China recently amended the Copyright Law and Regulations for Customs Protection of Intellectual Property Rights (the “Customs IPR Regulations”) to bring its IPR-related rules and regulations into compliance with an adverse World Trade Organization (WTO) panel ruling.
As reported in the March 2009 issue of our Bulletin, the WTO Dispute Settlement Body (DSB) in March 2009 adopted the decision of a dispute settlement panel appointed to review a case brought in 2007 by the United States against China alleging that China failed to fulfill its obligations under the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement.
Among other things, the panel ruled that the condition for copyright protection imposed by the first clause of Article 4 of the PRC Copyright Law is inconsistent with the requirements under TRIPs, which incorporates the Berne Convention for the Protection of Literary and Artistic Works by reference. The Berne Convention requires that all creative works of similar nature receive the same protection, whether the work is foreign or domestic. The panel decision states that under TRIPs, Member Countries can prohibit the publication and distribution of a work but cannot deny copyright protection to the work. The first clause of Article 4 of the PRC Copyright Law expressly excluded from copyright protection works prohibited from publication or distribution. Under this clause, works that have not been authorized for publication or distribution, such as foreign movies, remained unprotected while being reviewed by PRC authorities. The United States argued that under the clause, “yet-to-be approved” US works were essentially vulnerable to piracy and the copyright owners were without recourse. The panel also found China’s policies on the disposal of counterfeit goods to be in partial violation of TRIPs. In particular, PRC Customs authorities were allowed under then-existing regulations to auction off seized counterfeit goods once the infringing elements of the goods had been removed. The panel ruled that the practice of releasing imported infringing goods into commercial channels after the removal of unlawfully affixed marks is inconsistent with requirements under Article 59 of the TRIPs Agreement.
On February 26, 2010, the National People’s Congress Standing Committee approved several revisions to the PRC Copyright Law. While the scope of this recent amendment to the law is limited – one new article was added and one article was revised – it addresses the WTO panel’s ruling and deletes the first clause of Article 4 of the PRC Copyright Law. The amended law now affords the same copyright protection to all works, regardless of whether they have been cleared for publication or distribution in China and affords copyright owners to go after infringers even if the infringed work is not approved for publication or distribution. According to observers, whether the amendment will offer adequate remedy to aggrieved copyright owners will depend on how effectively and evenly the authorities enforce and implement the revised law.
Separately, on March 17, 2010, the State Council approved a number of revisions to the Customs IPR Regulations. Among other changes, the State Council revised Article 27 (which addresses the treatment of confiscated goods) to include a new clause stating that “for imported goods bearing counterfeit trademarks, mere removal of the trademarks [unlawfully affixed] is insufficient to permit their release into the channels of commerce, other than in exceptional cases.” This amendment aligns China’s regulations on the disposal of counterfeit trademark goods with the requirements under TRIPs, and observers opine that the amendment should make it harder for Customs to auction off imported counterfeit goods that are seized for trademark infringement. Based on available statistics, however, in recent years, Customs has usually destroyed seized goods and has rarely released them back into the channels of commerce. Consequently, this particular revision to the Customs IPR Regulations is unlikely to significantly alter existing Customs practice in this regard.
China announced at a WTO DSB meeting in March 2010 that it has fully complied with the WTO ruling. The amendments to the Copyright Law and to the Customs IPR Regulations both became effective on April 1, 2010.
