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### Viewing cable 05GENEVA2809, TRIPS COUNCIL, CHINA TRM, OCTOBER 25, 2005

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05GENEVA2809 | 2005-11-17 04:07 | 2011-04-28 00:00 | UNCLASSIFIED | US Mission Geneva

`

    This record is a partial extract of the original cable. The full text of the original cable is not available.

` `

    UNCLAS SECTION 01 OF 06 GENEVA 002809

    SIPDIS

    SENSITIVE BUT UNCLASSIFIED PLEASE HANDLE ACCORDINGLY

    STATE PASS USTR FOR ESPINEL, MCCOY, STRATFORD, WINTER,
    WELLER
    USDOC FOR DAS LEVINE, ITA/MAC/OCEA MCQUEEN/CELICO
    USDOC FOR ISRAEL
    PASS USPTO FOR DUDAS, BOLAND, BROWNING, WU, ANTHONY, NESS
    PARIS ALSO PASS USOECD
    STATE FOR EB/TPP/IPC, EAP/CM
    USDOJ FOR RIEGEL, BRYANT
    USDOJ FOR PARSKY, CHEMTOB, GAMMS, SHARRIN
    USPTO:  LASHLEY, SALMON
    GENEVA PASS TO USTR
    DHS FOR CBP/PIZZECK
    STATE PASS FTC FOR BLUMENTHAL

    E.O.12598: N/A
    TAGS: KIPR ETRD KJUS PGOV CH JA SW CA WTRO EUN
    SUBJECT:  TRIPS COUNCIL, CHINA TRM, OCTOBER 25, 2005

    1.(U)  Summary.  At the fourth annual Trade Review
    Mechanism (TRM) on China?s intellectual property (IP)
    regime at the WTO, the United States, Japan and the
    European Union submitted, collectively, their most
    extensive questions to the China.  In addition, the United
    States formally submitted its Article 63 request to China
    for further detail on China?s IPR enforcement regime since
    2001, with additional Article 63 requests also then
    expected from Switzerland and Japan.  Notwithstanding this
    increased pressure, the Chinese delegation  responded by
    rejecting many of the TRM questions as unrelated to China?s
    TRIPS obligations, avoiding various challenging questions
    in their entirety, and initially rejecting the Article 63
    request in a bilateral meeting as lacking specificity and
    not within the purview of Article 63 itself.  China instead
    urged reliance on bilateral mechanisms rather than the WTO
    process.  The WTO Secretariat will draft a factual report
    of China?s review to the General Council in accordance with
    China?s TRM, containing WTO Members? interventions and
    documentation.  END SUMMARY

    Background

    ¶2. (U)  An interagency delegation led by Acting Assistant
    U.S. Trade Representative for Intellectual Property,
    Investment and Services Victoria Espinel, and including
    Assistant USTR General Counsel Stanford McCoy, USPTO Geneva
    and Beijing based IPR Attaches, Jon Santamauro and Mark
    Cohen, as well as USPTO Attorney Advisor Deborah Lashley
    Johnson and USDOC?s Kristine Schlegelemilch attend the
    fourth annual TRM of China at TRIPS Council.  The USDEL
    also met with the Chinese delegation on October 25, 2005.
    The Chinese delegation was led by Shao Changfeng, Deputy
    Director, Notification and Policy Review Division,
    Department for WTO Affairs of MOFCOM.  Rong Min, who works
    in Law and Treaties under Li Ling of the Ministry of
    Commerce led the legal discussions, as well as Ren Gang
    from the SAIC, Xu Chao from the National Copyright
    Administration, among others.  Separate meetings were also
    held with the delegation of Japan.

    China Shows Less Willingness to Cooperate in a Multilateral
    Environment

    ¶3. (U)  At TRIPS Council, the Chinese head of delegation
    demonstrated a markedly less interest in engaging on IPR
    issues in comparison to past meetings.  The delegation
    argued at TRIPS Council and in the later bilateral meeting
    that many of the issues being raised by the USDEL and
    others were outside of the scope of TRIPS, could be better
    handled in bilateral context, and that the scope of the
    information requested was typically at a level beyond the
    capability that even the inquiring countries could respond
    to if they had been asked the same questions.  The
    potential precedential impact of the Chinese delegation?s
    efforts to narrowed the scope of information that it would
    provide in the TRM compared to prior years and its
    ungenerous view of the scope of TRIPS were not positive, to
    say the least.  Among the inquiries China rejected were
    that China: would not provide information on substantive
    IPR provisions in its Free Trade Agreements; would not
    provide information on limitations on scope of operations
    of non-governmental organizations in China; would not
    provide information on Internet copyright; would not
    publish its administrative decisions, including
    administrative enforcement decisions; and that China has no
    plans to amend its criminal code to address alleged TRIPS-
    inconsistencies.  The Chinese delegation also asserted that
    the relationship among market access, censorship and piracy
    were not TRIPS-relevant issues.

