# LongBench v2 / 66ed3148821e116aacb1f2ce

task_id: b8beca1d-aba0-599c-88ef-ef3a14ef9203
task_key: train--66ed3148821e116aacb1f2ce
task_revision_id: 3

{"choice_A":"China's Criminal Law and relevant judicial interpretations stipulate the amount and number of criminal sanctions for intellectual property rights, and China has actually set a certain criminal threshold, which may result in certain infringements that do not meet the criminal threshold or have no evidence to prove that they have a commercial purpose but reach a certain level of infringement cannot be regulated.","choice_B":"The meaning of \"scale, grade, proportion, scale\" and so on in the word scale itself has a certain scope or relativity, so the \"scale of business\" under Article 61 of the TRIPS Agreement should be judged according to specific needs or specific circumstances，A case-by-case analysis is required.","choice_C":"Because the panel found that China had not violated the provision.","choice_D":"Because China did not participate in the agreement.","context":"WORLD TRADE \nORGANIZATION \n \n \nWT/DS362/R \n26 January 2009 \n \n(09-0240) \n \n \n \nOriginal: English \n \n \n \n \n \n \n \n \n \n \n \nCHINA – MEASURES AFFECTING THE PROTECTION AND \nENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS \n \n \nReport of the Panel  \n \n \n \n \n \n \n\n\nWT/DS362/R \nPage 82 \n \n \n  \n(a) \nArticle 59 of the TRIPS Agreement is not applicable to the Customs measures insofar \nas those measures apply to goods destined for exportation; \n(b) \nthe United States has not established that the Customs measures are inconsistent with \nArticle 59 of the TRIPS Agreement, as it incorporates the principles set out in the \nfirst sentence of Article 46 of the TRIPS Agreement; and \n(c) \nthe Customs measures are inconsistent with Article 59 of the TRIPS Agreement, as it \nincorporates the principle set out in the fourth sentence of Article 46 of the TRIPS \nAgreement. \nC. \nCRIMINAL THRESHOLDS \n1. \nDescription of the measures at issue \n(a) \nIntroduction  \n7.396 This Section of the Panel's findings concerns criminal thresholds established by the following \nmeasures.  China's Criminal Law was adopted by the National People's Congress in 1979, revised by \nthe National People's Congress in 1997 and promulgated by Order of the President of the People's \nRepublic of China in 1997.  The Criminal Law is divided into two Parts:  Part One, setting out \n\"General Provisions\", and Part Two, setting out \"Specific Provisions\".  Part Two, Chapter III, \nprovides for \"Crimes of disrupting the order of the socialist market economy\".  Chapter III, Section 7, \nprovides for \"Crimes of infringing intellectual property rights\" and comprises Articles 213 to 220, \nconsidered below. \n7.397 The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate \nConcerning Some Issues on the Specific Application of Law for Handling Criminal Cases of \nInfringement of Intellectual Property Rights (Interpretation No. 19 [2004] of the Supreme People's \nCourt) (\"Judicial Interpretation No. 19 [2004]\") was adopted in November 2004 and entered into \nforce in December 2004.  It interprets certain terms used in Articles 213 to 219 of the Criminal Law \nand also deals with certain other matters.  \n7.398 The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate \nConcerning Some Issues on the Specific Application of Law for Handling Criminal Cases of \nInfringement of Intellectual Property Rights – II (Interpretation No. 6 [2007] of the Supreme People's \nCourt) (\"Judicial Interpretation No. 6 [2007]\") was adopted and entered into force in April 2007.  It \ninterprets certain terms used in Article 217 of the Criminal Law and also deals with certain other \nmatters. \n(b) \nTrademark provisions \n(i) \nUse of a counterfeit trademark  \n7.399 Article 213 of the Criminal Law may be translated as follows: \n\"Whoever, without permission from the owner of a registered trademark, uses a \ntrademark which is identical with the registered trademark on the same kind of \ncommodities shall, if the circumstances are serious, be sentenced to fixed-term \nimprisonment of not more than three years or criminal detention and shall also, or \nshall only, be fined; if the circumstances are especially serious, the offender shall be \n\n\n \nWT/DS362/R \n \nPage 83 \n \n \n  \nsentenced to fixed-term imprisonment of not less than three years but not more than \nseven years and shall also be fined.\"368  (emphasis added) \n7.400 Article 1 of Judicial Interpretation No. 19 [2004] interprets the phrase \"the circumstances are \nserious\" in Article 213 of the Criminal Law and may be translated as follows: \n\"Whoever, without permission from the owner of a registered trademark, uses a \ntrademark which is identical with the registered trademark on the same kind of \ncommodities, in any of the following circumstances which shall be deemed as 'the \ncircumstances are serious' under Article 213 of the Criminal Law, shall be sentenced \nto fixed-term imprisonment of not more than three years or criminal detention for the \ncrime of counterfeiting registered trademark, and shall also, or shall only, be fined: \n(1)  \nthe illegal business operation volume of not less than 50,000 Yuan369 or the \namount of illegal gains of not less than 30,000 Yuan; \n(2)  \nin the case of counterfeiting two or more registered trademarks, the illegal \nbusiness operation volume of not less than 30,000 Yuan or the amount of illegal gains \nof not less than 20,000 Yuan; \n(3)  \nother serious circumstances.\" 370  (emphasis added) \n7.401 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term \"illegal business \noperation volume\" and may be translated as follows: \n\"The 'illegal business operation volume' herein means the value of the infringing \nproducts manufactured, stored, transported or sold during the course of commission \nof the act of infringing intellectual property rights.  The value of the sold infringing \nproducts shall be calculated at the actual sale price. The value of the infringing \nproducts manufactured, stored, transported and unsold shall be calculated at the \nlabelled price or at the average actual sales price of the infringing products as verified. \nIf there is no labelled price on the infringing products or the actual sales price is \nunable to be verified, the price of the infringing products shall be calculated at the \nmiddle market price of the infringed products.\"371 \n7.402 Article 17 of Judicial Interpretation No. 30 [1998]372 defines the term \"amount of illegal \ngains\" and may be translated as follows: \n\"The 'amount of illegal gains' in this Interpretation refers to the amount of profit \nobtained.\"373 \n(ii) \nSelling counterfeit trademark commodities \n7.403 Article 214 of the Criminal Law may be translated as follows: \n                                                   \n368 Mutually agreed translation no. 1. \n369 This corresponds to US$6,250 at average market exchange rates (¥8.013/US$ for 2004-2007).   \n370 Mutually agreed translation no. 3. \n371 Mutually agreed translation no. 3. \n372 The Interpretation by the Supreme People's Court of Certain Questions Concerning the Specific \nApplication of Law in Adjudicating Criminal Cases Involving Illegal Publications (Interpretation No. 30  [1998] \nof the Supreme People's Court) in Exhibits US-4 and CHN-3. \n373 Mutually agreed translation no. 4.  The parties agree that this definition is applicable under Judicial \nInterpretation No. 19 [2004]:  see United States' and China's respective responses to Question No. 3(a). \n\n\nWT/DS362/R \nPage 84 \n \n \n  \n\"Whoever sells commodities, knowing374 that such commodities bear counterfeit \nregistered trademarks shall, if the amount of sales is relatively large, be sentenced to \nfixed-term imprisonment of not more than three years or criminal detention and shall \nalso, or shall only, be fined; if the amount of sales is huge, the offender shall be \nsentenced to fixed-term imprisonment of not less than three years but not more than \nseven years and shall also be fined.\"375  (emphasis added) \n7.404 Article 2 of Judicial Interpretation No. 19 [2004] interpreted the phrase \"the amount is \nrelatively large\" under Article 214 of the Criminal Law and may be translated as follows: \n\"Whoever sells commodities, knowing that such commodities bear counterfeit \nregistered trademarks, with the amount of sales of not less than 50,000 Yuan, this \nshall be deemed as 'the amount is relatively large' under Article 214 of the Criminal \nLaw, and the offender shall be sentenced to fixed-term imprisonment of not more \nthan three years or criminal detention for the crime of selling commodities bearing a \ncounterfeit registered trademark, and shall also, or shall only, be fined.\"376 \n(iii) \nForgery of trademarks and sale of forged trademarks \n7.405 Article 215 of the Criminal Law may be translated as follows: \n\"Whoever forges or, without the authorization of another person, makes \nrepresentations of that person's registered trademarks, or sells representations of \nanother person's registered trademark that are forged or made without authorization, \nshall, if the circumstances are serious, be sentenced to fixed-term imprisonment of \nnot more than three years, criminal detention or public surveillance and shall also, or \nshall only, be fined; if the circumstances are especially serious, the offender shall be \nsentenced to fixed-term imprisonment of not less than three years but not more than \nseven years and shall also be fined.\"377  (emphasis added) \n7.406 Article 3 of Judicial Interpretation No. 19 [2004] interpreted the phrase \"the circumstances are \nserious\" under Article 215 of the Criminal Law and may be translated as follows: \n\"Whoever forges or, without the authorization of another person, makes \nrepresentations of that person's registered trademarks or sells such representations, in \nany of the following circumstances which shall be deemed as 'the circumstances are \nserious' under Article 215 of the Criminal Law, shall be sentenced to fixed-term \nimprisonment of not more than three years, criminal detention or public surveillance \nfor the crime of illegally producing or selling illegally made representations of the \nregistered trademark, and shall also, or shall only, be fined: \n(1)  \nforging or, without the authorization, making representations of the registered \ntrademarks or selling such representations of not less than 20,000 pieces, or with the \nillegal business operation volume of not less than 50,000 Yuan, or the amount of \nillegal gains of not less than 30,000 Yuan; \n(2)  \nforging or, without the authorization, making two or more kinds of \nrepresentations of the registered trademarks or selling such representations of not less \n                                                   \n374 Note in mutually agreed translation:  Please refer to Article 9 of the 2004 Judicial Interpretation. \n375 Mutually agreed translation no. 1. \n376 Mutually agreed translation no. 3. \n377 Mutually agreed translation no. 1. \n\n\n \nWT/DS362/R \n \nPage 85 \n \n \n  \nthan 10,000 pieces, or with the illegal business operation volume of not less than \n30,000 Yuan, or the amount of illegal gains of not less than 20,000 Yuan; \n(3)  \nother serious circumstances.\"378 (emphasis added) \n7.407 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term \"illegal business \noperation volume\" as set out at paragraph 7.401 above.  Article 17 of Judicial Interpretation No. 30 \n[1998] defines the term \"amount of illegal gains\" as set out at paragraph 7.402 above.  Article 12(3) of \nJudicial Interpretation No. 19 [2004] defines the term \"piece\" and may be translated as follows: \n\"'Piece' (件)379 under Article 3 herein means one representation with the entire \ntrademark pattern.\"380 \n(c) \nCopyright provisions \n(i) \nCriminal copyright infringement \n7.408 Article 217 of the Criminal Law may be translated as follows: \n\"Whoever, for the purpose of making profits, commits any of the following acts of \ninfringement of copyright shall, if the amount of illegal gains is relatively large, or if \nthere are other serious circumstances, be sentenced to fixed-term imprisonment of \nnot more than three years or criminal detention and shall also, or shall only, be fined; \nif the amount of illegal gains is huge or if there are other especially serious \ncircumstances, the offender shall be sentenced to fixed-term imprisonment of not less \nthan three years but not more than seven years and shall also be fined: \n(1)  reproducing [/]381 distributing written works, musical works, cinematographic \nworks, television or video works, computer software or other works without \npermission of the copyright owner; \n(2)  publishing a book of which the exclusive right of publication is enjoyed by \nanother person; \n(3)  reproducing [/] distributing audio recording [/] video recording made by another \nperson without permission of the maker;  \n(4)  making, selling382 a work of fine art with the forged signature of another \nperson.\"383 (emphasis added) \n7.409 Article 5 of Judicial Interpretation No. 19 [2004] interpreted the phrases \"the amount of \nillegal gains is relatively large\" and \"there are other serious circumstances\" under Article 217 of the \nCriminal Law and may be translated as follows: \n                                                   \n378 Mutually agreed translation no. 3. \n379 Note in mutually agreed translation:  in this context, piece (件) is a \"measure word\" for a trademark \nrepresentation. \n380 Mutually agreed translation no. 3. \n381 The parties advised the Panel orally at the second substantive meeting that the use of \"[/]\" in \nmutually agreed translations nos. 1, 2 and 3 did not indicate disagreement but rather reflected the fact that the \noriginal version did not use the word \"and\". \n382 Note in mutually agreed translation:  There is neither \"and\" or \"or\" between \"making\" and \"selling\", \nonly a Chinese repetitive comma (、) or 顿号 which has no precise English equivalent. \n383 Mutually agreed translation no. 1. \n\n\nWT/DS362/R \nPage 86 \n \n \n  \n\"Whoever, for the purpose of making profits, commits any of the acts of infringement \nof copyright under Article 217 of the Criminal Law, with the amount of illegal gains \nof not less than 30,000 Yuan which shall be deemed as 'the amount of illegal gains is \nrelatively large'; in any of the following circumstances which shall be deemed as \n'there are other serious circumstances', shall be sentenced to fixed-term imprisonment \nof not more than three years or criminal detention for the crime of infringement of \ncopyright, and shall also, or shall only, be fined: \n(1)  \nthe illegal business operation volume of not less than 50,000 Yuan; \n(2)  \nreproducing [/] distributing, without permission of the copyright owner, a \nwritten work, musical work, cinematographic work, television or other video works, \ncomputer software and other works of not less than 1,000384 张 (份)385 in total; \n(3)  \nother serious circumstances.\"386 (emphasis added) \n7.410 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term \"illegal business \noperation volume\" as set out at paragraph 7.401 above.  Article 17 of Judicial Interpretation No. 30 \n[1998] defines the term \"amount of illegal gains\" as set out at paragraph 7.402 above. \n7.411 Article 1 of Judicial Interpretation No. 6 [2007] re-interpreted the phrase \"there are other \nserious circumstances\" under Article 217 of the Criminal Law and may be translated as follows: \n\"Whoever, for the purpose of making profits, reproduces [/] distributes, without \npermission of the copyright owner, a written work, musical work, cinematographic \nwork, television or video works, computer software and other works of not less than \n500 张 (份)387 in total, [the offence] shall be deemed as 'there are other serious \ncircumstances' under Article 217 of the Criminal Law …\"388 \n7.412 The number \"500\" in this provision conflicts with the number \"1000\" in the earlier Judicial \nInterpretation.  The number \"500\" therefore prevails by virtue of Article 7 of Judicial Interpretation \nNo. 6 [2007], which may be translated as follows: \n\"Where any previously promulgated judicial interpretation is in conflict with this \nInterpretation, this Interpretation shall prevail.\"389   \n(ii) \nSelling copyright-infringing reproductions \n7.413 Article 218 of the Criminal Law may be translated as follows: \n\"Whoever, for the purpose of making profits, sells infringing reproductions, knowing \nthat such infringing reproductions are those stipulated in Article 217 of this Law shall, \nif the amount of illegal gains is huge, be sentenced to fixed-term imprisonment of not \n                                                   \n384 The number \"1000\" has been superseded by \"500\":  see paragraphs 7.411 and 7.412 below. \n385 Note in mutually agreed translation:  张 is a Chinese \"measure word\" broadly used to count flat \nthings (like optical disks, pages, etc.) and 份 is a \"measure word\" used to count copies in general. \n386 Mutually agreed translation no. 3. \n387 Note in mutually agreed translation: 张 is a Chinese \"measure word\" broadly used to count flat \nthings (like optical disks, pages, etc.) and 份 is a \"measure word\" used to count copies in general. \n388 Mutually agreed translation no. 2. \n389 Mutually agreed translation no. 2 and the parties' respective responses to Question No. 3(a). \n\n\n \nWT/DS362/R \n \nPage 87 \n \n \n  \nmore than three years or criminal detention and shall also, or shall only, be fined.\"390 \n(emphasis added) \n7.414 Article 6 of Judicial Interpretation No. 19 [2004] interpreted the phrase \"the amount of illegal \ngains is huge\" under Article 218 of the Criminal Law and may be translated as follows: \n\"Whoever, for the purpose of making profits, commits any of the acts as stipulated in \nArticle 218 of the Criminal Law, where the amount of illegal gains is not less than \n100,000 Yuan, this shall be deemed as 'the amount of illegal gains is huge', and the \noffender shall be sentenced to fixed-term imprisonment of not more than three years \nor criminal detention for the crime of selling infringing reproductions, and shall also, \nor shall only, be fined.\"391 \n(d) \nCrimes of infringing intellectual property rights committed by a unit \n7.415 The Panel's terms of reference also refer to Article 220 of the Criminal Law on crimes under \nArticles 213 to 219 where committed by a unit.  The United States has not requested relief in respect \nof that Article.  Therefore, the Panel does not consider this aspect of the measure. \n2. \nConstruction of the measures at issue \n(a) \nIntroduction \n7.416 The Panel notes that this claim challenges China's criminal measures \"as such\".  The parties \ndisagree on certain aspects of the measures at issue.  The Panel is therefore obliged, in accordance \nwith its mandate, to make an objective assessment of the meaning of the relevant provisions of those \nmeasures.  The Panel recalls its observations at paragraph 7.28 above and confirms that it examines \nthese measures solely for the purpose of determining their conformity with China's obligations under \nthe TRIPS Agreement. \n(b) \nNormative effect of the Judicial Interpretations \n7.417 Under the 1982 Constitution of the People's Republic of China, the National People's \nCongress is the highest organ of State power and its permanent body is its Standing Committee.  The \nNational People's Congress and its Standing Committee exercise the legislative power of the State.  \nThe National People's Congress enacts and amends basic laws, such as the Criminal Law, whilst its \nStanding Committee enacts and amends other statutes.392 \n7.418 In 1981, the Standing Committee of the National People's Congress adopted a Resolution on \nImproving the Work of Interpreting the Law, in which it decided as follows:  \n\"Questions involving the specific application of laws and decrees in court trials shall \nbe interpreted by the Supreme People's Court.  Questions involving the specific \napplication of laws and decrees in procuratorial work shall be interpreted by the \nSupreme People's Procuratorate.\"393   \n                                                   \n390 Mutually agreed translation no. 1. \n391 Mutually agreed translation no. 3. \n392 1982 Constitution of the People's Republic of China, Articles 62 and 67, explained in China's WTO \nTrade Policy Review, Report by the Secretariat, WT/TPR/S/161, Chapter II(2), referenced in United States' first \nwritten submission, para. 22, set out in Exhibit US-16. \n393 1981 Resolution of the Standing Committee of the National People's Congress on Improving the \nWork of Interpreting the Law, paragraph 2, in Exhibit US-13. \n\n\nWT/DS362/R \nPage 88 \n \n \n  \n7.419 In 1997, the Supreme People's Court formulated Certain Provisions on Judicial Interpretation \nWork.  In March 2007, it replaced these with new Provisions on Judicial Interpretation Work, which \nmay be translated as follows: \n\"Judicial interpretations issued by the Supreme People's Court shall have legal \neffect.\"394 \n7.420 In 1996 the Supreme People's Procuratorate formulated Provisional Provisions on Judicial \nInterpretation Work.  In May 2006, it replaced these with Provisions on Judicial Interpretation Work, \nwhich may be translated as follows: \n\"Judicial interpretations made by the Supreme People's Procuratorate have legal \neffect.  