70. The representative of the United States said that his delegation appreciated China's efforts to improve its IPR enforcement and protection environment, and had welcomed that China's leadership at the highest levels, including President Hu, Premier Wen, and Vice Premier Wu Yi, had continued to publicly recognize the importance of IPR protection and enforcement over the past year. China also deserved credit for a number of concrete, positive developments: China had conducted several special enforcement campaigns, such as the "Mountain Eagle" campaign. It had issued a 2006 Action Plan on IPR Protection, which among other things called for "special crackdown efforts" with respect to various IPR infringement problems. It had adopted revised rules governing transfer of administrative and customs cases to criminal authorities. Although these rules were not a complete solution and did not address the problem of thresholds, they were nonetheless a welcome step. Authorities in a few parts of China, notably Shanghai, appeared to show greater willingness to take ex officio enforcement action on behalf of US right holders. And, notably, authorities in some parts of China had started to take enforcement actions against Internet piracy.
71. Unfortunately, however, the IPR situation in China remained critical. Infringement levels remained unacceptably high and continued to affect products, brands and technologies from a wide range of industries, including films, music and sound recordings, publishing, business and entertainment software, pharmaceuticals, chemicals, information technology, apparel, athletic footwear, textile fabrics and floor coverings, consumer goods, electrical equipment, automotive parts and industrial products, among many others. China's share of infringing goods seized at the US border in 2005 had been more than ten times greater than that of any other US trading partner.
72. He said that the key problems were well known and had been repeated many times in this forum: China suffered from chronic over-reliance on toothless administrative enforcement and underutilization of criminal remedies. Its own 2004 data showed that it channelled more than 99 per cent of copyright and trademark cases into its administrative systems, rather than its criminal system. China's high thresholds for criminal liability, i.e. the minimum values or volumes required to initiate criminal prosecution, continued to be a major reason for the lack of an effective criminal deterrent. Right holders had pointed to a number of other deficiencies that highlighted the need for reform of criminal IPR laws. For instance, Article 217 of the Criminal Law provided for prosecution of the unauthorized "reproducing and distributing" of certain copyrighted works. Thus, it appeared that unauthorized reproduction was subject to prosecution only when accompanied by unauthorized distribution, and vice versa. Enforcement efforts, particularly at the local level, were hampered by poor coordination, local protectionism and corruption, high thresholds for initiating investigations and prosecuting criminal cases, lack of training, and inadequate and non-transparent processes. In the copyright area, trade in pirated optical discs continued to thrive, and China continued to maintain market access restrictions that artificially limited the availability of foreign content and thus led consumers to the black market.
73. His delegation also remained concerned about various aspects of China's 2004 customs regulations and implementing rules. One example was that these rules established a hierarchy of requirements for the disposal of infringing goods that had been confiscated by Chinese customs authorities, following the removal of their infringing features. This hierarchy required such goods to re-enter channels of commerce unless the right owner paid for these goods.
74. He said that many Members, including the US, had worked hard to address these concerns through a constructive bilateral dialogue with China, which had often yielded positive results. One example was the bilateral discussions on the issue of software infringement in 2006 that had led to China's decision to require computers to be pre-installed with licensed operating system software. His delegation believed such bilateral discussions to be indispensable to a healthy trade relationship, and intended to continue these on a wide range of IPR issues. At the same time, the multilateral WTO forum and its tools, such as the TRM and the transparency provisions under Article 63.3 of the TRIPS Agreement, were equally indispensable to a healthy international trade environment.
75. Unfortunately, China had shown a disappointing reluctance to use these tools to clarify issues and explore possible solutions. While the United States appreciated China's responses today, it also noted that once again this year, as in the past, not all questions had been fully answered. These unanswered questions fell in three categories: The questions to which no answers had been provided at all included question 5, paragraphs (b), (c) and (d); question 19, paragraphs (b) and (c); question 22 paragraph (b); question 23; and question 28. Questions that China had regarded as lying outside the scope of this Council included questions 24, 25 and 26 concerning the Patent Law. It was his delegation's view that, as this review was a transparency exercise, taking a broad rather than a narrow perspective would help to avoid the use of other mechanisms to resolve disputes in the future. The third category of unanswered questions included questions 2, 4, 11, 15, 16, 17 and 27, and concerned various requests for data, which China had said were not yet available. His delegation would appreciate receiving that data once they were available.
76. He noted China's response that no new or revised judicial interpretations were contemplated regarding the possibility of lowering thresholds for criminal liability. The United States and other Members had repeatedly raised serious concerns about these thresholds in the past, and would continue to explore every possible avenue for resolving this issue. He also expressed his delegation's disappointment that China had not provided substantive responses to the questions posed a year ago by the United States and other Members under the provisions of Article 63.3, and thereby had not seized the opportunity to enhance mutual understanding and work towards concrete solutions. He said that the TRM process and transparency requests under Article 63.3 were valuable tools, as they could help Members solve particular problems without resorting to other mechanisms, such as the WTO dispute settlement process, and he urged China to take fuller advantage of such opportunities in the future.
77. The problem of IPR infringement in China was multifaceted and complex and required broad engagement and cooperation. Addressing these concerns might require bilateral discussions, multilateral tools like today's TRM, or the use of other avenues, and his delegation hoped to engage fully and constructively with China in all these efforts.