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DISPUTE SETTLEMENT: DISPUTE DS362

China — Measures Affecting the Protection and Enforcement of Intellectual Property Rights

This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

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Consultations

Complaint by the United States.

On 10 April 2007, the United States requested consultations with China concerning certain measures pertaining to the protection and enforcement of intellectual property rights in China.

The four matters on which the United States requests consultations are:

• 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;
    
• goods that infringe intellectual property rights that are confiscated by Chinese customs authorities, in particular the disposal of such goods following removal of their infringing features;
    
• the scope of coverage of criminal procedures and penalties for unauthorized reproduction or unauthorized distribution of copyrighted works; and
    
• the denial of copyright and related rights protection and enforcement to creative works of authorship, sound recordings and performances that have not been authorized for publication or distribution within China.

The United States claims that in relation to the four above-mentioned matters possible inconsistencies with the TRIPS Agreement arise as follows:

• 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.
    
• The requirement that infringing goods be released into the channels of commerce under 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.
    
• 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 those works (and may never enjoy such protection if the work is not authorized, or is not authorized for 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 Article 9.1 of the TRIPS Agreement. In addition, to the extent that the Copyright Law also denies protection of so-called related rights to performers and producers of sound recordings during the period of any pre-publication or pre-distribution, the Copyright Law appears to be inconsistent with China's obligations under Article 14 of the TRIPS Agreement. Furthermore, to the extent that different pre-distribution and pre-authorization review processes for Chinese nationals' works, performances (or their fixations) and sound recordings than for foreign nationals' works, performances (or their fixations) and sound recordings 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, the measures at issue appear to be inconsistent with China's obligations under Article 3.1 of the TRIPS Agreement. Additionally, to the extent that Article 4 of the Copyright Law causes foreign authors of works whose publication or distribution has not been authorized not to enjoy the rights granted to Chinese authors, the measures at issue appear to be inconsistent with China's obligations under Article 9.1 of the TRIPS Agreement (with respect at least to China'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 makes it impossible for rights holders to enforce their copyrights or related rights with respect to works, performances or sound recordings that have not been authorized for publication or distribution, China appears to act inconsistently with China's obligations under Article 41.1 of the TRIPS Agreement.
    
• 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.

On 20 April 2007, Japan requested to join the consultations. On 25 April 2007, Canada and the European Communities requested to join the consultations. On 26 April 2007, Mexico requested to join the consultations. Subsequently, China informed the DSB that it had accepted the requests of Canada, the European Communities, Japan and Mexico to join the consultations.

On 13 August 2007, the United States requested the establishment of a panel. At its meeting on 31 August 2007, the DSB deferred the establishment of a panel.

Panel and Appellate Body proceedings

At its meeting on 25 September 2007, the DSB established a panel. Argentina, the European Communities, Japan, Mexico and Chinese Taipei reserved their third-party rights. Subsequently, Australia, Brazil, Canada, India, Korea, Thailand and Turkey reserved their third-party rights. On 3 December 2007, the United States requested the Director-General to compose the panel. On 13 December 2007, the Director-General composed the panel. On 16 July 2008, the Chairman of the panel informed the DSB that due to the complexity of issues presented in this case, the panel would not be able to complete its work within six months from the date of the panel's composition. The panel expected to issue its final report to the parties by November 2008.

On 26 January 2009, the panel report was circulated to Members.  The panel concluded that the Copyright Law, specifically the first sentence of Article 4, is inconsistent with China's obligations under Article 5(1) of the Berne Convention (1971), as incorporated by Article 9.1 of the TRIPS Agreement; and Article 41.1 of the TRIPS Agreement.

With respect to the Customs measures, the panel determined that Article 59 of the TRIPS Agreement is not applicable to these measures insofar as they apply to goods destined for exportation and that the United States has not established that these measures are inconsistent with Article 59 of the TRIPS Agreement, as it incorporates the principles set out in the first sentence of Article 46 of the TRIPS Agreement.  The panel also determined that the Customs measures are inconsistent with Article 59 of the TRIPS Agreement, as it incorporates the principle set out in the fourth sentence of Article 46 of the TRIPS Agreement and that the United States has not established that the criminal thresholds are inconsistent with China's obligations under the first sentence of Article 61 of the TRIPS Agreement.

The panel exercised judicial economy with respect to the claim under Article 5(2) of the Berne Convention (1971), as incorporated by Article 9.1 of the TRIPS Agreement, the claims under Article 61 of the TRIPS Agreement (with respect to the Copyright Law) and the claims under Article 41.1 of the TRIPS Agreement and under the second sentence of Article 61 of the TRIPS Agreement (with respect to the criminal thresholds). 

The panel concluded that, to the extent that the Copyright Law and the Customs measures as such are inconsistent with the TRIPS Agreement, they nullify or impair benefits accruing to the United States under that Agreement, and recommended that China bring the Copyright Law and the Customs measures into conformity with its obligations under the TRIPS Agreement.

At its meeting on 20 March 2009, the DSB adopted the panel report. 

Implementation of adopted reports

On 15 April 2009, China informed the DSB that it intended to implement the DSB recommendations and rulings and that it would need a reasonable period of time to do so.  On 29 June 2009, China and the United States informed the DSB that they had agreed that the reasonable period of time for China to implement the DSB recommendations and rulings shall be 12 months from the adoption of the report.  Accordingly, the reasonable period of time expires on 20 March 2010.

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