.  Nonetheless, in Mexico's 
view, even under China's interp retation of "commercial scale", Chinese law does not comply with 
Article 61 of the TRIPS Agreement.  By virtue of the "safe harbors" described by the United States, Chinese law does not "provide for criminal procedures  and penalties to be applied at least in cases of 
wilful trademark counterfeiting or copyright piracy " even for instances that constitute a "significant 
magnitude of activity" or a "sustainable commercial enterprise". 
11. China summarizes the thresholds for its criminal procedures as follows: 
"In summary, under Chinese law, the affixation of a counterfeited registered 
trademark is a crime if the volume of illegal business is at least RMB50,000 (about 
$6,925) or if the illegal gains (profits ) are at least RMB30,000 (about $4,155) 
(Art. 213);  the sale of goods bearing such a trademark is a crime if the volume of sales is at least RMB50,000 (Art. 214);  and the production or sale of such trademarks 
is a crime if the illegal business volume is at least RMB50,000, if the illegal gains are at least RMB30,000, or if there are at least 20,000 infringing pieces of trademark items (Art. 215). 
The unlicensed reproduction and/or distribution of various works is a crime if any of 
the following thresholds are met:  the illegal gains are at least RMB30,000, the illegal 
business volume is at least RMB50,000, or there are at least 500 infringing copies (Art. 217);  and the sale of pirated copies is  a crime if the illegal gains are at least 
RMB100,000 (about $13,850) (Art. 218)."
6 
                                                      
2 United States' first written submission, paragraph 110.   The United States  presents two activities that 
fall within the meaning of "commercial scale" but clarifies that "it is the former activity that forms the focus of 
this submission". 
3 China's first written submission, paragraph 67. 
4 China's first written submission, paragraphs 4, 61-62, 64, 72 and 117. 
5 China's first written submission, paragraph 133. 
6 China's first written submission, paragraphs 20-21.  WT/DS362/R 
 Page C-49 
 
 
  12. The United States has demonstrated in its first submission and in its supporting exhibits that a 
considerable number of operations exist in China th at are under these thresholds.  This is prima facie 
evidence that such operati ons are commercially sustainable.  Moreover, although they are small, they 
are clearly "significant". 
13. Mexico agrees with China that national gove rnments should have broad discretion in 
establishing and applying their respective criminal procedures, and that the TRIPS Agreement does 
not require a uniform approach to such matte rs.  Nonetheless, the United States has presented 
evidence that, by virtue of a combination of f actors – the levels at which the thresholds for 
prosecution are set, the manner in which the values are calculated, and the complete exception ("safe 
harbor") for persons operating under the thresholds – Chinese legislation seems to have the effect of 
encouraging, rather than discouraging, counterfe iting of trademarks and piracy of copyrights. 
14. This situation is possible because persons are pe rmitted to engage in trademark counterfeiting 
and copyright piracy on a continuing basis, secure in the knowledge that they can avoid prosecution simply by limiting their commercial activities to cert ain levels.  Especially in the context of how 
copyright piracy is carried out in China – with large quantities of infringing articles distributed 
through many small establishments – Chinese law does not appear to provide for criminal penalties to 
be applied in cases of copyright piracy on a comme rcial scale within the meaning of the first sentence 
of Article 61. 
IV. CONCLUSION 
15. The Government of Mexico appreciates the opportu nity to participate in this proceeding as a 
third party and to submit its view s on these important legal issues relating to China's compliance with 
Article 61 of the TRIPS Agreement.  Mexico will closely follow developments in this matter and 
stands ready to answer any ques tions that the Panel may have. WT/DS362/R 
Page C-50  
 
