CHINA – MEASURES AFFECTING THE PROTECTION AND ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
Document: Request for Consultations by the United States
Date: 16 April 2007
Document codes: WT/DS362/1; G/L/819; IP/D/26
Complainant: U.S.
Respondent: China
Third parties: Argentina, Australia, Brazil, Canada, EU, India, Japan, South Korea, Mexico, Taiwan, Thailand, Turkey
Dispute stage: Panel
Agreements cited: Art. 61, 41.1, 46, 59, 9.1, 14, 3.1  Intellectual Property (TRIPS)

CHINA – MEASURES AFFECTING THE PROTECTION AND
ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS

Request for Consultations by the United States

 The following communication, dated 10 April 2007, from the delegation of the United States
to the delegation of China and to the Chairman of the Dispute Settlement Body, is circulated in
accordance with Article 4.4 of the DSU.

 My authorities have instructed me to request consultations with the Government of the
People's Republic of China ("China") pursuant to Articles 1 and 4 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes ("DSU") and Article 64 of the Agreement on Trade-
Related Aspects of Intellectual Property Rights ("TRIPS Agreement") (to the extent that Article 64
corresponds to Article XXII of the General Agreement on Tariffs and Trade 1994 ) with respect to
certain measures pertaining to the protection and enforcement of intellectual property rights in China.

I. Thresholds for criminal procedures and penalties

The first matter on which the United States requests consultations concerns the thresholds that
must be met in order for certain acts of trademark counterfeiting and copyright piracy to be subject to
criminal procedures and penalties. In this regard, the measures at issue include:

(1) the Criminal Law of the People's Republic of China (adopted at the Second Session of the
Fifth National People's Congress on 1 July 1979 a nd revised at the Fifth Session of the Eighth
National People's Congress on 14 March 1997) ("Cr iminal Law"), in particular Articles 213,
214, 215, 217, 218, and 220; and

(2) measures by the courts and procuratorate that apply throughout China, including the
Interpretation by the Supreme People's Court and the Supreme People's Procuratorate on
Several Issues of Concrete Application of Law in Handling Criminal Cases of Infringing
Intellectual Property (adopted at the 1331
st Session of the Judicial Committee of the Supreme
People's Court on 2 November 2004 and the 28 th Session of the Tenth Procuratorial
Committee of the Supreme People's Procurator ate on 11 November 2004 and to be effective
as of 22 December 2004) ("th e December 2004 Judicial In terpretation"), and the
Interpretation by the Supreme People's Court and the Supreme People's Procuratorate on
Several Issues of Concrete Application of Law in Handling Criminal Cases of Infringing
Intellectual Property (II) (adopted on 4 April 2007, at the 1422 nd Session of the Judicial
Committee of the Supreme People's Court and the 75 th Session of the Tenth Procuratorial
Committee of the Supreme People's Procuratorate, and to be effective on 5 April 2007) ("the
April 2007 Judicial Interpretation");

IP/D/26

as well as any amendments, related measures,
1 or implementing measures.

 Articles 213, 214, and 215 of the Criminal Law describe certain acts of trademark
counterfeiting that may be subject to criminal pr ocedures and penalties. However, under Article 213,
criminal procedures and penalties are available only "if the circumstances are serious" or "if the
circumstances are especia lly serious". Under Article 214, cr iminal procedures and penalties are
available only "if the amount of sales [of commoditi es bearing counterfeit registered trademarks] is
relatively large" or "if the amount of sales is huge ". Under Article 215, criminal procedures and
penalties are available only "if the circumstances ar e serious" or "if the circumstances are especially
serious".

 Articles 217 and 218 of the Crimin al Law describe certain acts of copyright piracy that may
be subject to criminal procedures and penalties. However, under Article 217, criminal procedures and
penalties are available only "if the amount of illegal ga ins is relatively large, or if there are other
serious circumstances" or "if the amount of illegal gains is huge or if there are other especially serious
circumstances". Under Article 218, criminal pr ocedures and penalties are available only "if the
amount of illegal gains is huge".

 Article 220 of the Criminal Law provides fo r the availability of procedures and penalties
when the crimes described in Articles 213 through 219 are committed by a "unit", as opposed to by
natural persons.

 The Criminal Law itself does not define the term s "serious", "especially serious", "relatively
large", and "huge" as used in the above-referenced ar ticles. Instead, these te rms are defined in the
December 2004 Judicial Interpretation and the Apri l 2007 Judicial Interpretation by reference to
"illegal business volume" (stated in terms of the value of products produced, stored, transported and
sold), "illegal gains" (stated in terms of profit), or number of "illegal copies".

