US, Switzerland, Japan Launch New WTO Probe On China’s IP Enforcement

The United States, Japan and Switzerland have taken bilateral actions through the World Trade Organization to probe China’s intellectual property rights enforcement, despite Chinese objections.

The three nations are requesting more transparency based on Article 63.3 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

During the 25 October TRIPS Council meeting, China was accused of continued “rampant” piracy and counterfeiting, but China pushed back, according to participants. But the United States requested details on judicial cases involving intellectual property rights enforcement from 2001 to 2004 in a 25 October evening bilateral meeting, but met with resistance from China, one official said.

“Our goal is to get detailed information that will help pinpoint exactly where the enforcement system is breaking down so we can decide appropriate next steps,” US Trade Representative Rob Portman said in a Wednesday statement. Portman referred to the action as a “special process.”

The transparency issue is addressed in separate letters from the heads of the US and Swiss permanent missions to the WTO in Geneva to Chinese Ambassador Sun Zhenyu and distributed at the TRIPS Council meeting being held at the WTO 25 to 28 October. Japan also has a similar letter, sources said.

At Tuesday’s TRIPS Council meeting the transitional review mechanism (TRM) pursuant to paragraph 18 of the China’s accession protocol also was discussed, but the letters in questions were said to be independent of this process.

On 26 October, the TRIPS Council spent the entire morning session on issues related biodiversity and did not complete its work. The meeting was suspended until Friday when the remainder of the agenda will be taken up. China is expected to present a reply statement to the United States and Switzerland under the “other business” item on the agenda, a Chinese delegate said.

A Swiss delegate said they would refer to their letter, and would request a written response from China by the end of January, a deadline also sought by the other two governments.

The US letter requests that China provide “clarifications regarding specific cases of [intellectual property rights] IPR enforcement that China has identified for the years 2001 through 2004,” and other relevant cases from 2005.

China, however, argues it is not bound to meet this request under TRIPS Article 63, a Chinese delegate to the TRIPS Council said Wednesday. He questioned the application of Article 63.1, which says that “laws and regulations, and final judicial decisions and administrative ruling of general applications … shall be published.”

China also questioned the application of TRIPS Article 63.3, which states that “A member, having reason to believe that a specific judicial decision or administrative ruling or bilateral agreement in the area of intellectual property rights affects its rights under this agreement, may also request in writing to be given access to or be informed in sufficient detail of such specific judicial decisions or administrative rulings or bilateral agreements.”

Referring to this argument, the Chinese delegate highlighted the word “specific,” arguing that China was not obliged to provide information on all such cases between 2001 and 2004. Rather, a member may only request information on specific cases that affect them.

A Swiss delegate said in an interview that his mission’s letter was sent independently of the US letter. He said a WTO member may question another under TRIPS Article 63.3 for transparency and that the practice is common for Switzerland, contrary to the US statement that this was a special process. But he added that as these were not Swiss questions only but issues of interest to other members as well, the letter had been distributed at the TRIPS Council. “This is neither a special initiative nor part of the review,” the delegate said.

Letters Call For Clarification

The US letter requests clarification on six issues. First, it wants China to identify the legal basis for any finding of intellectual property rights infringement, and how many of these findings were resolved on a basis other than IP rights infringement.

Second, it wants comprehensive information about the “precise nature and amount of all the remedies and provisional measures imposed” in the cases, as well as information on matters involving repeat infringers. Third, the US requests information on the year the cases in question were begun and resolved; the location; and the name of the competent authority.

Fourth, it asks China to provide details of trademark and copyright cases transferred to criminal authorities, and fifth, to clarify whether in the cases involving foreigners, “the rights holders are nationals of other WTO members or other countries,” and if possible, which ones. And finally, the United States says it “would appreciate clarification of the specific type(s) of products and operations involved in all of the identified cases where such information exists.”

Like the US letter, the Swiss letter recognises the “strong efforts” China has made to bring its intellectual property rights legislation into line with the TRIPS agreement but it requests “specific additional information regarding Chinese IPR enforcement.” Its questions are divided into three parts: implementation of legal provisions, remedies and provisional measures and institutional aspects.

The Swiss inquire about the legal basis for findings of IP rights infringements and which provisions have been infringed the most; in which kinds of cases administrative law is applied; average duration and typical reasons why rights holder lose their cases.

The Swiss letter also asks the Chinese to provide clarification on remedies and provisional measures available to right holders to enforce their IP rights. It also seeks clarification on the “minimal and maximum amount of fines and imprisonment imposed under Chinese enforcement practice and refer to examples of the reported cases.” This section in the Swiss letter is very similar to a request in the US letter.

The Swiss letter further requested an organisational chart of the Chinese enforcement authorities, clarifications in terms of stages of appeal, the relationship between the civil, criminal and administrative procedure and by what means transparency is ensured in Chinese enforcement procedures.

China Praised and Criticised On Enforcement

When China entered the WTO in 2001 it agreed to an annual review (TRM) for the first eight years. During the review on 25 October Japan, the United States and the European Union contributed with questions.

The main concern of the questioning countries was what they called “continuing and serious counterfeiting and piracy,” though they recognised the efforts China had made in protecting intellectual property, according to a WTO official. China replied that the more economic causes of infringements had to be better examined and that it was ready to collaborate on fighting the problem, which was global in its nature and not specifically Chinese, the WTO official said.

The United States praised the work of China’s Trademark and Patent Office but said the infringement problem was “rampant,” adding that it harmed “the interests of right holders, large and small, not only in China but around the world,” the WTO official said.

The issue of administrative measures being weaker than criminal proceedings was also raised, the official said. “We cannot help concluding that IPR [intellectual property rights] enforcement in China is insufficient to deter further infringements,” Japan said.

In its reply, China noted that it needed members’ help and support in addressing this issue and referred to a white paper it had issued entitled, New Progress in China’s Protection of Intellectual Property Rights.

The paper notes that the State Intellectual Property Office handled 353,807 applications in 2004, up 14.7 percent from the previous year. Foreign applications accounted for 21.2 percent, up by 30.8 percent on 2003.

China said in its TRM communication that “51,851 trademark law-breaking cases of various kinds were investigated and dealt with across China in the year 2004,” and that “5,494 out of the total trademark law-breaking case involve a foreign party or factor.”