  ANNEX C-15 
 
ORAL STATEMENT BY MEXICO 
I. INTRODUCTION 
1. Mr Chairman and members of the Panel, Mexico will address issues that are before this Panel 
relating to the interpretation of Article 61 of the Agreement on Trade-Related Aspects of Intellectual 
Property Rights (TRIPS Agreement).  Specifically, Mexico will address the appropriate interpretation 
of the term "commercial scale" and why the thr esholds for criminal procedures and penalties under 
Chinese law are inconsistent with Ch ina's obligations under Article 61. 
II. INTERPRETATION OF "COMMERCIAL SCALE" 
2. The first sentence of Article 61 of the TRI PS Agreement provides that "Members shall 
provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial s cale."  By virtue of this provision, Members are 
required to have in place criminal procedures and penalties that as a minimum  must apply to the wilful  
trademark counterfeiting or copyright piracy that take place on a commercial scale .  In short, 
Article 61 requires members to criminalize targeted  activities that take place on a commercial scale. 
3. At issue in this dispute is whether, throug h the setting of its quantitative thresholds for 
criminal procedures and penalties, China has st opped criminalizing the activities targeted under 
Article 61.  As China summarizes in paragraph 60 of  its first written submission, "[t]he core of the 
dispute between the United States and China is the meaning and scope of 'commercial scale'".  However, what China attempts to do in its first wr itten submission is to provide an interpretation of 
"commercial scale" that per se  excludes certain commercially-orien ted activities and wilful trademark 
counterfeiting and copyright piracy fro m criminal procedures and penalties. 
4. China argues that "commercial scale" refers  to a "significant magnitude of activity"
1 and 
"sustainable commercial enterprise".2  The United States, on the contrary, argues that: 
"the concept of 'commercial scale' extends  … to those who engage in commercial 
activities in order to make a 'financial re turn' in the marketplace, and who are, by 
definition, therefore operating on a commercial scale"3 
5. These diverging interpretations lead to very different implications.  China takes a narrow 
approach to the interpretation of "commercial scale", while the United States takes a broader 
approach.  Mexico also acknowledges the interpretations of Canada4, Korea5 and Brazil6 that the term 
"commercial scale" invokes the notion of the magnitude  of profitability sought.  In other words, it 
applies to activities that are meaningful and done in pursuit of financial gain.  However, as Korea 
points out, it is unclear why the scope of the te rm should be narrowed, as China argues, to a 
"significant magnitude of activity".7 
                                                      
1 China's first written submission, paragraphs 4, 61-62, 64, 72 and 117. 
2 China's first written submission, paragraph 133. 
3United States' first written submission, paragraph 110. 
4 Canada's third party submission, paragraph 5. 
5 Korea's third party submission, paragraph 26. 
6 Brazil's third party submission, paragraph 36. 
7 Korea's third party submission, paragraphs 26 and 30.  WT/DS362/R 
 Page C-51 
 
 
  6. Requiring that activities be meaningful and, at th e same time, done in pur suit of financial gain 
would not capture casual and individual instances of trademark counterfeiting or copyright piracy.  In paragraph 15 of its written submission, Japan provi des a useful example of a street vendor selling 
purses in Geneva who contributes to the chain of tr ademark infringement even though he or she is 
operating on a small scale.  Such activity is clearly meaningful in the sense that it contributes to the 
chain of infringement.  As the purpose of Article 61 is to deter wilful tr ademark counterfeiting or 
copyright piracy through the use of criminal procedures and penalties, it would make little sense to require Members to restrict only activities of a "significant magnitude". 
7. The example above helps to better understand what could be an alternative, not to mention a 
better or correct interpretation of the concept "comme rcial scale".  Likewise, "[i]n accordance with the 
ordinary meaning to be given to the terms of the tr eaty in their context and in the light of its object 
and purpose", as the Vienna Convention on the Law of Treaties requires, it should be noted that the word "scale" is not necessarily subject to conditio ns of magnitude, but rather, to "quality" (same 
quality).
8  In this regard no obligation is imposed on Members with respect to wilful counterfeiting of 
trademarks or piracy of copyrights – at least not under Article 61 of the TRIPS Agreement – unless 
such acts are done commercially (i.e. on a commercial scale). 
8. China also argues that it is permissible to inte rpret the term "commercial scale" to be limited 
to the activities of manufacturing or indus trial production, and not retail sales.9  Here once again, 
China is attempting to narrow the scope of the term "commercial scale". 
9. Mexico agrees that the main characteristic of "commercial scale" is the financial gain or 
profit, regardless of the role of the infringer in th e distribution of the illicit products.  In paragraph 5 
of its written submission, Canada clearly sets out why China's interpretation is problematic: 
"Indeed, for the commercial infringer, as fo r any other person carrying out a business, 
profitability can be achieved by reproducing or selling large quantities, or by reproducing or distributing small quan tities with high margins.  Professional 
infringers can accomplish low-overhead and high-margin mass-production and 
distribution from their homes using their laptop computers;  factory assembly-lines 
are not needed.  By associating the term "commercial scale" with industrial-scale 
production, China overlooks these economic realities." 
10. Mexico agrees with Canada's arguments regard ing Members' discretion to prosecute trivial 
cases.
10  As long as Members have in place the necessar y criminal procedures and penalties to provide 
the required deterrent effect they maintain the ab ility to exercise prosecutorial discretion when the 
case so merits.  But China has taken an alternative approach by establishing the threshold for wilful 
trademark counterfeiting and copyright piracy so as to outright exclude certain commercially-oriented 
activities from sanctions and thereby prevent Ch inese officials from exercising any discretion. 
III. THE DETERRENT EFFECT OF THE CRIMINAL PROCEDURES AND 
PENALTIES  
11. The obligation in the first sentence of Article 61 mu st be interpreted in the light of its context, 
which includes the second sentence of that Article.  The second sentence reads in part "[r]emedies 
available shall include imprisonment and/or monetary  fines sufficient to provide a deterrent … ".  
                                                      