People's procuratorates may use provisions of judicial interpretation in legal \ndocuments such as bills of indictment or protest.\"395 \n7.421 The Provisions of the Supreme People's Court on Judicial Interpretation Work and the \nProvisions of the Supreme People's Procuratorate on Judicial Interpretation Work both provide for the \njoint formulation of judicial interpretations by the Supreme People's Court and the Supreme People's \nProcuratorate when an issue involves both judicial and prosecutorial work.396 \n7.422 The United States submits that, in light of the above, the Judicial Interpretations at issue in \nthis dispute are binding and have the force of law.397   \n7.423 China submits that the Judicial Interpretations are issued \"in order to ensure a uniform \nunderstanding and application of the law\".398  China does not disagree with the United States' \ndescription of the legal basis and binding nature of the Judicial Interpretations at issue as set out in the \nUnited States' first written submission.399  China confirms that if an illegal act does not meet one of \nthe pertinent thresholds set out in the Judicial Interpretations at issue, prosecution of that act is legally \nimpossible.400 \n7.424 In light of the above, the Panel finds that the Judicial Interpretations of the Articles of the \nCriminal Law at issue are binding and have the force of law. \n(c) \nThresholds under the Criminal Law in general \n7.425 China informs the Panel that it employs thresholds across a range of commercial crimes, \nreflecting the significance of various illegal acts for overall public and economic order and China's \nprioritization of criminal enforcement, prosecution and judicial resources.  China submits that the \ncriminal thresholds for counterfeiting and piracy are reasonable and appropriate in the context of this \nlegal structure and the other laws on commercial crimes.401 \n                                                   \n394 Provisions of the Supreme People's Court on Judicial Interpretation Work, Article 5, 法发 [2007] \nNo. 12 in Exhibit US-14. \n395 Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work, Article 5, 高检发\n研字 [2006] No. 4 in Exhibit US-15. \n396 Provisions of the Supreme People's Court on Judicial Interpretation Work (referred to in note 394 \nabove), Article 7, and Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work \n(referred to in note 395 above), Article 21. \n397 United States' first written submission, para. 24. \n398 China's first written submission, para. 22. \n399 China's response to Question No. 10, referencing paras 20-24 of that submission. \n400 China's response to Question No. 55. \n401 China's first written submission, paras 122-127. \n\n\n \nWT/DS362/R \n \nPage 89 \n \n \n  \n7.426 The United States responds that what China chooses to do with its domestic non-IPR criminal \nthresholds has no bearing on the Panel's assessment of whether China meets its international \nobligations under the first sentence of Article 61 of the TRIPS Agreement.402 \n7.427 The Panel observes that Part One of the Criminal Law sets out general provisions.  Within \nPart One, Chapter II, Section 1 provides for \"Crimes and Criminal Responsibility\".  Article 13 defines \na crime and may be translated in fine as follows:  \n\"However, if the circumstances are obviously minor and the harm done is not serious, \nthe act shall not be considered a crime.\"403 \n7.428 China submits that, throughout the Criminal Law, the definitions of various crimes are \naccompanied by rules for determining at what point the particular proscribed conduct becomes so \nserious as to constitute a crime.404  These are collated and issued in Prosecution Standards.  In \nresponse to a question from the Panel, China indicated that most substantive provisions in Chapter III \non economic crimes, Chapter V on property violation and Chapter VI, Section 9 on producing, selling \nand disseminating pornographic materials405 are also subject to specific thresholds, such as those \napplicable to Articles 213, 214, 215, 217 and 218 of the Criminal Law that are at issue in this \ndispute.406   \n7.429 The Panel notes China's acknowledgement that a total of 11 crimes out of 117 crimes set out \nin these relevant Parts and this relevant Section of the Criminal Law are not subject to any specific \nthreshold.407  Therefore, whilst China may for internal policy reasons frequently use thresholds to \ndefine the point at which many classes of illegal act are considered serious enough to be criminalized, \nChina's legal structure is capable of criminalizing certain acts without recourse to thresholds.  \n(d) \nThresholds for conviction or aggravation  \n7.430 The Panel notes that some thresholds in the Criminal Law set minimum requirements for \nconviction (\"conviction thresholds\") whilst others set minimum requirements for higher penalties \n(\"aggravation thresholds\").  Most of the Articles at issue in this dispute include both.  The conviction \nthresholds comprise \"serious circumstances\" in Articles 213 and 215, \"relatively large amount of \nsales\" in Article 214, \"relatively large amount of illegal gains\" or \"other serious circumstances\" in \nArticle 217 and \"huge amount of sales\" in Article 218.  The aggravation thresholds comprise \n\"especially serious circumstances\" in Articles 213, 215 and 217 and \"huge amount of sales\" in \nArticle 214.   \n7.431 The United States only challenges the conviction thresholds as these render prosecution \nimpossible in the absence of certain criteria.  Therefore, the Panel does not consider the aggravation \nthresholds further. \n                                                   \n402 United States' rebuttal submission, paras 100-102. \n403 Exhibit CHN-1. \n404 China's first written submission, para. 121. \n405 Crimes under Part Two, Chapter VI, Section 9 of the Criminal Law were addressed together with \ncopyright crimes under Articles 217 and 218 in Judicial Interpretation No. 30 [1998] (referred to in note 372 \nabove). \n406 See China's response to Question No. 57.   \n407 China's response to Question No. 57. \n\n\nWT/DS362/R \nPage 90 \n \n \n  \n(e) \nGeneral provisions on inchoate crimes  \n7.432 China refers to certain general provisions of the Criminal Law that it alleges apply to the \ncrimes of infringing intellectual property rights.  These include Article 22 on preparation for a crime, \nand Article 23 on attempted crime, which may trigger criminal prosecution and penalties.408   \n7.433 The United States replied that the extent to which these general provisions on inchoate crimes \ncan address evidence of potential infringement is beside the point, as the thresholds rule out criminal \nliability based on evidence of actual infringement.409  In response to a question, the United States \nnotes that neither the Criminal Law, Judicial Interpretation No. 19 [2004] nor Judicial Interpretation \nNo. 6 [2007] contains any specific provisions concerning the offences of preparation or attempt \nrelating to the completed crimes of trademark counterfeiting and copyright piracy.410 \n7.434 The Panel observes that Part One, Chapter II, Section 2 of the Criminal Law sets out three \ninchoate crimes of preparation for a crime, criminal attempt and discontinuation of a crime.411  \nArticle 22 may be translated as follows: \n\"Preparation for a crime refers to the preparation of the instruments or the creation of \nthe conditions for a crime. \nAn offender who prepares for a crime may, in comparison with one who completes \nthe crime, be given a lighter or mitigated punishment or be exempted from \npunishment.\"412 \n7.435 Article 23 may be translated, relevantly, as follows: \n\"A criminal attempt refers to a case where an offender has already started to commit a \ncrime but is prevented from completing it for reasons independent of his will. \nAn offender who attempts to commit a crime may, in comparison with one who \ncompletes the crime, be given a lighter or mitigated punishment.\"413 \n7.436 The Panel notes that each of these Articles contains provisions that appear to be of general \napplication and that relate explicitly to \"a crime\" (犯罪).  The Articles to which China refers contain \nno express limitation to certain specific provisions of the Criminal Law.  They form part of Chapter II \non \"Crimes\" found in Part One on \"General Provisions\", which also sets out the aim, basic principles \nand scope of application of the Criminal Law in Chapter I, provisions on punishments in Chapter III \nand the concrete application of punishments in Chapter IV.  On their face, there is no reason to \nsuppose that Articles 22 and 23 do not apply to the crimes of infringing intellectual property rights in \nArticles 213, 214, 215, 217 and 218 of the Criminal Law.  This reading is confirmed by examples of \njudicial decisions submitted by China that show courts applying Articles 22 and 23 of the Criminal \nLaw in cases of crimes of infringing intellectual property rights.414   \n7.437 The Panel also notes that China has referred to the offences of preparation for a crime and \nattempted crime to show that packaging and product components can be taken into account in \n                                                   \n408 China's first written submission, paras 35-37;  rebuttal submission, paras 36-41. \n409 United States' second oral statement, para. 34. \n410 United States' response to Question No. 8. \n411 The parties have not referred to Article 24 on discontinuation of a crime. \n412 Exhibit CHN-1. \n413 Exhibit CHN-1. \n414 The United States refers to these judicial decisions and appears to acknowledge that the Articles \nwere applied in these cases: see United States' response to Question No. 8. \n\n\n \nWT/DS362/R \n \nPage 91 \n \n \n  \ndetermining the availability of criminal procedures to enforce the substantive crimes of infringing \nintellectual property rights.  However, the Panel notes that China has not alleged that the offences of \npreparation and attempt render activities falling below the thresholds in Articles 213 to 220 generally \nsubject to criminal prosecution. \n(f) \nGeneral provisions on joint crimes \n7.438 Japan, supported by the European Communities, argues that quantitative thresholds would not \ncapture counterfeiting activities of limited value or smaller quantities which are on a \"commercial \nscale\" due to their professional organization or the systematic cooperation with other persons.415 \nMexico further submits that small scale activity is \"clearly meaningful\" as it contributes to the chain \nof infringement.416 \n7.439 In response to these third party submissions, China refers to Articles 25, 26 and 27 of the \nCriminal Law on joint liability, criminal groups and accomplices to show that the Criminal Law \nrecognizes certain non-quantitative factors, such as evidence of collaboration between infringers.417  \nChina submits that they apply to the crimes of infringing intellectual property rights in Articles 213, \n214, 215, 217 and 218 of the Criminal Law.418   \n7.440 The United States replies that this argument is of no consequence with respect to infringers \nthat work alone. All the evidence demonstrates is that below-the-threshold activity could be captured \nif it existed as part of an above-the-threshold activity.419 \n7.441 The Panel observes that Part One, Chapter II, Section 3 of the Criminal Law provides for \n\"Joint crimes\".  It sets out five provisions.  Article 25 may be translated, relevantly, as follows: \n\"A joint crime refers to an intentional crime committed by two or more persons \njointly. …\" 420 \n7.442 Article 26 may be translated as follows: \n\"A principal criminal refers to any person who organizes and leads a criminal group \nin carrying out criminal activities or plays a principal role in a joint crime. \nA criminal group refers to a relatively stable criminal organization formed by three or \nmore persons for the purpose of committing crimes jointly. \nAny ringleader who organizes or leads a criminal group shall be punished on the \nbasis of all the crimes that the criminal group has committed. \nAny principal criminal not included in paragraph 3 shall be punished on the basis of \nall the crimes that he participates in or that he organizes or directs.\" 421 \n                                                   \n415 Japan's third party written submission, para. 17; European Communities' third party oral statement, \npara. 10. \n416 Mexico's third party oral statement, paras 6-7. \n417 China's rebuttal submission, paras 42-46. \n418 China's rebuttal submission, para. 33. \n419 United States' second oral statement, para. 35, referring to the application of the joint crime \nprovision in one case (CHN-12), cited by China in its rebuttal submission, para. 44, and its response to Question \nNo. 56. \n420 Exhibit CHN-1. \n421 Exhibit CHN-1. \n\n\nWT/DS362/R \nPage 92 \n \n \n  \n7.443 Article 27 may be translated as follows: \n\"An accomplice refers to any person who plays a secondary or auxiliary role in a joint \ncrime. \nAn accomplice shall be given a lighter or mitigated punishment or be exempted from \npunishment.\" 422 \n7.444 The Panel observes that Articles 26 and 27 are limited to \"joint crimes\" which are defined by \nArticle 25 as \"intentional crimes\".  On their face, there is no reason to suppose that Articles 25, 26 and \n27 do not apply to the crimes of infringing intellectual property rights in Articles 213, 214, 215, 217 \nand 218 of the Criminal Law.  Several judicial decisions submitted by China show one or more of \nthese Articles being cited in relation to Article 213.423  The decisions show that the relevant factors \nwere aggregated among several offenders in order to reach a criminal threshold.   \n7.445 China submitted that it may apply criminal procedures and penalties, on the basis of joint \ncrimes and criminal group membership, to infringers that would not otherwise reach the criminal \nthresholds of the substantive criminal laws.424  However, in response to a question, China confirmed \nthat the numerical thresholds under Articles 213, 214, 215, 217 and 218 of the Criminal Law apply to \njoint crimes under Articles 25, 26 and 27 of the Criminal Law.425   \n7.446 Therefore, the Panel considers that the concept of joint crimes is relevant to the capacity of \nthe Criminal Law to take into account an element of organization among different offenders.  \nHowever, it does not alter the lack of criminal procedures and penalties for acts of infringement \nfalling below the thresholds in Articles 213 to 220. \n(g) \nSpecific features of the thresholds for crimes of infringing intellectual property rights \n(i) \nProfit-making purpose \n7.447 The United States submits that the thresholds \"all require proof of an intention to make a \nfinancial gain or profit\".426   \n7.448 The Panel observes that, as regards the trademark offences, two of the thresholds under \nArticle 213 of the Criminal Law, as interpreted by Article 1 of Judicial Interpretation No. 19 [2004], \nare set in terms of \"illegal business operation volume\" and \"illegal gains\" (i.e. amount of profits \nobtained427).  Article 214 of the Criminal Law applies to the act of selling, and the corresponding \nthreshold in Article 2 of Judicial Interpretation No. 19 [2004] is set in terms of \"amount of sales\".  \nThese all imply a purpose of obtaining financial gain or making profits.  Article 215 of the Criminal \nLaw does not expressly refer to a profit-making purpose. \n7.449 As regards the copyright offences, both Articles 217 and 218 of the Criminal Law expressly \nrefer to acts carried out for \"the purpose of making profits\".  This language is reiterated in the \ncorresponding interpretations in Articles 5 and 6 of Judicial Interpretation No. 19 [2004] and Article 1 \nof Judicial Interpretation No. 6 [2007]. \n                                                   \n422 Exhibit CHN-1. \n423 Exhibits CHN-4, CHN-6, CHN-9, CHN-12, CHN-13 and CHN-16. \n424 China's rebuttal submission, para. 46. \n425 China's response to Question No. 56. \n426 United States' response to Question No. 59. \n427 See paragraph 7.402 above. \n\n\n \nWT/DS362/R \n \nPage 93 \n \n \n  \n7.450 Therefore, Articles 213, 214, 217 and 218 of the Criminal Law take account of at least one \nqualitative factor in conjunction with the numerical thresholds.  In this dispute, the United States does \nnot challenge this aspect of the measure.428 \n(ii) \nAlternative thresholds \n7.451 The parties agree that the thresholds refer to a range of different factors, comprising illegal \nbusiness operation volume, amount of illegal gains (or profits), amount of sales, number of \"copies\" \nand \"other serious circumstances\".  The first three are, by their own terms, indicators of business \nactivity and are either expressly, or impliedly, linked to selling, in other words, commercial activity.  \nThe first four are all expressed in numerical terms. \n7.452 China emphasizes that the multiple standards set forth in each of Articles 213, 215 and 217 of \nthe Criminal Law are all alternatives.429 The United States agrees and claims that application of any or \nall of the alternative thresholds leaves many acts of commercial scale piracy and counterfeiting \nimmune from criminal prosecution or conviction.430 \n7.453 The Panel observes that Articles 213 and 215 of the Criminal Law each contain a single \nthreshold.  However, these are interpreted by Articles 1 and 3 of Judicial Interpretation No. 19 [2004] \nin terms of a series of distinct circumstances.  It is clear from the text of Articles 1 and 3 that each of \nthese circumstances applies in the alternative as Articles 1 and 3 each provide that the conviction \nthreshold under the relevant Article of the Criminal Law shall be deemed satisfied in \"any of the \nfollowing circumstances\".   \n7.454 The Panel observes that Article 217 of the Criminal Law contains two conviction thresholds \nnamely, \"the amount of illegal gains\" and \"other serious circumstances\".  The text of Article 217 \nmakes it clear that these are alternatives to each other by the use of the word \"or\".  Both of these \nthresholds are interpreted by Article 5 of Judicial Interpretation No. 19 [2004]:  the former in terms of \na numerical amount and the latter in terms of a series of distinct circumstances.  It is clear from the \ntext of Article 5 that each of these circumstances applies in the alternative as Article 5 provides that \nthe conviction threshold of \"other serious circumstances\" under Article 217 of the Criminal Law shall \nbe deemed satisfied in \"any of the following circumstances\".  Satisfaction of any one of those \ncircumstances, or \"the amount of illegal gains\" threshold, shall be deemed to satisfy the relevant \nconviction threshold. \n7.455 This means, for example, that the use of a counterfeit trademark where the illegal business \noperation volume is, say, ¥40,000 (i.e. below the threshold of ¥50,000 applicable under Article 213 of \nthe Criminal Law) is not exempt from criminal prosecution unless the amount of illegal gains, the \nnumber of registered trademarks involved in the offence, and other circumstances all fail to fulfil the \nother applicable thresholds.  However, where an act of infringement falls below all the applicable \nthresholds, criminal prosecution and penalties are not available. \n7.456 It is not disputed that the crimes of selling under Articles 214 and 218 of the Criminal Law \neach contain only one conviction threshold.  Therefore, those thresholds do not apply as alternatives. \n(iii) \nCumulative calculation over time \n7.457 China submits that the thresholds are calculated over a prolonged period of time.  This is \nreflected in the general limitation period for crimes of a continuous nature, and the specific provision \n                                                   \n428 See paragraphs 7.659 and 7.660 below. \n429 China's first written submission, paras 33-34. \n430 United States' rebuttal submission, para. 77. \n\n\nWT/DS362/R \nPage 94 \n \n \n  \non cumulative calculation in Article 12(2) of Judicial Interpretation No. 19 [2004].  China asserts that \nthis principle also applies to thresholds in terms of numbers of copies.  Therefore, the thresholds for \ncrimes infringing intellectual property rights can be calculated over the entire duration of the \ninfringing activity.431   \n7.458 The United States notes that Article 12(2) of Judicial Interpretation No. 19 [2004] is subject \nto a condition, namely, that no administrative penalty or criminal punishment has been imposed.432  \nChina responds that administrative enforcement forestalls the commission of the crime.433 \n7.459 The Panel observes that Part One, Chapter IV, Section 8 of the Criminal Law sets out \nlimitation periods for the prosecution of crimes.  Article 87 provides for limitation periods calculated \naccording to the maximum punishment for the relevant crime, of which the shortest period is five \nyears.  Article 89 of the Criminal Law provides that the limitation period for a criminal act of a \ncontinual or continuous nature shall be counted from the date the criminal act is terminated.434 \n7.460 The Panel also notes that Article 12(2) of Judicial Interpretation No. 19 [2004] may be \ntranslated as follows: \n\"In the case of infringement committed for [sic] more than once for which no \nadministrative penalty or criminal punishment has been imposed, the illegal business \noperation volume, the amount of illegal gains, or the amount of sales shall be \ncalculated accumulatively.