However, right holders report that enforcement efforts, particularly at the local level, are hampered by poor coordination among Chinese Government ministries and agencies, local protectionism and corruption, high thresholds for initiating investigations and prosecuting criminal cases, lack of training, and inadequate and non-transparent processes.
Several factors contribute to China's poor IPR enforcement record. One major factor is China's chronic underutilization of deterrent criminal remedies. China channels the vast majority of enforcement to administrative authorities. The trademark and copyright industries continue to point out that administrative fines are too low to provide a deterrent, and as a result, infringers continue to consider administrative seizures and fines as a cost of doing business. Rules designed to promote transfer of cases to criminal authorities do not appear to have solved the problem.
At the 2005 JCCT, China agreed to increase the number of criminal prosecutions for IPR violations relative to the total number ofIPR administrative cases. Unfortunately, there has been no sign yet of a significant shift in emphasis toward criminal enforcement. The safe harbors from criminal liability created by China's high thresholds for criminal liability (i.e., minimum values or volumes required to initiate criminal prosecution, normally calculated on the basis of the infringer's actual or marked price) continue to be a major reason for the lack of an effective criminal deterrent. These safe harbors are among the matters for which the United States has requested WTO dispute settlement with China.
In April 2007, China issued a new Judicial Interpretation that appears to clarify certain aspects of China's criminal thresholds. Although the 2007 Judicial Interpretation appears to have resolved the problem in China's Criminal Law that required unauthorized distribution in order to prosecute unauthorized reproduction, other legal obstacles in the area of criminal enforcement remain. They include, for example, the lack of criminal liability for certain acts of copyright infringement; the profit motive requirement in copyright cases, which hampers efforts to fight Internet piracy where there is no clear motive of financial gain; the requirement of identical trademarks in counterfeiting cases; and the absence of minimum, proportionate sentences and clear standards for initiation of police investigations in cases where there is a reasonable suspicion of criminal activity. The United States remains willing to work with China to achieve further progress in the area of criminal remedies.
At the same time, the United States has also been encouraging China to consider a variety of changes to its administrative and civil enforcement regimes, such as the restoration of minimum (and deterrent) fines in administrative trademark enforcement cases, increased referral of administrative enforcement actions for criminal prosecution, elimination of the need for legalization and consularization of foreign evidence, implementation of a discovery process with compulsory measures for evidence protection, provision of meaningful injunctive relief, and enforcement of judicial orders.
In addition, the United States calls upon China to take more aggressive action to prosecute manufacturers of counterfeit goods, producers of pirated optical discs, and entities engaged in commercial reproduction of pirated books, journals, and periodicals. Authorities should
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