362Report02附件二.docx

362Report02附件二.docx

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362Report02附件二

ANNEXB

SUBMISSIONSOFCHINA

CONTENTS

PAGE

B-1

ExecutiveSummaryofthefirstwrittensubmissionofChina

B-2

B-2

ExecutiveSummaryoftheoralstatementofChinaatthefirstsubstantivemeeting

B-16

B-3

ClosingoralstatementofChinaatthefirstsubstantivemeeting

B-21

B-4

ExecutiveSummaryoftherebuttalsubmissionofChina

B-23

B-5

ExecutiveSummaryoftheoralstatementofChinaatthesecondsubstantivemeeting

B-39

B-6

ClosingoralstatementofChinaatthesecondsubstantivemeeting

B-44

ANNEXB–1

EXECUTIVESUMMARYOFTHEFIRSTWRITTENSUBMISSION

OFCHINA

I.Introduction

1.TheUnitedStatesfallsfarshortofmeetingitsburdenofshowingthatChinaisnoncompliantwithitsobligationsundertheAgreementonTrade-RelatedAspectsofIntellectualPropertyRights（"TRIPS"）.Initsfirstwrittensubmission,theUnitedStateshasconsistentlymischaracterizedChineselawandpractice.TheUnitedStateshasalsosoughttoexpandsignificantlythescopeofMembers'obligationsunderTRIPS;andithasdisregardedtheveryfirstparagraphoftheAgreement:

"MembersshallbefreetodeterminetheappropriatemethodofimplementingtheprovisionsofthisAgreementwithintheirownlegalsystems."

2.InitsClaimOne（SectionIVoftheUSSubmission）,theUnitedStateshasfailedtodemonstratethatChina'scriminallawisinconsistentwithChina'sobligationsunderTRIPS.TheUSargumentisbasedonaformulationofTRIPSArticle61thatwasexpresslyrejectedatthetimeTRIPSwasnegotiated.ContrarytotheUSclaim,ChinafaithfullycomplieswithitsobligationsunderTRIPSbyprovidingcriminalproceduresandpenaltiesforwillfulcounterfeitingandpiracythatareappropriatewithinthecommercialcontextandlegalstructuresofChina.

3.InitsClaimTwo（SectionVoftheUSSubmission）,theUnitedStatesmisstatesChina'sTRIPSobligations,mischaracterizesChineseCustoms'practices,andaccordingly,hasfailedtodemonstratethatChineseCustomsdealswithseizedinfringinggoodsinamannerthatisinconsistentwithTRIPSArticle59.

4.InitsClaimThree（SectionVIoftheUSSubmission）,theUSargumentisbasedonfundamentalerrorsintheunderstandingofChinesecopyrightlaw.TheUnitedStates'chiefconcerninitsthirdclaim–anditscentralmisunderstanding–isthatChina'slawsdonotprovideautomaticandimmediatecopyrightprotection.TheUSclaimcollapseswhenthiserroriscorrected.

5.FurtherinregardtoitsClaimThree,theUnitedStatesfailstomakeaprimafaciecaseastoassertionsinitspleadingsrelatingtoTRIPSArticle3（nationaltreatment）andArticle14（relatedrights）.

II.China'scriminalthresholdsareconsistentwithChina'sobligationsunderTRIPSArticles.61and41.1

A.China'sIntellectualPropertyEnforcementRegime

1.Chinahasthreelegalregimesfortheenforcementofintellectualpropertyrights:

criminal,administrativeandcivilenforcement.Chinaemploysallthreeregimesinitseffortstocombatcounterfeitingandpiracy.CriminalmeasuresareusedagainstcounterfeitingandpiracywhenthoseactsareundertakenonasufficientscaletoexceedChina'sthresholdsforcriminalenforcementandChinaalsotakesgovernmentactionagainstactivitythroughitsadministrativelawenforcementsystem.Alongsidethesetwoformsofgovernmentaction,Chinamakescivilenforcementrightsavailabletointellectualpropertyrightsholders.

2.Chinahasimposedcriminalsanctionsonwillfultrademarkcounterfeitingandcopyrightpiracyonacommercialscale

1.Chinapresentsadetaileddescriptionofitscriminallawregimeforintellectualproperty.Chinaexplainseachofthecriminallawsthatconcernintellectualpropertyinfringement,thespecificthresholdsofactivitythattriggercriminalsanctionsundereachlaw,andthecalculationofthesethresholds.Chinafurtherexplainsthatcriminalpenaltiesareavailableininstancesofunfinishedproductsorindiciaofcommercialscaleinfringement;andthatChineselawallowsforprivateindividualstoinitiatecriminalaction.

2.Inthecourseofdescribingthislegalregime,ChinaendeavorstoaddressandcorrectnumerousUSmisstatementsandmischaracterizations.IndescribingChinesecriminallaw,theUnitedStateshasmisrepresentedthescopeofChina's"illegalbusinessoperationvolume"thresholdforcriminalactivity,ignoringthefactthatChineseauthoritiesincludeevidenceofinfringinggoodsatotherwarehouses,intransportation,andalreadysold.TheUnitedStateshasdisregardedChina'scumulativecalculationofcriminalthresholdsoverthemultipleyearsofthecriminalactivity.IthasignoredthealternativenatureofthethresholdsunderseveralofChina'slaws,whichistosaythatinfringementtriggerscriminalenforcementifitmeetsanyoneofthecriminalthresholds.Finally,theUnitedStateshaswronglyclaimedthatChinamaynotadministercriminalpenaltiesforunfinishedproductsandindiciaofinfringement,whenChineselawclearlyprovidesotherwise.

