Page:Special 301 Report 2005.pdf/17

 States, in China and throughout the world. Batteries, pharmaceuticals, auto parts, industrial equipment and many other counterfeit products from China come to our shores. The OCR submissions aver, for example, that foreign pharmaceutical companies lost 10-15 percent of annual revenues in China due to increased counterfeiting.

Article 63 of the TRIPS Agreement requires laws, regulations and final judicial decisions and administrative rulings of general application pertaining to IPR infringement be made publicly available to rights holders. Despite this requirement, lack of transparent information on IPR infringement levels and enforcement activities in China continues to be an acute problem. Several OCR submissions express concern regarding the Chinese Government's unwillingness to provide sufficiently detailed enforcement information. For example, one industry group observed that "[a]lthough Chinese authorities have undertaken some administrative enforcement actions against pirates, the Government's refusal to share information about ... the ultimate outcomes of these actions makes it very difficult for rights holders to assess the deterrent impact of China's enforcement efforts."

Transparency in rulemaking is also a continuing problem. Government entities responsible for drafting rules often refuse to make drafts widely available for public comment, and instead limit their "consultations" to pre-selected industry and trade associations. A prime example is China's drafting of the criminal judicial interpretation. During the 2003 Transitional Review of China's WTO/TRIPS compliance, China pledged to increase transparency by making draft judicial interpretations on IPR matters available for public comment. Despite this pledge made in Geneva and numerous requests from the United States and rights holders, China refused to release a draft of its December 2004 judicial interpretation for public comment. In addition, guidelines for the examination of patents and trademarks are not publicly available, and numerous local rules, such as those governing trade secrets, are inconsistent with national law, regulations or rules, resulting in uncertainty and confusion for rights holders.

Article 61 of the TRIPS Agreement requires a criminal IPR enforcement system with deterrent effect. Presently, however, criminal enforcement in China has not demonstrated any deterrent effect on infringers. China's authorities have pursued criminal prosecutions in a relatively small number of cases, notwithstanding China's commitment to the United States to impose more criminal penalties on the range of counterfeiting and piracy activities. While the number of criminal trademark prosecutions appears to be increasing, we have reports of very few, if any, criminal copyright prosecutions. When criminal prosecutions are pursued, a lack of transparency makes it difficult to ascertain whether they resulted in convictions and, if so, what penalties were imposed.

The Supreme People's Court and Supreme People's Procuratorate (SPP) issued a new judicial interpretation (JI) in December 2004 redefining the criteria for (1) commencing prosecutions and