China describes TRIPS Council proposal on ACTA and other plurilateral enforcement agreements.

At a June 28, 2010 Geneva workshop on the Anti-Counterfeiting Trade Agreement. Dr. Zhao Hong, from the Permanent Mission of the People's Republic of China to the World Trade Organization, distributed a proposal that was prepared for the June 8-9, 2010 meeting of the WTO TRIPS Council:

Decisions to be taken

Decision of the TRIPS Council on the Relationship between the TRIPS Agreement and Intellectual Property Provisions of bilateral, plurilteral Trade Agreeements

Members,

Recognizing the importance of protecting intellectual property rights as a tool to promote technological innovations and the transfer and dissemination of technology which enhance productivity and welfare of human-beings;

Acknowledging the efforts that have been made by all Members, especially developing country Members in protecting intellectual property rights at both legislative and enforcement levels;

Reiterating that Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS Agreement) should contribute to strike a balance of interests between the developed country Members and developing country Members as well as the right holders of intellectual property rights and the general public;

Realizing the enhancement of the protection and enforcement of intellectual property rights is a long term issue, and that infringement of intellectual property rights is still a challenge at both global and national levels;

Bearing in mind Member shall be free to determine the appropriate method of implementing the TRIPS Agreement within their own legal system and practice;

Noting the rising trend of incorporating enforcement standards higher than those embodied in the TRIPS Agreement into various plurilateral, regional and bilateral trade agreements, especially the ongoing negotiations on the Anti-Counterfeiting Trade Agreement;

Recognizing the TRIPS Agreement desires to reduce distortion and impediment to international trade and to ensure that measures and procedures to enforce intellectual property do not themselves become barrier to legitimate trade,

Recalling the WTO is the appropriate forum to solving trade issues related with Intellectual Property Rights through multilateral consultations and cooperations;

Hereby agree as follows:

1. The provisions on the enforcement of Intellectual Property Rights in any plurilateral, regional and bilateral trade agreement to which a WTO Member is a party shall not be inconsistent with the TRIPS Agreement;

2. The enforcement of Intellectual Property Rights by a Member, in accordance with provisions on the enforcement of Intellectual Property Rights in any plurilateral, regional and bilateral trade agreement, shall not create distortions and impediments to legitimate international trade;

3. Member shall be free to determine the appropriate allocation of public enforcement resources within their own legal system and practice to enforce and protect Intellectual Property Rights, and the autonomy of Member in this regard shall not be restricted or burdened in any plurilateral, regional and bilateral trade agreement to which a WTO Member is a party.

Later Dr. Zhao Hong shared this China intervention at the TRIPS Council meeting.

Introducing the Agenda Item M: “TRIPS Enforcement Trend”

---- on June 8-9 Regular Session of TRIPS Council, China

Thank you, Chairman.

China appreciates the opportunity to introduce the agenda item M “TRIPS enforcement trend” to the Members of TRIPS Council which we understand is not easy to be maintained on the agenda. I will come back on the procedural perspectives on this agenda item later.

First, some background note on this topic. Why an enforcement issue? Why developing Members used to oppose to discuss the enforcement issues previously while proposing such a topic now? Why it is not an agenda item under “other business” rather than a separate new agenda item? While TRIPS Agreement requires only the minimum level of protection of IPR by Members, why “TRIPS plus” is a problem? What is the ground for addressing the issue before the TRIPS Council. We know all these are pertinent questions worthwhile to be answered. And they will be answered properly.

Ever since the coming into force of TRIPS agreement, multilateral discipline concerning the protection of IPR has been set up in the area of international trade. The first few years after the establishment of TRIPS Agreement would witness the compliance requirements by Members, usually developed Members towards developing Members on their national IP legislation. Then as time went by, enforcement has become a prima concern of the demanders. They are not only pushing the TRIPS consistent IP legislation by Members but also pushing the protection standards to be enhanced to a higher level in different international forums, including WIPO, WHO, WCO etc. Yet multilateral approach seemingly not succeeded in achieving this, while bilateral, plurilateral or regional approaches are much easier to be handled with. That is why in the recently concluded FTA or RTA, there usually will contain certain provisions on IPR or a chapter of IPR, a pretty much of which may require the level of protection or standards of enforcement higher than that has been provided by TRIPS Agreement, especially at least one of the parties to the FTA or RTA is a developed Member. With the rapid proliferation of RTA and FTA, the so called “TRIPS plus enforcement trend” is much prevailing than ever before.

This trend became more phenomenal and even strengthened when the Anti-Counterfeit Trade Agreement (ACTA) was officially unveiled on 20 April, 2010 after several years of secret negotiations among some Members of the WTO. China strongly believes, as a Member of WTO, it is her legitimate right to stand up to make comments at the WTO on ACTA when it firstly appeared on the official websites of some WTO Members. Surely the proper way to do so is through proposing an agenda item at the TRIPS Council which is the most relevant WTO subsidiary body to this topic. Actually China’s position on the enforcement issues has never been changed, unlike the representative of EU has alleged. Though being only a draft, with most part of its text still in square brackets, ACTA could be foreseen to be intended to broaden the scope of piracy and counterfeit, enhance the standards of protection through an extensive scope of civil, criminal and border measures, as well as setting up special discipline for digital environment, all of which go beyond TRIPS Agreement of WTO. For example it will apply to goods not only in imports, but also exports, in-transit consignment and goods under custom supervision. Moreover, the scope for ex-officio enforcement has been remarkably extended and standards for initiation of such action significantly lowered.

