WORLD TRADE  
ORGANIZATION  IP/C/W/521 
17 October 2008 
 
 (08-4992) 
Council for Trade-Related Aspects 
of Intellectual Property Rights Original:   English 
 
 
 
TRANSITIONAL REVIEW MECHANISM OF CHINA 
 
Communication from the European Communities  
 
 
 By means of a communication from the dele gation of the European Communities, dated 
13 October 2008, the Secretariat has received the following contribution in the context of the 
transitional review mechanism under Secti on 18 of China's Protocol on Accession. 
 
_______________ 
 
  The European Communities (hereinafter referr ed to as the "EC") would like to thank the 
People's Republic of China (hereinafter referred to as "China") for its participation in the TRM 
process and look forward to the further clarification of the important matter of IPR protection and 
enforcement in China. 
 
I. GENERAL 
1. The EC notes the initiatives taken by China over the last year aimed at improving the 
situation regarding the protection and enfo rcement of intellectual property rights. 
2. Since the 2007 TRM exercise several developments  have indeed occurred in China in the 
field of IPRs, such as: 
- On 5 June 2008, the publication of a National Intellectual Property Rights Strategy  
which sheds some further light on the effort s China intends to make to protect IPR for 
the next five years and a second period until the year 2020.  Some welcomed topics 
include strengthening IP protection, includi ng enhancing of the judicial enforcement, 
cutting down the costs of protection and making infringements more costly; 
- On18 March 2008, the adoption of China's Action Plan on IPR Protection  2008 which 
details 280 measures in 10 areas and in which China has included the drafting, formulation and revision of 24 laws, regula tions, rules and administrative measures on 
trademark, copyright, patent, plant variety rights and customs protection as well as five 
Judicial interpretations; 
- On 1 May 2008, the entry into force of the Provisions on the Disclosure of Government 
Information and their implementation by the State Intellectual Property Office (SIPO) in their own Interim Measures for the Disc losure of Government Information; 
- The current revision of Chinese intellectual property laws, in particular the Third 
Revision of the Patent Law (draft text as issued on 29 August 2008), and the announced 
upcoming revision of the Copyright and Trademark Law; IP/C/W/521 
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  - The number and value of items seized on ex port at the Chinese border rose 83 per cent 
and 116 per cent, respectively, compared to  2006.  Furthermore, the EC has noted a 
reduction in the number of EU customs seizu res of counterfeit goods coming from China 
in 2007 (about 60 per cent) compared to 2006 (80 per cent).  In January 2008, the General Administration of Customs (GAC) issued new measures, which came into effect 
in April 2008, according to which export comp anies and customs brokers can be profiled 
and categorized on the basis of their previous track record of IPR violations; 
- Some judicial decisions which illustrate th e role of the Supreme People's Court in 
implementing IPR laws in line with international best practices. 
3. However, despite these developments and Chin a's efforts to address problems in its IP 
system, European companies continue facing serious IP R problems in China, in particular the lack of 
proper access to the legal system and effective IPR enforcement.  Criminal prosecution remains little 
effective.  Sanctions against IPR infringements ar e insufficient to deter in fringers.  Administrative 
enforcement procedures are still subject to discre tion in many areas.  Civil procedures against 
infringing activities remain difficult to obtain, ofte n expensive and in comparison to domestic cases 
more time consuming.  The EC therefore urges China to actively pursue its efforts towards an 
effective intellectual property protection and enforcement system. 
4. On the basis of the cooperation established betw een the EC and China in the context of the 
EU-China IP Dialogue and IP Working Group, and in  the light of the above -mentioned developments, 
the EC would like to take this opportunity to rai se a number of questions regarding areas of concern 
(many of which were already raised during the 20 07 TRM exercise without receiving a satisfactory 
answer). 
II. IPR PROTECTION 
A. P
ATENTS , TECHNOLOGY TRANSFER AND PROTECTION OF CONFIDENTIAL DATA 
1. Third Patent Law Revision 