8 See:  Diccionario de la Lengua Española.  Real Academia Española:  2. f. Sucesión ordenada de 
valores distintos de una misma cualidad [Ordered successi on of different values of one and the same quality].  
Escala de colores, de dureza . 
9 China's first written submission, paragraphs 73-78 and 133. 
10 Canada's third party submission, paragraph 11. WT/DS362/R 
Page C-52  
 
  Thus, deterrence of wilful trademark counterfeiting or copyright piracy on a commercial scale is an 
important purpose of Article 61 and of  the TRIPS Agreement as a whole. 
12. In Mexico's view, China's interpretation of th e term "commercial scale" inherently prevents 
its criminal procedures and penalties from having as an object the effective deterrence of wilful trademark counterfeiting and copyright piracy because the thresholds exclude a significant amount of 
such activity.  As such, the interpretation is inc onsistent with a proper interpretation of the term 
"commercial scale" in its context and in the light of the object and purpose of the TRIPS Agreement as required under Article 31 of the Vienna Convention. 
13. Mexico agrees with the United States
11, Korea12 and Canada13 that China's Criminal Law 
establishes thresholds that are arbitrary.  China's criminal laws and procedures do not effectively deter 
wilful trademark counterfeiting or copyright piracy because such activities take place on a level that is 
well below what China considers to be "commercial scale".  It is not simply a matter of China failing 
to prosecute trivial cases of wilful trademark count erfeiting or copyright piracy.  Rather, China has 
arbitrarily set thresholds that do not even permit the initiation of pr osecutions against such activities. 
14. Canada highlights how arbitrary and ineffectiv e these thresholds are by linking them to the 
annual Gross Domestic Product (GDP) per cap ita.  For example, Article 213 of the Criminal Law of 
the People's Republic of China  establishes as the threshold for the crime of counterfeiting registered 
trademarks a volume of illegal business of at l east RMB50,000 (approximately US$6,925) or illegal 
gains of at least RMB30,000 (approximately US$4,155) ;  and yet, as Canada points out, China's GDP 
per capita is only the equivalent of US$2,500 and 57 million people earn less than US$125 per year.  
In short, when a purveyor of goods with counte rfeited registered trademarks has access to labour 
forces whose income can be as low as US$125 a year , then that purveyor could mount a substantial 
counterfeiting operation that would not meet the US $6,935 threshold for illegal business activity.  It 
also means that in a region where the average income may only be US$2,500, people have an 
incentive to participate in the counterfeit goods industry as they only need to make less than 
US$4,155 a year to fly under the radar of the Chin ese administration.  In short, people could make a 
full-time living off counterfeit goods without earning enough to allow the Chinese authorities to 
initiate prosecutions.  As stated by Mexico in its  third party submission, the Chinese law seems to 
have the effect of encouraging, rather than disc ouraging, counterfeiting of trademarks and copyright 
piracy. 
IV. CONCLUSION 
15. Mr Chairman and members of the Panel, the Government of Mexico appreciates the 
opportunity to participate in this proceeding as a th ird party and to submit its views on these important 
legal issues relating to China's compliance with Article 61 of the TRIPS Agreement. 
16. Mexico looks forward to closely monitoring future  developments in this dispute and would be 
pleased to answer any questions that the Panel may have. 
                                                      
11 United States' first written submission, paragraph 151. 
12 Korea's third party submission, paragraphs 19-20. 
13 Canada's third party submission, paragraphs 3-4.  WT/DS362/R 
 Page C-53 
 
