The Trips Enforcement Dispute

• Publication year: 2021

89 Nebraska L. Rev.1046. The TRIPS Enforcement Dispute

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Peter K. Yu(fn*)

The TRIPS Enforcement Dispute

TABLE OF CONTENTS

I. Introduction..........................................1047

II. The Dispute ..........................................1052
A.Thresholds for Criminal Procedures and Penalties .1056
B.Disposal of Infringing Goods.......................1069
C.Copyright Protection for Censored Works ..........1075

III.The Limitations (and Perhaps Mistakes)............... 1081
A.Thresholds for Criminal Procedures and Penalties .1083
B.Disposal of Infringing Goods .......................1091
C.Copyright Protection for Censored Works ..........1096
D.Summary .........................................1101

IV.The Silver Linings .................................... 1103
A.United States ..................................... 1103
B.China ............................................. 1107
C.Other Less Developed Countries ................... 1109
V.The Road Ahead ...................................... 1113
A.Lessons for Intellectual Property Rights Holders ... 1113
B.A New Intellectual Property Enforcement Strategy . 1117
1.Understand Provincial and Local Differences ... 1118
2.Take the Long View ........................... 1122
3.Appreciate Local Solutions on Their Own Terms ......................................... 1124
4.Don't Hide the Ball............................1125
5.Beware of Difference Engineers................1127
6.Summary......................................1129

VI.Conclusion............................................1130

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I. INTRODUCTION

2010 marks the fifteenth anniversary of the entering into force of the Agreement on Trade-Related Aspects of Intellectual Property Rights(fn1) (TRIPS Agreement) of the World Trade Organization (WTO). When the Agreement was drafted, commentators quickly extolled the unprecedented benefits of having a set of multilateral enforcement norms built into the international intellectual property regime.(fn2) For

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many, the introduction of the mandatory WTO dispute settlement process was a, if not the, crowning achievement of the Uruguay Round of Trade Negotiations (Uruguay Round).(fn3)

Notwithstanding these high praises, the purported major strength of the TRIPS Agreement, oxymoronically, turns out to be also a major weakness. Unlike the substantive provisions in the Paris Convention for the Protection of Industrial Property(fn4) and the Berne Convention for the Protection of Literary and Artistic Works(fn5) (Berne Convention), the two century-old international intellectual property agreements that have now been incorporated into the TRIPS Agreement,(fn6) the TRIPS enforcement provisions were rather new and primitive. As Jerome

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Reichman and David Lange observed, the enforcement procedures "on closer inspection appear to constitute a set of truly minimum standards of due process on which future legislation will have to build."(fn7) It is small wonder that Professors Reichman and Lange have considered Part III of the Agreement its "Achilles' heel."(fn8)

After more than a decade of implementation, the effectiveness of the enforcement provisions in the TRIPS Agreement was finally called into question before the WTO Dispute Settlement Body (DSB). In January 2009, the DSB released an important panel report on the U.S.-China dispute over the protection and enforcement of intellectual property rights under the TRIPS Agreement.(fn9) In this report, a WTO panel, for the first time, focused primarily on the interpretation and implementation of the TRIPS enforcement provisions.(fn10) In addition to examining in great detail and depth the obligations under Articles 41,(fn11) 46,(fn12) 59,(fn13) and 61(fn14) of the TRIPS Agreement, the panel also briefly explored the implications of Articles 1.1(fn15) and 41.5,(fn16) the two provisions that are highly important to less developed countries- which include, in WTO parlance, both developing and least developed countries.

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The release of this panel report cannot be timelier for researchers who study closely the international intellectual property regime. In the past few years, developed countries-in particular the United States, the European Union, Japan, and Switzerland-have been actively pushing for the development of new international intellectual property enforcement norms through bilateral, plurilateral, and regional trade agreements.(fn17) These countries were also the main drivers of the highly controversial Anti-Counterfeiting Trade Agreement (ACTA), which utilized a "country club" approach to strengthen international intellectual property enforcement norms.(fn18) Commentators have heavily criticized that approach for undermining the integrity of the existing international trading system.(fn19)

Meanwhile, less developed countries successfully established various development agendas at the WTo, the World Intellectual Property organization (WIPo), as well as other international fora.(fn20) At the WTo, for example, the initiation of the Doha Development Round of Trade Negotiations has led to the adoption of the Declaration on the TRIPS Agreement and Public Health(fn21) (Doha Declaration) and the unprecedented acceptance of a protocol to formally amend the TRIPS Agreement.(fn22) A few years later, WIPO followed suit by establishing a WIPo Development Agenda,(fn23) which included the adoption of forty-five recommendations for actions, ranging from technical assistance and capacity building to norm setting and public policy, and from technology transfer to assessment, evaluation, and impact studies.(fn24)

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Outside the multilateral fora, the WTO panel report also has important ramifications for bilateral or plurilateral state-to-state negotiations-most notably those between China and the United States. Because the lack of intellectual property protection and enforcement has been the subject of perennial disputes between China and the United States since China reopened the country to foreign trade in the late 1970s,(fn25) the panel report also provides policymakers and commentators with a rare opportunity to fully evaluate the use of the WTO approach to enhance protection and enforcement of intellectual property rights in China. This new approach did not exist before China joined the international trading body in December 2001;(fn26) at that time, the United States had to rely on threats of trade sanctions, threats of non-renewal of most favored nation status, and opposition to China's entry into the WTO to induce China to strengthen intellectual property protection and enforcement.(fn27)

This Article provides an in-depth and comprehensive analysis of the WTO panel report on China-Measures Affecting the Protection and Enforcement of Intellectual Property Rights. It focuses on the lessons the WTO panel report has provided to policymakers, commentators, and intellectual property rights holders. It also advances a novel

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argument that the outcome of the present dispute reflects the common mistakes foreign businesses in China have made. This Article demonstrates that the present panel report is unlikely to result in dramatic improvements in intellectual property protection and enforcement in China. It underscores the importance of this report for not only intellectual property rights holders, but also those who study China and Chinese law as well as those who intend to conduct business in the Middle Kingdom.

Part II of the Article discusses the key arguments made by China and the United States as well as the major findings in the WTO panel report. Part III focuses on the remedial actions China has undertaken in an effort to bring its laws into conformity with the TRIPS Agreement. This Part explores the limitations of the panel report in providing intellectual property rights holders with meaningful protection. Conscious of these limitations, Part IV examines the key benefits of the WTO panel report to the United States, China, and other less developed countries. Part V outlines the many lessons the report has provided for intellectual property rights holders. It concludes with some concrete suggestions on how to revamp the United States' intellectual property enforcement strategy vis-a-vis China.

II. THE DISPUTE

In April 2007, the United States requested consultations with China concerning China's failure to protect and enforce intellectual property rights pursuant to the TRIPS Agreement.(fn28) As the Office of the United States Trade Representative (USTR) stated in its press release: "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."(fn29)

Although the United States framed the complaint as a gap-filling exercise, China had a rather different reaction to the complaint. As the spokesperson of China's permanent mission to the WTO declared:

For nearly 30 years and particularly since joining the WTO in 2001, China has spared no efforts to improve its IPR legislation, and now the legislation is in full accordance with WTO rules... .

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By initiating the case, the United States is actually trying to change the WTO legal structure on IPR protection, with an attempt to impose extra obligations on...