5. The EC appreciates the efforts of China in revising the Chinese Patent Law and the 
opportunity to provide comments on the revised draft.  The EC takes note of many positive 
developments in the latest draft text dated 29 A ugust 2008.  However, a number of provisions still 
require further clarification. 
6. New Article 21 states that "any entity or individual may file an application in a foreign 
country for a patent for invention-creation made in  China with an advance confidentiality examination 
conducted by patent administration department under the State Council".  The EC would like to get 
clarification on the envisaged mechanism and purpose of this provision. 
7. New Article 24 states that "any design for wh ich a patent right may be granted shall be 
substantively different from the prior design or a co mbination of the features of the prior design".  
Can China indicate what is deemed to be qualified as "substantively different"? 
8. New Article 49(2) in conjunction with New Ar ticle 54 states that a compulsory licence is 
granted for a patent where it is determined through the judicial or administrative procedure that the 
exercise of the patent is an act that eliminates or  restricts competition (New Article 49(2)), with such 
licence according to New Article 54 not restricted only to supply for the domestic market.  Can China give a case example under which circumstances it envisages the requirements fulfilled?  IP/C/W/521 
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  9. Recent filing numbers for utility models and desi gn patents show a strong increase in number, 
with the vast majority of filers Chinese enterpri ses.  Many companies, including Chinese ones, have 
voiced the difficulty to enter the Chinese patent sy stem with copies of prior art or non-inventive 
modifications of previous applica tions, but later on very costly an d lengthy procedures for legitimate 
right holders to eliminate these copies ("easy to get in, hard to get out").  New Article 62 tries to 
address this problem by making the enforcement of such invalid rights dependant on a search report. 
Are there any further mechanisms foreseen to compensate right holde rs for the sometimes significant 
costs to get rid of invalid copies, in particular as regards invalidation? 
2. Protection of confidential information 
10. In various sectors, where companies are require d to apply for the technical and/or regulatory 
approval for products or for the authorization to build  a plant, such companies are required to entrust 
Chinese governmental or official agencies or institute s with highly confidential information.  In many 
cases, it is felt that the information required go es beyond what is reasonably needed.  Does China 
intend to adopt clear instructions to restrict the di sclosure of technical know-how to what is strictly 
necessary for the required authorisation or approval relating to import of a product, commercialization 
of a product (e.g. type approval) or the construction of a plant? 
11. Often, such information is not kept confidentia l but is made public and, in certain instances, 
data have been published on the in ternet before regulatory approval for such a product is granted. 
Would China be prepared to clearly define the obligations of all governmental officers and their related institutes, and enforce the liability and sanctions against those officers who disseminate 
confidential information without permission? 
3. Protection of test data for pharmaceutical products 
12. The EC welcomes the draft Drug Registrati on Regulation (DRR) of 10 March 2007 and 
expects that some of the proposed changes will  lead to some improvement of the regulatory 
framework in China.  However, the following IPR-related aspects need to be clarified. 
13. The regulatory framework in China provides fo r six marketing authorization categories.  
Depending on the marketing authorization category,  the type and extent of information to be 
submitted to the registration authority varies.  Th erefore, generic products for which only a limited 
data set has to be submitted bene fit from a different treatment from innovative products.  This practice 
might give rise to the conclusion that the provision s on data protection formally in place in China are 
nullified by the possibility to refer to less comprehe nsive data which are often in the public domain, 
with the public domain often interpreted in a broa d way including data provided by third parties for 
market approval.  This would undermine the objectiv e of an effective data protection.  Does China 