3.ChinaemploysanadministrativeenforcementregimethatimposessignificantdeterrenceonIntellectualPropertyinfringementbeneathcCriminalthresholds

1.Chinadescribesthegovernmentadministrativeenforcementregimethatoperatesseparatelyfromthecriminallaw,andisnotsubjecttotheminimumthresholdsofcriminallaw.China'sadministrativeenforcementsystemisauniquefeatureofChina'slegalstructurethatdoesnothaveaparallelinmostWesternsystems,includingtheUSlegalsystem.ContrarytotheUSassertionthatthethresholdsinChinesecriminallawcreate"asafeharbor"forlow-levelintellectualpropertyinfringement,Chinainfactoperatesagovernment-ledenforcementsystemtowhichinfringementonanyscaleissubject.Low-levelintellectualpropertyinfringersdonotoperatefreeofgovernment-ledenforcementinChina.

4.TheUSassertionsoninfringementtrendsareunfounded

1.ChinaaddressestheUSallegationthatahighproportionofcopyrightinfringementcasesfallbeneaththenumericalthresholdsandthatinfringersreducedtheirvolumeofcopiestoavoidcriminalliabilitywhenthecriminalthresholdswerelowered. ThedatasetonwhichtheUnitedStatesreliescomesfromadministrativeraidscarriedoutattherequestoftheright-holdersthemselves:

itsprobativerelevanceisunclear,andinanyevent,thedatadoesnotsupporttheUSassertionsofstatisticaltrends.

B.TheUnitedStatesbearsanespeciallyhighburdenofproofinadvancingtheclaimthatChinafailstomeetitsArticle61obligation

1.Asthecomplainingparty,theUnitedStatesbearstheburdenofproofinadvancingtheargumentthatChina'scriminalenforcementregimedoesnotcomplywiththeobligationarticulatedinTRIPSArticle61. Inthisparticularinstance,however,theUnitedStatesbearsasignificantlyhigherburdenthanitwouldnormallyencounter.ThatisbecausetheUnitedStatesisadvancingaclaim–thatMembersofTRIPSmustenactcriminallawsthatmeethighlyspecificinternationalstandards–thatcutsdecisivelyagainstthetraditionandnormsofinternationallaw.

2.Internationalorganizationsaccordgreatdeferencetonationalauthoritiesincriminallawmatters.Areviewofinternationallawshowsthatstateshavetraditionallyregardedcriminallawastheexclusivedomainofsovereignjurisdiction;wheresovereigngovernmentsaresubjecttointernationalcommitmentsconcerningcriminallaw,thesecommitmentsaffordsignificantdiscretiontogovernmentsregardingimplementation;andinternationalcourtshavebeenexceedinglyreluctanttoimposespecificcriminalstandardsonstates.

3.Inlightofprevailinginternationallaw,theUnitedStatesmustnotmerelyshowthatitsproposedinterpretationoftheTRIPSArticle61obligationiscorrectbyordinarystandards.ItmustalsopersuadethispanelthatthepartiestoTRIPSagreedtoanobligationtoreformtheircriminallawsofsuchspecificitythatitisasharpdeparturefromthepracticeofeverycountryineveryotherinternationalforumthatrelatestonationalcriminallaws.

C.TRIPSArticle61requiresthatMemberssetforthcriminalthresholdsforcounterfeitingandpiracywithinthebroadanddiscretionarymeaningof"CommercialScale"

1.TRIPSArticle61declaresthat"Membersshallprovideforcriminalproceduresandpenaltiestobeappliedatleastincasesofwillfultrademarkcounterfeitingorcopyrightpiracyonacommercialscale."ThecoreofthedisputebetweentheUnitedStatesandChinaisthemeaningandscopeof"commercialscale".TheUnitedStatesadvancesaproposeddefinitionthatisinconsistentwiththeordinarymeaningandthatwasexpresslyrejectedbytheTRIPSnegotiators.

2.TheobligationsetforthinArticle61isthatMembersimposecriminalpenaltiesforwillfulinfringementthatinvolvesasignificantmagnitudeofactivity,asappropriatewithinthecommercialcontextandlegalstructuresoftheMember.Chinameetsthisobligation.

2.Theordinarymeaningof"commercialscale"isnotanyscaleofactivityundertakenforfinancialgain

1.TheUnitedStatessetsforthadeeplyflaweddefinitionof"commercialscale".TheUnitedStatesarguesthattheordinarymeaningof"commercialscale"maybeadducedbycombiningtheordinarymeaningof"commercial"（"interestedinfinancialreturn"）and"scale"（"magnitude,extent,ordegree"）.Bythissynthesis,theUnitedStatesclaims,theterm"commercialscale"hastwodistinctmeaningsandwouldcapturetwoclassesofactivity:

first,"commercialscale"wouldcaptureanyactivitythathasthepurposeoffinancialreturn.（Thatis,thesinglesaleofanitemforoneUScentwouldconstitutecommercialscaleactivity）.Second,"commercialscale"wouldalsocaptureactivities