    ¶4.   (SBU) In addition to the above, in some instances,
    China flatly misstated or confused relevant Chinese laws.
    Thus, China equated the legal requirements in its Trademark
    Law to protect geographical indications (GI?s), including
    relevant implementing regulations, with a rule promulgated
    by China?s Administration for Quality Supervision,
    Inspection and Quarantine; a rule has much less legal
    effect or significance than a law in China.  China also
    advised that there are no plans to revise any IPR laws,
    when in fact a draft revision of the patent law has been
    discussed, and a revision to the Trademark Law is also
    expected to be revived for consideration by the National
    Peoples Congress.   Moreover, the Chinese delegate in the
    discussion on implementing the Doha agreement regarding
    access to medicines advised that China is drafting
    implementing legislation for Doha, which could take the
    form of a revised law.

    ¶5.   (SBU) China also advised that only Beijing and
    Shanghai have lists of foreign specially protected marks,
    when data suggests that other localities have developed or
    are contemplating such lists.  China also suggested that
    rights holders can apply to have their brands included on
    these lists, when in fact the list in Beijing, at least, is
    closed.  In the criminal IPR area, China misstated that
    arrest and investigation standards for IPR crimes can only
    be adopted by the National People?s Congress, when in fact
    such local standards have been known to exist for some time
    and have been adopted in Shanghai and elsewhere.

    Modest Improvements in China?s IPR Regime Revealed by China

    ¶6. (U) China did advise that there has been no change in
    its policies towards licensing of investigative firms, that
    information regarding the national IPR strategy is
    available on a website, www.nipsocn, and that freight
    forwarders may be held liable for exporting infringing
    goods under appropriate circumstances.  Chinese Customs is
    drafting guidance with the Ministry of Public Security
    (MPS) on procedures with Customs procedures in
    international trade.  Chinese delegates also said criminal
    penalties may be available for service mark infringement,
    and explained that the recent judicial interpretation on
    criminal IPR enforcement does not address the relationship
    between repeated administrative offenses and criminal
    liability.  Two websites provide details on local efforts
    to improve trademark enforcement: www.baic.gov.cn and
    www.sgs.gov.cn, for Beijing and Shanghai, respectively.
    The compulsory license for textbooks applies to foreign and
    domestic textbooks, although China had not yet received any
    complaints about such efforts.   No special protection is
    afforded to well known marks under the criminal law,
    although infringements of well known marks more easily
    cross the thresholds of criminality.

    U.S. Highlights Continuing Challenges, While EU and Japan
    Express Dissatisfaction, Canada Expresses Weakly Worded
    Concerns

    ¶7. (U) The U.S. delegation separately delivered five
    additional questions to TRIPS Council for later response by
    China, as well as a statement which highlighted areas in
    which there had been improvements by China, as well as
    outlining underlying concerns.  The U.S. statement in
    particular highlighted concerns about national treatment in
    enforcement, continued problems in squatting, including
    design squatting, the need for enhanced criminal
    deterrence, a continuing problem with lack of transparency
    in the Chinese system, and the importance of efficient
    enforcement measures to small and medium enterprises who
    are encountering infringement in China and who lack a
    physical presence in China..  The United States also
    expressed its concerns about low levels of enforcement
    action taken on behalf of foreign rights holders, as well
    as lack of transparency in the administrative system
    generally.  The United States also noted that it believed
    that only a criminal justice system could adequately serve
    the need for effective deterrence in accordance with
    China?s own legal development and the TRIPS Article 61
    obligation to have criminal procedures and penalties.

    ¶8.  (SBU) The Japanese delegation, relying upon METI?s
    ?Field Survey for Infringement of Intellectual Property
    Right in China? completed on June 23, 2005 (available at:
    http://www.meti.go.jp/english/report/data/050 623ChinaIPR.ht
    ml), advised TRIPS Council that ?there still exists
    significant problem in IP protection and enforcement in
    China.?  In particular, application of administrative
    sanctions is not effective enough, and as a result repeated
    infringement is rampant.  At least one half of Japanese
    companies which use remedial procedures also experienced
    repeated infringement and  that Chinese IPR enforcement is
    insufficient to deter further infringements, the Japanese
    delegation explained.  Japan underscored the importance of
    enhanced criminal prosecution against IPR infringement.
    The Japanese delegation in a separate bilateral with USDEL
    advised that it had not received any complaints about
    famous brand issues in China, a subject of the USG TRM
    inquiry, and was interested in knowing further about this.

    ¶9. (U) The European Commission delegation advised that the
    Chinese response was ?not as comprehensive and detailed? as
    it would have hoped, and that it would like to see more
    questions answered.  The EC noted some progress on IP
    enforcement in China but that, like other delegations, it
    remains ?highly concerned.?  The EC noted in particular
    that it would continue to work bilaterally, building upon
    its mid-October IPR Working Group meeting in Beijing.
    (Note:  Some recipients of this report also received (SBU)
    Beijing 17254, which provided a readout of that October 18
    EU-China IPR Working Group meeting.  Endnote.)

    ¶10. (U) Canada noted its concern about Chinese
    infringements of products affecting public health and
    safety, such as pharmaceuticals, and that it was pleased to
    host a recent Chinese delegation on Internet copyright
    matters.