\"435 \n7.461 These provisions show that the thresholds may take into account multiple acts of infringement, \nand not simply the income, profits, sales or number of copies in a single transaction or at a single \npoint in time.  This point is confirmed by examples of judicial decisions submitted by China showing \nthat, when calculating whether thresholds had been met, courts have taken into account infringements \nduring periods of up to five years.436  An administrative penalty for a particular act of infringement \nexcludes that act from the cumulative calculation of the \"illegal business operation volume\", \"the \namount of illegal gains\", or \"the amount of sales\" thresholds and, hence, from criminal procedures and \npenalties. \n(iv) \nCalculation of illegal business operation volume – goods \n7.462 China submits that the calculation of \"illegal business operation volume\" thresholds is not \nlimited to goods in a single location at the same point in time.  Rather, the threshold covers all \ninfringing goods associated with the infringer, even those no longer in the infringer's possession.437   \n7.463 The United States acknowledges that, in certain circumstances, the definition of \"illegal \nbusiness operation volume\" appears to permit an infringer's goods on different premises to be taken \ninto account in calculation of the threshold.438 \n7.464 The Panel observes that three conviction thresholds under Articles 213, 215 and 217 of the \nCriminal Law are set in terms of \"illegal business operation volume\".  The definition of \"illegal \n                                                   \n431 China's first written submission, paras 30-32;  rebuttal submission, paras 26-27. \n432 United States' response to Question No. 2(a). \n433 China's rebuttal submission, paras 28-29. \n434 Exhibit CHN-1. \n435 Mutually agreed translation no. 3. \n436 Exhibits CHN-4, CHN-13 and CHN-14. \n437 China's first written submission, paras 23-24. \n438 United States' response to Question No. 2(a). \n\n\n \nWT/DS362/R \n \nPage 95 \n \n \n  \nbusiness operation volume\" in Article 12(1) of Judicial Interpretation No. 19 [2004]439 refers to \ninfringing products \"manufactured, stored, transported or sold\" during the course of commission of \nthe act of infringing intellectual property rights.  On its face, this does not restrict the calculation of \nthese thresholds to the value of goods seized in a single place at the same point in time.  This \ninterpretation is confirmed by examples of judicial decisions submitted by China showing that courts \nhave taken into account the value of goods already sold440, as well as of goods seized at different \nlocations441 when calculating the illegal business operation volume.   \n(v) \nCalculation of illegal business operation volume – price \n7.465 The United States claimed that the calculation methodology required for \"illegal business \noperation volume\" was based on the prices of infringing goods, not the value of legitimate non-\ninfringing goods.442   \n7.466 China responded that the calculation methodology is based on the actual, labelled or average \nsales price of the infringing goods but, where this cannot be determined, the price will be calculated \nbased on the average market price of the infringed, i.e. genuine, goods.443  In response to a question \nfrom the Panel, China agreed that the price of the genuine goods is used as a last resort.444 \n7.467 The Panel observes that three conviction thresholds under Articles 213, 215 and 217 of the \nCriminal Law are set in terms of \"illegal business operation volume\", which can be calculated by \nalternative methods.  Ultimately, the parties agree that, in accordance with the definition of \"illegal \nbusiness operation volume\" in Article 12(1) of Judicial Interpretation No. 19 [2004]445, the primary \nmethod of calculation of those thresholds is based on the actual price at which infringing goods were \nsold or labelled or, if unsold, the average actual sales price of the infringing products as verified.  It is \nonly where there is no labelled price or the actual sales price is unable to be verified that the illegal \nbusiness operation volume is calculated according to the \"middle\" market price of the infringed \nproducts.  In other words, the threshold primarily relates to the value of the counterfeit trademark or \ncopyright infringing goods but may, as a last resort, relate to the value of the genuine products.   \n7.468 It is not disputed that the value of the counterfeit trademark goods or copyright infringing \ngoods will be less than the value of the corresponding genuine goods.  This has the effect of making \nthe illegal business operation threshold harder to satisfy in those cases where the price of the genuine \ngoods is not used.  The number of cases that will fall below the thresholds is therefore greater than if \nthe price of the infringed goods is used in all cases. \n(vi) \nNumber of goods and prices  \n7.469 China also submits that the illegal business operation threshold, in particular, is a flexible \nstandard in its own right because it takes into account both the number and the value of infringing \narticles.446  The United States does not comment. \n                                                   \n439 Set out at paragraph 7.401 above. \n440 Exhibits CHN-4, CHN-5 and CHN-6. \n441 Exhibit CHN-7. \n442 United States' first written submission, para. 119, relying on a translation in Exhibit US-2 that \nreferred in fine to \"products produced by infringing on intellectual property rights\" rather than \"the infringed \nproducts\". \n443 China's first written submission, para. 28. \n444 China's response to Question No. 2(c). \n445 Set out at paragraph 7.401 above. \n446 China's rebuttal submission, paras 23-24. \n\n\nWT/DS362/R \nPage 96 \n \n \n  \n7.470 The Panel observes that, in accordance with the definition of \"illegal business operation \nvolume\" in Article 12(1) of Judicial Interpretation No. 19 [2004]447, these thresholds are calculated in \nterms of the price of goods.  Naturally, the number of goods required to meet the threshold is \ninversely proportional to the value of those goods.  Therefore, the threshold is flexible enough to \ncapture a small number of high-value goods or a large number of low-value goods.  However, where \nthe number of goods multiplied by the value of the goods is less than the threshold and not captured \nby any alternative applicable threshold, no criminal procedures and penalties will apply. \n(vii) \nResidual thresholds \n7.471 The parties initially did not address another threshold, that of \"other serious circumstances\" \napplicable under Articles 213, 215 and 217 of the Criminal Law. \n7.472 In response to a question from the Panel for clarification of the meaning of these thresholds, \nthe United States noted a case in which a prosecutor had invoked the similarly undefined aggravation \nthreshold of \"other especially serious circumstances\" under Article 1 of Judicial Interpretation No. 19 \n[2004].  That prosecutor had unsuccessfully cited \"serious effects in both domestic and international \nsociety\".448  \n7.473 In response to the same question, China explained that the inclusion of \"other serious \ncircumstances\" was a legislative device that preserves legal flexibility for courts and for the future \ndevelopment of laws.  The provisions allows a court to determine that a particular act, while not \nmeeting the other defined thresholds, is comparable and equivalent to those thresholds and therefore \ndeserves to be subject to criminal penalties.  China was unable in the time available to provide \nspecific examples of cases in which this threshold had been used.449   \n7.474 The Panel observes that, on the face of the measures at issue, one of the thresholds applicable \nto three crimes infringing intellectual property rights is a residual category of \"other serious \ncircumstances\".  In the case of Articles 213 and 215 of the Criminal Law, this threshold only appears \nin the text of Judicial Interpretation No. 19 [2004].  In the case of Article 217 of the Criminal Law, \nthis threshold actually appears in the text of the Article itself, but is later defined in terms of two \nspecific thresholds plus an identically worded residual category of \"other serious circumstances\".  \nThis bears out China's explanation that this threshold is a legislative device that allows for the future \ndevelopment of laws.  However, it is not alleged that any other thresholds have yet been devised \nbeyond those set out in this Report. \n7.475 Moreover, it is not alleged that the courts or prosecutors would treat all infringing acts that \nfall below the numerical thresholds as criminal acts by virtue of this residual threshold.  China \nconfirms that if an illegal act does not meet one of the pertinent thresholds set out in the Judicial \nInterpretations at issue, prosecution of that act is legally impossible.450  China also confirms that these \nresidual thresholds apply to other acts that are \"comparable and equivalent\" to the defined thresholds.  \nTherefore, these residual thresholds do not significantly alter the legal position but rather help define \nthe class of trademark- and copyright-infringing acts that are not treated as criminal.   \n(viii) \nAdministrative enforcement \n7.476 China draws the Panel's attention to its system of administrative enforcement of intellectual \nproperty infringement that operates separately from its criminal enforcement system.  It informs the \n                                                   \n447 Set out at paragraph 7.401 above. \n448 United States' response to Question No. 9, citing Exhibit US-61. \n449 China's response to Questions Nos. 9 and 55;  rebuttal submission, para. 22.   \n450 See paragraphs 7.423 and 7.455 above. \n\n\n \nWT/DS362/R \n \nPage 97 \n \n \n  \nPanel that in China infringement on any scale is subject to administrative enforcement.  Public \nsecurity authorities tend to focus more on infringement above the criminal thresholds, and copyright \nand commerce administrative authorities are more likely to target low-scale infringement.451   \n7.477 The United States responds that only criminal procedures and penalties can fulfil the \nobligations in Article 61 of the TRIPS Agreement.  Administrative enforcement is not a substitute for \ncriminal enforcement.452 \n7.478 The Panel notes that administrative sanctions, including fines, are available for intellectual \nproperty infringement falling below the criminal thresholds in China.  Therefore, the thresholds do not \ncreate a \"safe harbour\".  However, neither party to the dispute 453 argues that administrative \nenforcement may fulfil the obligations on criminal procedures and remedies set out in Article 61 of \nthe TRIPS Agreement.  Therefore, the Panel does not consider this issue further. \n(h) \nConclusion regarding construction of the measures at issue \n7.479 For the above reasons, the Panel concludes that, whilst the structure of the thresholds and the \nmethod of calculation of some of them can take account of various circumstances, acts of trademark \nand copyright infringement falling below all the applicable thresholds are not subject to criminal \nprocedures and penalties.  The Panel will now consider whether any of those acts of infringement \nconstitute \"wilful trademark counterfeiting or copyright piracy on a commercial scale\" within the \nmeaning of Article 61 of the TRIPS Agreement.  \n3. \nClaim under the first sentence of Article 61 of the TRIPS Agreement  \n(a) \nMain arguments of the parties \n7.480 The United States submits that the concept of \"commercial scale\" extends both to those who \nengage in commercial activities in order to make a \"financial return\" in the marketplace, and who are, \nby definition, therefore operating on a commercial scale, as well as to those whose actions, regardless \nof motive or purpose, are of a sufficient extent or magnitude to qualify as \"commercial scale\" in the \nrelevant market.454  Later, it clarified that the concept of \"commercial scale\" referred to counterfeiting \nor piracy that reach a certain extent or magnitude with a link to the marketplace.  Whether a particular \ncounterfeiting or piracy activity is \"on a commercial scale\" will depend on the facts and circumstances \nsurrounding that activity.  Relevant factors would include the market for the infringed goods, the \nobject of the infringement, the value of the infringed goods, the means of producing the infringed \ngoods, and the impact of the infringement on the right holder.455  Some activity would be so trivial or \nof a de minimis character so as not to be \"on a commercial scale\" in some circumstances, such as \noccasional infringing acts of a purely personal nature carried out by consumers, or the sale of trivial \nvolumes for trivial amounts (i.e., the sale of one copy for ¥1) unless there are circumstances indicating \nto the contrary.456   \n7.481 China responds that \"commercial scale\" refers to a significant magnitude of infringement \nactivity. This is a broad standard, subject to national discretion and local conditions.457  The United \nStates fails to interpret \"commercial scale\" as a single term and its interpretation reads the word \n                                                   \n451 China's first written submission, paras 39-43. \n452 United States' rebuttal submission, paras 116-119. \n453 Contrast Brazil's third party written submission, paras 39-42. \n454 United States' first written submission, para. 110. \n455 United States' response to Question No. 59. \n456 United States' response to Question No. 60. \n457 China's first written submission, paras 64 and 117; China's first oral statement, para. 30. \n\n\nWT/DS362/R \nPage 98 \n \n \n  \n\"scale\" completely out of the definition.458  The context of Articles 1.1 and 41.5 of the TRIPS \nAgreement shows that Members retain considerable discretion with respect to law enforcement, and \nthat the ability to define the standards of Article 61 is reserved for Members.459  Later, it clarified that \nwhile these Articles did not provide an absolute defence against the substantive obligation of \nArticle 61, they did provide relevant context and counselled strongly against interpretations of \nArticle 61 in ways that would be inconsistent with China's legal system and would require the \ndiversion of enforcement resources.460  The negotiating record of the TRIPS Agreement, as well as \nsubsequent actions of Members show that they understood \"commercial scale\" to impose only a high \nand broad standard which only covered significant infringement activity.461 \n7.482 The United States claims that China's criminal thresholds require authorities to disregard \nother indicia of commercial scale counterfeiting and piracy from physical evidence to consideration of \nthe impact the piracy or counterfeiting has on the commercial marketplace and by extension, right \nholders.462  The United States argues that a range of quantitative and qualitative factors should be \ntaken into account to ensure all \"commercial scale\" activities are subject to Article 61.463 \n7.483 China responds that Chinese courts do consider semi-finished or unfinished products, and that \nthese are evidence of preparation and attempt, as well as of substantive crimes.464  Evidentiary \nprocedures and impact on the right holder are irrelevant to Article 61 of the TRIPS Agreement.465  \nThe Criminal Law also addresses organizational elements of crimes in provisions on vicarious \nliability.466   \n(b) \nMain arguments of third parties \n7.484 Argentina argues that China's measures do not appear to be inconsistent with Article 61 of the \nTRIPS Agreement, as Article 1.1 provided China with the flexibility to implement enforcement \nprovisions in a way compatible with its existing constitutional and regulatory framework.467 \n7.485 Australia argues that \"commercial scale\" encompasses any act or series of acts of trademark \ncounterfeiting or copyright piracy that adversely affects the financial rewards available to a right \nholder within a Member territory and that the ordinary meaning of the word \"scale\" incorporates the \nnotion of a comparative assessment. Whether an individual case is on a commercial scale can only be \ndetermined case-by-case, taking account of all relevant circumstances, including the potential impact \nof digitally-based technologies. 468  This can include infringement activities with no financial \nadvantage for the infringer, which nevertheless have substantial prejudicial impact on the right holder \nbecause of the availability of infringing material on digital networks.469   \n                                                   \n458 China's first written submission, paras 67-71, China's first oral statement, paras 26-27. \n459 China's first written submission, paras 90, 92 and 98-101. \n460 China's second written submission, paras 102-107. \n461 China's first written submission, paras 104-108 and 109-116; China's second written submission, \nparas 116-134. \n462 United States' first written submission, paras 143-150.   \n463 United States' rebuttal submission, para. 38. \n464 China's first written submission paras 35-37; rebuttal submission, para. 32. \n465 China's first written submission, paras 141 and 139. \n466 China's rebuttal submission, paras 42-46. \n467 Argentina's third party written submission, paras 20 and 23. \n468 Australia's third party written submission, paras 18-19, supporting the definition suggested in the \nUnited States' first written submission, para. 110. \n469 Australia's third party written submission, para. 16, Australia's response to Third Party Question \nNo. 6. \n\n\n \nWT/DS362/R \n \nPage 99 \n \n \n  \n7.486 Brazil argues that an interpretation of \"commercial scale\" must give meaning to both terms in \nthis expression, which combine \"order of magnitude\" with the purpose of obtaining financial gains.   \nTherefore, Brazil considers that Article 61 establishes a two-pronged minimum standard that requires \nMembers to provide for criminal procedures and penalties at least for wilful trademark and copyright \ninfringements that involve profit-seeking motivation and significant amounts of infringing goods.470    \n7.487 Canada argues that China's authorities are precluded from applying criminal sanctions in \nmany cases of wilful trademark counterfeiting or copyright piracy on a commercial scale because \nChina's thresholds are arbitrary, too high and inflexible.  The concept of \"commercial scale\" includes \ndifferent factors. It relates to more than just industrial production and includes cases of wilful \ntrademark counterfeiting and copyright piracy undertaken on sufficient scale to constitute the pursuit \nof profit or the carrying out of a business. This is a qualitative test and requires discretion in order to \nconsider the circumstances of a given case. While negligible volumes of counterfeit would probably \nnot qualify, the wilful reproduction of hundreds of pirated copies for the equivalent value of \nthousands of dollars in sales revenue would, by any objective measure, be infringing on a commercial \nscale. This would be especially true in China where annual GDP per capita is just US$2,500 and \n57 million people earn less than US$125 per year.  While Article 61 does not require prosecution of \neach case of wilful trademark counterfeiting and copyright piracy on a commercial scale, it does \nrequire Members to be in a position to do so, when circumstances merit the exercise of prosecutorial \ndiscretion.471  \n7.488 The European Communities argues that Article 61 singles out two types of infringements \nbecause they have a particular potential of harming right holders. Therefore, \"on a commercial scale\" \nmust comprise all activities with a particular potential for harm which results from them pertaining to \na business or profit generation.  Quantitative thresholds alone are not enough to capture aspects of \nprofessional organization or systematic cooperation.  In order to capture all infringements on a \ncommercial scale, criminal enforcement authorities must be able to take into account additional \nfactors such as indications of business organization or profit orientation of an activity.472  The \nEuropean Communities further argues that, because it provides for criminal procedures and penalties \n\"to be applied\", the first sentence of Article 61 obliges Members not just to criminalize, but also to \nprosecute the activities mentioned therein.473 \n7.489 Japan argues that while quantitative thresholds could identify many instances of \"commercial \nscale\" counterfeiting they would not capture counterfeiting activities of limited value or smaller \nquantities which are on a \"commercial scale\" due to additional circumstances, such as their \nprofessional organization or easy repetition.  