WORLD TRADE
ORGANIZATIONIP/C/W/413
12 November 2003
(03-6053)
Council for Trade-Related Aspects
of Intellectual Property RightsOriginal:  English
TRANSITIONAL REVIEW MECHANISM OF CHINA
Communication from the European Communities
By means of a communication from the Delegation of the European Commission dated
7 November 2003, the Secretariat has received the following questions that the European
Communities has posed to China in the context of the transitional review mechanism under Section 18
of its Protocol on Accession.
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The European Communities (hereinafter referred to as "EC") have identified the following
statements which are submitted to the TRIPS Council:
1. China's membership of the World Trade Organi zation and its commitment to comply with the
TRIPS Agreement have undoubtedly resulted in fundamental changes in the area of intellectual
property.
2. Whilst a few years ago, intellectual property was only an abstract concept in China, the
Chinese Government has now, in accordance with its international commitments, significantlystrengthened the legal framework of intellectual property protection.
3. However, the EC consider that in the field of enforcement of intellectual property rights, the
situation has not substantially improved in comparison with last year.
4. Hence, the EC reiterate their previous concerns that there is a marked need for additional
efforts in the field of enforcement of intellectual property rights.  The lack of an effective anddeterrent system for combating infringement of inte llectual property rights is still a major source of
contention between China and foreign investors.
5. China's share of the world's trade of counterfeit and pirated goods continues to increase
annually.  The high rates of counterfeiting and piracy not only destroy the creative initiative of
Chinese inventors and creators, they also hurt the bilateral relations with many trading partners,including the European Union.  This situation is detrimental to investment and development, it leads
to the loss of revenue for both Chinese and foreign right holders.
6. In addition to its economic impact, piracy and counterfeiting may have a damaging effect
upon public health (particularly in the field of pharmaceuticals) and consumer protection (e.g. spare
parts for motor vehicles).  Earlier this year China' s authorities successfully raided several distributors
of a fake medicine for Hepatitis B.  The fake drug did not contain any active substance and thus theIP/C/W/413
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health of consumers of the medicine was seriously at  stake.  The case though is not resolved in the
absence of appropriate criminal prosecution.
7. Needless to mention that counterfeiting and piracy may also affect public security and that the
profits of such trade are often appropriated by organised crime.  It is even said that trade in counterfeit
and pirated goods has become more attractive nowadays than drug trafficking, as indeed highpotential profits can be obtained without the risk of major legal penalties.
8. Whilst the Chinese government has been increasingly receptive to calls for reforms in
criminal enforcement against piracy and counterfeiting and Chinese police and prosecutors have
become markedly more willing to accept complaints  from foreign right holders, China still needs to
further strengthen its legislative framework for the enforcement of intellectual property rights and
ensure the vigorous application of its enforcement legislation in order to reduce the existing high
levels of piracy and counterfeiting.
9. While certain actions against counterfeiting ar e effective when working with the responsible
State Administration for Industry and Commerce (S AIC), at lower levels the situation appears
substantially different.  There is almost unanimity  in stating that local authorities (provincial and
municipal), courts and the police enforce intellectual property protection in an unsatisfactory manner,
rendering the task in  the field difficult, time consuming and expensive for the right-holders.  
10. Improvement to the current enforcement system should be sought in a number of areas, in
particular: (i) the co-ordination and co-operation between the various Ministries and agencies in
charge of enforcement of intellectual property rights should be enhanced, (ii) more deterrent penalties
should be enacted, (iii) the transfer of cases for criminal investigation to the Public Security Bureaux
should be encouraged, (iv) the criminal liability standards should be unambiguous (contradictoryinterpretations persist despite the, in 2001 issued Prosecution Guidelines and Judicial Interpretations
issued by the Supreme People's Court, the Supreme People's Procuratorate and the Ministry of Public
Security), and (v) resources for the training of police and local officials should increase and wider
media campaigns to raise public awareness of intellectual property issues should be organised.
11. The EC would like to suggest again to the Chin ese authorities to strive towards the adoption
of a comprehensive long term strategy for the enforcement of intellectual property rights which will
involve all relevant agencies, the judiciary, the customs and police officials at national, provincial and
municipal level.
12. Therefore, the EC:
• Call on the Chinese Government to take tougher measures to protect intellectual property
rights in line with its international commitments;
• Ask the Chinese Government to establish a forward looking enforcement strategy for
intellectual property which will suit both the domestic and international markets;
• Encourage the Chinese Government to set up an efficient and deterrent system for the
enforcement of intellectual property rights which will ultimately attract a high level of
foreign investment and strengthen competitiveness in the world market;
• Recommend the Chinese Government to reflect on the creation of a high level
Coordination Working Office that could promote further development of the intellectual
property protection system of China, strengthen the enforcement of intellectual propertyrights, and give directions to fulfil international obligations of China.
13. The EC is prepared to enhance its co-operation with China in order to achieve a sustainable
intellectual property protection system.  Not only will the EC continue to monitor the situation in
China and to ensure that its economic interests are appropriately safeguarded, it is also committed toIP/C/W/413
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working together with the Chinese Government to improve the situation, thereby creating a win-win
situation for all parties.
14. The EC welcome the recently launched EU/China Structured Dialogue on Intellectual
Property. Such a constructive undertaking is important to achieve mutual understanding of each
other's system of intellectual property protection and will definitely assist EU/China joint efforts tocombat piracy and counterfeiting in China.
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