Protection and Enforcement of Intellectual Property Rights Case Analysis International Economic Law Class 2013/2014 Presented by: Muhammad Faiz Aziz (P72110) Noor Farahani Binti Norizan (P72105)
Contents I I IV III 1. Brief Information 2. Issues 3. Arguments 4. Findings 5. Current Status 6. Conclusion 7. References
BRIEF INFORMATION Short title China Intellectual Property Rights Complainant United States Respondent China Third Parties Argentina; Australia; Brazil; Canada; European Communities; India; Japan; Korea, Republic of; Mexico; Chinese Taipei; Thailand; Turkey Agreements cited: (as cited in request for consultations) Intellectual Property (TRIPS): Art. 3.1, 9.1,14, 41.1, 46, 59, 61 Request for Consultations 10 April 2007 Panel Established & Composed 25 September 2007 & 13 December 2007* Panel report circulated 26 January 2009 Adopted by DSB 20 March 2009* Implemented by China 26 February 2010* Source: WTO (with modifications) ISSUES 1. Thresholds for criminal procedures and penalties 2. Disposal of goods confiscated by Customs Authorities that infringe Intellectual Property Rights 3. Denial of copyright and related rights protection and enforcement to works that have not been authorized for publication or distribution within China ISSUES 1. Thresholds for criminal procedures and penalties China Criminal Law* Provision Inconsistent with TRIPS Agreement Art 213 "if the circumstances are serious" or "if the circumstances are especially serious."
Article 41.1 & Article 61
China implements threshold with concept of ILLEGAL BUSINESS VOLUME Art 214 "if the amount of sales [of commodities bearing counterfeit registered trademarks] is relatively large" or "if the amount of sales is huge." Art 215 "if the circumstances are serious" or "if the circumstances are especially serious." Art 217 "if the amount of illegal gains 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." Art 218 "if the amount of illegal gains is huge." Art 220 By Unit as opposed to by natural persons With is interpretation by the Supreme People's Court and the Supreme People's Procuratorate ISSUES Article 41.1 of TRIPS Agreement:
Members shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements. These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse. ISSUES Article 61 of TRIPS Agreement
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 scale. Remedies available shall include imprisonment and/or monetary fines sufficient to provide a deterrent, consistently with the level of penalties applied for crimes of a corresponding gravity. In appropriate cases, remedies available shall also include the seizure, forfeiture and destruction of the infringing goods and of any materials and implements the predominant use of which has been in the commission of the offence. Members may provide for criminal procedures and penalties to be applied in other cases of infringement of intellectual property rights, in particular where they are committed wilfully and on a commercial scale. ISSUES ILLEGAL BUSINESS VOLUME
The calculation methodology based on the prices through which the counterfeit goods undercut legitimate merchandise. Thus, the value of "illegal business volume" for a quantity of counterfeit merchandise can be far less than the value of an equivalent quantity of legitimate merchandise.
This concept creates barriers to prosecution of commercial scale counterfeiting and piracy (whether carried out by businesses or others) because it is not a calculation of the value of the legitimate non- infringing goods with which the counterfeit goods compete. ISSUES 2. Disposal of goods confiscated by Customs Authorities that infringe Intellectual Property Rights China Custom Law* Provision Inconsistent with TRIPS Agreement Customs IPR Regulations 2003
Set forth a hierarchy of requirements for the disposal of goods that infringe intellectual property rights and that are confiscated by Chinese customs authorities.
Under that hierarchy, the Chinese customs authorities are required to give priority to disposal options that 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 .