Mere quantification of \"commercial scale\" does not \ncapture all instances of commercial scale counterfeiting, and additional qualitative elements need to \nbe taken into account in order to consider such organizational characteristics of an activity.474  \n7.490 Korea argues that China's thresholds arbitrarily carve out certain IPR crimes from the \npossibility of criminal sanction and are therefore inconsistent with the TRIPS Agreement. \n\"Commercial scale\" represents a level of magnitude that is realized by operating or maintaining a \nbusiness activity, large or small, for the purpose of gaining financial return through IPR infringement \nin a somewhat systematic fashion. Therefore, anybody engaging in a business activity by infringing \n                                                   \n470 Brazil's third party written submission, paras 35-38 \n471 Canada's third party written submission, paras 4-8 and 11. \n472 European Communities' third party oral statement, paras 10 and 14. \n473 European Communities' third party written submission, para. 10-11; European Communities' \nresponse to Third Party Question No. 10, \n474 Japan's third party written submission, paras 17 and 30; Japan's third party oral statement, para. 13. \n\n\nWT/DS362/R \nPage 100 \n \n \n  \nIPRs and realizing a financial return, regardless of the alleged amount at issue, should be regarded as \nviolating IPRs on a \"commercial scale\".475 \n7.491 Mexico submits that the concept of \"commercial scale\" encompasses activities that go beyond \ncasual or occasional infringements that are not made for the purpose of generating revenue. In that \ncontext, the word \"scale\" is not necessarily bound to conditions of magnitude, but alternatively to that \nof quality.  Mexico further submits that small scale activity is \"clearly meaningful\" as it contributes to \nthe chain of infringement.476 \n7.492 Chinese Taipei submits that \"commercial scale\" is an abstract legal concept that involves \nmultiple factors of local circumstances, such as nature of the infringed rights, value and price in the \nmarket, motive and purpose of act, method and scale of infringement, damage caused, profit gained, \ncultural background, advancement of modern technology and living standards, that need to be \nconsidered on a case-by-case basis.477 \n7.493 Thailand argues that, as there is no definition of \"commercial scale\" in the TRIPS Agreement, \nthis constitutes a built-in flexibility recognizing the different legal systems of Members.  Every \nMember can adopt the interpretation it deems appropriate.478 \n(c) \nConsideration by the Panel \n(i) \nNature of the claim \n7.494 The United States' claim relates to cases of wilful trademark counterfeiting and copyright \npiracy in respect of which China does not provide for criminal procedures and penalties to be applied \nbut which the United States claims are \"on a commercial scale\".479  The claim is based on two alleged \n\"fundamental problems\" referred to in this Report as the two limbs of this claim.  The first limb \nconcerns the level and method of calculation of the thresholds.  By specifying certain levels, the \nthresholds allegedly eliminate whole classes of counterfeiting and piracy from risk of criminal \nprosecution and conviction.480  The second limb concerns the limited set of numerical tests in the \nthresholds.  By focussing solely on these tests, the thresholds allegedly require law enforcement \nofficials to disregard other indicia of counterfeiting and piracy.481  \n7.495 The Panel notes that the first limb of the claim addresses the numbers specified in the \nnumerical tests, and the way in which some of them are calculated, in order to show that the \nthresholds are too high.  These are quantitative issues.  The second limb addresses certain factors that \nthe numerical tests do not take into account.  These are qualitative issues.  Neither limb is a broad \nclaim that numerical thresholds cannot capture all cases \"on a commercial scale\".  In response to the \nPanel's requests for clarification of the claim after both the first and the second substantive meetings, \nthe United States clarified that it did not object to the use of numerical thresholds per se. 482  \n                                                   \n475 Korea's third party written submission, paras 20 and 27; Korea's third party oral statement, para. 6. \n476 Mexico's third party written submission, paras 10; Mexico's third party oral statement, paras 6-7. \n477 Chinese Taipei's third party written submission, para. 21; Chinese Taipei's third party oral statement, \npara. 11. \n478 Thailand's third party oral statement, para. 3. \n479 United States' first written submission, paras 116 and 143. \n480 United States' first written submission, para. 112;  rebuttal submission, para. 74. \n481 United States' first oral statement, para. 36;  first oral statement (closing statement), para. 16. \n482 United States' responses to Questions Nos. 25 and 54.  It seems pertinent to note that during the \nnegotiations of the terms of China's accession to the WTO, some members of the Working Party took a similar \nposition.  In particular, they expressed concerns that the monetary thresholds were very high and seldom met.  \nThey considered that those thresholds should be lowered:  see the Working Party Report, para. 304.  China \n\n\n \nWT/DS362/R \n \nPage 101 \n \n \n  \nAccordingly, the Panel is not asked to consider whether numerical thresholds, as a matter of principle, \ncan implement an obligation in terms of cases \"on a commercial scale\".   \n7.496 Therefore, in its assessment of this claim, the Panel will proceed as follows: \n(a) \nwith respect to the first limb of the claim, the Panel will assess whether the levels in \nChina's thresholds are too high to capture all cases on a commercial scale; and \n(b) \nwith respect to the second limb of the claim, the Panel will assess whether the other \nfactors raised by the United States can be taken into account by China's thresholds to \ncapture all cases on a commercial scale and, if not, whether this is a TRIPS \nrequirement. \n(ii) \nProcedural issues \n7.497 China argues that the United States bears \"a significantly higher burden [of proof] than it \nwould normally encounter\" because this claim concerns criminal law matters.  China argues that the \nPanel should treat sovereign jurisdiction over police powers as a powerful default norm, departure \nfrom which can be authorized only in light of explicit and unequivocal consent of State parties.483  \nChina later clarified that it was not referring to a factual burden of proof but rather to the inability of \nthe United States to provide the evidence to support its legal interpretation of Article 61 of the TRIPS \nAgreement.484  China also argues for the application of the \"interpretative canon\" of in dubio mitius \nwhich, it submits, has a particular justification in the realm of criminal law.485 \n7.498 The United States responds that the fact that Article 61 of the TRIPS Agreement touches on \ncriminal law does not change the provisions of Article 3.2 of the DSU or the customary rules of treaty \ninterpretation reflected in the Vienna Convention on the Law of Treaties (\"Vienna Convention\").486  \nIn this dispute, the meaning of \"commercial scale\" is reached through the general rule of \ninterpretation in Article 31 of the Vienna Convention.  There is no \"doubt\" which is a precondition of \nreliance on the concept of in dubio mitius.487 \n7.499 The Panel notes that this claim is brought under Article 61 of the TRIPS Agreement, which \nconcerns criminal procedures and penalties.488  Article 64.1 of that Agreement provides that:  \n\"The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied \nby the Dispute Settlement Understanding shall apply to consultations and the \nsettlement of disputes under this Agreement except as otherwise specifically provided \nherein.\" \n7.500 The application of the rules and procedures of the DSU to the settlement of disputes under the \nTRIPS Agreement is confirmed by Article 1.1 of the DSU, in conjunction with Appendix 1 of the \nDSU which lists the TRIPS Agreement as a \"covered agreement\".  In accordance with Article 3.2 of \nthe DSU, the Panel applies \"the customary rules of interpretation of public international law\" to its \ntask of interpreting the TRIPS Agreement in this dispute.  The general rule of interpretation, \n                                                                                                                                                              \nsubsequently reduced certain thresholds with the adoption of Judicial Interpretation No. 19 [2004]:  see United \nStates' first written submission, para. 27. \n483 China's first written submission, paras 49-59. \n484 China's first oral statement (closing statement), paras 4-7. \n485 China's rebuttal submission, paras 51-56. \n486 United States' rebuttal submission, paras 63-67. \n487 United States' rebuttal submission, para. 68. \n488 Despite use of the word \"remedies\" in the second and third sentences, it seems clear that criminal \nsanctions are \"penalties\". \n\n\nWT/DS362/R \nPage 102 \n \n \n  \nexpressed in Article 31 of the Vienna Convention, and the rules on supplementary means of \ninterpretation in Article 32 of the Vienna Convention, have attained the status of rules of customary or \ngeneral international law.489  The Panel will apply the general rule of interpretation and, to the extent \nwarranted, supplementary means of interpretation.  The Panel is mindful that Article 3.2 of the DSU \nalso provides that \"recommendations and rulings of the DSB cannot add to or diminish the rights and \nobligations provided in the covered agreements\".   \n7.501 The Panel acknowledges the sensitive nature of criminal matters and attendant concerns \nregarding sovereignty.  These concerns may be expected to find reflection in the text and scope of \ntreaty obligations regarding such matters as negotiated by States and other Members.490  Section 5 of \nPart III of the TRIPS Agreement, dedicated to criminal procedures and remedies, is considerably \nbriefer and less detailed than the other Sections on enforcement in Part III.  Brief as it is, the text of \nSection 5 also contains significant limitations and flexibilities.  The customary rules of treaty \ninterpretation oblige the treaty interpreter to take these limitations and flexibilities into account in \ninterpreting the relevant provision.   \n(iii) \nNature of the obligation \n7.502 This claim is brought under the first sentence of Article 61 of the TRIPS Agreement.  \nArticle 61 constitutes the whole of Section 5 of Part III of that Agreement and provides as follows: \n\"SECTION 5:  CRIMINAL PROCEDURES \n \nArticle 61 \n \nMembers shall provide for criminal procedures and penalties to be applied at least in \ncases of wilful trademark counterfeiting or copyright piracy on a commercial scale.  \nRemedies available shall include imprisonment and/or monetary fines sufficient to \nprovide a deterrent, consistently with the level of penalties applied for crimes of a \ncorresponding gravity.  In appropriate cases, remedies available shall also include the \nseizure, forfeiture and destruction of the infringing goods and of any materials and \nimplements the predominant use of which has been in the commission of the offence.  \nMembers may provide for criminal procedures and penalties to be applied in other \ncases of infringement of intellectual property rights, in particular where they are \ncommitted wilfully and on a commercial scale.\" \n7.503 The first sentence of this Article uses the word \"shall\", indicating that it is mandatory.  This \nstands in contrast to the fourth sentence, which addresses the same issue with respect to other cases of \ninfringement of intellectual property rights but uses the word \"may\", indicating that it is permissive.  \nUnlike the third sentence, the first sentence contains no language such as \"in appropriate cases\" which \nmight expressly introduce some margin of discretion.  The terms of the first sentence of Article 61, \nread in context, impose an obligation.  \n7.504 This interpretation is confirmed by Article 41 of the TRIPS Agreement on \"General \nObligations\", which is the first provision of Part III of the TRIPS Agreement and forms part of the \ncontext of Article 61.  Article 41.1 provides, relevantly, as follows: \n\"Members shall ensure that enforcement procedures as specified in this Part are \navailable under their law so as to permit effective action against any act of \n                                                   \n489 Appellate Body Reports in US – Gasoline, at p. 17;  and Japan – Alcoholic Beverages II, at p. 10. \n490 Articles 3, 4 and 41, in particular paragraph 4, of the TRIPS Agreement inter alia also apply to \ncriminal enforcement procedures. \n\n\n \nWT/DS362/R \n \nPage 103 \n \n \n  \ninfringement of intellectual property rights covered by this Agreement, including \nexpeditious remedies to prevent infringements and remedies which constitute a \ndeterrent to further infringements.\" \n7.505 In the Panel's view, the general obligation in Article 41.1 confirms that Article 61 contains \nobligations, as one of the specific provisions on enforcement procedures in Part III. \n7.506 China submits that the first sentence of Article 61 cannot set forth a specific obligation \nbecause it provides for enforcement against certain types of infringement but neither the TRIPS \nAgreement nor the Berne Convention (1971) define what constitutes substantive infringement.  Rather, \nthey defer to national discretion to define the rights being infringed.491  \n7.507 The Panel agrees with China that the first sentence of Article 61 contains a number of terms \nthat are not defined by the Agreement and that this can affect the proper interpretation of the provision.  \nHowever, even though the first sentence does not use the term \"infringement\", it is important to note \nthat Part II of the TRIPS Agreement, including the provisions of the Paris Convention (1967) \nincorporated by Article 2.1, and the provisions of the Berne Convention (1971) incorporated by \nArticle 9.1, provide for minimum standards concerning the availability, scope and use of intellectual \nproperty rights that apply irrespective of national treatment.  These provisions define the rights \nconferred by intellectual property and the circumstances in which those rights are infringed.  Part III \nof the TRIPS Agreement provides for the enforcement of those rights, to varying degrees.  Therefore, \nthe Agreement contains substantive obligations that are not simply matters of national discretion. \n7.508 China submits that Article 61 of the TRIPS Agreement is less specific than the Anti-Dumping \nAgreement and the Agreement on Subsidies and Countervailing Measures and lacks the clarity \nrequired to demonstrate a specific, concrete obligation.  China also argues that the TRIPS Agreement \nlacks a provision such as Article 18.4 of the Anti-Dumping Agreement requiring Members to take \nsteps to ensure the conformity of their laws with its provisions.492 \n7.509 The Panel agrees that the TRIPS Agreement differs from trade remedy agreements.  However, \nthe Panel will apply the usual rules of treaty interpretation to the terms used in the TRIPS Agreement \nand make its assessment on that basis in accordance with Article 11 of the DSU.  The Panel draws \nChina's attention to Article XVI:4 of the WTO Agreement which provides as follows: \n\"Each  Member shall ensure the conformity of its laws, regulations and administrative \nprocedures with its obligations as provided in the annexed Agreements.\" \n7.510 The \"annexed Agreements\" include the TRIPS Agreement.  Therefore, Members are obliged \nto ensure conformity of their respective laws with their respective obligations as provided in the \nTRIPS Agreement. \n7.511 China submits that the third sentence of Article 1.1 of the TRIPS Agreement sets forth the \noverall context for interpreting the specificity of the standards in the TRIPS Agreement.  It describes \nArticle 1.1 as a specific \"caveat\" that establishes boundaries on obligations, specifically in the realm \nof enforcement.493 \n7.512 The Panel observes that Article 1.1 of the TRIPS Agreement provides as follows: \n                                                   \n491 China's first written submission, paras 80-82.     \n492 China's first written submission, paras 83-87. \n493 China's first written submission, paras 89-97. \n\n\nWT/DS362/R \nPage 104 \n \n \n  \n\"Members shall give effect to the provisions of this Agreement.  Members may, but \nshall not be obliged to, implement in their law more extensive protection than is \nrequired by this Agreement, provided that such protection does not contravene the \nprovisions of this Agreement.  Members shall be free to determine the appropriate \nmethod of implementing the provisions of this Agreement within their own legal \nsystem and practice.\" \n7.513 The first sentence of Article 1.1 sets out the basic obligation that Members \"shall give effect\" \nto the provisions of this Agreement.  This means that the provisions of the Agreement are obligations \nwhere stated, and the first sentence of Article 61 so states.  The second sentence of Article 1.1 \nclarifies that the provisions of the Agreement are minimum standards only, in that it gives Members \nthe freedom to implement a higher standard, subject to a condition.  The third sentence of Article 1.1 \ndoes not grant Members freedom to implement a lower standard, but rather grants freedom to \ndetermine the appropriate method of implementation of the provisions to which they are required to \ngive effect under the first sentence.  The Panel agrees that differences among Members' respective \nlegal systems and practices tend to be more important in the area of enforcement.  However, a \ncoherent reading of the three sentences of Article 1.1 does not permit differences in domestic legal \nsystems and practices to justify any derogation from the basic obligation to give effect to the \nprovisions on enforcement.   \n7.514 Therefore, the standard of compliance with Article 61 is the minimum internationally agreed \nstandard set out in that Article.  The minimum standard in Article 61 does not defer to China's \ndomestic practice on the definition of criminal liability and sanctions for other wrongful acts in areas \nnot subject to international obligations under the TRIPS Agreement, unless it so states.  For example, \nthe second sentence refers to \"crimes of a corresponding gravity\" which might refer to domestic \npractice in other areas.  However, the first sentence of Article 61 does not make any such reference. \n7.515 For the above reasons, the Panel confirms its view at paragraphs 7.503 to 7.505 above that the \nfirst sentence of Article 61 of the TRIPS Agreement imposes an obligation.  The Panel will now turn \nto the terms used in that provision, read in context and in light of the object and purpose of the \nAgreement, to determine the scope and content of that obligation. \n(iv) \nScope of the obligation \n7.516 The terms of the obligation in the first sentence of Article 61 of the TRIPS Agreement are that \nMembers shall \"provide for criminal procedures and penalties to be applied\".  That obligation applies \nto \"wilful trademark counterfeiting or copyright piracy on a commercial scale\".  Within that scope, \nthere are no exceptions.  The obligation applies to all acts of wilful trademark counterfeiting or \ncopyright piracy on a commercial scale.   \n7.517 The Panel recalls its conclusion at paragraph 7.479 above that, in China, acts of trademark \nand copyright infringement falling below the applicable thresholds are not subject to criminal \nprocedures and penalties.  The issue that arises is whether any of those acts of infringement constitute \n\"wilful trademark counterfeiting or copyright piracy on a commercial scale\" within the meaning of the \nfirst sentence of Article 61.  This requires the Panel to consider the interpretation of that phrase.   \n7.518 The Panel notes that the first sentence of Article 61 contains no fewer than four limitations on \nthe obligation that it sets forth.  These define the scope of the relevant obligation and are not \nexceptions.  The first limitation is that the obligation applies to trademarks and copyright rather than  \nto all intellectual property rights covered by the TRIPS Agreement.  The fourth sentence of Article 61 \ngives Members the option to criminalize other infringements of intellectual property rights, in \nparticular where they are committed wilfully and on a commercial scale.  Despite the potential gravity \nof such infringements, Article 61 creates no obligation to criminalize them.  This can be contrasted \n\n\n \nWT/DS362/R \n \nPage 105 \n \n \n  \nwith Sections 2 and 3 of Part III of the TRIPS Agreement, regarding civil and administrative \nprocedures and remedies, which apply to any act of infringement of intellectual property rights \ncovered by the Agreement.  It can also be contrasted with Section 4 of Part III which attaches \nconditions to the option to apply its procedures to other infringements of intellectual property \nrights.494   \n7.519 The second limitation in the first sentence of Article 61, which is related to the first, is that it \napplies to counterfeiting and piracy rather than to all infringements of trademarks and copyright.  This \ncan also be contrasted with Sections 2 and 3 of Part III of the TRIPS Agreement.  This limitation, like \nthe first, indicates an intention to reduce the scope of the obligation.  