 Additionally, where the thresholds are de fined in terms of "illegal business volume",
Article 12 of the December 2004 Judicial Interpreta tion provides that value ordinarily is calculated
according to "the prices at which such products are actually sold" or "the labeled prices or the actual
prices found to be sold at after investigation". In other words, it is the price of the infringing goods as
opposed to the price of the corresponding legitimat e goods that determines "illegal business volume".
The lower the actual or labeled prices of infringin g goods, the more of them an infringer can sell or
offer for sale without reaching the thresholds in th e Criminal Law that are defined by reference to
"illegal business volume".

 The United States understands that acts of trademark counterfeiting and copyright piracy
occurring on a commercial scale in Chin a that fail to meet the thresholds are not subject to criminal
procedures and penalties in China. The lack of criminal procedures and penalties for commercial
scale counterfeiting and piracy in China as a result of the thresholds appears to be inconsistent with
China's obligations under Articles 41.1 and 61 of the TRIPS Agreement.

1 Such other related measures include but are not limited to the Explanation on Certain Questions
Related to the Concrete Application of Law in Hearing Cases of Crimes of Illegal Publication Fa Se (1998)
No. 30 (adopted by the Adjudication Committee of the Supreme People's Court at its 1032 nd meeting on
11 December 1998, effective as of 23 December 1998) and the Prosecution Guidelines for Criminal Cases
Jointly Issued by the Supreme People's Procuratorate and the Ministry of Public Safety (18 April 2001).

 IP/D/26

II. Disposal of goods confiscated by Customs authorities that infringe intellectual property
rights

 The second matter on which the United States requests consultations concerns goods that
infringe intellectual property rights that are confi scated by Chinese customs authorities, in particular
the disposal of such goods following removal of their infringing features.

 In this regard, the measures at issue include:

(1) the Regulations of the People's Republic of China for Customs Protection of Intellectual
Property Rights (adopted at the 30
th Ordinary Meeting of the State Council on 26 November
2003, published by the State Council on 2 Decem ber 2003, and effective from 1 March 2004)
("Customs IPR Regulations"), in particular Chapter 4 thereof; and

(2) the Implementing Measures of Customs of the People's Republic of China for the Regulations
of the People's Republic of China on Custom s Protection of Intellectual Property Rights
(adopted at an Administration Affairs Meeting of the General Administration of Customs on
22 April 2004, issued by the General Administration of Customs with Order No. 114 on
25 May 2004, and effective from 1 July 2004) ("Customs IPR Implementing Measures"), in
particular Chapter 5 thereof;

as well as any amendments, related measures,
2 or implementing measures.

 Specifically, the United States understands that Article 27 of the Customs IPR Regulations
and Article 30 of the Customs IPR Implementing Measures set forth a hierarchy of requirements for
the disposal of goods that infringe intellectual pr operty rights and that are confiscated by Chinese
customs authorities. Under that hierarchy, the cust oms authorities often appear to be required to give
priority to disposal options that would allow such goods to enter the channels of commerce (for
instance, through auctioning the goods after removing their infringing features). Only if the
infringing features cannot be removed must the goods be destroyed. The requirement that infringing
goods be released into the channels of commerce unde r the circumstances set forth in the measures at
issue appears to be inconsistent with China' s obligations under Articles 46 and 59 of the TRIPS
Agreement.

III. Denial of copyright and related rights protection and enforcement to works that have
not been authorized for publication or distribution within China

 The third matter on which the United States reque sts consultations concerns the denial of
copyright and related rights protection and enfo rcement to creative works of authorship, sound
recordings, and performances that have not been au thorized for publication or distribution within
China. For example, it appears that works that are required to undergo censorship review (or other
forms of pre-publication or pre-distribution review) before entering the Chinese market are not
protected by copyright before the review is comp lete and publication and distribution within China
has been authorized.

2 Such other related measures include but are not limited to the Law of the People's Republic of China
on Administrative Penalty (adopted at the Fourth Session of the Eighth National People's Congress on 17 March
1996, promulgated by Order No. 63 of the President of the People's Republic of China on 17 March 1996, and
effective as of 1 October 1996) and in particular Article 53 thereof.