 
  ANNEX C-16 
 
EXECUTIVE SUMMARY OF THE THIRD PARTY SUBMISSION  
BY CHINESE TAIPEI 
1. The Separate Customs Territory of Taiwan, Pe nghu, Kinmen and Matsu (hereinafter referred 
to as "TPKM"), as a third party in this proceeding,  makes this submission because it has a systemic 
interest in the correct interpretation of the TRIPS Agreement. 
2. The submission can be divided into two parts. In the first, we address some general principles 
that the panel should observe while making an objectiv e assessment of the dispute.  In particular, we 
provide the panel with references to prior WTO ju risprudence.  Then, we submit our views on 
specific, relevant provisions and measures at issue. 
I. THE TRIPS AGREEMENT IS A MINIMUM STANDARDS AGREEMENT 
3. Article 1.1 of the TRIPS Agreement prescribes the minimum required of Members by the 
TRIPS Agreement to protect intell ectual property rights, allowing th em to go beyond this minimum in 
pursuit of more stringent standards of protection if they so wish.  Members must take the necessary 
legal and administrative action to ensure the rights and obligations contained in the Agreement are put 
into effect, but they are free to determine for th emselves how best to implement their obligations 
under the Agreement within the context of their own legal systems.  Members are not to enact 
measures of protection, however, that w ould negate such rights and obligations. 
II. THE PANEL'S FUNCTION AND REVI EW OF MEMBERS' DOMESTIC 
LEGISLATION 
4. In accordance with Article 11 of the DSU, a panel should make an objective assessment of the 
matter before it, including an objective assessment of the facts of the case and of the applicability of 
and conformity with the relevant c overed Agreements.  It should also  make such other findings as will 
assist the DSB in making the recommendations or in giving the rulings provided for in the covered Agreements.  
5. As noted by the Appellate Body in India – Patent (US)  and by the panel in US – Section 301 
Trade Act , the panel's task is essentially to examine the domestic legislation at dispute solely for the 
purpose of determining whether the party to the dis pute meets its WTO obligations.  In doing so, the 
panel does not set out to interpret the domestic law "as such", but to establish the meaning of that 
domestic law in terms of factual elements, and to  check whether these factual elements constitute 
conduct by the party that may be contrary to its WTO obligations.  A panel is not bound to accept the 
interpretation presented by the party in dispute in making factual findings concerning the meaning of 
the domestic law. 
III. INTERPRETATION OF THE TRIPS AGREEMENT 
6. Article 3.2 of the DSU directs the DSB to clarify provisions of WTO Agreements in 
accordance with the customar y rules of interpretation of public international law.  As noted by a 
number of panel and Appellate Body reports, customary rules of interp retation of public international 
law are embodied in the text of the 1969 Vienna Convention on the Law of Treaties.  The principles 
codified in Articles 31 and 32 of the Vienna Conventi on have attained the status of customary rules. 
7. Accordingly, the TRIPS Agreement must be in terpreted in good faith based on the wording, 
the context, and the overall object and purpose of the Agreement.  In addition, the work done in the 
preparation of the treaty and the circumstances of its conclusion may also be take n into consideration.  WT/DS362/R 
Page C-54  
 
  IV. BURDEN OF PROOF 
8. The Appellate Body and panel reports have accepted and cons istently applied the general 
rules that, (1) the party that asserts  a fact, whether claimant or res pondent, is responsible for providing 
proof thereof, and (2) the burden of proof lies with the party, whether complainant or defendant, that 
asserts the affirmative of a particular claim or defence.  
9. The initial burden of proof lies with the complain ing party, which must establish a prima facie 
case of inconsistency with a particular provision.  A prima facie case must be based on "evidence and legal argument" put forward by the complaining party in  relation to each of the elements of the claim.  
In the case of uncertainty, i.e. wh ere all the evidence and arguments remain in equipoise, the benefit 
of the doubt is given to the defending party.  Under the usual allocation of the burden of proof, a 
responding Member's measure will be treated as  WTO-consistent, until sufficient evidence is 
presented to prove otherwise. 
V. CHINA'S CRIMINAL THRESHOLDS AND ARTICLE 61 OF THE TRIPS 
AGREEMENT 
10. We agree that police powers and the enforcement of criminal law are the exclusive domain of 
the sovereign jurisdiction, which shall be highly r espected.  Nevertheless, it can still be compromised 
with the consent of the State.  By concludi ng the TRIPS Agreement, or acceding to the WTO 
Agreement, Members assume an obligation under Artic le 61 of the TRIPS Agreement to adjust their 
scope and level of criminal enforcement accordingly.  There is an agreed "bottom line", i.e. a general 
principle that "Members shall provide for criminal procedures and penalties to be applied at least in 
cases of wilful trademark counterfeiting or copyri ght piracy on a commercial scale."  Based on the 
customary rule of " pacta sunt servanda ", this is binding upon the Members and must be performed in 
good faith. 
11. The panel in this case is requested to make an  objective assessment of whether China's law, 
by setting specific thresholds, captures all wilful infringement on a commercial scale and meets the minimum standard required by Article 61 of the TRIPS Agreement.  The panel should clarify the 
definition of the term "commercial scale" in the co ntext of Article 61 based on the existing rules of 
interpretation.  We would like to remind the panel of the Appellate Body's statement that, "[t]he 
purpose of treaty interpretation is to establish th e common intention of the parties to the treaty." 
12. While interpreting the provision at issue, dictionaries are a useful starting point for the 
definition of the terms.  Nevertheless, as the Appe llate Body has noted, "dic tionary definitions have 
their limitations in revealing the ordinary meani ng of a term. This is especially true where the 
meanings of terms used in the different authentic  texts of the WTO Agreement are susceptible to 
differences in scope…".  In US – Gambling  the Appellate Body also pointed out that, "a Panel may 
start with the dictionary definitions of the terms to  be interpreted.  But dictionaries, alone, are not 
necessarily capable of resolving complex questions  of interpretation, as they typically aim to 
catalogue all meanings of words – be those meani ngs common or rare, universal or specialized." 
Therefore, "the ordinary meaning of a treaty term  must be ascertained according to the particular 
circumstances of each case.  Importantly, the ordinary meaning of a treaty term must be seen in the light of the intention of the parties "as expressed in  the words used by them against the light of the 
surrounding circumstances." 
13. We have a particular concern ove r the "one-size-fits-all" regime of criminal thresholds.  That 
is, whether a specific numerical threshold can cap ture all commercial-scale infringements that are 
intended to be covered by Article  61 of the TRIPS Agreement.  WT/DS362/R 
 Page C-55 
 