Indeed, the records of the \nnegotiation of the TRIPS Agreement confirm that the term \"infringements of trademarks and \ncopyright\" on a commercial scale was considered in the draft provision on criminal procedures but \nultimately rejected.495   \n7.520 The terms \"trademark counterfeiting\" and \"copyright piracy\" are not defined in the TRIPS \nAgreement.  They are distinct from the concepts of \"trademark infringement\" and \"copyright \ninfringement\".  They are similar to the terms \"counterfeit trademark goods\" and \"pirated copyright \ngoods\" which are defined for the purposes of the TRIPS Agreement496 in footnote 14 as follows: \n\"For the purposes of this Agreement: \n(a) \n'counterfeit trademark goods' shall mean any goods, including packaging, \nbearing without authorization a trademark which is identical to the trademark validly \nregistered in respect of such goods, or which cannot be distinguished in its essential \naspects from such a trademark, and which thereby infringes the rights of the owner of \nthe trademark in question under the law of the country of importation; \n(b) \n'pirated copyright goods' shall mean any goods which are copies made \nwithout the consent of the right holder or person duly authorized by the right holder \nin the country of production and which are made directly or indirectly from an article \nwhere the making of that copy would have constituted an infringement of a copyright \nor a related right under the law of the country of importation.\" \n7.521 The terms used in the first sentence of Article 61 denote classes of acts or activity whilst the \nterms used in footnote 14 denote classes of goods only.  This reflects the fact that Article 61 provides \nfor criminal enforcement against infringing acts whilst Section 4 of Part III (in which the terms \ndefined in footnote 14 are used) provides for enforcement at the border against infringing goods.  The \ndefinitions in footnote 14 also refer to the law of the country of \"importation\" whilst Article 61 relates \nto the law of the Member to which the obligation applies – generally speaking, the law of the Member \nwhere the infringing act occurs.  Subject to these observations, the Panel considers that the definitions \nin footnote 14 are relevant in understanding the terms used in Article 61.   \n7.522 The United States does not claim that Articles 213, 214, 215, 217 and 218 of the Criminal \nLaw fail to cover the full extent of the terms \"trademark counterfeiting\" and \"copyright piracy\" as \n                                                   \n494 See paragraph 7.223 above. \n495 The Panel has recourse to this supplementary means of interpretation in accordance with Article 32 \nof the Vienna Convention in order to confirm the meaning resulting from the application of the general rule of \ninterpretation in Article 31.  See, for example, the Chairman's draft text of 23 July 1990 (document \nMTN.GNG/NG11/W/76). \n496 The terms \"counterfeit trademark goods\" and \"pirated copyright goods\" are used not only in \nSection 4 of Part III but also in Article 69 of the TRIPS Agreement.  The identical term \"counterfeit trademark \ngoods\" is also used in Article 46. \n\n\nWT/DS362/R \nPage 106 \n \n \n  \nused in Article 61 of the TRIPS Agreement.497  China does not contest that each of the thresholds \nestablished by the Criminal Law, in particular Articles 213, 214, 215, 217 and 218, applies to acts of \n\"trademark counterfeiting\" and \"copyright piracy\".  Therefore, it is unnecessary for the Panel to \ninterpret those terms in greater detail at this stage. \n7.523 The third limitation in the first sentence of Article 61 is indicated by the word \"wilful\" that \nprecedes the words \"trademark counterfeiting or copyright piracy\".  This word functions as a qualifier \nindicating that trademark counterfeiting or copyright piracy is not subject to the obligation in the first \nsentence of Article 61 unless it is \"wilful\".  This word, focussing on the infringer's intent, reflects the \ncriminal nature of the enforcement procedures at issue.  It is absent from Section 4 of Part III, even \nthough that Section is similarly limited, as a minimum, to counterfeit trademark goods and pirated \ncopyright goods.  The penalties for criminal acts, such as imprisonment, fines and forfeiture of \nproperty, are relatively grave, as reflected in the second sentence of Article 61.  There is no obligation \nto make such penalties available with respect to acts of infringement committed without the requisite \nintent. \n7.524 The fourth limitation in the first sentence of Article 61 is indicated by the phrase \"on a \ncommercial scale\" that follows the words \"trademark counterfeiting or copyright piracy\". This phrase, \nlike the word \"wilful\", appears to qualify both \"trademark counterfeiting\" and \"copyright piracy\".  \nThe limitation to cases on a commercial scale, like the limitation to cases of wilfulness, stands in \ncontrast to all other specific obligations on enforcement in Part III of the TRIPS Agreement.498 \n7.525 The principal interpretative point in dispute is the meaning of the phrase \"on a commercial \nscale\".  This phrase functions in context as a qualifier, indicating that wilful trademark counterfeiting \nor copyright piracy is included in the scope of the obligation provided that it also satisfies the \ncondition of being \"on a commercial scale\".  Accordingly, certain acts of wilful trademark \ncounterfeiting or copyright piracy are excluded from the scope of the first sentence of Article 61.   \n7.526 Despite the fact that trademark counterfeiting and copyright piracy infringe the rights of right \nholders, and despite the fact that they can be grave, the two qualifications of wilfulness and \"on a \ncommercial scale\" indicate that Article 61 does not require Members to provide for criminal \nprocedures and penalties to be applied to such counterfeiting and piracy per se unless they satisfy \ncertain additional criteria.  This is highlighted by the fourth sentence of Article 61, which allows \nMembers to provide for criminal procedures and penalties to be applied in other cases of infringement, \n\"in particular\" where they are committed wilfully and on a commercial scale.  This indicates that the \nnegotiators considered cases of wilful infringement on a commercial scale to represent a subset of \ncases of infringement, comprising the graver cases.  This is useful context for interpreting the first \nsentence of Article 61, even though it does not refer to \"infringement\" in general, because the first \nsentence refers to both \"counterfeiting\" and \"piracy\" and wilfulness and commercial scale, evidently \nto limit the cases of infringement in different ways.  Therefore, the text of Article 61 indicates that it \nmust not be assumed that the nature of counterfeiting and piracy per se is such that Members are \nobliged to provide for the application of criminal procedures and penalties. \n7.527 This is consistent with the nature of the obligation, being a minimum standard, as expressly \nconfirmed by the use of the words \"at least\" in the first sentence of Article 61 and, more generally, by \nthe second sentence of Article 1.1, quoted at paragraph 7.512 above.  Members may, and many do, \ncriminalize other acts of trademark counterfeiting, other acts of copyright piracy, other acts of \ninfringement of trademarks and copyright, and acts of infringement of other intellectual property \nrights such as patents, but there is no obligation to do so under the TRIPS Agreement. \n                                                   \n497 United States' first written submission, paras 101 and 106. \n498 Section 4 contains a de minimis exception, discussed at paragraph 7.553 below. \n\n\n \nWT/DS362/R \n \nPage 107 \n \n \n  \n7.528 Part III of the TRIPS Agreement distinguishes between the treatment of wilful trademark \ncounterfeiting and copyright piracy on a commercial scale, on the one hand, and all other \ninfringements of intellectual property rights, on the other hand, in that only the former are subject to \nan obligation regarding criminal procedures and penalties.  This indicates the shared view of the \nnegotiators that the former are the most blatant and egregious acts of infringement.  This view must \ninform the interpretation of Article 61.  \n7.529 The Panel recalls its findings at paragraph 7.241 above as to the circumstances of conclusion \nof the TRIPS Agreement with respect to enforcement procedures.  Whilst some of the pre-existing \ninternational intellectual property agreements or conventions contain provisions on the characteristics \nof enforcement mechanisms, it is striking that none of them create any specific minimum standard for \ncriminal enforcement procedures.499  Among the international intellectual property agreements with \nwide membership, Article 61 of the TRIPS Agreement is, in this sense, unique. \n7.530 This reflects, in part, the fact that intellectual property rights are private rights, as recognized \nin the fourth recital of the Preamble to the TRIPS Agreement.  In contrast, criminal procedures are \ndesigned to punish acts that transgress societal values.  This is reflected in the use of the word \n\"penalties\" in Article 61. \n7.531 Bearing in mind these aspects of the context of the first sentence of Article 61, and the object \nand purpose of the TRIPS Agreement, the Panel now turns to the ordinary meaning of the words \"on a \ncommercial scale\".   \n(v) \n\"on a commercial scale\"  \n7.532 The parties adopt different approaches to the task of interpreting the phrase \"on a commercial \nscale\".  The Panel will examine each of these approaches in turn, beginning with that of the \ncomplainant. \n7.533 The ordinary meaning of the word \"scale\" is uncontroversial.  It may be defined as \"relative \nmagnitude or extent; degree, proportion.  Freq. in on a grand, lavish, small, etc. scale\".500  The \nordinary meaning of the word includes both the concept of quantity, in terms of magnitude or extent, \nas well as the concept of relativity.  Both concepts are combined in the notions of degree and \nproportion.  Therefore, a particular \"scale\" compares certain things or actions in terms of their size.  \nSome things or actions will be of the relevant size and others will not.   \n7.534 The relevant size is indicated by the word \"commercial\".  The ordinary meaning of \n\"commercial\" may be defined in various ways.  The following two definitions have been raised in the \ncourse of these proceedings: \n\"1.  Engaged in commerce;  of, pertaining to, or bearing on commerce.  \n2.  (…)  \n3.  Interested in financial return rather than artistry;  likely to make a profit;  regarded \nas a mere matter of business.\"501 \n                                                   \n499 The Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of \ntheir Phonograms, Article 3, expressly provides that each Contracting State may implement the Convention by \nmeans of penal sanctions. \n500 New Shorter Oxford English Dictionary (1993).  Mexico notes a definition in Spanish that refers to \ndegree, but that is not apposite in context:  see Mexico's third party oral statement, fn. 8. \n501 New Shorter Oxford English Dictionary (1993). \n\n\nWT/DS362/R \nPage 108 \n \n \n  \n7.535 The Panel considers the first definition to be apposite.  It includes the term \"commerce\" which \nmay, in turn, be defined as \"buying and selling; the exchange of merchandise or services, esp. on a \nlarge scale\". 502   Reading this definition into the definition of \"commercial\" indicates that \n\"commercial\" means, basically, engaged in buying and selling, or pertaining to, or bearing on, buying \nand selling.503  A combination of that expanded definition of \"commercial\" and the definition of \n\"scale\" would render a meaning in terms of a relative magnitude or extent (of those) engaged in \nbuying and selling, or a relative magnitude or extent pertaining to, or bearing on, buying and selling.  \nThis draws a link to the commercial marketplace. \n7.536 The United States also submits that the word \"commercial\" scale draws a link to the \ncommercial marketplace.  However, it refers to elements of the first and third meanings in \ndefinition 3., but dismisses the relevance of the second meaning, \"likely to make a profit\", because it \nis different from the other two.504   \n7.537 The Panel notes that the third definition, which includes the qualifiers \"rather than artistry\" \nand \"mere\", refers to usages such as a \"commercial artist\", \"commercial film\" or \"commercial \nwriting\" in the sense of those who are more interested in financial return than the artistic merit of a \nwork, works that are of such a nature that they are likely to make a profit and works that are regarded \nas a mere matter of business rather than as expressions of other values.  This definition is not apposite \nin the first sentence of Article 61.   \n7.538 Therefore, the Panel considers that the first definition set out at paragraph 7.534 above is \nappropriate.  However, the combination of that definition of \"commercial\" with the definition of \n\"scale\" presents a problem in that scale is a quantitative concept whilst commercial is qualitative, in \nthe sense that it refers to the nature of certain acts.  Some acts are in fact commercial, whilst others are \nnot.  Any act of selling can be described as commercial in this primary sense, irrespective of its size or \nvalue.  If \"commercial\" is simply read as a qualitative term, referring to all acts pertaining to, or \nbearing on commerce, this would read the word \"scale\" out of the text.  Acts on a commercial scale \nwould simply be commercial acts.  The phrase \"on a commercial scale\" would simply mean \n\"commercial\".  Such an interpretation fails to give meaning to all the terms used in the treaty and is \ninconsistent with the rule of effective treaty interpretation.505  \n7.539 There are no other uses of the word \"scale\" in the TRIPS Agreement, besides the first and \nfourth sentences of Article 61.  However, the wider context shows that the TRIPS Agreement \nfrequently uses the word \"commercial\" with many other nouns, although nowhere else with \"scale\".  \nThe other uses of the word \"commercial\" include \"commercial rental\"506, \"commercial purposes\"507, \n\"commercial exploitation\" 508 , \"commercial terms\" 509 , \"public non-commercial use\" 510 , \"first \ncommercial exploitation\" 511, \"honest commercial practices\" 512, \"commercial value\" 513 , \"unfair \ncommercial use\"514, \"non-commercial nature\"515 and \"legitimate commercial interests\".516   \n                                                   \n502 Ibid. \n503 The Panel also observes that the definition of \"commerce\" itself expressly includes a notion of \n\"scale\", but this appears to refer to commerce in a general sense, such as \"trade and commerce\", which does not \nappear apposite within the word \"commercial\". \n504 See United States' first written submission, paras 109, 110 and 123. \n505 See, for example, Appellate Body Reports in US – Gasoline, at p. 23; Japan – Alcoholic \nBeverages II, at p. 12. \n506 Articles 11 and 14.4 of the TRIPS Agreement. \n507 Articles 26.1 and 36 of the TRIPS Agreement. \n508 Article 27.2 of the TRIPS Agreement. \n509 Article 31(b) of the TRIPS Agreement. \n510 Article 31(b) and (c) of the TRIPS Agreement. \n511 Article 38.1 and 38.2 of the TRIPS Agreement. \n\n\n \nWT/DS362/R \n \nPage 109 \n \n \n  \n7.540 The provisions of the Paris Convention (1967) incorporated by Article 2.1 of the TRIPS \nAgreement include uses of the word \"commercial\" in the phrase \"industrial or commercial \nestablishment\" (in the singular or plural)517 and in the phrases \"industrial or commercial matters\" and \n\"industrial or commercial activities\".518  The provisions of the Berne Convention (1971) incorporated \nby Article 9.1 of the TRIPS Agreement include the phrase \"any commercial purpose\".519  The \nprovisions of the IPIC Treaty incorporated by Article 35 of the TRIPS Agreement include the phrase \n\"commercially exploited\" and \"exploits ordinarily commercially\".520 \n7.541 The context shows that the negotiators chose to qualify certain activities, such as rental, \nexploitation and use, as \"commercial\".  They also chose to qualify various nouns, such as \"terms\", \n\"value\", \"nature\" and \"interests\", as \"commercial\" or \"non-commercial\".  In a similar way, they could \nhave agreed that the obligation in the first sentence of Article 61 would apply to cases of wilful and \n\"commercial\" trademark counterfeiting or copyright piracy.  This would have included all commercial \nactivity.  Indeed, the records of the negotiation of the TRIPS Agreement show that this formulation \nwas in fact suggested (by the United States) at an early stage. 521  \n7.542 The context shows that the negotiators used the term \"commercial purposes\" in two \nprovisions on the scope of protection of certain categories of intellectual property rights, and that the \nAppendix to the Berne Convention (1971) already did use that term in the singular in provisions on \npossible limitations to particular rights.  However, the negotiators did not agree that the obligation in \nthe first sentence of Article 61 would apply to cases of wilful trademark counterfeiting or copyright \npiracy \"for commercial purposes\".  This would have included all activity for financial gain or profit.  \n7.543 Instead, the negotiators agreed in Article 61 to use the distinct phrase \"on a commercial scale\".  \nThis indicates that the word \"scale\" was a deliberate choice and must be given due interpretative \nweight.  \"Scale\" denotes a relative size, and reflects the intention of the negotiators that the limitation \non the obligation in the first sentence of the Article depended on the size of acts of counterfeiting and \npiracy.  Therefore, whilst \"commercial\" is a qualitative term, it would be an error to read it solely in \nthose terms.  In context it must indicate a quantity.522   \n7.544 A review of the uses of the word \"commercial\" throughout the TRIPS Agreement indicates \nthat it links various activities, not simply selling, to the marketplace.  It also shows that \"commercial\" \nactivities cannot be presumed to be on a larger scale than others, such as \"public non-commercial\" \nactivities, even though they would generally be larger than, say, \"personal\" or \"domestic\" use.  The \ndistinguishing characteristic of a commercial activity is that it is carried out for profit.523  The review \n                                                                                                                                                              \n512 Article 39.2 of the TRIPS Agreement. \n513 Article 39.2(b) of the TRIPS Agreement. \n514 Article 39.3 of the TRIPS Agreement. \n515 Article 60 of the TRIPS Agreement. \n516 Article 63.4 of the TRIPS Agreement. \n517 Articles 3, 5C(3), 6quinquiesA(2) and 7bis(1)) of the Paris Convention (1967).  This phrase also \nappears in footnote 1 to the TRIPS Agreement. \n518 Article 10bis of the Paris Convention (1967).   \n519 Articles II(9)(a)(iv) and IV(4)(c)(iii) of the Appendix to the Berne Convention (1971). \n520 Article 7(1) and (2), of the IPIC Treaty. \n521 The United States suggested in October 1988 a provision applying to trademark counterfeiting and \ncopyright infringement that were \"wilful and commercial\" (see document MTN.GNG/NG11/W/14/Rev.1).  This \nsuggestion was not taken up.  A later US proposal, like certain other proposals, used the phrase \"on a \ncommercial scale\" (see document MTN.GNG/NG11/W/70). \n522 The Panel is not required, for the purposes of this claim, to express a view as to whether \n\"commercial\" also indicates certain qualitative factors, such as a profit-seeking purpose. \n523 At the same time, some activities – such as experimentation – may be conducted in the course of \nbusiness or in connection with a business without a specific profit-making purpose. \n\n\nWT/DS362/R \nPage 110 \n \n \n  \nof the uses of the word \"commercial\" also shows that, unlike all the others, Article 61 uses the word \n\"commercial\" to qualify a notion of size.   \n7.545 In the Panel's view, the combination of the primary definition of \"commercial\" and the \ndefinition of \"scale\" can be reconciled with the context of Article 61 if it is assessed not solely \naccording to the nature of an activity but also in terms of relative size, as a market benchmark.  As \nthere is no other qualifier besides \"commercial\", that benchmark must be whatever \"commercial\" \ntypically or usually connotes.  In quantitative terms, the benchmark would be the magnitude or extent \nat which engagement in commerce, or activities pertaining to or bearing on commerce, are typically or \nusually carried on, in other words, the magnitude or extent of typical or usual commercial activity.  \nGiven that the phrase uses the indefinite article \"a\", it refers to more than one magnitude or extent of \ntypical or usual commercial activity.  The magnitude or extent will vary in the different \"cases\" of \ncounterfeiting and piracy to which the obligation applies.  In the Panel's view, this reflects the fact \nthat what is typical or usual varies according to the type of commerce concerned.     \n7.546 Turning to the arguments of the parties and various third parties on this point, they have \nattempted to give due meaning to both the terms \"commerce\" and \"scale\" in different ways.  Initially, \nthe United States submitted as follows: \n\"those who engage in commercial activities in order to make a 'financial return' in the \nmarketplace … are, by definition, therefore operating on a commercial scale\"524   \n7.547 Similarly, Canada submitted that \"commercial scale\" refers to activities undertaken with a \nview to profiting.525  The European Communities submitted that the terms \"commercial\" and \"scale\" \ndenote activities that pertain to a business or to the generation of profits\".526   \n7.548 The Panel considers these interpretations unsatisfactory, as they seem to equate \"commercial \nscale\" with \"commercial purpose\" or merely \"commercial\", which are not the term used in Article 61.    \n7.549 The United States then clarified that it does not read the word \"scale\" out of the term \n\"commercial scale\" and added a qualifier or two to its initial position, submitting that: \n\"an infringer seriously engaged in pursuing financial gain in the marketplace is \nnecessarily acting on a 'scale' that is 'commercial' and therefore falls within the \nordinary meaning of the term.\" (emphasis added and removed)527; and \n\"'commercial scale' certainly extends to those who are genuinely engaged in \ncommercial activities in order to make a financial return.\"528 (emphasis added) \n7.550 In response to a request for clarification from the Panel, the United States explained:  \n\"The United States has employed the words 'seriously' or 'genuinely' to underscore \nthat the IPR infringer must be actually engaged in pursuing financial gain through \nnon-trivial commercial activities in the marketplace, as opposed to, for example, a \none-off entry into the marketplace of a limited nature.   \n                                                   \n524 United States' first written submission, para. 110.  This submission also interpreted \"scale\": see \nparagraph 7.659 below. \n525 Canada's third party written submission, para. 5. \n526 European Communities' third party oral statement, paras 4 and 14. \n527 United States' rebuttal submission, para. 17. \n528 United States' closing oral statement at the second substantive meeting, para. 15. \n\n\n \nWT/DS362/R \n \nPage 111 \n \n \n  \nWhether an infringer is 'seriously' or 'genuinely' engaged in commercial activities \nwould depend on the facts and circumstances of the activity.  (…)\" 529 \n7.551 The Panel understands that this refined approach interprets \"commercial scale\" as basically \neverything that is \"commercial\" with the exception of some trivial or de minimis activities.  It is not \nclear how \"seriously\" and \"genuinely\" indicate \"non-trivial\" activities – if anything, \"seriously\" \nindicates something more important.  However, there is no need to consider its meaning further as the \nword \"seriously\" is not used in the terms of the treaty, nor is it implied by the terms that are used.   \n7.552 Whilst the United States' refined approach has the merit of ensuring that its interpretation of \n\"commercial scale\" does not capture an identical class of acts as the term \"commercial purpose\", the \ndifference seems minimal.  This refined approach does not read the word \"scale\" out of the text but \nnevertheless it reads the word down to such an extent that it lacks the significance that the negotiators \nevidently intended.  The negotiators chose the word \"scale\", which refers to size, rather than other \nwords that they actually used elsewhere in the Agreement that do not exclude activities on the basis of \nsize.  They also used the word \"scale\" in the fourth sentence of Article 61, together with the term \"in \nparticular\", which would be virtually redundant if the sentence simply meant that Members could \nprovide for criminal procedures and penalties to be applied \"in particular\" to more than trivial or \nde minimis cases.  The context throughout Part III shows that the limitations in Section 5 reflect an \neffort to address only the more blatant and egregious infringements. \n7.553 As to the view that \"on a commercial scale\" is basically a de minimis provision, the Panel \nneed look no further than the preceding provision, Article 60, to see how the negotiators addressed \nthat issue.  Article 60 forms part of Section 4 on special requirements related to border measures and \nserves an analogous purpose to the phrase \"on a commercial scale\" in Article 61 in that both define \nthe lower end of infringement at which a particular type of enforcement procedure must be available.  \nHowever, the terms of each are quite different:  Article 60 defines de minimis infringement in terms of \nvolume (\"small quantities\"), nature (\"of a non-commercial nature\") and circumstances (\"in travellers' \npersonal luggage or sent in small consignments\").  Had the negotiators wanted to exclude only \nde minimis infringement from the minimum standard of Article 61, they had a model in Article 60, or \nthey could have used words such as \"except for minor or personal use\".  However, they did not.530  \nInstead, Article 61 refers to size (\"scale\") qualified only by the word \"commercial\".  This indicates \nthat the negotiators intended something different from de minimis.  Article 60 also indicates that the \nnegotiators did not equate small with non-commercial, confirming that a \"commercial\" scale is not \nnecessarily small-scale nor large-scale. \n7.554 Among the other third parties, Brazil referred to a \"significant\" or \"large\" enough level based \non certain factors531, Mexico argued for a \"meaningful\" level532; Korea referred to operating a \nbusiness \"in a somewhat systematic fashion\".533  Canada acknowledged as follows: \n\"There is perhaps no easily quantifiable measure because none is provided for in \nTRIPS.  This omission suggests that the test is qualitative: what a reasonable person \nwould think in the circumstances.\"534 \n                                                   \n529 United States' response to Question No. 63. \n530 Indeed, the United States expressed a similar view in order to explain why a reference to \n\"exceptional cases\" in Article 46 of the TRIPS Agreement is not a de minimis test (see paragraph 7.387 above).   \n531 Brazil's third party written submission, para. 36. \n532 Mexico's third party oral statement, para. 6.   \n533 Korea's third party written submission, para. 27. \n534 Canada's third party written submission, para. 7. \n\n\nWT/DS362/R \nPage 112 \n \n \n  \n7.555 The Panel considers that these interpretations, whilst they may reflect sound domestic policy \nconsiderations, lack a clear basis in the rules of treaty interpretation which the Panel is obliged to \napply.  All of these interpretations are valid explanations as to why such infringement should be \nunlawful but they do not explain why it must be a crime.  The answer to that question must be found \nin the terms of the treaty as finally agreed.   \n7.556 In this connection it seems pertinent to recall that the negotiators chose a term that was \ndifferent from the commercial purpose or financial return standards used in the national legislation of \na number of the participants. \n7.557 Turning now to the respondent's approach to the interpretation of \"on a commercial scale\", \nChina submits that these words should be interpreted as a single term.535  The United States proposes \nthat each of the terms in the two-word term be interpreted and does not submit that there are other \nordinary uses of the phrase that would be relevant.536 \n7.558 The Panel observes that the general rule of treaty interpretation in Article 31 of the Vienna \nConvention refers in paragraph 1 to the ordinary meaning of the terms of the treaty, read in context.  \nWhere the terms are a single term, or ordinarily used together, then the treaty interpreter should refer \nto the ordinary meaning of that single term, or of each term in the particular context of each other.  \nThis is a distinct exercise from that in paragraph 4 of Article 31 of the Vienna Convention which \nrequires a \"special meaning\" to be given to a term if it is established that the parties so intended.  No \nparty to this dispute considers that a \"special meaning\" should be given to the phrase \"on a \ncommercial scale\", and nor does the Panel. \n7.559 The Panel will follow the approach explained by the Appellate Body in EC – Chicken Cuts:  \n\"The Appellate Body has observed that dictionaries are a 'useful starting point' for the \nanalysis of 'ordinary meaning' of a treaty term, but they are not necessarily dispositive.  \nThe ordinary meaning of a treaty term must be ascertained according to the particular \ncircumstances of each case.  Importantly, the ordinary meaning of a treaty term must \nbe seen in the light of the intention of the parties 'as expressed in the words used by \nthem against the light of the surrounding circumstances'\".537   \n7.560 The Panel recalls that the dictionary definition of \"scale\" (quoted at paragraph 7.533 above) \nincludes the entry \"Freq. in on a grand, lavish, small, etc. scale\".  These examples show that the \nphrase \"on a … scale\" is frequently used.  Therefore, the use of the words \"on a commercial scale\" as \na phrase appears to be relevant to their ordinary meaning. \n7.561 The circumstances surrounding the inclusion of the phrase \"on a commercial scale\" show that \nthe phrase has been used and, in some cases, defined in the intellectual property legislation of various \ncountries for periods stretching back almost a century.  Specifically, the patent laws of these countries \nrefer to the working of inventions, or failure to work inventions, \"on a commercial scale\".538  The term \n                                                   \n535 China's first written submission, paras 69-71. \n536 United States' response to Question No. 68. \n537 Appellate Body Report in EC – Chicken Cuts, para. 175, quoting Appellate Body Report in US – \nSoftwood Lumber IV, para. 59, and referring to Appellate Body Reports in US – Offset Act (Byrd Amendment), \npara. 248, and US – Gambling, para. 166, and quoting McNair, The Law of Treaties (Oxford, Clarendon Press, \n1961), p. 365.   \n538 See, for example, the Australian Patent Act 1990, s. 135(1) (mentioned in response to Third Party \nQuestion No. 9);  Indian Patents Act 1970, ss. 83-84;  South African Patent Act 1978, s. 56;  United Kingdom \nPatent Act 1977-1988, s. 50; Zimbabwean Patents Act 1971, s. 31, in Exhibit CHN-198, and the patent laws of \nother Commonwealth countries.  Earlier, the United Kingdom Patents and Design Act 1919, s. 27, had referred \nto working a patent \"on a commercial scale\". \n\n\n \nWT/DS362/R \n \nPage 113 \n \n \n  \nis used in relation to the exploitation of protected subject matter, as in Article 61, but the purpose of \nthese non-working provisions, and the considerations relevant to their operation, are distinct from \nthose of criminal procedures and penalties as addressed in Article 61 of the TRIPS Agreement.  There \nis insufficient indication that the meaning ascribed to the term \"on a commercial scale\" in such \nlegislation was that intended by the negotiators of the TRIPS Agreement when they used the term in \nthe first and fourth sentences of Article 61.  However, this circumstance shows the phrase in use in an \nintellectual property context long before the negotiation of the TRIPS Agreement.     \n7.562 The term \"on a commercial scale\" was also used in the specific context of trademark \ncounterfeiting and copyright piracy in the WIPO Committee of Experts on Measures Against \nCounterfeiting and Piracy in 1988 contemporaneously with the earlier part of the negotiations of the \nTRIPS Agreement.  Draft Model Provisions for National Laws set out in a Memorandum by the \nInternational Bureau of WIPO for that Committee included, in Article A(1), (2) and (3), three draft \nModel Provisions on manufacturing as an act of counterfeiting, manufacturing as an act of piracy and \nadditional acts of counterfeiting and piracy, respectively.  Each of those draft Model Provisions \ncontained a proviso that such goods were manufactured, or the act was committed, \"on a commercial \nscale\".  An explanatory observation accompanied the term \"commercial scale\" as a phrase.539   \n7.563 The evidence on the record includes many other uses of the words \"commercial scale\" and \n\"on a commercial scale\" in a variety of contexts.  Accordingly, the Panel considers that the words \n\"commercial\" and \"scale\" provide important context for the ordinary meaning of each other when \nused together in the phrase \"on a commercial scale\" as in the first sentence of Article 61 of the TRIPS \nAgreement.   \n7.564 China submits that the phrase \"on a commercial scale\" refers to \"a significant magnitude of \ninfringement activity\".540  China refers to four isolated uses of the phrase \"commercial scale\" spread \nout over a period of forty years: one at the 1947-1948 Havana Conference, one in a 1985 GATT \nCouncil meeting, and two in US national legislation on alternative energy development.  From these \nuses, China posits an interpretation suggestive of industrial scale activity.541   \n7.565 The Panel considers that this interpretation is predetermined by the context of the uses that \nChina has selected, which refer to commercial scale activities at an industrial level.  This is inapposite \nin the context of Article 61 of the TRIPS Agreement which applies to acts of infringement of \nindividual rights, including those subsisting in individual products.  This interpretation simply \nreplaces the term \"commercial\", that is used in the text, with \"significant\", that is not used in the text, \neffectively reading out the term \"commercial\".   \n7.566 China also argues that the explanatory observation that accompanied the draft Model \nProvisions is an example of ordinary usage of the term \"commercial scale\".542   \n7.567 The Panel notes that the explanatory observation did not purport to be a definition but was \nprepared by the International Bureau of WIPO for the specific purpose of accompanying a provision \non manufacturing in the draft Model Provisions.  The Report of the WIPO Committee of Experts on \nMeasures against Counterfeiting and Piracy of April 1988 shows that the concept of \"commercial \n                                                   \n539 That explanatory observation read as follows:  \n\"'Commercial scale' is a notion which will have to be applied taking into consideration the \ncircumstances accompanying the manufacture.  The quantity of the goods manufactured, the \nway in which they were, are or are intended to be used and the will to make profit are among \nthe factors that the courts will have to take into consideration.\"   \nSee WIPO document C&P/CE/2 of 18, 19 February 1988, para. 17, set out in Exhibit CHN-43 \n540 China's first written submission, para. 64. \n541 Exhibits CHN-44, CHN-45, CHN-46 and CHN-47. \n542 China's first written submission, para. 72;  rebuttal submission, para. 76. \n\n\nWT/DS362/R \nPage 114 \n \n \n  \nscale\" proved controversial.543  Accordingly, it is not an example of ordinary usage.  In any event, the \ndraft Model Provisions of the Committee of Experts themselves were never agreed. 544  Therefore, it \nwould not be appropriate to select an explanatory observation that accompanied them and elevate it to \nthe status of the proper interpretation of a treaty text that was negotiated in another forum and that \nwas finally agreed. \n7.568 Turning to other evidence on the record, two third parties contrasted \"commercial scale\" \nproduction with \"pilot scale\" production or \"small scale test\" production.545  The Panel finds these \ncontrasting terms relevant because they indicate a quantity, and because production can be an act of \ncounterfeiting or piracy.   \n7.569 In response to questions from the Panel, China, but not the United States, provided other \nexamples of ordinary uses of the phrase \"commercial scale\", including in company press releases, \nfilings with the US Securities and Exchange Commission and patent applications.  The United States \nargues that these examples are functions of individuals' \"own lexicography\" and are not used in the \nsame fashion or manner.546  The United States also notes that patent applications are unrelated to the \nfirst sentence of Article 61 of the TRIPS Agreement. \n7.570 The Panel considers that each of the uses on the record, being in the English language, \nreflects the understanding of the authors as to the ordinary meaning of those words and phrases in that \nlanguage.  That is the reason why a language allows its speakers to render themselves mutually \nintelligible.  These are the very meanings that dictionaries catalogue.  Naturally, words and phrases in \nthe same language may have more than one meaning, \"common or rare, universal or specialized\".547  \nIt is incumbent on the Panel to assess these usages in context to discern which is relevant to the \nquestion of interpretation at hand, just as the Panel has done when confronted with multiple \ndefinitions of the words \"commercial\" and \"scale\" in the same dictionary.  The Panel also notes that \nArticle 61 of the TRIPS Agreement specifically relates the concept of infringement \"on a commercial \nscale\" to other intellectual property rights, which include patents, in the fourth sentence of that Article.   \n7.571 Turning to the ordinary meaning of the term \"on a commercial scale\", the evidence includes \nexamples of uses of that precise term and also the words \"commercial scale\" followed by a noun.  It is \nnot suggested that this changes the meaning.  The nouns include \"manufacturing\", \"production\", \n\"facility\", \"processes\", \"reactor\", \"composition\" and \"cultivation\", and the term also follows \n\"manufacture\" and \"employ\".548  This confirms that the phrase can be used in different contexts as a \nsingle term.     \n7.572 Some of these nouns, notably manufacturing and production, refer to acts that could constitute \ntrademark counterfeiting and copyright piracy, and are therefore particularly apposite to the \ninterpretation of the first sentence of Article 61 of the TRIPS Agreement.  However, counterfeiting \nand piracy include other acts besides manufacturing and production.  There are no uses on the record \nof the phrase with the word \"sales\" or \"selling\". \n                                                   \n543 See Report adopted by the WIPO Committee of Experts on Measures Against Counterfeiting and \nPiracy, WIPO document C&P/CE/4 of 28 April 1988, reproduced in Exhibit CHN-72, at paras 71-81 and 94. \n544 The April 1988 session of the Committee of Experts could not complete its work and it was \nenvisaged that a revised text would be prepared: see Report in note 543 above, at para. 177. \n545 Australia's and Mexico's respective responses to Third Party Question No. 4. \n546 United States' response to Question No. 69;  comments on China's response to Question No. 68.   \n547 Appellate Body Report in US – Gambling, para. 164. \n548 Press releases of Novovax and Dupont, and US Securities and Exchange Commission filings of \nAmylin Pharmaceuticals, Inc., Biocryst Pharmaceuticals, Inc., Cambridge Display Technology, Inc. and \nVerenium Corporation in Exhibit CHN-196; and China's original evidence in Exhibits CHN-44, CHN-45, CHN-\n46 and CHN-47. \n\n\n \nWT/DS362/R \n \nPage 115 \n \n \n  \n7.573 Simple searches of online patent databases of the Patent Cooperation Treaty, the United \nStates Patent and Trademark Office and the European Patent Office, reveal many patent applications \nthat use the phrase \"commercial scale\".  China has provided abstracts of some applications that define \nthe phrase \"commercial scale\" in precise, quantitative terms of volume, weight or speed.549 These \ndefinitions vary greatly and relate to different factors, according to the invention claimed in the \napplication.  From this evidence, China concludes that: \n\"In the context of patent applications, the phrase 'commercial scale' refers to a certain \nlevel of magnitude.  This magnitude is not necessarily objectively high, but it is \nrelatively high in the context of the operation involved.\"550   \n7.574 The United States finds this statement \"telling\" and recalls its view that: \n\"[B]ased on its ordinary meaning, what qualifies as 'commercial scale' piracy or \ncounterfeiting will vary among product and market, and therefore, what is \n'commercial scale' can be determined using factors relevant to a particular \nsituation.\"551 \n7.575 The United States argues that the uses in the press releases and SEC filings must be \nunderstood in context, as in some cases:   \n\"[W]hether a manufacturing activity is 'commercial scale' may well mean whether the \nactivity is undertaken on a scale, or at a level of economic efficiency, that allows that \npublic company to make a return on investment or profit for its shareholders.\"552 \n7.576 The Panel observes a certain degree of convergence between the parties' views, as compared \nto their initial positions, when addressing these ordinary uses of the phrase \"commercial scale\".  