59. The representative of the United States thanked China for the answers to Members' questions and said that her delegation found the TRM mechanism to be a useful addition to other multilateral and bilateral forums for discussing IPRs, including the concerns of China, the United States and other countries
60. Her delegation appreciated China's efforts to improve its IPR enforcement and protection environment, including the growth of China's Trademark Office and Patent Office and the increasing docket of the Chinese courts and enforcement agencies, the credit for which belonged to a large part to Vice Premier Wu Yi and her staff. However, although China had committed itself to address a number of problems in its IPR regime and to significantly reduce IPR infringement levels, IPR infringement in China remained rampant and deterrent processes were necessary to bring this problem under control. The magnitude of IPR infringement in China was harming the interests of right holders in China and around the world. In this respect, her delegation had welcomed China's President Hu Jintao's statement on 13 September 2005 that "China will continue to step up its efforts to protect intellectual properties. And we will certainly enhance our effort in fighting all kinds of violations in this regard."
61. She said that IPR protection had also become critical to the community of China's own right holders, as could be seen in the areas of trademarks, plant varieties and design and utility model patents where Chinese applications dominated. In other areas, such as invention patents, domestic applications were increasingly likely to dominate in the near future.
62. Her delegation welcomed China's commitment to accede to the WIPO Internet treaties, which, in view of over 100,000,000 Internet users and rapid broadband deployment in China, was important to all copyright owners, including Chinese writers, composers, publishers, recording studios, movie makers and software developers. The United States welcomed the increased transparency of the National Copyright Administration in this drafting process and hoped that accession would proceed smoothly.
63. The United States also welcomed the State Intellectual Property Protection Office's and other agencies' efforts to improve provisions for the transfer of cases from the non-deterrent administrative process to criminal prosecution, as currently such transfers constituted only a tiny percentage of overall administrative cases, and the efforts to clarify the possibility that exporters could face criminal liability.
64. Unfortunately, however, the situation was deteriorating in certain areas such as squatting on foreign trademarks and designs, where whole industrial designs were now being been imitated under the cover of design patents which were not examined, and for which there were no deterrent remedies against squatting. In addition, the Internet and trade shows increasingly provided vehicles for widespread imitation and infringement, including export of counterfeit and pirated goods in physical form or through uploading movies, software, books, and music. As China had become a factory to the world, Chinese counterfeit products were found throughout the world and across every conceivable sector, whether or not the holder of the rights in these products had a factory or presence in China.
65. At last year's TRIPS Council, her delegation had noted several continuing problems in China's enforcement environment, including: local protectionism, institutional deficiencies, over-reliance on weak administrative remedies, and concerns about the compatibility of China's criminal enforcement system with TRIPS requirements. Although some steps had been taken, such as the Ministry of Public Security's Mountain Eagle campaign regarding criminal enforcement of trademarks, more remained to be done.
66. Although the Chinese Government's on-going efforts had had some positive results, there were indications that the system remained non-deterrent. For example, while China was the second largest market for computers in the world, its software market was only the 25th largest. Sales of legitimate movies and music were also artificially low due to a high piracy level. Seizures of Chinese origin goods by foreign customs authorities remained high – over 60% of all seizures in the United States alone – and widespread retail sales of counterfeit and pirated goods could be witnessed in any major Chinese city. These retail sales had been effectively decriminalized by the December 2004 Judicial Interpretation, and relegated to this ineffective administrative system. Her delegation continued to be concerned about the apparent lack of criminal remedies available for certain offences, especially in the critical area of copyright protection, where basic structures of a deterrent criminal remedy were not in place. Her delegation also believed that there should be a criminal remedy against exports of counterfeit goods.
67. The criminal IPR system was especially important to right holders with limited resources, such as SMEs, because they may not otherwise have an understanding of China's IPR system; lacked the capacity to post people in China to handle the local administrative and civil systems; and were confronted with large scale commercial counterfeiting and piracy affecting their traditional markets.
68. She noted that the basic underpinning of TRIPS was rule of law and that criminal procedures required decisions in writing, based on evidence, with a right to counsel, applied by independent judges trained in law, with a right of appeal, according to a clear process, based on proportionate sentencing standards, and other supporting legal structures. A non-deterrent administrative system could not achieve these purposes and could easily become self-serving and prejudicial against foreign rights, particularly when local laws required discriminatory treatment in favour of domestic right holders.
69. In this year's TRM, her delegation had pointed to specific local statutes that provided enhanced enforcement or allocation of resources for local companies and had also inquired about other mechanisms that could be described as promoting interests of Chinese right holders or potential right holders over those of other Members. In this regard, she noted her delegation's concern that much of China's enforcement efforts appeared to be directed in favour of China's own companies. For example, according to the data for 2004, over 98% of China's administrative copyright cases had been on behalf of Chinese right holders, while approximately only 10% of all administrative trademark cases had been undertaken on behalf of foreigners.
70. While China's responses to these questions were appreciated, her delegation noted that not all questions had been fully answered and no responses had been received to the questions regarding GIs and famous brands, as well as to most of the questions posed with regard to copyright. Her delegation was looking forward to hearing further answers from the Chinese delegation in this multilateral forum as well as in their bilateral discussions.