 
  14. The term "commercial scale" used in Article 61 of the TRIPS Agreement is an abstract legal 
concept.  Multiple aspects of local circumstances, such as the nature of the infringed rights, values and 
prices in the market, the motive and purpose of an act, the method and scale of infringement, the damage caused, profit gained, the cultural back ground, the state of advancement of modern 
technology and living standards, sha ll be taken into account in the im plementation of Article 61 of the 
TRIPS Agreement. 
VI. AN ANALYSIS OF ARTICLE 46 OF THE TRIPS AGREEMENT 
15. According to Article 46 of the TRIPS Agreement,  a Member is required to ensure that its 
judicial authority is provided with the power to or der either the disposal or the destruction of the 
infringing goods.  However, the Article does not go on to prescribe either the circumstances under 
which infringing goods must be destroyed or be dis posed of, or any sequence or priority between the 
two options.  A Member should be considered to have met the minimum standard if its judicial 
authority is provided with such power and authority that includes both disposal and destruction. 
16. As to deciding whether to dispose of or dest roy infringing goods, according to Article 1.1 of 
the TRIPS Agreement, a Member is free to dete rmine for itself the most appropriate method of 
implementing Article 46 within its own legal system and practice. It is beyond the issue of minimum 
standard for a Member to determine the circ umstances under which infringing goods are to be 
disposed of or destroyed. 
17. In addition to the kind of power that a Member s hould vest in its judicial authority, Article 46 
sets forth certain conditions relating to the implementa tion of the said disposal and destruction.  While 
a Member or its judicial authority may use discre tion in its choice of approach to dealing with 
infringing goods, it shall comply with the conditions attached to either approach, as required by the 
said Article. 
18. The judicial authority must have the power to order either the disposal or destruction of 
infringing goods, whether at its own discretion or within the guidelines issued by any other authority of the Member.  Furthermore, no matter for what reason, when the judicial authority orders the 
disposal of infringing goods, there shall be no compensation of any sort.  Disposal must be made 
outside the channels of commerce, and any harm to the right holder must be avoided.  If a judicial 
authority orders the destruction of infringing goods, there shall be no compensation of any sort, and the order to destroy shall not be contrary to any existing constitutional requirements. 
19. In this dispute, the possibilities open to China's customs for disposing of the infringing goods 
are:  donation to a relevant public welfare organization;   sale to the right-holders;  or, auction after the 
infringing features have been removed.  The pane l should make an objective assessment as to whether 
the three conditions attached to the disposal aut hority in Article 46 of the TRIPS Agreement have 
been observed in implementing the disposal by one of the possible methods. 
VII. QUERY CONCERNING ARTICLE 4.1 OF CHINA'S COPYRIGHT LAW 
20. TPKM has reached a conclusion similar to that  of the United States' analysis on the 
interpretation of Article 4.1. Firstly, the English translation of Article 4.1 is clear and correct. It 
delivers the same meaning as the article in Chinese delivers at first sight. Secondly, works such as 
newspapers, books and movies cannot be  distributed before passing a content review according to the 
relevant regulations. Excepting the version that ha s passed the content review, works that have not 
passed and works that fail to pass the content revi ew are prohibited from distribution by law, which 
means they fall within the scope of Article 4.1's "works the publication or distribution of which is 
prohibited by law". WT/DS362/R 
Page C-56  
 
  21. Clarification is required as to whether, as argue d, China protects works that have not been 
submitted for a content review or that are pending au thorization, and whether copyright protection is 
provided for works that are unconstitutional or immoral. 
22. Further questions arise out of China's apparent  contradictory arguments. If China limits the 
scope of Article 4.1 to only works that fail to p ass a content review for the reasons that they are 
unconstitutional or immoral, would it be correct to assume that these unconstitutional and immoral 
works are not only prohibited from publication and distribution, but also denied the protection of copyrights? What about the protection of these wo rks before they are deemed unconstitutional or 
immoral? Would protection be withdrawn retrospe ctively once they are deemed unconstitutional or 
immoral? The possible implications of these ambiguiti es are crucial to the examination of conformity 
with the Agreement. 
23. The raison d'être  for a copyright is to provide eff ective protection to works against any 
infringement. It would be futile to claim on the on e hand that a copyright exists from the time a work 
is created, and on the other to deny the protection of  such a right. There would appear at first sight to 
be some contradiction within China's laws and regul ations, which leads to suspicion of a certain lack 
of conformity with the TRIPS Agreement. 
24. TPKM shares the view of both parties that China has the right to conduct a content review 
based on Article 17 of the Berne Convention (1971)  and Article 9.1 of the TRIPS Agreement. TPKM 
is also delighted to learn of China's position on  the clear division between content review and 
copyright protection, and the fact that a copyright exists from the time when a work is created. TPKM 
is further of the view that a right cannot be i ndependent of effective pr otection. Under the TRIPS 
Agreement, a work may be prohibited from publication or distribution, but it shall not be deprived of 
its copyright protection. 
25. TPKM thanks the panel for providing us with the opportunity to contribute to its 
understanding of the issues at stake. We respectfully  request the panel to take into account the above 
observations and comments in its deliberations, and hope that the panel will find the views helpful.  WT/DS362/R 
 Page C-57 
 