The \nPanel considers that the contexts in which the term \"on a commercial scale\" or \"commercial scale\" is \nused, given their variety, indicate that each of the words \"commercial\" and \"scale\" provides important \ncontext for the interpretation of the other when used together.  Their combined meaning varies greatly \naccording to the context around them and the lack of precision in the term is apparent.553  However, it \nis clear that none of these uses refer to activities that are simply commercial.  Rather, they are \nevidently intended to distinguish certain activities (or premises) from others that pertain to or have a \nbearing on commerce but which do not meet a market benchmark in terms of what is typical.  The \nprecise benchmark in each case depends on the product and the market to which the phrase relates.   \n7.577 The Panel recalls its view at paragraph 7.545 above and, in light of the evidence considered \nabove, finds that a \"commercial scale\" is the magnitude or extent of typical or usual commercial \nactivity.  Therefore, counterfeiting or piracy \"on a commercial scale\" refers to counterfeiting or piracy \ncarried on at the magnitude or extent of typical or usual commercial activity with respect to a given \nproduct in a given market.  The magnitude or extent of typical or usual commercial activity with \nrespect to a given product in a given market forms a benchmark by which to assess the obligation in \nthe first sentence of Article 61.  It follows that what constitutes a commercial scale for counterfeiting \nor piracy of a particular product in a particular market will depend on the magnitude or extent that is \ntypical or usual with respect to such a product in such a market, which may be small or large.  The \n                                                   \n549 International applications published under the PCT: WO 00/61722;  WO 2004/054949 A1; WO \n2006/110534 A2; WO2008/020357 A2; United States patent no. 6,525,205 B2; United States patent application \nno. 2007/0202578 A1; in Exhibit CHN-197. \n550 China's response to Question No. 69. \n551 United States' comment on China's response to Question No. 69, citing its response to Question \nNo. 16 and second oral statement (closing statement), paras 10-11. \n552 United States' comment on China's response to Question No. 68. \n553 The lack of precision is highlighted by the addition of specific definitions in the patent applications. \n\n\nWT/DS362/R \nPage 116 \n \n \n  \nmagnitude or extent of typical or usual commercial activity relates, in the longer term, to \nprofitability.554   \n7.578 The Panel observes that what is typical or usual in commerce is a flexible concept.  The \nimmediate context in the second sentence of Article 61, which is closely related to the first, refers to \nthe similarly flexible concepts of \"deterrent\" and \"corresponding gravity\".  Neither these terms nor \n\"commercial scale\" are precise but all depend on circumstances, which vary according to the differing \nforms of commerce and of counterfeiting and piracy to which these obligations apply.  \n7.579 The parties have presented certain other facts and arguments in relation to the interpretation \nof \"a commercial scale\", which the Panel will now assess.  \n(vi) \nSubsequent practice  \n7.580 China refers to certain material as \"subsequent practice\" in the application of the TRIPS \nAgreement within the meaning of Article 31(3) of the Vienna Convention. The material comprises the \nenforcement policies of two authorities of two Members, a draft Directive of another Member and \nvarious free trade agreements entered into by the United States.555   \n7.581 The Panel has reviewed the material and considers that it lacks the breadth to constitute a \ncommon, consistent, discernible pattern of acts or pronouncements.  Further, the content of the \nmaterial does not imply agreement on the interpretation of Article 61 of the TRIPS Agreement.556  \nTherefore, the Panel does not consider that it constitutes subsequent practice for the purposes of this \ninterpretation.   \n(vii) \nSupplementary means of interpretation \n7.582 China initially submitted that the draft Model Provisions contained a definition which formed \nthe basis for discussion of the term in the negotiation of the TRIPS Agreement.557   \n7.583 The United States responded that the status of this document under the Vienna Convention is \nunclear.  If the document could be used as a supplementary means of interpretation, it would confirm \nthat a variety of factors would need to be taken into account to determine whether an act is on a \ncommercial scale.558   \n7.584 Canada and Japan refer to the explanatory observation on \"commercial scale\" that \naccompanied the draft Model Provisions, noting that it referred to quantitative as well as non-\nquantitative factors.  The European Communities sees limited interest in recourse to supplementary \nmeans of interpretation but notes the same point.559   \n7.585 The Panel recalls its observations regarding the explanatory observation that accompanied the \ndraft Model Provisions at paragraph 7.567 above.  It appears that the explanatory observation did not \nrepresent the common intentions of the WIPO Committee of Experts on Measures Against \n                                                   \n554 This finding is without prejudice to the qualitative aspect of \"commercial scale\" considered with \nrespect to the second limb of this claim.   \n555 China's first written submission, paras 104-108. \n556 See Appellate Body Reports in Japan – Alcoholic Beverages II, p. 13;  US – Gambling, paras 192-\n193, and EC – Chicken Cuts, para. 259. \n557 China's first written submission, paras 72-75 and 110. \n558 United States' rebuttal submission, paras 26-37. \n559 Canada's third party written submission, para. 6; Japan's third party written submission, paras 22-23; \nEuropean Communities' third party oral statement, paras 11-12. \n\n\n \nWT/DS362/R \n \nPage 117 \n \n \n  \nCounterfeiting and Piracy, much less the common intentions of the participants in the negotiation of \nthe TRIPS Agreement.  \n7.586 The draft Model Provisions were mentioned in the records of the TRIPS negotiations, in May \n1988560 and August 1988561, in the context of a discussion of the scope of a framework on trade in \ncounterfeit goods (that was never concluded).  Documents of the WIPO Committee of Experts, \nincluding the draft Model Provisions, were communicated to the TRIPS negotiating group and made \navailable in the GATT Secretariat for consultation by interested delegations, but not circulated, in \nJune 1988.562  The Panel considers that this evidence indicates that the negotiators of the TRIPS \nAgreement were aware of the explanatory observation by the International Bureau of WIPO \naddressing \"commercial scale\", but it does not indicate that the content of that explanatory \nobservation represented their common intentions. \n7.587 There is a certain temporal correlation between the work of the WIPO Committee of Experts \nand the use of the term \"commercial scale\" in the drafting of Article 61 of the TRIPS Agreement.  The \nEuropean Communities' proposal for the negotiations on the enforcement of trade-related intellectual \nproperty rights in May 1989 (\"EC proposal\")563 contained a draft provision on criminal procedures \nand sanctions that bears a strong similarity to the first, second and fourth sentences of Article 61 in the \nfinal text of the TRIPS Agreement.  It was also the first proposal to use the words \"on a commercial \nscale\".  In response to a question from the Panel, the European Communities informed the Panel that: \n\"In spite of intense research, the European Communities has not been able to find any \ntrace that the phrase 'on a commercial scale' in the EC proposal of 30 May 1989 was \nsourced from another instrument.\"564 \n7.588 In any event, there are differences between the draft Model Provisions of the WIPO \nCommittee of Experts, the EC proposal on criminal procedures and sanctions to the TRIPS \nnegotiating group, and the terms of Article 61 of the TRIPS Agreement.  In particular, the draft Model \nProvisions incorporated the phrase \"on a commercial scale\" within the concepts of \"counterfeiting\" \nand \"piracy\" whilst Article 61 uses the phrase \"on a commercial scale\" to qualify the concepts of \n\"wilful trademark counterfeiting or copyright piracy\".  Further, the explanatory observation that \naccompanied the draft Model Provisions was limited to the act of manufacturing whilst Article 61 \nencompasses the range of acts of counterfeiting and piracy.   \n7.589 The records of the TRIPS negotiations do not disclose any discussion of the meaning of the \nphrase \"on a commercial scale\".   \n7.590 Therefore, the Panel does not consider that the explanatory observation that accompanied the \ndraft Model Provisions sheds any further light beyond that noted at paragraph 7.562 above on the \nintentions of the TRIPS negotiators when they used the term \"commercial scale\".   \n                                                   \n560 It was suggested that, in that connection, the negotiating group should take into account definitions \nestablished in national legislation, those under preparation in the WIPO Committee of Experts on Measures \nAgainst Counterfeiting and Piracy and the existing obligations of relevance in intellectual property conventions: \nsee the minutes of the meeting in document MTN.GNG/NG11/7, paras 23 and 33, in Exhibit CHN-71. \n561 A participant suggested that, in determining the types of infringement to be covered by a framework \non trade in counterfeit goods, the criteria suggested in the WIPO draft model legislation should be employed:  \nsee the minutes of the meeting in document MTN.GNG/NG11/8, at para. 52, in Exhibit CHN-55.   \n562 See GATT document MTN.GNG/NG11/W/5/Add.6. \n563 GATT document MTN.GNG/NG11/W/31. \n564 European Communities' response to Third Party Question No. 8. \n\n\nWT/DS362/R \nPage 118 \n \n \n  \n(viii) \nArticle 41.5 of the TRIPS Agreement \n7.591 China submits that Article 41.5 of the TRIPS Agreement makes clear that none of the \nenforcement provisions can be read to require Members to set out low-scale – and therefore high \nresource – thresholds for the criminalization of intellectual property infringement.565  It later clarified \nthat low-scale thresholds implied high amounts of resources because the first sentence of Article 61 is \nonly satisfied by criminal measures that are actually applied.566   \n7.592 The United States does not claim that China has an obligation to prosecute all counterfeiting \nand piracy falling within the scope of the first sentence of Article 61.567 \n7.593 Article 41.5 provides as follows: \n\"It is understood that this Part does not create any obligation to put in place a judicial \nsystem for the enforcement of intellectual property rights distinct from that for the \nenforcement of law in general, nor does it affect the capacity of Members to enforce \ntheir law in general.  Nothing in this Part creates any obligation with respect to the \ndistribution of resources as between enforcement of intellectual property rights and \nthe enforcement of law in general.\" \n7.594 The Panel considers that Article 41.5 is an important provision in the overall balance of rights \nand obligations in Part III of the TRIPS Agreement.  Both sentences apply to \"this Part\", which \nincludes Article 61.   \n7.595 The first sentence of Article 41.5 does not appear to be relevant to this dispute.  China has \nadministrative agencies dedicated to intellectual property enforcement that are separate from its law \nenforcement agencies in general.  It is under no obligation to put in place a separate judicial system \nfor IPR enforcement.   \n7.596 The second sentence of Article 41.5 relates to the deployment of resources for enforcement.  \nIn the Panel's view, that plays an important role in relation to Article 41, in particular, paragraph 1568, \nand the actual exercise of authority to enforce intellectual property rights throughout Part III.  \nHowever, the Panel's findings in this dispute regarding the first sentence of Article 61 are confined to \nthe issue of what acts of infringement must be criminalized and not those which must be prosecuted.   \n7.597 China refers to the second sentence of Article 61 on remedies and notes that it contains an \nelement of flexibility in its reference to \"the level of penalties applied for crimes of a corresponding \ngravity\".  China argues that if Members are not required to impose meaningful punishment for low-\nlevel crimes, they should not be required to enforce intellectual property crimes at a low level \neither.569  The Panel simply recalls its comment in paragraph 7.596 and confirms that it has not made \na finding on any duty to prosecute. \n7.598 China asks the Panel to note that its criminal law allows for the possibility of private \nprosecution of certain crimes.  It speculates that defining a crime with too low a threshold \"could \nunleash a large volume of private enforcement actions and impose a significant burden on the judicial \n                                                   \n565 China's first written submission, paras 98-101. \n566 China's rebuttal submission, paras 122-124:  see also European Communities' response to Third \nParty Question No. 10.  Australia makes a similar point in relation to the second sentence of Article 61:  see its \nthird party written submission, para. 25.   \n567 United States' rebuttal submission, paras 47-48. \n568 Article 41.1 of the TRIPS Agreement is quoted at paragraph 7.170 above. \n569 China's rebuttal submission, paras 108-110. \n\n\n \nWT/DS362/R \n \nPage 119 \n \n \n  \nsystem\".570  However, in response to questions, China was unable to substantiate its concern.  In \nparticular, it lacked any data relevant to its experience after it lowered thresholds for the crimes \ninfringing intellectual property crimes in 2004.571  Therefore, the Panel does not need to consider that \nissue further. \n7.599 In light of the above, the Panel confirms its interpretation of \"on a commercial scale\" set out \nat paragraph 7.577 above.  The Panel will now apply that interpretation to the measures at issue. \n(ix) \nConformity of the measures at issue with respect to the level of the thresholds \n7.600 The Panel recalls its finding at paragraph 7.545 above regarding the interpretation of the \nphrase \"wilful trademark counterfeiting or copyright piracy 'on a commercial scale'\", as used in \nArticle 61 of the TRIPS Agreement.  The Panel recalls, in particular, that this is a relative standard, \nwhich will vary when applied to different fact situations. \n7.601 The Panel notes that it is the standard in the treaty obligation that varies as applied to different \nfact situations, and not necessarily the means by which Members choose to implement that standard.  \nThe Panel recalls that the third sentence of Article 1.1 of the TRIPS Agreement, quoted and discussed \nat paragraphs 7.512 and 7.513 above, provides as follows: \n\"Members shall be free to determine the appropriate method of implementing the \nprovisions of this Agreement within their own legal system and practice.\" \n7.602 This provision confirms that the TRIPS Agreement does not mandate specific forms of \nlegislation.572  The Panel may not simply assume that a Member must give its authorities wide \ndiscretion to determine what is on a commercial scale in any given case, and may not simply assume \nthat thresholds, including numerical tests, are inconsistent with the relative benchmark in the first \nsentence of Article 61 of the TRIPS Agreement.  As long as a Member in fact provides for criminal \nprocedures and penalties to be applied in cases of wilful trademark counterfeiting or copyright piracy \non a commercial scale, it will comply with this obligation.  If it is alleged that a Member's method of \nimplementation does not so provide in such cases, that allegation must be proven with evidence.  \nTherefore, the Panel will assess whether the evidence shows that China fails to provide for criminal \nprocedures and penalties to be applied in any such cases. \n7.603 The Panel begins with the first limb of the claim.  In the first limb of the claim, the United \nStates challenges the levels at which certain thresholds are set.  Having chosen to challenge the level \nof a series of numerical thresholds as compared to a relative standard, it is necessary for the \nUnited States to demonstrate that the levels are higher than that standard as applied in certain factual \nsituations.   That calls for quantitative evidence.  Later, the Panel will address the second limb of the \nclaim, in which the United States challenges the factors taken into account by the criminal thresholds.  \nThat calls for qualitative evidence. \n                                                   \n570 China's first written submission, para. 38, referring to Article 170 of the Criminal Procedure Law, as \nrestated in Article 5 of Judicial Interpretation No. 6 [2007]. \n571 China's response to Question No. 14.   \n572 The United States accepts this: see its rebuttal submission, paras 42-44;  response to Question \nNo. 54. \n\n\nWT/DS362/R \nPage 120 \n \n \n  \n7.604 The parties agree that the standard of \"a commercial scale\" will vary by product and market \nand that the conformity of China's criminal thresholds with that standard must be assessed by \nreference to China's marketplace. 573  \n7.605 The Panel recalls that a previous Panel had occasion to apply certain relative standards in the \nTRIPS Agreement in quantitative terms.  The Panel in US – Section 110(5) Copyright Act interpreted \nthe phrase \"certain special cases\" inter alia in terms of a narrow scope or reach, and the phrase \"a \nnormal exploitation of the work\" inter alia in an empirical or quantitative sense, as those phrases are \nused in Article 13 of the TRIPS Agreement.574  As in the present case, the parties in that dispute \nagreed that conformity had to be assessed wholly or primarily in relation to the respondent's market.  \nThe Panel in that dispute adopted the following approach in assessing the conformity of a measure \nwith Article 13: \n\"We note that while the WTO Members are free to choose the method of \nimplementation, the minimum standards of protection are the same for all of them.  In \nthe present case it is enough for our purposes to take account of the specific \nconditions applying in the US market in assessing whether the measure in question \nconflicts with a normal exploitation in that market, or whether the measure meets the \nother conditions of Article 13.\"575  (footnote deleted) \n7.606 In the present dispute, the Panel considers this approach appropriate as well.  The Panel needs \nto consider the specific conditions applying in China's marketplace in assessing whether the measures \nin question, which exclude certain acts of infringement from particular liability, conform to the \nrelative standard in Article 61.576  This applies a fortiori as the relative standard is set in terms of what \nis \"on a commercial scale\", which varies not only by market but also by product within the same \nmarket.   \n7.607 The nature of the measures at issue and the applicable treaty obligation under consideration in \nthis Section of this Report can be contrasted with those considered in Section VII:A.  It was not \nnecessary for the United States to demonstrate the particular class of works to which the Copyright \nLaw denies copyright protection because it was clear that the measure at issue denies all copyright \nprotection to some works and the relevant obligation in the TRIPS Agreement does not permit denial \nof all copyright protection to any such works.  In contrast, the measures that establish the criminal \nthresholds set forth levels that deny criminal procedures and penalties in some, but not all, cases of \nwilful trademark counterfeiting and copyright piracy, and the relevant obligation permits the denial of \ncriminal procedures and penalties in some such cases.   \n7.608 The United States argues that the criminal thresholds exclude certain commercial activity.  \nThe United States relies, in particular, on the text of the measures establishing the criminal thresholds \nthemselves.577   \n                                                   \n573 United States' first written submission, fn. 78 and para. 118;  rebuttal submission, para. 17;  \nresponses to Questions Nos. 16 and 66;  China's first written submission, paras 133-137; response to Question \nNo. 16. \n574 See Panel Report in US – Section 110(5) Copyright Act, paras 6.113 and 6.178. \n575 Ibid., para. 6.189.   \n576 The Panel Report in Canada – Pharmaceutical Patents also considered the meaning of \"normal\" \nexploitation (in that case, of a patent) but in abstract terms.  However, it did so in an assessment of an exception \nthat was challenged on the basis of the nature of the acts that the measures excused from liability, not their \nmagnitude or extent.  Both parties also addressed the meaning of \"normal\" in that case in abstract terms: see \nparas 7.51-7.59. \n577 United States first written submission, para. 110;  rebuttal submission, para. 10. \n\n\n \nWT/DS362/R \n \nPage 121 \n \n \n  \n7.609 The Panel has reviewed the measures and agrees that, on their face, they do exclude certain \ncommercial activity from criminal procedures and penalties.  