## Facts

- The United States challenged aspects of China’s intellectual property enforcement framework under the TRIPS Agreement.
- The challenged measures addressed: (1) criminal liability thresholds for willful trademark counterfeiting and copyright piracy; (2) customs disposal options for seized infringing goods; and (3) denial of copyright and related-rights protection for works not authorized for publication or distribution in China.
- China’s criminal provisions were implemented through judicial interpretations specifying monetary, quantity, and “illegal gains” thresholds for prosecution.
- China’s customs rules permitted multiple post-seizure outcomes, including auction, donation, sale to the right holder, and destruction, with destruction treated as a last resort in parts of the regime.
- China’s copyright framework conditioned protection and enforcement for certain works on domestic publication or distribution approval.
- A WTO panel was established after consultations failed; the panel report was circulated on January 26, 2009 and adopted on March 20, 2009, with no appeal.

## Issues

1. Whether China’s criminal thresholds for trademark counterfeiting and copyright piracy fail to provide criminal procedures and penalties for willful infringement “on a commercial scale,” contrary to TRIPS Article 61.
2. Whether China’s customs disposal rules permit seized infringing goods to re-enter commerce in a manner inconsistent with TRIPS Articles 46 and 59.
3. Whether conditioning copyright and related-rights protection and enforcement on domestic authorization violates TRIPS Article 9.1 (incorporating Berne Convention requirements of automatic protection and the prohibition on formalities).

## Decision

- The panel rejected the United States’ challenge to China’s criminal thresholds, finding the evidence insufficient to show that China’s thresholds necessarily excluded commercial-scale infringement from criminal liability under TRIPS Article 61.
- The panel found aspects of China’s customs disposal regime inconsistent with TRIPS Articles 46 and 59 because the rules could allow infringing goods, including counterfeit trademark goods, to re-enter ordinary commercial channels without reliably eliminating infringing features.
- The panel found China acted inconsistently with TRIPS Article 9.1 (via Berne) by denying copyright and related-rights protection and enforcement to certain works solely due to lack of domestic publication or distribution authorization.

## Legal Principles

- Under TRIPS Article 61, Members must provide criminal procedures and penalties at least for willful trademark counterfeiting and copyright piracy “on a commercial scale,” while retaining some discretion to define “commercial scale”; a complainant must prove that the challenged thresholds exclude typical commercial-scale conduct from criminal coverage.
- Under TRIPS Articles 46 and 59, remedies and border measures must be structured to prevent infringing goods from entering normal commercial channels in a way that harms right holders’ legitimate interests; disposal mechanisms that foreseeably return infringing goods to commerce may breach TRIPS.
- TRIPS Article 9.1 incorporates core Berne Convention obligations requiring automatic copyright protection without formalities; conditioning the existence or enforceability of rights on prior state authorization for publication or distribution is inconsistent with those obligations.

## Conclusion

The panel upheld China’s discretion to set criminal enforcement thresholds absent proof that commercial-scale infringement systematically escapes prosecution, but found TRIPS violations where customs disposal rules could place infringing goods back into commerce and where copyright protection and enforcement were denied based on lack of domestic authorization.


China—Measures Affecting the Protection and Enforcement of Intellectual Property Rights, WT/DS362/R (WTO Panel 2009)