 
  ANNEX C-17 
 
ORAL STATEMENT BY CHINESE TAIPEI 
1. Thank you, Mr. Chairman and distinguished members of the panel. 
2. As a third party in this proceeding, we do not s upport any particular part y to the dispute.  We 
make this statement because we have a systemic interest in the correct interpretation of various 
provisions of the TRIPS Agreement.  
3. Our written submission is in two parts.  In the fi rst, there are some general principles that we 
believe the Panel should observe in making an objectiv e assessment of the dispute.  In particular, we 
have provided referenc es to previous WTO jurisprudence.  In  the second part, we submit our views on 
the specific, relevant provisions and measures at issu e.  I am not going to cover all of these in detail 
here, but I would just like to highlight the principles that we believe to be critical to this case, and the 
points that concern us most.  
4. The first key principle is that the TRIPS Agreement is a minimum standards Agreement . 
Article 1.1 prescribes the minimum required of Memb ers to protect intellectual property rights.  They 
must take the necessary legal and administrative ac tion to ensure the rights and obligations in the 
Agreement are put into effect, but they are free to  determine for themselves how best to implement 
these obligations in the context of their own lega l systems.  Members are not allowed, though, to 
enact protection measures that would negate such rights and obligations. 
5. Furthermore, Article 3.2 of the DSU directs the DSB to clarify provisions of WTO 
Agreements in accordance with the customary rules of interpretation  of public international law.  As a 
number of Panel and Appellate Body reports have not ed, these "customary rules of interpretation" are 
embodied in the text of the 1969 Vienna Convention on the Law of Treaties – Articles 31 and 32 to be 
precise.  
6. The TRIPS Agreement must therefore be inte rpreted in good faith, based on the wording, 
context and overall objective and purpose of the Agre ement.  In addition, the work done in the 
preparation of the Treaty, and the circumstances of its conclusion, may also be taken into 
consideration.  
7. Now, if I may, Mr. Chairman, I would like to turn to the second part of our submission, which 
describes our views on the specific, relevant provisions and measures at issue, starting with China's 
criminal thresholds and Article 61 of the TRIPS Agreement . 
8. We agree that police powers and the enforcement of criminal law are the exclusive domain of 
the sovereign jurisdiction, which shall be highly r espected.  Nevertheless, it can still be compromised 
with the consent of the State.  By concludi ng the TRIPS Agreement, or acceding to the WTO 
Agreement, Members assume an obligation, under Artic le 61 of the TRIPS Agreement, to adjust their 
scope and level of criminal enforcement accordingly.  There is an agreed "bottom line", i.e. a general 
principle that "Members shall provide for criminal procedures and penalties to be applied at least in 
cases of wilful trademark counterfeiting or copyri ght piracy on a commercial scale."  Based on the 
customary rule of " pacta sunt servanda ", this is binding upon the Members and must be performed in 
good faith. 
9. The Panel in this case is requested to make an  objective assessment of whether China's law, 
by setting specific thresholds, captures all wilful infringement on a commercial scale and meets the minimum standard required by Article 61 of the TR IPS Agreement.  We think the Panel should clarify 
the definition of the term "commercial scale" in th e context of Article 61 based on the existing rules of WT/DS362/R 
Page C-58  
 