Article 46 & Article 59 Customs IPR Implementing Measures 2004 General Administration of Customs Announcement No. 16 (2 April 2007) ISSUES Article 45 of TRIPS Agreement
In order to create an effective deterrent to infringement, the judicial authorities shall have the authority to order that goods that they have found to be infringing be, without compensation of any sort, disposed of outside the channels of commerce in such a manner as to avoid any harm caused to the right holder, or, unless this would be contrary to existing constitutional requirements, destroyed. The judicial authorities shall also have the authority to order that materials and implements the predominant use of which has been in the creation of the infringing goods be, without compensation of any sort, disposed of outside the channels of commerce in such a manner as to minimize the risks of further infringements. In considering such requests, the need for proportionality between the seriousness of the infringement and the remedies ordered as well as the interests of third parties shall be taken into account. In regard to counterfeit trademark goods, the simple removal of the trademark unlawfully affixed shall not be sufficient, other than in exceptional cases, to permit release of the goods into the channels of commerce. ISSUES Article 59 of TRIPS Agreement
Without prejudice to other rights of action open to the right holder and subject to the right of the defendant to seek review by a judicial authority, competent authorities shall have the authority to order the destruction or disposal of infringing goods in accordance with the principles set out in Article 46. In regard to counterfeit trademark goods, the authorities shall not allow the re-exportation of the infringing goods in an unaltered state or subject them to a different customs procedure, other than in exceptional circumstances. ISSUES 3. Denial of copyright and related rights protection and enforcement to works that have not been authorized for publication or distribution within China There are 10 regulations allegedly inconsistent: (1) the Copyright Law, in particular Article 4; (2) the Criminal Law; the Regulations on the Administration of Publishing Industry; the Regulations on the Administration of Broadcasting; the Regulations on the Administration of Audiovisual Products; the Regulations on the Administration of Films; and the Regulations on the Administration of Telecommunication; (3) the Regulations on Administration of the Films Industry; (4) the Administrative Regulations on Audiovisual Products; (5) the Administrative Regulation on Publishing; (6) the Administrative Regulations on Electronic Publications; (7) the Measures for the Administration of Import of Audio and Video Products; (8) the Procedures for Examination and Approval for Publishing Finished Electronic Publication Items Licensed by a Foreign Copyright Owner; (9) the Procedures for Examination and Approval of Importation of Finished Electronic Publication Items by Electronic Publication Importation Entities; (10) the Procedures for Recording of Imported Publications.
ISSUES 3. Denial of copyright and related rights protection and enforcement to works that have not been authorized for publication or distribution within China Allegedly Inconsistent with Article 5(1) of the Berne Convention for the Protection of Literary and Artistic Works (1971) (the "Berne Convention") . It provides 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.
Moreover, these rights may not be made subject to any formality (Berne Convention Article 5(2)). Article 9.1 of the TRIPS Agreement requires all WTO Members, inter alia, to comply with Articles 1 through 21 of the Berne Convention. ISSUES 3. Denial of copyright and related rights protection and enforcement to works that have not been authorized for publication or distribution within China Article 4 of the China 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 in China is prohibited (such as those works whose publication or distribution has not been authorized in China) appear not to enjoy the protection specially granted by the Berne Convention in respect of those works (and, it appears, 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). ARGUMENTS 1. Thresholds for criminal procedures and penalties USA CHINA The first sentence of Article 61 of the TRIPS 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 scale."
"provide for" means to "take appropriate measures in view of a possible event; make adequate preparation."
The phrase "Members shall provide for . . ." thus means that Members have an obligation to include in their law criminal procedures and penalties that apply in cases of wilful commercial scale trademark counterfeiting and copyright piracy.
TRIPS Agreement Article 61 must be read in accordance with Vienna Convention.
A treaty must be interpreted "in the light of its object and purpose." The object and purpose of TRIPS, laid out clearly in the Preamble to the Agreement, are to enhance international trade though the protection of intellectual property within the framework of Members' legal norms and resource constraints.
The object and purpose underscore that TRIPS Article 61 should not be read to harmonize legal systems across Members or to disregard Members interests in developing criminal measures that reflect its own legal norms and public interests
ARGUMENTS 2. Disposal of goods confiscated by Customs Authorities that infringe Intellectual Property Rights USA CHINA Article 27 of the Customs IPR Regulations and Article 30 of the Customs IPR Implementing Measures mandate a compulsory sequence of steps (or "items") that Chinese Customs must take in deciding how to treat goods determined infringe intellectual property rights.
Neither of the two components of the compulsory first "item" accords with Article 46 principles. The first item contains two parts. Customs ascertains whether the infringing goods can be used for "public good"; if so, Customs gives the goods to the relevant "public welfare organization". Where a donation to a charity is an option, and the donation has the right-holder's consent, this may be a socially beneficial disposition of infringing goods that also observes the principles of Article 46. On the other hand, allowing counterfeit goods to be used, even for "public good," can be harmful to a right holder in certain cases.