We attach huge concerns on the so called “TRIPS plus enforcement Trend” and sincerely worries about the implications it may bring about.

In our view, the “TRIPS Plus Trend” may at least cause the following problems.

1. Potential legal conflicts and unpredictability

Though TRIPS requires only minimum standards of IP protection and allows Members to implement their law more extensive protection, it also provides certain conditions for applying such extensive protection. First, “such protection shall not contravene the provisions of this agreement” (Art. 1.1 of TRIPS). Second, it requires Members shall ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade (Art. 41.1). Thirdly, these extensive protections shall also not inappropriately restrict the built-in flexibilities and exceptions in TRIPS Agreement. Fourthly, according to the chapeau of Article 20 GATT 1994, IP provisions shall not violate other covered agreements under WTO and shall not be applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination among Members or a disguised restriction on international trade and only measure necessary to secure compliance with laws or regulations could be applied (the so called “necessity test”).

Some may wonder whether the “extensive protection” or “TRIPS plus provision” may possibly violate the provisions of TRIPS or any other covered Agreements of WTO. The cases which Brazil and India have recently raised against the EU and one Member State at the DSB of WTO on its Custom Regulation and on seizure of transit goods are good examples that at least there are real potential for such violations.

Conflictions may also be created by the provisions of National Treatment and MFN treatment within these FTA and RTA and regional agreements on IPR. As the standards or scopes of protection vary with each other in these RTA, FTA or regional IP Agreements, and they all contain provisions of NT and MFN, potential conflicts and unpredictability are huge as which standards will apply in practice and difficulties will arouse tremendously in the process of implementations of these provisions. That is the first point of our concern.

2. Possible distortion on legitimate trade

The first sentence of the preamble of TRIPS Agreements makes it clear, TRIPS is aimed at reducing distortions and impediments to international trade. Surely enough it is also the ultimate goal of the WTO. Yet as explained above, the various TRIPS plus standards has made the international legal framework on IPR extremely complicated and unpredictable which may cause adverse impact on international trade. It is estimated the trade volume of Member of ACTA accounts for 70% of the world trade. Thus the impact on trade would be even larger if ACTA could be completed at any foreseeable future.

People may wonder how “extensive protection” may cause problem to legitimate trade. Just but one example. Suppose the threshold for seizure of suspected pirating or counterfeiting goods by custom authorities would be lowered, anyone or any right holder with little evidence or not enough guarantee may be able to stop trade by requesting custom to seize or desist goods or ex officio actions could lead to the same effect while in most cases the loss is irreparable. These loopholes could easily be abused by competitors or rivalries in international trade, thus could cause enormous problems that may be adversely impede legitimate trade in an unexpected way.

That is the second point of our concern.

3. Systematic concerns over TRIPS balances being upset

TRIPS is an international Agreement that has been designed to strike delicate balances in several aspects as a result of long term arduous negotiations. First of all, balance had been sought between the three pillars of the WTO, e.g. GATT, GATS and TRIPS. Especially, when agreeing to incorporate TRIPS into WTO, developing Members are expecting the integration of agriculture and textile into GATT. Of course, independent scholars will have their assessment whether these intentions and goals have been met or not in reality. Secondly, TRIPS has not only tried to strike a balance between developed and developing countries, rights and obligations of IP holders, technology innovation and transfer and dissemination of technology, rights of producers and interests users, but also the economic welfare and social welfare including public health and nutrition. Therefore the unilateral or plurilateral increasing of level of protection which bypass the multilateral approach will upset these delicate balances, and causes systematic concerns over international trade relationship.

Due to the gap in technology, there is an imbalance of interests between the developed and developing world in IPR protection. TRIPS plus enforcement trend in RTA, FTA and ACTA will certainly reduce the balance of interests that TRIPS intends to establish, and making it easier to build technological barriers, devastating the potential conflict of IP with other institutional arrangements. From domestic point of view, even the balance between producers and users of technology is somehow controversial nowadays. IP holders are not the only group of constituencies that national governments need to represent. The one way of increasing level of protection may cause additional social costs and consumer welfare loss. Set aside the public health issue, just take internet as an example. The rapid advances of tele-communication and internet technology has made the scope and forms of IP extend quickly and widely in the cyber world. Internet and mobile communication shall not only be a tool for right holders to reap their profits but shall benefit the general public as well. Piracy is a problem that should be resolved. But how to define fair use in digital era is an issue worthwhile to be answered first. The Canadian secretary of Industrial policy admitted its use of music on mobile violates the New Canadian Copyright law (which is in the process of approval) is just but a quick example.