  interpretation.  We would like to remind the Panel of the Appellate Body's statement that, "[t]he 
purpose of treaty interpretation is to establish the common  intention of the parties to the treaty." 
10. Both parties to the dispute have provided dic tionary definitions of the words "commercial" 
and "scale".  As the Appellate Body has noted in  the past, "dictionary definitions have their 
limitations in revealing the ordinary meaning of  a term".  They have also pointed out that 
"Dictionaries alone are not necessarily capable of r esolving complex questions of interpretation, as 
they typically aim to catalogue all meanings of words – be they common or rare, universal or 
specialized."  Therefore, "the ordinary meaning of  a treaty term must be ascertained according to the 
particular circumstances of each case". Importantly, it must be seen in the light of the intention of the 
parties, and I quote: "as expressed in the words us ed by them against the light of the surrounding 
circumstances." 
11. With regard to China's criminal thresholds, we  have a particular concern over the "one-
size-fits-all" regime. We wonder, whether a specifi c numerical threshold can capture all commercial-
scale infringements that are intended to be covered by Article 61 of the TRIPS Agreement. 
12. The term "commercial scale" used in Article 61 of the TRIPS Agreement is an abstract legal 
concept.  In our view, many different aspects of lo cal circumstances, such as: nature of the infringed 
rights; characteristics of the product;  values and prices in the market; motive and purpose of the act; 
method and scale of the infringement; damage caused;  profit gained; the cultural background;  the 
state of advancement of modern technology; and the li ving standards, have to be considered on a case-
by-case basis in the implementation of Article 61 of the TRIPS Agreement.  
13. Next, the second issue at dispute, which relates to the interpretation of Article 46 of the 
TRIPS Agreement .  According to that Article, a Member is required to ensure that its judicial 
authority is provided with the power to order either the disposal or the destruction of the infringing 
goods.  However, the Article does not go on to prescribe either the circumstances under which infringing goods must be destroyed or be disposed  of, or any sequence or priority between the two 
options.  A Member should be consider ed to have met the minimum standa rd if its judicial authority is 
provided with the relevant power and authority. 
14. According to Article 1.1 of the TRIPS Agreement, a Member is free to determine for itself the 
most appropriate method of implementing Article 46 w ithin its own legal system and practice.  It is 
beyond the issue of minimum standards for a Memb er to determine the circumstances under which 
infringing goods are to be disposed of or destroyed. 
15. However, Article 46 does set forth certain cond itions relating to the implementation of the 
said disposal and destruction.  While a Member or its judicial authority may exercise discretion in its 
choice of approach to dealing with infringing goods , it shall comply with th e conditions attached to 
whichever approach it chooses to take. 
16. When the judicial authority orders the disposal
 of infringing goods, there shall be no 
compensation of any sort. Disposal must be made out side the channels of commerce, and any harm to 
the right holder must be avoided.  If a judicial authority orders the destruction  of infringing goods, 
there shall be no compensation of any sort, and the order to destroy shall not be contrary to any 
existing constitutional requirements. 
17. In this dispute, the possibilities open to China's customs for disposing of the infringing goods 
are:  
(a) donation to a relevant public welfare organization;   WT/DS362/R 
 Page C-59 
 
 
  (b) sale to the right-holders;  or,  
(c) auction after the infringing features have been removed.  
18. We suggest the Panel makes an objective assessm ent as to whether the conditions attached to 
the disposal authority in Article 46 of the TRIPS agreement have been fully observed by China in 
implementing  these possible methods of disposal. 
19. Regarding the issue of Article 4.1 of China's Copyright Law , we reached a conclusion similar 
to that of the United States' analysis on the in terpretation of the Article.  Firstly, the English 
translation is clear and correct. On the face of it, th e same meaning is delivered in the English version 
as in the Chinese.  Secondly, works such as news papers, books and movies cannot be distributed 
before passing a content review according to the re levant regulations.  With the exception of the 
version that has passed the content review, works th at have not passed, and works that fail to pass the 
content review are prohibited from distribution by la w, which means they fall within the scope of 
Article 4.1's "works the publication or di stribution of which is prohibited by law". 
20. We think that clarification is required as to whether, as argued, China protects works that 
have not been submitted for a content review or th at are pending authorization, and whether copyright 
protection is provided for works that are unconstitutional or immoral. 
21. Further questions arise out of China's apparently contradictory arguments.  If China limits the 
scope of Article 4.1 to only works that fail to p ass a content review for the reasons that they are 
unconstitutional or immoral, would it be correct to assume that these unconstitutional and immoral 
works are not only prohibited from publication and distribution, but also denied the protection of copyrights?  What about the protection of these wo rks before they are deemed unconstitutional or 
immoral?  Would protection be withdrawn retrospectively once th ey are deemed unconstitutional or 
immoral?  We think the possible implications of these ambiguities are crucial to the examination of 
conformity with the Agreement. 
22. Finally, we think the raison d'être  for a copyright is to provide effective protection to works 
against any infringement. It would be futile to claim on the one hand that a copyright exists from the 
time a work is created, and on the other to deny the protection of such a right.  There would appear at 
first sight to be some contradiction within China' s laws and regulations, which leads to the suspicion 
of a certain lack of conformity with the TRIPS Agreement. 
23. We share the view of both parties that China has the right to conduct a content review based 
on Article 17 of the Berne Convention (1971) and Artic le 9.1 of the TRIPS Agreement. We are also 
delighted to learn of China's position on the clear division between content review and copyright 
protection, and the fact that a copyright exists from the time when a work is created. We are further of 
the view that a right cannot be independent of e ffective protection. Under the TRIPS Agreement, a 
work may be prohibited from publication or distributi on, but it shall not be deprived of its copyright 
protection. 
24. In conclusion, we would like to thank the Panel for providing us with the opportunity to 
contribute to its understanding of the issues at stake.  We respectfully request that the Panel take into 
account these observations and comments in its de liberations, and we hope it will find our views 
helpful. 
25. Thank you very much, Mr. Chairman and distinguished members of the Panel. WT/DS362/R 
Page C-60  
 
