Editor's note:

Pertaining to the WTO dispute between the U.S. and China, our journalist Lloyd Flaton obtained an interview with Mark Cohen, the Intellectual Property Attaché of the U.S. Embassy in Beijing. Mr. Cohen, who was attending the intellectual property negotiations between the U.S. and China in Geneva, answered our related questions in written form.

China IP: Many people in China believe that pressure by the US Congress led to the US government to initiate the recent WTO case against China with respect to IPR protection and enforcement. What is your opinion as to the origin of the recent WTO case?

Mr. Cohen: What were the precipitating factors for the WTO consultation request? This is a historical question.  I am not a historian, but the historical factors are many.  Certainly, Congress is vitally interested in seeing that American IPR rights are fairly protected overseas, and that we also have a good IPR system domestically.  Changes in party control of the Congress may have been exaggerated in this regard.  If, for example, you are a congressman from Southern California, it is almost certain that you are interested in copyright protection for motion pictures or music, whether you are democratic or republican.  Judge Rogan, when he was head of the USPTO, a republican from Southern California, was certainly interested in industries from California.  Moreover, discussions over the issues that could be raised in a possible case were certainly raised with Chinese colleagues well before the April 10, 2007 filing date.  There was no great change in strategy that I was aware of.

From a longer perspective, certain of the issues raised in the consultation request in fact have a long history.  The issue of criminalization of counterfeiting and piracy dates back to the mid and late 90's, when one of  the major issues then were control over exports of pirated optical media.  China's border measures also date from approximately that time.

When China joined the WTO, the Working Party Report on China's WTO accession obligated the State Council to recommend to the courts and judiciary to lower criminal thresholds.  A new judicial interpretation reflecting this commitment was promulgated in December 2004.  In fact, that judicial interpretation lowered most thresholds, but raised a few: previous "zero" thresholds for recidivist activity, willful infringement of well known marks and pharmaceuticals.  Concerns also remained over whether the criminal law required both "reproduction" and "distribution".

Questions concerning the overall deterrence of China's civil, criminal and administrative systems have also been raised at TRIPS Council since China joined the WTO, and in USTR's Annual Special 301 reports.  Issues regarding transparency of the enforcement system had also been separately raised in an "Article 63" request filed by the United States and other countries with the WTO.

Of course, there had been several other initiatives to improve criminal enforcement, including U.S. efforts to improve referrals from administrative to criminal prosecution, educating rights holders concerning how to effectively use the system, addressing new issues such as Internet piracy, cyber crime, and transborder trade in infringing goods, the problems of infringements in the globalized economy and digital age, improving law enforcement cooperation, engaging on challenges of local enforcement, and others. The issue is hardly new.

The WTO case only addresses four issues and from that perspective is narrowly focused. We all need to continue to work together to address shared challenges. Another way of looking at the problem is by trying to take a snapshot of where China can most improve its IPR system with a minimal amount of resources.  Criminal measures have the potential for social deterrence. China's administrative system has not succeeded in keeping pace with the growth in infringing activity, as measured by such benchmarks as the growth in seizures of Chinese origin counterfeit goods overseas. A deterrent criminal IPR system, implemented in a predictable and proportionate matter, helps.

China IP: In the past, the US and China have always resolved intellectual property rights problems through cooperation and consultation. Despite the universally recognized efforts by the Chinese government to protect IPR and increase enforcement, why has the US government decided to initiate a WTO case at this time? 

Mr. Cohen:Decisions on filing WTO cases are made by USTR, of which I am not a part. I represent the USPTO and the Department of Commerce on IPR issues in China and I handle the administration of IPR issues for the Embassy on behalf of the Ambassador. 

In general, I can say that the U.S. government has no great desire to file requests for WTO consultation.  We prefer to settle matters bilaterally by negotiation.  However, the WTO mechanism exists to resolve issues that are difficult to resolve bilaterally and can shed a new light on old issues.  Obviously, USTR decided to initiate the requests because they had determined that consultations would be more successful in addressing some challenging issues.  The U.S. did not decide "now we will resolve all cases in Geneva", or that "bilateral mechanisms" are meaningless.  Nor did they decide that they would forego a right of all WTO member countries to request consultations.  Only the issues that were raised in the consultation request, which is available in Chinese and English on the U.S. Embassy website, were raised.

China is the fourth largest trading country in the world.  It has the largest trademark office, and one of the largest patent offices.  It has a very brisk civil docket and probably the world's largest administrative enforcement system.  It has an extensive, and rather complicated three-track IPR system - civil, criminal and administrative, with wide variances in local enforcement.  However infringing Chinese goods are found throughout the world.  Certain highly competitive U.S industries, such as our music, motion pictures and publishing sectors, find that their products are widely available with limited deterrence, particularly on a retail level.  One need walk down any major thoroughfare in Beijing, Shanghai, and Guangzhou or talk to a middle class Chinese citizen to understand that many of these people don't know where, if at all, they can buy legitimate music or movies.  To address these problems requires legal reform and cooperation.