intend to review the six registration categorie s to ensure non-discrimination and create an 
environment in line with the sprit of the Chinese legal provision on data exclusivity? 
14. The current system does not enable drug approva l authorities to help solve patent disputes at 
an early stage of the procedure.  Some changes were introduced in the final revised DRR of 2007 
including the reference to a notification system and the possibility of initiating legal action during 
registration.  Can China indicate if and how this notification system works in practice?  Can China 
also indicate whether detailed guidelines exist to interpret the timing of publication and which details 
are published? IP/C/W/521 
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  4. Protection of products subject to marketing authorization 
15. As some specific products require long additiona l periods for their development and in order 
to obtain marketing authorizations, a number of  countries have decided to compensate for these 
periods during which the patent can not be exploite d by an additional protection mechanism (e.g. in 
the EC with the creation of Supplementary Protec tion Certificates for pharmaceutical products and for 
plant protection products).  Does China plan to grant additional protection – in the form of patent term 
restoration or supplementary protection certificates – to products that can not be marketed before a 
specific marketing authorization has been  given (such as pharmaceutical products)? 
5. Relations between patents and standards 
16. It has been reported that Chinese courts as r ecent as June 2008, have imposed the granting of 
compulsory licences in respect of patented technologi es identified by right holders who participate in 
standard setting procedures in China or which ar e included into a standard in China (without or 
against the will of patentees), with explicit excl usion of the FRAND basis (fair, reasonable and non-
discriminatory) for remuneration.  Could China clar ify the situation regarding the legal consequences 
of a patented technique being required for the implementation of a certain standard? 
B. T
RADEMARKS  
1. Trademark Law Revision 
17. The EC welcomes the revision of the Chinese Tr ademark Law, in particular the proposed 
amendments to limit the preliminary examination of a trademark application to the absolute grounds 
of refusal and to start oppositions at the level of the Trademark Review and Adjudication Broad 
(TRAB).  The EC welcomes the possibility to partic ipate in the consultation process initiated by the 
Chinese authorities.  Can China inform us of th e state of play on this consultation process? 
2. Counterfeiting at retail and wholesale markets 
18. In January 2008 the Beijing Municipality Admi nistration of Industry  and Commerce (AIC) 
issued a model text of a lease contract including the tw o strike rule into the private lease contracts of 
vendors in retail and wholesale markets in Beijing.  This rule aims at expelling vendors of counterfeit 
and pirated products from the markets.  Can China i ndicate how it intends to promote this model text? 
Can China also inform of the practical implementa tion of this model text?  Can China confirm police 
and/or Administration of Industry and Commerce's s upport to ensure that market order is respected 
when these clauses are implemented by landlords? 
19. It has been reported that during the Olympi c Games the Chinese authorities had conducted 
raids and the situation in main markets was rather cl ean in Beijing, in particular the absence of visible 
fake products from famous brands.  This is a welcomed initiative.  Ca n China confirm that it intends 
to pursue and intensify such action in the long term? 
20. Can China indicate which action it intends to ta ke to definitely clean out the markets from 
counterfeit products, especially in the Beijing Silk Market.  Does China agr ee that police (Public 
Security Bureau) should be active in pursuing crimin al liability for the storage of counterfeit goods in 
warehouses in order to re-establish market order and enable fair competition?  Does China agree that 
the degree of infringements may require revision of onerous formality requirements for enforcement, 
in particular by administrative authorities?  Does China agree that action by the authorities should not 
be limited to trademark infringement, but also encompass withdrawal of business licences in case of 
repeated infringements?  IP/C/W/521 
 Page 5 
 