  ANNEX C-18 
 
ORAL STATEMENT BY THAILAND 
I. INTRODUCTION 
1. Mr. Chairman, distinguished Members of the Pane l, I appreciate this opportunity to present, 
on behalf of the Royal Thai Govern ment, Thailand's views in this panel proceeding as third party.  In 
this regard, we have the following observations to make. 
II. CHINA'S CRIMINAL THRESHOLDS  
2. The United States claimed in its submission that China failed to meet its obligation under 
Article 61 of the TRIPS Agreement which requires Members to provide for criminal procedures and 
penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a 
commercial scale. 
3. In our view, the TRIPS Agreement requires Members to put in place a criminal procedure for 
those who intentionally infringe trademark or co pyrights on a commercial scale.  Nonetheless, the 
Agreement does not define the meaning of "on a comme rcial scale".  It leaves room for a Member to 
make the interpretation it deems appropriate.  Th ailand sees this, like many other provisions in the 
Agreement, as intended or built-in flexibility, rec ognizing the different legal systems of Members. 
4. Moreover, Article 1.1 of the TRIPS Agreement states that "…Members shall be free to 
determine the appropriate method of  implementing the provisions of th is Agreement within their own 
legal system and practice."   
5. The United States also claimed th at China's assessments of the value of pirated goods were 
based on the value of the pirated goods themselves a nd not the genuine articles, and due to the fact 
that the value of pirated goods is normally low, the thresholds for criminal procedures have seldom 
been met.  The TRIPS Agreement has no provisi on on how Members are to assess the value of the 
intellectual property right infringing goods.  Thailand,  therefore, believes this action should be solely 
based on each Member's applicable internal laws and regulations. 
III. CHINESE CUSTOMS AUTHORITY IN DESTROY AND DISPOSE OF IPR 
INFRINGING GOODS. 
6. In its Submission, the United States claimed that Chinese Customs has no authority to order 
the destruction of the confiscated IPR infringing goods.  However, Chinese Customs has to comply 
with the following steps: 
(a) trying to dispose of the confiscated IPR infringing goods by giving them to social 
welfare bodies, or letting the right holder buy them back; 
(b) in the case that the goods cannot be used for social welfare purposes, and the right 
holder is not willing to buy them, having th e goods auctioned with the IPR infringing 
features removed; and  
(c) for the confiscated goods that could not be disposed of by the methods specified in 
(1) and (2), having them destroyed.  WT/DS362/R 
 Page C-61 
 
 
  Nonetheless, China's submission argues that th e three methods embodied in its Regulations 
on Customs Protection of Intellectual Property Rights are presented in an absolute hierarchy;  China 
Customs may apply the most appropriate method to dispose of or destroy the IPR infringing goods. 
7. Article 59 and 46 of the TRIPS Agreement require s that the competent agencies shall have the 
authority to order the destruction or disposal of  infringing goods without compensation of any sort.  
As for the disposal of such goods, it shall be dispos ed of outside the channel of commerce in such a 
manner as to avoid any harm caused to the right hol der, and, in regard to counterfeit trademark goods, 
the simple removal of the trademark unlawfully a ffixed shall not be sufficient, other than in 
exceptional cases, to permit release of th e goods into the channel of commerce. 
8. It is clear to Thailand that to fulfil the requi rement of the TRIPS Agreement in this regard, 
Members shall authorise its competent agencies to orde r either the destruction or the disposal of the 
IPR infringing goods or both.  In our view, th e TRIPS Agreement accepts that the IPR infringing 
goods may be treated in such a manner other than th eir destruction, provided that such a manner is 
consistent with the principle of the disposal  of infringing goods embodied in Article 46.  
9. Thailand believes that the TRIPS Agreement does not limit Members' ability to develop 
measures for the disposal of the infringing goods prio r to a destruction order being issued.  However, 
the authority concerned needs to ensure that th e infringed goods are disposed of outside of the 
channels of commerce, in such a manner as to avoi d any harm being caused to the right holder and in 
a manner that creates an effective deterrent to infringement.  
IV. CONCLUSION 
10. Mr. Chairman, distinguished Members of the Pa nel, Thailand appreciates the opportunity to 
present our views in this meeting.  Thank you very much for your kind attention.