China was not the first country to be the subject of a WTO case involving intellectual property rights protection, and it will likely not be the last.  The WTO specifically requires that member states acknowledge that a dispute settlement request is not a hostile act.   In fact, the Untied States have every interest in continuing to cooperate with China on a full range of IPR issues, much as we have with trading partners when we initiated or responded to prior WTO cases.  At the recent Strategic Economic Dialogue, for example, we had progress in Customs cooperation on IPR issues, and we look forward to other forms of cooperation and exchange.

China IP: Are you concerned that the WTO case will negatively impact the cooperation of the Chinese and US government with respect to IPR matters and that it may in fact be counterproductive?

Mr. Cohen: There is nothing counterproductive about asking a country to demonstrate compliance with its WTO commitments and resolving a long-standing issue.  Indeed, initiation of a WTO case suggests that there is a greater, not lesser need for mutual understanding and real exchange.  We cannot ask ourselves to do anything less that we would of rights holders - to reasonably respect and enforce your rights in accordance with law. 

Of course, certain regions and ministries in China may choose to curtail cooperation.  This would be regrettable, and it could lead to increased misunderstandings, which is in neither country's best interests.  I have personally worked very hard for the past several years to build up relationships between our patent, trademark, copyright and other IPR offices. 

Living in China and speaking Chinese, I continue to have some opportunities to meet with companies, lawyers, academics and others, to read articles and cases, and to exchange views on current developments.  Curtailing cooperation would likely harm the people who need it most - individuals in Washington and Beijing who need to exchange views on a regular basis to understand developments in each others countries.  Once programs are dropped, it could also take some time to reinstate them.  I am also personally concerned that it could also result in increased pressure for formal mechanisms to resolve concerns, if other avenues are closed off.

China IP: What additional steps does the US government want to see the Chinese government take with respect to IPR protection and enforcement?

Mr. Cohen: China needs to take steps consistent with WTO and other commitments and its own legal structures to improve IPR protection and enforcement.  China, like all countries, needs to periodically review and evaluate its laws and regulations, and allocation of resources to determine that it is protecting IPR in the most effective manner possible. The rapid growth in China's economy, increasing technological challenges to copyright and other rights, globalization of IPR criminal activity, and the need to cooperate in technical areas, such as patent examination and cyber crime, all suggest areas where China can take steps forward.

There are some rather obvious changes that could be extremely helpful.  One can legitimately ask why China has not yet even announced plans to amend its criminal IPR laws, when the patent, trademark, copyright and unfair competition laws are all under some stage of revision, and in most cases were already amended once in the last six years.  China's trademark office needs to have more flexibility in hiring additional examiners in light of the explosion in growth of trademark applications.  China's courts, prosecutors and police need to take definitive steps to address local protectionism, such as by creating nationally paid IPR police, establishing regional or national circuit courts for IPR appeals, creating mandatory sentencing guidelines, or other steps.  Everybody needs to play a role.

China and its foreign trading partners also need to find ways to overcome current frustrations that IPR infringements continue to grow in most areas notwithstanding high government efforts.  The media in China and the West also need to fairly report on the problems and accomplishments.  Chinese media should not ignore the widespread problems and harm to the reputation of China due to widespread infringement. One hardly sees, for example, news reports on foreign customs seizures of Chinese origin counterfeit or pirated goods.   Strident record of "oppression" by foreign patentees when China has huge trade surpluses built upon manufacturing products it did not invent, are a testament to the successes of the IPR system, and not a basis for dismantling or attacking it.   The very limited role that foreigners play in some aspects of China's IPR system - utility models, design patents, and civil litigation (to name a few) should also be explored and addressed.  The burdens imposed on Chinese rights holders as they struggle to enforce their rights in a challenging environment should also not be neglected, as China struggles to become an innovative economy. 

I do not know of a comprehensive "wish list."  No one expects that China should bring its piracy or counterfeiting rates down to zero.  Most people would like to see an absolute drop in both piracy and counterfeiting levels and some easing in monetary losses.  Many people would like to see significant improvements in regional hot spots and in some rather open and notorious situations - for example Beijing's consumer markets, such as Silk Street as one way to make headway. Some reduction in the pressure on copyright enforcement could easily be achieved by facilitating greater market access, such as removing the 20 foreign film caps on theatrical releases. 

China has devoted considerable resources to protection and enforcement of IPR; however some serious consideration might be given to reallocating those resources in light of China's current development.  China's National Copyright Administration needs vastly more enforcement officials.  China's Trademark Office needs to dramatically increase staff to reduce pendency while improving quality.  China should consider establishing national appellate IPR court and/or establishing specialized IPR prosecutors or police units as in the United States. China could also engage with the U.S. in a wider range of criminal IPR cases, particularly time-sensitive Internet cases.  Formalities in civil cases could be reduced, such as by removing burdensome notarization and consularization requirements.  Procedures for improving handling of confidential information might be improved.  A system of patent linkage like our Hatch Waxman Act might be considered.

Reciting a litany of ways in which IPR protection might be improved in China does not mean that each of these issues is a "WTO case".  Rather, it underscores the fact that there are vast areas where significant improvements can be made in China's IPR system through dialogue and engagement.  After all, the vast majority of China's IPR cases involve Chinese rights holders (90% or more of civil cases alone).  The vast majority of China's trademark, design patent and utility model patent holders is also Chinese.