82. The representative of Japan recalled that, at the first transitional review in 2002, his delegation had raised questions about five issues, namely further improvement of enforcement including judicial procedures, patent examination procedures, protection of well-known trademarks, licensing regulations on patents and know-how, and the system requiring foreign patent applicants to use representative offices designated as those for foreign applicants. He expressed his appreciation of the efforts by the Chinese Government to improve the situation, for example by increasing the number of representative offices designated as those for foreign applicants and amending the system pertaining to protection of well-known trademarks. However, given the current situation and problems, such as the damage caused by counterfeiting and piracy and delays in granting patents, he expected China to make further efforts. In this regard, of particular importance were further improvements in enforcement including the active implementation of criminal prosecution, amendments of the guidelines for criminal prosecution and elimination of delays in granting patents.
83. With respect to the issue of further improvements of enforcement, he said that the Chinese Government's enforcement was inadequate in view of Part II of the Protocol and Articles 41 and 61. A recent Japanese survey had shown that the majority of Japanese companies investing in China were still suffering damage from counterfeiting in China. Improvement of enforcement was of greatest importance for the protection of intellectual property rights in China. He requested that enforcement be improved, in particular, in respect to the following three aspects. First, criminal procedures: in his view, criminal prosecution was the most effective way to deal with violators. According to the survey, approximately 10% of the Japanese companies that had been harmed by counterfeiting had been subject to repeated violations of their rights since December 2002. However, the conviction rate was extremely low. Therefore, he hoped that China would actively pursue criminal prosecutions and apply stronger punishments to boost the deterrent effect. The present standard for prosecuting criminal cases included a threshold of a certain level of sale proceeds from counterfeit goods. Changes to this standard would be needed. Secondly, administrative procedures: he expressed his hope that China would take stronger administrative measures, including imposing stiffer fines and increasing the number of seizures, to ensure an active and smooth administrative control of the problem. Thirdly, localism: he appreciated China's reply that it would make aggressive efforts to correct the localism. He hoped to see the introduction and actual implementation of measures in this area. Some Japanese companies that had requested the seizure of counterfeit goods indicated that they had come across cases of localism where authorities had refused to seize goods because they had been produced by a major local company. He called on the central government to strengthen the surveillance of local authorities in order to eliminate localism.
84. Regarding patent examination processes, he said that the average pendency of the examination of Japanese patent applications was 36.8 months and that measures had been taken, including an increase in the number of examiners. Some Japanese companies had expressed their satisfaction at these measures to ameliorate delays in granting patents. However, as regards one patent application, examination had not yet begun after 65 months. Some Japanese companies had reported that the problem of examination delays had not yet been resolved, particularly in the area of advanced technology such as liquid-screen displays, PCs and IC cards. As a result of such delays, licence agreements could not be concluded for investment in China and it was not possible to obtain compensation for damages caused by counterfeit goods. In the light of Article 62.2 of the TRIPS Agreement and the need for improved transparency, he asked China to consider the following two matters: first, enhancing transparency by regularly disclosing data on the pendency of patent examination, thereby promoting mutual understanding between the countries concerned; and second, accelerating patent examination.
85. In regard to the protection of well-known trademarks, he welcomed the increased clarity resulting from the rules relating to the approval and protection of famous trademarks. He hoped that the protection of foreign well-known trademarks would be strengthened without discrimination on the basis of nationality and that approval procedures would be simplified. He also hoped that China would disclose information on the status of domestic and foreign approvals following the enactment of the new ordinances that had been effective since June 2003.
86. As to licensing regulations on patents and know-how, he expressed his appreciation of certain improvements in this area, both in regard to the Export and Import Administrative Ordinance and the legal system. However, he was concerned that the disparity between domestic contract law and the licensing regulations would raise issues relating to national treatment. In addition, some Japanese companies had reported that there had been cases where the information on the abolition of some laws and regulations at the time of China's accession to the WTO had not been sufficiently transmitted to regional authorities. Therefore, he wished that China would ensure proper enforcement by regional authorities of laws and regulations reflecting the relevant revisions.