Identifier
Created
Classification
Origin
05GENEVA2809
2005-11-17 04:07:00
UNCLASSIFIED
US Mission Geneva
Cable title:  

TRIPS COUNCIL, CHINA TRM, OCTOBER 25, 2005

Tags:  KIPR ETRD KJUS PGOV CH JA SW CA WTRO EUN 
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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

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