 
  3. Trademark Office backlog 
21. There has been an increasingly alarming back log of cases pending at the Trademark Office 
(TMO) and Trademark Review and Adjudication Boar d (TRAB).  An application, which today takes 
an average of two years before it can be published an d registered, can be delayed by five to six years 
in the case of a dispute.  In certain  cases, such lengthy litigation results  in a denial of justice, and is 
detrimental to all parties concerned.  It is doubtful whether this is compliant with Article 62(2) of the 
TRIPS Agreement and the generally accepted concept of "reasonable period of time". 
22. Recently China announced that more staff (about 400) would be allocated to the Trademark 
Office and Trademark Review and Adjudication Bo ard in 2008 to deal with the processing of 
trademark applications and the review of oppositio n and cancellation actions.  Can China confirm this 
information and inform us of the state of play on this staff allocation? 
C. COPYRIGHT  
1. Market access 
23. Foreign suppliers of sound recording distribu tion services appear to receive less favourable 
treatment than that accorded to Chinese suppliers of sound recording distribution services.  It would 
appear that any "imported" music (which appears to  include music in which certain rights are held by 
a foreign-owned or foreign-invested enterprise) is s ubject to content review before digital distribution. 
However, music in which such rights are held by  Chinese enterprises without foreign investment is 
subject to registration but not prior content review before digital distribution. 
24. Consequently, it appears that foreign-owned and foreign-invested sound recording 
distribution enterprises in China, as well as ente rprises that supply cross-border sound recording 
distribution services, are treated less favourably than  say sound recording dist ribution enterprises that 
are wholly Chinese-owned.  Another problem is the time it takes to clear the censorship process.  In 
the fast-moving music business whoever gets to market  first has a big advantage and it would appear 
that the infringers are often able to supply music months before the copyright holder can.  How does 
China intend to resolve these issues ?  Does China intend to apply the same censorship requirements to 
Chinese enterprises as to foreign suppliers?  Does Ch ina have any plans to streamline the censorship 
process to allow right holders quicker access to the market? 
25. It appears that sound recordings imported into Ch ina in physical form but intended for digital 
distribution must undergo content review prior to distribution within China;  domestically produced 
sound recordings appear not to be subject to this requirement but can instead be digitally distributed 
immediately.  It thus appears that sound recordings  imported into China in physical form are treated 
less favourably than sound recordings produced in China in physical form.  It also appears that 
achieving censorship clearance for a digital work does not mean that the equivalent physical work has also passed censorship and vice versa.  How does Ch ina intend to resolve th ese issues?  Does China 
intend to apply the same censorship requirements to Chinese enterprises as to foreign suppliers?  Does 
China have any plans to streamline the censorship pr ocess to allow right holders quicker access to the 
market?  Will China ensure that only one censorship application is required for content irrespective of 
the form that it takes (i.e. digital or physical form)? 
2. Tariff rates 
26. Article 9(1) of the TRIPS Agreement imposes an  obligation to comply with Articles 1-21 of 
the Berne Convention.  Article 11 bis of the Berne Convention prescribes  that at least an equitable 
remuneration is payable to the author for the broad casting of their works.  It appears that since the 
amendment of the Chinese Copyright Law in 2001, no remuneration has been paid to right holders for IP/C/W/521 
Page 6  
 
