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United States Requests WTO Panel in Case Challenging Deficiencies in China's Intellectual Property Rights Laws

August 13, 2007


Office of the U.S. Trade Representative announced today that the
United States has requested
the World Trade Organization (WTO) to establish a dispute settlement panel, the
next step in its WTO case challenging deficiencies in China’s legal
regime for protecting and enforcing copyrights and trademarks on a wide range of

“The United
States and China have tried, through formal consultations
over the last three months, to resolve differences arising from
U.S. concerns about
inadequate protection of intellectual property rights in China. 
That dialogue has not generated solutions to the issues we have raised, so we
are asking the WTO to form a panel to settle this dispute,” said USTR spokesman
Sean Spicer.  “It is in the best interest of all nations, including
China, to protect intellectual
property rights.  Over the past several years China has taken
tangible steps to improve IPR protection and enforcement. However, we still see
important gaps that need to be addressed.  We will pursue this legal
dispute in the WTO and will continue to work with China
bilaterally on other important IPR issues.”

In pursuing this action, the United States is seeking to eliminate significant
structural deficiencies that give pirates and counterfeiters in China a
safe harbor to avoid criminal liability.  The United States is also seeking to improve
enforcement procedures at China’s border, and to give copyright owners more
tools to prevent the production of unauthorized copies in China.  The
United States requested WTO
dispute settlement consultations with China over these issues in
April.  The United
States and China held consultations in early
June.  China has not,
however, taken any steps that address these U.S. concerns
during this period.

The U.S. panel request will be considered
by the WTO Dispute Settlement Body at its next meeting, which is scheduled for
August 31.


The United
States initiated dispute settlement proceedings over
deficiencies in China’s legal
regime for protecting and enforcing copyrights and trademarks by requesting
consultations with China on April 10, 2007. 
Consultations were held on June 7-8, 2007.  Under WTO rules, the WTO
Dispute Settlement Body (DSB) will consider the U.S. request for
establishment of a panel at its next meeting, which is scheduled for August 31,

The U.S. panel request alleges violations of various
provisions of the WTO Agreement on Trade-Related Aspects of Intellectual
Property Rights (the TRIPS Agreement) related to three aspects of
China’s IPR regime.  First, the
request challenges quantitative thresholds in China’s criminal
law that must be met in order to start criminal prosecutions or obtain criminal
convictions for copyright piracy and trademark counterfeiting.  Wholesalers
and distributors are able to operate below these high thresholds without fear of
criminal liability, so these thresholds effectively permit piracy and
counterfeiting on a commercial scale.

Second, the panel request addresses the rules for disposal
of IPR-infringing goods seized by Chinese customs authorities.  Those rules
appear to permit goods to be released into commerce following the removal of
fake labels or other infringing features, when WTO rules dictate that these
goods normally should be kept out of the marketplace altogether. 

Third, the panel request addresses the apparent denial of
copyright protection for works poised to enter the market but awaiting Chinese
censorship approval.  It appears that Chinese copyright law provides the
copyright holder with no right to complain about copyright infringement
(including illegal/infringing copies and unauthorized translations) before
censorship approval is granted.  Immediate availability of copyright
protection is critical to protect new products from pirates, who – unlike
legitimate producers – do not wait for the Chinese content review process to be

This is one of five WTO cases the United States has brought against
China and the third case
against China where the
States has requested a WTO dispute settlement
panel.  The United
States requested a panel in September 2006 to examine
China’s regulations imposing local
content requirements in the auto sector through discriminatory charges on
imported auto parts; panel proceedings in that dispute are underway.  In
July 2007, the United States
requested a panel regarding several subsidy programs the United States
believes are prohibited under WTO rules; the panel request in that dispute is
pending before the DSB.   In the market access dispute , which
concerns Chinese market access barriers affecting copyright intensive industries
(movies, music, home entertainment videos, publications), the United States has
just completed  supplemental consultations with China and is considering
next steps.  China settled the fifth case,
concerning discriminatory taxes on semiconductors, during WTO consultations in