IPRs are two edged weapons that exemplify efforts to balance different social and economic policy objectives when they were elaborately designed. Therefore TRIPS plus enforcement trend definitely poses systematic concerns at both domestic and international level.

4. Concerns on allocation of public resources

Human being are facing a variety of challenges nowadays, such as hunger, poverty, pollution, water shortage, forest shrinking, illegal drug, malnutrition, public health, human trafficking, child labor, food safety, social unrest and anti-terrorism etc. All these are externalities that require public enforcement by necessary governmental input. IPR is a private right. Theoretically speaking, the cost of enforcing IPR shall be borne by private parties themselves.

Yet in reality, due to the strong lobbying power of the Multinationals and the outside pressures from developed countries, many developing countries have put IPR as a priority of their enforcement activities though public resources available are limited.

The TRIPS plus trend will certainly put developing countries at even worse situations because there will be more and more out side pressures for them to use their limited public resource to enforce private IP rights which may go against the provision of Art. 41.5 of the TRIPS Agreement.
Based on this, we suggest the TRIPS Council adopt the following principles, which have been prescribed by TRIPS already, for both the current and future RTA FTA and regional IP agreements to be complied with:

1) The IP chapter, IP provisions of RTA, FTA or IP regional Agreement that a WTO Member is a party, shall not be inconsistent with TRIPS Agreement of WTO;

2) The enforcement of IPR shall not created distortion on legitimate international trade;

3) No WTO Member shall be restrained from the autonomy to utilize its public enforcement resources to meet the needs in different social and economic dimensions.

We urge Members who are negotiating these TRIPS plus enforcement provisions to reconsider their rational in doing so, stop deviating from the multilateral approach in enhancing the standards of IP enforcement and have the commitments made under TRIPS Agreement be accomplished fully and shall not violate the provisions of TRIPS or any other WTO covered agreements in any forms.

Having said that, China would like to reiterate its unchanged positions on IP protection:

1) Protection of IPR is a national policy of China, the 2008 national IP strategy is but an evidence of such a national policy;

2) China recognizes the importance of the protection of IP in establishing an innovative, intelligent, credible society and in boosting economy with inventions in science and technology.

3) China realizes that pirating and counterfeiting is a long term issue in the process of its modernization. China’s commitments in enforcing IPR in due course in accordance with its laws and regulations will never be changed. China does possess the largest enforcing team in the world and will continue to work towards establishing an investor friendly business environment.

By concluding, what has been stressed by China here today, is the unilateral or plurilateral enhancing of IP enforcement standards may cause serious adverse impacts as illustrated above. We don’t think it is the wise way to address the issue. It is not because of lack of harsh enforcing standards or there are not enough policemen that cause the severity of pirating, counterfeiting or other forms of infringement of IPR. The Chinese ancient philosopher Lao Zi said, “the more the criminal codes, the more the stealers”. [ ]

Actually, IPR infringement is largely a problem during the process of development. Therefore development is where the crux is. If people fail to address the root causes while always beat around the bush, things will not get better.

Therefore we genuinely believe Members of WTO do have common interests and only cooperation will lead to a win-win result.

China stands ready to discuss with Members on how to make the works at the TRIPS Council contribute to the issue of development. And we will have a full schedule and our time is precious. Better make good and wise use of it.

Lastly, some observations on the procedural perspective of this agenda item.

The practice of adopting agenda at yesterday’s meeting is surely a good lesson for developing Members of WTO.

China and India have fulfilled all the procedure requirements in the rules of WTO governing the addition of the agenda item. But that was opposed by Switzerland and EU at an excuse of not providing detailed background information beforehand, which is another WTO plus requirement.

If India and China had not shown flexibilities on the amendment suggested by EU on the agenda item proposed by China and India, we were not sure whether we would be able to have the TRIPS Council meeting this time. I suppose it is a lively lesson for Members to consider how to use their legitimate procedural rights and how to deal with the consensus based decision making process of WTO. Of course it is never too old to learn, especially as a new Member of WTO, we will always be ready to learn from other experienced Members.

Having said that, I would like to quote from Bible “Treat others the way you want to be treated”. Interestingly enough I found a similar expression in the “Dialect of Confucius”, “Don’t give others anything you don’t want” [ ]. I quote this because I believe there are commonalities among different cultures of mankind. I hope this spirit could guide our future works at the TRIPS Council and wish the work of TRIPS Council goes on smoothly and productively based on trust and collaboration among Members.

I understand there are complains that China and India fail to provide background note for this agenda item proposed, I hope you won’t complain this introduction is too long.
Thank you for your attention.

Taken together with India and Brazil's earlier interventions on seizures of goods-in-transit, this signals an expanded effort to have the WTO address the tensions between global norms to liberalize global trade and reduce trade barriers, and intellectual property enforcement policies, including cases where policy initiatives appear to be captured by certain right-owner lobby groups.