  the use of music in their broadcasts, as the rate of remuneration, or tariff, has not been set by the State 
Council.  What measures will China ta ke to ensure a speedy resolution of this problem?  When will 
the tariff rates be set by the State Council?  Will ri ght holders be compensated for the years when their 
music was being broadcast prior to tariff rates being set? 
D. P
LANT VARIETY PROTECTION  
27. The EC noticed the reduction of costs for the application and testing of new plant  varieties' 
protection in China, as well as the reduction of ad ministrative and technical burdens as from 1 January 
2008 concerning some rules for the implementati on of its Regulation on the Protection of new 
varieties of plants (e.g. reduction of the checking period of a novel variety from two years to one year, 
no more need to work with a representative agency for foreign enterprise who wish to protect their 
new varieties in China, etc.) 
28. Nevertheless, loopholes still remain in the plant variety protection system in China, such as 
the fact that only a limited number of plant species  are protectable in China - patent protection for 
plants not covered under the Chinese system cannot be obtained - and that the so-called "farmer's 
exemption" applies also to ornamental and fruit plants.  In addition, the system does not cover 
harvested and processed material neither imported protected material.  How does China intend to 
resolve these issues?  Do es China intend to accede to the Inte rnational Convention for the Protection 
of New Varieties of Plants of 1991 to resolve them? 
E. IPR  AND COMPETITION LAW  
29. The EC welcomes the recently adopted Chinese Anti-Monopoly Law.  This new legislation 
refers to the concept of "abuse of intellectual propert y rights" in particular in Article 55.  Can China 
clarify what this concept means in practice?  Ca n China confirm that this concept does not go beyond 
what the TRIPS Agreement considers as abusive practices under Article 31(k) (compulsory licensing) 
and Article 40 (competition)?  Can China confirm that the implementing provisions of the Anti-
Monopoly Law will clarify this concept? 
III. IPR ENFORCEMENT 
A. INFORMATION OF IPR  HOLDERS  
30. Under the current system in China the IPR holder has no binding right to be involved in the 
proceedings.  Once the claim of the IPR holder has been accepted, most law enforcement agencies are 
not obliged to inform him of the results of the acti on.  On the other hand, the infringer has the right to 
defend his case and appeal to a higher authority.  Can China indicate:  (1) how it intends to ensure that 
IPR holders are adequately informed of the develo pment and results of the enforcement procedures;  
and (2) if it is intended to give IPR holders a ri ght to be involved in proceedings they initiated? 
B. CUSTOMS MEASURES  
31. Statistics provided by EU customs show a dram atic increase in the number of counterfeit and 
pirated goods coming from China and entering EU terr itory.  In 2007, about 60 per cent of the total 
counterfeit and pirated goods seized by EU custom s authorities came from China.  While this figure 
has decreased compared to  2006, the counterfeiting and piracy prob lem is still growing faster in size 
and complexity than what the Chinese system, with th e methods currently used, is able to deal with. 
What measures does China intend to take to tackle this problem?  IP/C/W/521 
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  C. CIVIL ENFORCEMENT  
1. Notarisation and legalisation of Power of Attorney and evidence 
32. Foreign companies which wish to initiate le gal proceedings in China but do not have a 
registered branch office or an investment presence in China, are required to produce a notarised and 
legalised Power of Attorney in favour of a register ed practising Chinese lawyer.  They also need to 
notarise and legalise any document justifying thei r incorporations.  Similarly, all documentary 
evidence produced in administrativ e or judicial litigation needs to  go through the same notarisation 
and legalisation process when they originate from a foreign country.  This is cumbersome and time consuming and can constitute an obstacle to any ur gent proceeding.  A positive step was made last 
year with the adoption by the Supreme People's Court of Opinions on the Comprehensive 
Strengthening of Intellectual Property Trials Wo rk and the Provision of Judicial Guarantee for 
Building An Innovation-oriented Country (11 January 2007)  but the provisions relating to notarisation 
and legalisation of overseas evidence are not clear enough and insufficient. 
33. As regards evidentiary requirements, can China indicate whether these requirements are 
mandatory and systematic or whether the judge h as some discretion in the matter?  If systematic, 
would China be ready to simplify the rules and repl ace the notarisation and le galisation of documents 
by an optional decision by the court on a case-by-case basis, in particular where there is reasonable 
doubt regarding the authenticity and/or content of a document?  What has been the impact of the 
above-mentioned 2007 SPC Opinion on the court practice? 
34. Regarding representation before the courts, are the rules mandatory or does the judge have 
some discretion in the matter?  If mandatory, does the law foresee the exhaustive list of documents to 
be provided?  Can China confirm that every time an attorney is replaced by a party or his address or 
the address of the entrusting party changes, the notari sation and legalisation needs to be re-applied, as 
well as in case of appeal to a case, even where there is no such change? 
2. Interim injunctions 
36. In China, it is difficult to obtain injunctions in practice.  It is estimated that less than 
two per cent of all interim injunction applications  actually submitted to the courts are granted.  
Official statistics do not take into account or give  a breakdown on applications  made which have not 
been "accepted" by the courts, for example due to th e lack of notarisation and legalisation of Power of 
Attorney.  How does China intend to solve this proble m, in particular to make the injunction system 
more transparent?  3. Level of damages 
35. In China right holders complain that the dama ges awarded by the courts are inadequate to 
compensate for losses or to deter further infring ement – not even covering the full costs of 
enforcement.  Can China describe the existing crit eria to determine the amount of damages to be 
awarded by the courts?  Do they take into account the profits made by the pirate?  Does the Chinese 
law allow the judge to impose da mages for each individual copyright infringement, as opposed to 
being applied to each case (covering a number of in fringements)?  Can China indicate whether legal 
fees and expenses (attorney's fees) are taken in to account in the determination of damages? 
4. Price evaluation system 
36. The calculation method used to determine the "s eriousness" of a case (for the application of 
the thresholds) appears to be inappropriate.  Instead of using prices of authentic goods, Chinese 
authorities rely on prices indicated by the suspect or other opaque means and which do not take into IP/C/W/521 
Page 8  
 
