TradePost Archives > January 29, 2009 > this article

U.S. claims win in WTO case against China IPR laws

January 28, 2009
World Trade\Interactive

The World Trade Organization made public Jan. 26 a dispute settlement panel ruling in a case brought by the U.S. against China’s legal regime for protecting and enforcing intellectual property rights on a wide range of products.

Acting U.S. Trade Representative Peter Allgeier said the panel ruling “found that a number of deficiencies in China’s IPR regime are incompatible with China’s obligations under the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights. According to a USTR press release, the panel’s findings included the following.

• China’s denial of copyright protection to works that do not meet its “content review” standards is impermissible under the TRIPS Agreement. The U.S. had alleged that this blanket denial of protection deprives certain copyright owners of vital enforcement tools to prevent unauthorized copies from being produced in China and distributed there or exported to other markets.

• It is impermissible for China to provide for simple removal of an infringing trademark as the only precondition for the sale at public auction of counterfeit goods seized by Chinese customs authorities. The U.S. argued that returning these goods to the marketplace with only the infringing mark removed could confuse consumers, harm the reputation of the legitimate product and facilitate rather than deter further acts of infringement involving these goods.

• The TRIPS Agreement requires criminal penalties and procedures to be available for all commercial scale copyright piracy and trademark counterfeiting, and the panel agreed that the term “commercial scale” means that China cannot set its thresholds for prosecution so high as to ignore the realities of the commercial marketplace. However, the panel determined that it needed more evidence to conclude that actual thresholds for prosecution in China’s criminal law are so high as to allow commercial-scale counterfeiting and piracy to occur without the possibility of criminal prosecution. The panel also clarified that determining what constitutes “commercial scale” depends on factors such as the product at issue, the particular market in which it is sold and the impact of technological developments that can enable pirates and counterfeiters to flourish with lower costs and in more pervasive ways.