Archive for February, 2009

US/China Panel Report is Out

by Daniel Gervais on Sunday, February 1st at 5:03 PM

The Panel Report in the US/China dispute was released on January 26, 2009. It is available at

As most observers had predicted, the Panel accepted the US argument that China could not deny copyright protection to censored works. While the Berne Convention, most of the substantive provisions of which were incorporated into TRIPS, allows countries to control the dissemination of copyrighted works, it does not allow them to deny copyright protection to such works. Article 5(2) of the Convention also provides that the “enjoyment and the exercise of [the rights protected under the Convention] shall not be subject to any formality.” The Panel declined to rule (“as a matter of judicial economy”) on whether the censorship review was a formality, noting that there was evidence of the availability of enforcement during the review process. There is disagreement on this point. The Panel based its ruling mostly on Article 5(1) of the Berne Convention, which provides in part that “authors shall enjoy, in respect of works for which they are protected under this Convention, the rights specially granted by this Convention.” The Panel report also contains a variety of questionable dicta (for example on Article 6bis) but none that should lead to a reversal by the Appellate Body, should the report be appealed. The Article 5(2) matter may, however, be reviewable on appeal.

If the report is adopted by the Dispute Settlement Body), China would have to provide copyright protection to censored works. It is unclear whether this will have much effect in practice because distribution of those works would be illegal for other reasons.
The second US claim was that China’s disposal of counterfeit goods violated Articles 46 and 59 of TRIPS. TRIPS is designed to ensure that seized infringing goods do not re-enter the channels of commerce. Authorities must have the authority to order their disposal or destruction. The first issue under this claim was whether China may auction off or give counterfeit goods to charitable organizations such as the Red Cross. The Panel found that this form of disposal of infringing goods was acceptable, in part because safegaurds were in place.The evidence showed that approximately half of the cases of seizure led to destruction of the goods. The Panel did take issue with China’s public auctions of infringing goods after “eradication” of the infringing mark. The TRIPS Agreement does not allow for re-entry into the channels of commerce of infringing goods after the “simple removal” of the infringing trademark other than in exceptional circumstances. The Panel noted that the “release into the channels of commerce of such goods, while they may no longer infringe upon the exclusive rights in Article 16 of the TRIPS Agreement, will not comply with the requirement in the fourth sentence of Article 46, as incorporated by Article 59. “ Auctions were not exceptional, because a Member must show why and how a measure is “exceptional” not just that it is not applied frequently.

The United States had also challenged the fact that no criminal penalties are available in China under a number of quantitative and qualitative infringement thresholds. The Agreement provides that criminal penalties must be available for infringements “on a commercial scale.” The Panel noted that US had not challenged the principle of establishing predetermined thresholds but rather the level of those thresholds and how they are measured under Chinese law. The Panel concluded, first, that “on a commercial scale” was essentially synonymous with “commercial activity.” It found that China’s approach was acceptable (mostly based on the evidence submitted). It also noted that TRIPS left some flexibility to WTO Members.

Sunday, February 1st at 5:03 PM