  account criteria such as unfinished goods and th e various components necessary to complete the 
infringement process (i.e. bottling/packaging).  As a result, large seizures of infringing goods are 
often considered at an unreasonable low value, wh ich is an obstacle to any serious and effective 
action.  Can China indicate if it intends to clarify this situation? 
5. Litigation costs 
37. Especially for patents and for criminal proce dures, litigation costs are reported to be very 
high, particularly for foreign right holders which are subjected to complex and costly legalisation 
requirements and have to engage – officially not ev en legal – investigation firms to obtain evidence to 
meet the burden of proof requirements set by Ch inese courts.  Does China intend to simplify the 
requirements applicable to foreign entities involved in IPR litigation? 
D. C
RIMINAL ENFORCEMENT  
1. Revision of the threshold system 
38. On 4 April 2007, the Supreme People's C ourt and the Supreme People's Procuratorate 
adopted an Interpretation on Several Issues in the Concrete Application of the Law in Handling 
Criminal Cases of IP Infringement .  This Interpretation aims to reduce the criminal threshold for 
copyright to 500 units and cancel the distinction betw een "individual" and "units".  As regards online 
piracy, can China clarify whether the threshold of "500 units" means making available 500 songs on 
the website or having to prove download of 5 00 songs?  Does China intend to re-evaluate the 
threshold mechanism for criminal prosecution for infringements of other intellectual property rights on the basis of the standards set for copyright infringements? 
2. Suspended sentences 
39. According to the Chinese Criminal Code (Artic le 72) the sentence can be suspended for cases 
punishable by imprisonment up to three years (consid ered "serious cases") under certain conditions.  
In practice, there have been quite a number of "very serious cases" (punishable by imprisonment from three to seven years without possibility of suspen sion), with large quantities seized, where the final 
decision was exactly three years, the court taki ng the opportunity of the ambivalence to grant 
suspension.  Can China indicate which measures it in tends to take to prevent suspension in "very 
serious cases"? 
E. O
NLINE PIRACY  
40. Unauthorized use of copyright and trademar ks on the internet is becoming increasingly 
common and widespread.  Unauthorized downloads of  music, software and literary works are widely 
available, and that there are endless possibilities to  obtain pirated and counterfeited goods via internet 
portal by phone or mail order.  Can China indicat e which kind of measures it has taken to enforce 
existing laws and regulations against the act of li nking to, and the hosting of, websites offering illegal 
or infringing content? 
41. In the run up to the Olympics, China maintained a round-the-clock watch on over 200 
Chinese websites in order to stop unauthorised transmissions of Olym pic events.  A surveillance team 
was even set up to detect and block all web-casts of  events, except those that were authorised by the 
International Olympic Committee.  Can China indicat e whether such an action will be pursued in the 
future and is not only a one-shot initiative?  If so , can China confirm that such an action will be 
applicable to all infringing websites?  IP/C/W/521 
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  42. The application of the internet regulations ra ises many complicated legal questions for the 
relevant authorities who have been identified as be ing responsible for their enforcement causing them 
to hesitate in taking action.  This  only benefits the infringers and allo ws piracy to become endemic if 
not contained at this stage.  Can China clarify th e issue of the proper jurisdiction for taking action? 
More specifically, can China clarify which minist ry or agency is responsible for shutting down 
infringing websites? 
43. Right holders, who wish to serve a notice of infri ngement to a website or to the relevant ISP, 
in the case where the operator cannot be identified, ar e currently confronted with overly complicated 
and burdensome procedures.  Can Ch ina indicate which measures it has taken or intends to take to 
clarify and simplify the situation where a website operator or ISP refuses to respond or delete the 
infringing content, or where they provide a res ponse that does not accept responsibility for the content 
and subsequently allows for the infringement to continue? 
 
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