    ¶11. (U) There were no interventions from any of the several
    countries currently negotiating Free Trade Agreements
    (FTAs) with China.   As in last year?s TRM an IPR delegate
    from a North African country privately expressed his
    concerns over increased counterfeiting of trademarks from
    his country in China and their export back to his country.
    In addition, he noted that these marks were also being
    squatted upon in China.  The scheduling of the TRM did not
    permit further extensive bilateral discussions with other
    missions.

    Chinese Delegation Gets Defensive

    ¶12.  (SBU) The Chinese delegation, in its closing comments,
    rejected many of the assertions made by many countries that
    China was responsible for much of the world trade in
    counterfeit goods.The Chinese delegation also pointed out
    that many of the challenges China faces are  not unique to
    China, but are also being faced by many developed and
    developing countries.  This official specifically pointed
    to a recent criminal case involving two Americans in
    Shanghai who were convicted of selling pirated DVD?s over
    the Internet (Operation Spring), as well as other cases
    suggesting international involvement in the trade of
    counterfeit and pirated goods.  Comment: This was a long-
    anticipated first effort by China to use criminal justice
    cooperation with foreign countries to support its trade
    position in IPR and highlights the critical need for
    improved cooperation between trade and criminal justice
    authorities in the United States to ensure that criminal
    cases are prosecuted or presented that advance overall
    intellectual property and trade goals.  End comment.

    Bilateral Meeting: The First Legal Sparring Over TRIPS
    Article 63

    ¶13. (U)   A separate bilateral meeting was held between the
    USG and China over outstanding bilateral issues.  The
    meeting had originally been scheduled before the TRIPS
    Council session, but was ultimately postponed until after
    the TRM, perhaps to afford a further opportunity to the
    Chinese delegation to consider how to respond to the
    Article 63 request in a bilateral, rather than a
    multilateral context.

    ¶14. (U)   The delegate from China leading this discussion
    was Rong Min, from the Law and Treaties Division of China?s
    Ministry of Commerce (MOFCOM).  Mr. Rong advised that his
    government had not yet come to a final decision regarding
    how to respond to these requests.  However, in his view,
    the US government?s Article 63.3 request was governed by
    TRIPS Article 63.1 which limited such requests to ?final
    judicial decisions and administrative rulings of general
    application,? made effective by a Member.  As, in his view,
    China is not a common law country and lacks cases of
    precedential impact, he did not view Article 63.1 as
    applying to China.  With regard to Article 63.3, the first
    sentence of 63.3 was clearly governed by Article 63.1, as
    it stated that WTO members shall ?supply, in response to a
    written request from another Member, information of the
    sort referred to in paragraph 1.? The second sentence of
    Article 63.3 was also not applicable, as it stated 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.? Because, in Mr. Rong?s view, the USG
    had not identified specific decisions of concern but had
    asked for information regarding all cases, the request was
    overly broad.  Moreover, Mr. Rong also expressed his
    opinion that Article 63.3 was a one-side authorization.
    The USG may make such requests, however there was no
    corresponding Chinese obligation to respond.  Mr. Rong
    suggested that a more appropriate legal basis would be
    Article 18 of China?s Protocol of  Accession to the WTO.
    Note:  Article 18 provides the legal basis for the TRM
    itself.   End  note.14.    The Chinese head of delegation
    however took pains to note in his final comments that the
    Chinese delegation would respond to the inquiry if it was
    in fact required under TRIPS and that it was willing to
    respond to many of the USG concerns outside of the WTO
    context.

    ¶15. (U)   USTR General Counsel?s Stan McCoy led the U.S.
    response.  The U.S. advised that the reason that the
    request was being made was because the Chinese government
    had previously identified these decisions as important
    enough to distribute to TRIPS Council in statistical
    format.  There is no indication in the second sentence of
    Article 63.3 that it should be governed by Article 63.1.
    The U.S. also advised that a one-sided view that members
    could pose questions without any corresponding obligation
    would render the second sentence of 63.3 ineffective, which
    certainly could not have been the drafters? intent.
    Finally, the US government was prepared to work with China
    to make the work manageable.  Most importantly, Article 63
    was intended to avoid disputes by providing a basis for a
    cooperative exchange of information.

    ¶16.  (SBU)  In a separate discussion after the bilateral
    meeting of delegations with the Beijing IPR Attach,, two
    Chinese IPR officials argued noted that  the scope of the
    U.S. request is too broad for them to easily implement as
    there are simply too many IPR administrative enforcement
    cases.  They would appreciate a narrower request on
    specific issues.

    Comment

    ¶17. (SBU) Compared to last year?s TRM, this year?s TRM
    provided considerably less constructive information on
    developments in China?s IPR system. China was also
    noticeably less willing to engage multilaterally on the
    relevant issues.  It was too early to determine what
    impact, if any, the Article 63 request will have and how
    China will respond to it as well as the overall impact on
    these requests on bilateral dialogue, including Embassy
    Beijing?s Ambassador?s Roundtables on IPR protection in
    China in Beijing and Shanghai, the JCCT IPR Working Group
    meetings, and related efforts which will no doubt be the
    subject of separate cables from Beijing and Shanghai.
    AllGEIER

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