IP/D/26

 In this regard, the measures at issue include:

(1) the Copyright Law,
3 in particular Article 4;

(2) the Criminal Law, the Regulations on the Administration of Publishing Industry, the
Regulations on the Administration of Broadcas ting, the Regulations on the Administration of
Audiovisual Products, the Regulations on the Ad ministration of films, and the Regulations on
the Administration of Telecommunication;4

(3) the Administrative Regulations on Audiovisual Products 5;

(4) the Administrative Regulation on Publishing
6;

(5) the Administrative Regulations on Electronic Publications 7;

(6) the Measures for the Administration of Import of Audio and Video Products
8;

(7) the Procedures for Examination and Approval for Publishing Finished Electronic Publication
Items Licensed by a Foreign Copyright Owner
9;

(8) the Procedures for Examination and Appr oval of Importation of Finished Electronic
Publication Items by Electronic Publication Importation Entities10;

(9) the Procedures for Recording of Imported Publications
11;

(10) the Interim Regulations on Internet Culture Administration 12; and

(11) the Several Opinions on the Develo pment and Regulation of Network Music
13;

3 Adopted at the 15th Session of the Standing Committee of the Seventh National People's Congress on
7 September 1990, and amended according to the Decision on the Revision of the Copyright Law of the People's
Republic of China, adopted at the 24th Session of the Standing Committee of the Ninth National People's
Congress on 27 October 2001. See Main Dedicated Intellectual Property Laws and Regulations Notified under
Article 63.2 of the Agreement: China, IP/N/1/CHN/C/1, circulated 8 July 2002.
4 As noted by China in reply to a question in Review of Legislation: China , IP/Q/CHN/1, circulated
10 December 2002, section V.A.3.
5 State Council Order No. 341, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.
6 State Council Order No. 343, adopted at the 50th executive meeting of the State Council on
12 December 2001, promulgated on 25 December 2001.
7 Order No. 11 of the General Administration of Press and Publication (30 December 1997).
8 Decree No. 23 of the Ministry of Culture and the General Administration of Customs (17 April 2002).
9 General Administration of Pre ss and Publication (27 December 20 05) (Basis of Establishment:
Decision on Establishing Administrative Licensing for Items Necessary to be Maintained for Administrative
Examination and Approval by the State Council [State Council Order No. 412]).
10 General Administration of Press and Publication (27 December 2005) (Basis of Establishment:
Decision on Establishing Administrative Licensing for Items Necessary to be Maintained for Administrative
Examination and Approval by the State Council [State Council Order No. 412]).
11 General Administration of Press and Publication (27 December 2005) (Basis of Establishment:
Article 45 of the Administration Regulations on Publication [State Council Order No. 343]).
12 Promulgated in Order No. 27 of the Ministry of Culture (10 May 2003), amended by Order No. 32 of
the Ministry of Culture (1 July 2004).
13 Ministry of Culture (20 November 2006).

 IP/D/26

as well as any amendments, related measures, or implementing measures.

 Article 5(1) of the Berne Convention for the Protection of Literary and Artistic Works (1971)
(the "Berne Convention") requires that foreign authors of protected works shall enjoy all the rights
granted to domestic authors, as well as all the rights specially granted by the Berne Convention.
14
These rights may not be made subject to any form ality (Berne Convention Article 5(2)). TRIPS
Agreement Article 9.1 requires all WTO Members, inter alia, to comply with Articles 1 through 21 of
the Berne Convention.15

 China's Copyright Law provides the legal basis for copyright protection within China of the
works of Chinese and foreign authors, and it provides an array of rights to such authors ( e.g., rights of
reproduction, translation, and adaptation). In add ition, the Copyright Law provides specific statutory
protections to performers, producers of sound record ings, and broadcasting or ganizations. However,
the first sentence of Article 4 of the Copyright Law provides as follows: "Works the publication or
distribution of which is prohibited by law shall not be protected by this Law". Therefore, authors of
works whose publication or distribution has not been authorized (and whose publication or
distribution is therefore prohibited) appear not to enjoy the minimum standards of protection specially
granted by the Berne Convention in respect of t hose works (and may never enjoy such protection if
the work is not authorized, or is not authorized fo r distribution or publication in the form as submitted
for review). In addition, the rights of authors of works whose publication or distribution is required to
undergo pre-publication or pre-distribution review appear to be subject to the formality of successful
conclusion of such review. The foregoing appears to be inconsistent with China's obligations under
TRIPS Agreement Article 9.1.