Customs may also allow the right holder to purchase the goods "for compensation" . The option under which a right holder can buy the infringing goods is not disposal.
Customs have the authority to order 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, or destroyed. Article 59 does not require that China limit Customs' disposition methods to disposal outside the channels of commerce and to destruction.
Therefore, Customs has the authority to donate infringing goods to social welfare organizations and has the legal responsibility of ensuring that donated goods are exclusively used by social welfare organizations and that they are exclusively used for social welfare purposes.
Infringers whose goods are auctioned are left in exactly the same position as if the goods had been destroyed: in both instances the infringers lose the goods without any compensation.
In addition, Right holders have a legal, formal right to comment prior to any public auction; this procedure helps Customs to determine that a good would be inappropriate for public auction, and thereby helps avoid harm to the right- holders ARGUMENTS 3. Denial of copyright and related rights protection and enforcement to works that have not been authorized for publication or distribution within China USA CHINA By denying copyright protection to works that should have it, Article 4 allows copyright infringers to profit at the expense of the legitimate rightholder, without fear of being subjected to enforcement procedures and remedies for copyright infringement..
Article 9.1 of the TRIPS Agreement provides that all WTO Members shall comply with Articles 1 through 21 of the Berne Convention, except that 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 there from.
China is a party to the Berne Convention.
China maintains government review and approval processes with respect to the publication and distribution within China of a variety of works, including films and DVD releases.
In general terms, a work subject to these processes may be published or distributed only if the required authorization is obtained. The United States does not object to the existence of these processes, nor could it.
This sovereign right is an inherent, reserved power acknowledged by international law as referenced in Article 17 of the Berne Convention for the Protection of Literary and Artistic Rights ("Berne Convention"), and expressly incorporated into the WTO structure through Article 9.1 of the TRIPS Agreement.
RESULTS (a) the Copyright Law, specifically the first sentence of Article 4, is inconsistent with China's obligations under: (i) Article 5(1) of the Berne Convention (1971), as incorporated by Article 9.1 of the TRIPS Agreement; and (ii) Article 41.1 of the TRIPS Agreement;
(b) with respect to the Customs measures: (i) Article 59 of the TRIPS Agreement is not applicable to the Customs measures insofar as those measures apply to goods destined for exportation; (ii) the United States has not established that the Customs 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; (iii) 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.
(c) 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.
RESULTS Under Article 3.8 of the DSU, in cases where there is an infringement of the obligations Assumed under a covered agreement, the action is considered prima facie to constitute a case of nullification or impairment. China did not succeed in rebutting that presumption. Accordingly, the Panel concludes 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.
In light of these conclusions, the Panel recommends pursuant to Article 19.1 of the DSU that China bring the Copyright Law and the Customs measures into conformity with its obligations under the TRIPS Agreement.
In this dispute, the Panel's task was not to ascertain the existence or the level of trademark counterfeiting and copyright piracy in China in general nor to review the desirability of strict IPR enforcement. The United States challenged three specific alleged deficiencies in China's IPR legal system in relation to certain specific provisions of the TRIPS Agreement. The Panel's mandate was limited to a review of whether those alleged deficiencies, based upon an objective assessment of the facts presented by the parties, are inconsistent with those specific provisions of the TRIPS Agreement.
As of 26 February 2010, China has implemented the recommendations and rulings of the DSB with respect to the Copyright Law.
However, The United States and China agree to use mechanism of "Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding"
No further announcement regarding Compliance Proceeding of DS362 case CURRENT STATUS REFERENCES TRIPs (Trade Related Intellectual Property Rights) Agreement The Berne Convention for the Protection of Literary and Artistic Works (1971) Copyright Law of the People's Republic of China 1990 (as amended in 2001 and 2010) China Measures Affecting The Protection And Enforcement Of Intellectual Property Rights: Request for Consultations by the United States, WT/DS362/1, 16 April 2007 China Measures Affecting The Protection And Enforcement Of Intellectual Property Rights: Request for Consultations by the United States, WT/DS362/R, 26 January 2009