 In addition, Article 14 of the TRIPS Agre ement requires China to give performers, inter alia,
the possibility of preventing certain acts, and to give producers of phonograms (sound recordings) the
right to authorize or prohibit the direct or indirect reproduction of their sound recordings (collectively,
the "related rights"). To the ex tent that the Copyright Law also denies protection of these rights to
performers and producers of sound recordings during the period of any pre-publication or
pre-distribution prohibition, the Copyright Law appear s to be inconsistent with China's obligations
under Article 14 of the TRIPS Agreement.

 Furthermore, it appears that the measures at issue provide different pre-distribution and
pre-authorization review processes for Chinese nationa ls' works, performances (or their fixations) and
sound recordings than for foreign nationals' wo rks, performances (or their fixations) and sound
recordings. To the extent that these different processes, taken together with Article 4 of the Copyright
Law, result in earlier or otherwise more favourable protection or enforcement of copyright or related
rights for Chinese authors' works, Chinese performers' performances (or their fixations) and Chinese
producers' sound recordings than for foreign aut hors' works, foreign performers' performances (or
their fixations) and foreign producers' sound reco rdings, the measures at issue appear to be
inconsistent with China's obligations under TRIPS Agreement Article 3.1. Additionally, to the extent
that Article 4 of the Copyright Law, independe ntly or in conjunction with the different pre-
authorization or pre-distribution processes in the ot her measures at issue, causes foreign authors of
works whose publication or distribution has not been authorized not to enjoy the rights granted to

14 The minimum standards of copyright protection fo r literary and artistic works specially granted by
the Berne Convention include, inter alia, the right of reproduction (Berne Co nvention Article 9(1)), the right of
adaptation (Berne Convention Article 12), and the right of translation (Berne Convention Article 8).
15 However, WTO Members do not have rights or obligations under the TRIPS Agreement in respect of
the rights conferred under Article 6bis of the Berne Convention or of the rights derived therefrom.

IP/D/26

Chinese authors, the measures at issue appear to be inconsistent with China's obligations under TRIPS
Agreement Article 9.1 (with respect at least to Chin a's obligations to comply with Articles 5(1) and
5(2) of the Berne Convention).

 In addition, to the extent that Article 4 of China's Copyright Law, independently or in
conjunction with the other measures at issue, make s it impossible for rightsholders to enforce their
copyrights or related rights with respect to works, performances or sound recordings that have not
been authorized for publication or distribution, Ch ina fails to make enforcement procedures available
so as to permit effective action against infringement s of those copyrights and related rights. This
appears to be inconsistent with China's obligations under TRIPS Agreement Article 41.1.

IV. Unavailability of criminal procedures and pe nalties for a person who engages in either
unauthorized reproduction or unauthorized distribution of copyrighted works

 The fourth matter on which the United States requests consultations concerns the scope of
coverage of criminal procedures and penalties for unauthorized reproduction or unauthorized
distribution of copyrighted works. In particular, it appears that unauthorized reproduction of
copyrighted works by itself – that is, unauthorized reproduction that is not accompanied by
unauthorized distribution – may not be subject to criminal procedures and penalties. Likewise, it
appears that unauthorized distribution of copyri ghted works by itself – that is, unauthorized
distribution that is not accompanied by unauthorized reproduction – may not be not subject to
criminal procedures and penalties.

 In this regard, the measures at issue include the Criminal Law, in particular Article 217, as
well as any amendments, related measures, or implementing measures.

 Article 217 establishes the availability of crimin al procedures and penalties for certain acts of
copyright piracy, including "reproducing and distributing [ fuzhifaxing] a written work, musical work,
motion picture, television programme or other visu al works, computer software or other works
without permission of the copyright owner" and "reproducing and distributing an audio or video
recording produced by another person without permission of the producer".
16

 To the extent that wilful copyright piracy on a commercial scale that consists of unauthorized
reproduction – but not unauthorized distribution – of copyrighted works, and vice versa, may not be
subject to criminal procedures and penalties under the law of China, this would appear to be
inconsistent with China's obligations under Articles 41.1 and 61 of the TRIPS Agreement.

The United States notes that Article 2 of the April 2007 Judicial Interpretation addresses the
phrase "reproducing and distributing" [ fuzhifaxing], and we look forward to discussing this matter
with China during our consultations.

 We look forward to receiving your reply to th e present request and to fixing a mutually
convenient date for consultations.

Article 217.