For example, some of the criminal \nthresholds are set in terms that refer expressly to commercial activity, such as \"illegal business \noperation volume\", which is defined in terms of \"manufacture, storage, transportation, or sales\" of \ninfringing products, and \"illegal gains\" which is defined in terms of profit.  However, based solely on \nthe measures on their face, the Panel cannot distinguish between acts that, in China's marketplace, are \non a commercial scale, and those that are not.   \n7.610 Certain thresholds are set in monetary terms, ranging from ¥20,000 profit to ¥50,000 turnover \nor sales.  The measures, on their face, do not indicate what these amounts represent as compared to a \nrelevant commercial benchmark in China.578  Each of these amounts represents a range of volumes of \ngoods, which vary according to price.  Another factor to take into account is the period of time over \nwhich infringements can be cumulated to satisfy these thresholds.  One threshold is set not in \nmonetary terms but rather at 500 张 (份) (\"copies\" for the sake of simplicity).  Whilst it is reasonably \nclear to the Panel how many goods that comprises with respect to certain traditional media, this is not, \non its face, related to any relevant market benchmark in China either.   \n7.611 The Panel has noted the United States' repeated assertions that certain amounts constitute \ncounterfeiting or piracy on a commercial scale.  The most recurrent example concerns 499 copyright-\ninfringing \"copies\", although it is not related to the same product in all examples or, sometimes, to \nany product.579  The only facts in these examples are amounts equal to, or slightly less than, those in \nthe measures themselves.  Those amounts, in combination with the monetary thresholds and the \nfactors used in the thresholds, demonstrate the class of acts for which China does not provide criminal \nprocedures and penalties to be applied.  Those numbers and factors do not, in themselves, demonstrate \nwhat constitutes a commercial scale for any product or in any market in China.   \n7.612 China asserted the relevance of the scale of commerce in China in its first written submission \nand referred to Economic Census statistics (considered below).580   \n7.613 The Panel asked both parties after the first substantive meeting whether \"commercial scale\" \nvaries according to characteristics of markets, products and operators within a market, how \n\"commercial scale\" can be related to these considerations and what type of data could be relevant.581 \n7.614 In response to the Panel's question, the United States referred to the interpretation of \n\"commercial scale\" that it had proposed in its first written submission, which included all commercial \nactivity by definition.  The United States agreed that \"commercial scale\" must be viewed with \nreference to the marketplace, and acknowledged that the scale of what is commercial necessarily will \nvary by product and market.  It acknowledged that what is \"commercial scale\" can vary from situation \nto situation according to a number of factors.  It asserted that China's criminal thresholds fail to \ncapture commercial scale in certain market situations.582  Nevertheless, the United States did not \nprovide data regarding products and markets or other factors that would demonstrate what constituted \n\"a commercial scale\" in the specific situation of China's marketplace. \n                                                   \n578 The parties agree that the thresholds should be assessed in the form in which they appear in China's \nmeasures, namely Renminbi (¥), which is the local currency used in China's marketplace:  see their respective \nresponses to Question No. 5. \n579 United States' first written submission, para. 139;  response to Question No. 25;  rebuttal submission, \npara. 112;  response to Question No. 64. \n580 China's first written submission, paras 133-137. \n581 Question No. 16. \n582 United States' response to Question No. 16. \n\n\nWT/DS362/R \nPage 122 \n \n \n  \n7.615 In its rebuttal of China's assertion regarding the scale of commerce in China, the United States \nnoted that the \"commercial scale\" standard was a relative one.583  It commented on the Economic \nCensus statistics submitted by China but at the same time dismissed their relevance as they are \naggregate statistics related to undefined average economic units.  It also recalled an earlier assertion \nthat the Chinese market, including the market for many copyright and trademark-bearing goods, is \nfragmented and characterized by a profusion of small manufacturers, middlemen, distributors, and \nsmall outlets at the retail level.584    \n7.616 The Panel has reviewed the evidence in support of this assertion.585  The evidence comprises a \nquote from a short article from a US newspaper, the San Francisco Chronicle, titled \"30,000-Store \nWholesale Mall Keeps China Competitive\" regarding the number of stores in a particular mall in \nYiwu and the physical dimensions of some stalls586; a statistic quoted from an extract from a \nmanagement consultant report titled \"The 2005 Global Retail Development Index\" that the top ten \nretailers in China hold less than 2 per cent of the market, and another statistic that the top 100 retailers \nhave less than 6.4 per cent587; and a quote from an article in Time magazine titled \"In China, There's \nPriceless, and for Everything Else, There's Cash\" that a shopping mall in Luohu spans six floors of \nsmall stores.588   \n7.617 The Panel finds that, even if these sources were suitable for the purpose of demonstration of \ncontested facts in this proceeding, the information that was provided was too little and too random to \ndemonstrate a level that constitutes a commercial scale for any product in China.   \n7.618 The United States referred to Canada's third party written submission, which had provided an \nestimate of China's gross domestic product per capita.589  It did not explain specifically how this \nfigure was comparable to China's numerical thresholds.   \n7.619 The Panel considers GDP per capita a reliable indicator of average national income but not a \nsufficient indicator of a commercial scale, as it is calculated with a denominator of total population.590  \nThe Panel also notes that GDP is a far more aggregated figure than those in the Economic Census \nstatistics that the United States dismissed. \n7.620 China submits that the United States must provide evidence that China's laws actually \nfunction to exclude a category of infringement that meets the \"commercial scale\" standard.  \nHypothetical examples do not qualify as sufficient evidence.591   \n7.621 In response, the United States asserts that it, and a number of third parties, have provided \n\"numerous, concrete illustrations\" of commercial-scale piracy and counterfeiting that take place \nunderneath China's thresholds.592  It refers to a \"Report on Copyright Complaints, Raids and Resulting \nCriminal Actions in China\" prepared by a coalition of trade associations in 2008 (the \"CCA \nReport\").593   \n                                                   \n583 United States' rebuttal submission, para. 104. \n584 United States' rebuttal submission, paras 106-107.   \n585 The evidence was submitted with the United States' first written submission, para. 122. \n586 Exhibit US-28. \n587 A.T. Kearney: \"Destination: China\" in The 2005 Global Retail Development Index in Exhibit US-29. \n588 Exhibit US-30.  An article from the London Daily Telegraph is also submitted in Exhibit US-31. \n589 United States' rebuttal submission, para. 108, referring to Exhibit CDA-1.   \n590 As noted in China's rebuttal submission, para. 142.   \n591 China's rebuttal submission, para. 149. \n592 United States' second oral statement, para. 28, elaborating on its rebuttal submission, paras 9-10. \n593 The Report, contained in Exhibit US-41, was prepared by the \"China Copyright Alliance\", a \ncoalition of six trade associations that represent several creative industry sectors.   \n\n\n \nWT/DS362/R \n \nPage 123 \n \n \n  \n7.622 The Panel has reviewed the CCA Report to determine whether it bears out the United States' \nassertion.  The CCA Report was originally submitted as a case example intended to show that the \ncriminal thresholds create a \"safe harbour\" (an assertion not borne out by the data594) and also to show \nthat significant quantities of retail sales of infringing product take place in China at levels below \nChina's thresholds.595   \n7.623 The Panel notes that the question whether retail sales of infringing product take place below \nthe thresholds is not dispositive of the claim, as the first sentence of Article 61 does not require \nMembers to provide for criminal procedures and penalties to be applied to all such cases.  Further, the \nCCA Report sets out for each raid \"total units seized (DVD, CD, VCD)\".  For some raids, the total \nunits seized were as few as five.  Therefore, while the aggregate number of seizures below China's \nthresholds may or may not be \"significant\", the seizure data does not permit any deduction as to the \nscale of operations of the individual raided retail outlets.  The total units seized in many cases may be \nonly part of, or even incidental to, a commercial operation. The seizure data illustrates the scale of \ninfringing stock on hand (as it is intended to do) but it does not show the scale of the individual retail \nbusinesses or what constitutes a commercial scale for those products in that market.596 \n7.624   China provided official statistics from its Economic Census.597  The statistics include figures \nfor average annual revenue for enterprises engaged in different industrial sectors in China.  Annual \nrevenue appears to be a concept capable of comparison with \"illegal business operation volume\" as \ndefined in Judicial Interpretation No. 19 [2004] and set out at paragraph 7.401 above.  The statistics \nshow that the illegal business operation volume threshold of ¥50,000 for counterfeiting one registered \ntrademark in violation of Article 213 of the Criminal Law is equivalent to 0.41 per cent of the average \nannual revenue of  enterprises engaged in light industry;  0.8 per cent of the average annual revenue of \nsmall-size enterprises;  and 0.84 per cent of the average revenue of Chinese retail businesses.598   \n7.625 The Economic Census statistics also refer to a concept of the \"Individual Operation \nHousehold\" which is defined as the smallest unit of commerce in Chinese economic statistics.  The \n                                                   \n594 The CCA Report was submitted as a case example of how the thresholds allegedly create a \"safe \nharbour\" for commercial scale trademark counterfeiting and copyright piracy and provide \"clear guideposts\" as \nto how to avoid the risk of criminal prosecution.  It was alleged that the CCA Report shows that when the \nnumerical thresholds are shifted down, commercial operations are adjusted and restructured to ensure that they \nremain at levels that fall under the thresholds.  The CCA Report covers the period January 2006 to November \n2007 - the period during which a threshold under Article 217 of the Criminal Law was lowered from 1000 \ncopies to 500 copies (see paragraphs 7.411 and 7.412 above).  The CCA Report highlights a congruence in the \npercentage of seizures below the threshold before and after it was lowered.  However, when further data was \nprovided regarding the percentage of seizures below 500 copies before the threshold was lowered, when it was \nan irrelevant number, the Panel was able to observe a (somewhat lesser but still strong) congruence between \nthat percentage and the percentage of seizures below the same level when it was the threshold.  Therefore, the \nPanel does not find that the data in the CCA Report supports the conclusion that the commercial operations of \ninfringers are related to the levels of the thresholds.  See United States' first written submission, paras 151-161.  \nThe further data was provided by the United States in response to Question No. 1 posed by China.   \n595 United States' first written submission, para. 157;  rebuttal submission, paras 93-97.   \n596 The United States alleged in response to an unrelated question that if a person engaged in legitimate \ncommercial activities is also engaged in infringing activities, the existence of the legitimate commercial \nplatform to support the infringing activities would be a pertinent consideration in assessing whether the \ninfringing activities are \"on a commercial scale\":  see United States' response to Question No. 62.   However, \nthe Panel notes that the phrase \"on a commercial scale\" qualifies the terms \"trademark counterfeiting or \ncopyright piracy\" and a legitimate commercial platform does not fall within the scope of either of those terms. \n597 China Economic Census Yearbook 2004, edited by the Executive Office of the First National \nEconomic Census Leading Group of the State Council, published in Chinese and English by the China Statistics \nPress.  Extracts from the Volume of Secondary Industry (Section One) and the Volume of Synthesis, including \ninterpretation of main indicators and rules on classification, are reproduced in Exhibit CHN-79. \n598 See China's response to Question No. 17. \n\n\nWT/DS362/R \nPage 124 \n \n \n  \nstatistics show that the illegal business operation volume threshold of ¥50,000 for counterfeiting one \nregistered trademark is equivalent to 22.56 per cent of the average annual revenue of Individual \nOperation Households and 29.44 per cent of the average annual revenue of Individual Operation \nHouseholds engaged in retail.599 \n7.626 The Panel notes that these calculations are percentages of an average and may be relevant to \nestablishing what is a typical or usual level of commercial activity in a general sense.  However, the \nstatistics are highly aggregated and do not refer to any particular products, according to which the \nbenchmark of \"a commercial scale\" necessarily varies.  Moreover, the statistics regarding individual \noperation households engaged in retail do not address the basic question of whether retail sales by \nindividual operation households are typical or usual in China.  Therefore, the Panel does not consider \nthat these statistics are sufficient for it to form a view as to whether the illegal business operation \nvolume thresholds capture all trademark counterfeiting or copyright piracy on a commercial scale in \nChina. \n7.627 The United States also submitted other press articles to illustrate points in its first written \nsubmission, particularly regarding the calculation of certain thresholds.  China objected at the outset \narguing that \"[t]he Panel can afford little or no weight to such anecdotal and potentially misinformed \nreports\".600  The United States was puzzled by China's concern at its recourse to newspapers or other \nmedia.  It recalled its prior attempts to obtain information from China pursuant to Article 63.3 of the \nTRIPS Agreement.  China had declined to provide information and stated instead that its competent \ndomestic IPR authorities had also made relevant information publicly available through their official \nwebsites, newspapers, magazines and other proper channels.  The United States added that the \ninformation in newspapers and magazines is \"drawn from a variety of well-established and well-\nregarded sources\".601 \n7.628 The Panel has reviewed the press articles and notes that none of them are corroborated, nor do \nthey refer to events or statements that would not require corroboration.  Whilst the publications are \nreputable, most of these particular articles are brief and are quoted either for general statements or \nrandom pieces of information.  Most are anecdotal in tone, some repeating casual remarks about \nprices of fake goods, anonymous statements or speculation.  They have titles including \"Fake Pens \nWrite Their Own Ticket\",  \"Chasing copycats in a tiger economy\", \"Hollywood takes on fake Chinese \nDVDs\", \"Film not out yet on DVD?  You can find it in China\" and \"Inside China's teeming world of \nfake goods\".602  Most of the press articles are printed in US or other foreign English-language media \nthat are not claimed to be authoritative sources of information on prices and markets in China.  There \nare four press articles from Chinese sources, one from Xinhua News Agency and three from the \nEnglish-language China Daily. Two are quoted simply to demonstrate the existence of certain goods \nin China603; another quotes a vague statement from unnamed \"market insiders\" on how illegal \npublishers tend to work604; and the other quotes an \"insider\" for the maximum and minimum prices of \na range of pirated and genuine goods.605  One other alleged \"recent news account\" is not attributed to \nany source at all.606   \n7.629 The Panel emphasizes that, in the absence of more reliable and relevant data, it has reviewed \nthe evidence in the press articles with respect to a central point in this claim that is highly contested.  \n                                                   \n599 Ibid. \n600 China first written submission, para. 45. \n601 United States' rebuttal submission, para. 98 and fn. 102. \n602 Exhibits US-24, US-30, US-31, US-33, US-34, US-37.  \n603 A Xinhua News Agency article refers to goods with high turnover and relatively low cost, in Exhibit \nUS-26, and a China Daily article refers to the existence of HDVDs, in Exhibit US-39. \n604 Exhibit US-38. \n605 Exhibit US-32. \n606 United States' first written submission, para. 136, citing the price of a Spider Man 3 DVD. \n\n\n \nWT/DS362/R \n \nPage 125 \n \n \n  \nThe credibility and weight of that evidence are therefore critical to the Panel's task.  For the reasons \nset out above, the Panel does not ascribe any weight to the evidence in the press articles and finds that, \neven if it did, the information that these press articles contain is inadequate to demonstrate what is \ntypical or usual in China for the purposes of the relevant treaty obligation.607  \n7.630 There is no indication that probative evidence on this point would be difficult to obtain.  \nIndeed, it can be noted that more specific information on prices and markets in China is contained in \nvarious US exhibits, notably information on prices of products in a report on Cinema and Home \nEntertainment in China prepared by Screen Digest and Nielsen NRG608 (submitted in support of the \nclaim regarding the Copyright Law) and in annexes to a letter from Nintendo of America to the \nUnited States Trade Representative.609  The United States did not refer to this evidence in its \nsubmissions.  Further, in response to a question from the Panel, the United States had no apparent \ndifficulty in providing a translation of a Chinese judicial decision that had been mentioned in one of \nthe press articles.610   \n7.631 The information in the exhibits would not necessarily have been sufficient and, even if it were, \nit would not be appropriate for the Panel to trawl them for evidence to which the United States did not \nrefer to make the United States' case for it.  As the Appellate Body Report in US – Gambling states: \n\"A prima facie case must be based on 'evidence  and  legal argument' put forward by \nthe complaining party in relation to  each  of the elements of the claim.  A \ncomplaining party may not simply submit evidence and expect the panel to divine \nfrom it a claim of WTO-inconsistency.  Nor may a complaining party simply allege \nfacts without relating them to its legal arguments.\"611 \n7.632 For the above reasons, the Panel finds that the United States has not made a prima facie case \nwith respect to the first limb of its claim under the first sentence of Article 61 of the TRIPS \nAgreement.  The Panel will now turn to the second limb of the claim. \n(x) \nOther indicia – physical evidence \n7.633 With respect to the second limb of this claim, the United States alleges that China's value and \nvolume thresholds are tied to finished goods and therefore ignore other indicia of commercial scale \noperations, such as the presence of unfinished products and fake packaging.612   The Panel will assess \nwhether these other indicia can be taken into account by China's thresholds and, to the extent that they \n                                                   \n607 The Panel's approach is consistent with the approach of other international tribunals, notably the \nInternational Court of Justice: see Rosenne, S., The Law and Practice of the International Court 1920 – 2005, \n(M. Nijhoff, 2006), Volume III at para. 257, and Highet, K., \"Evidence and Proof of Facts\", in Damrosch, L., \nThe International Court of Justice at a Crossroads, (Transnational, 1987) cited in the Panel Report in Australia \n– Automotive Leather II at para. 9.65, fn. 210.  The Panel's approach in the present dispute is also consistent \nwith the approach in the Arbitrator's Award in EC – The ACP-EC Partnership Agreement II, at paras 57-58.  \nWhilst the Appellate Body Report in Brazil – Retreaded Tyres referred to a newspaper article in a footnote, it \ndid so after referencing two substantial reports on point, and the point was not central to the findings in that \ndispute: see Appellate Body Report, para. 207, fn. 393, citing the Panel Report, para. 7.201, fn. 1358. \n608 United States' first written submission, para. 200, citing Exhibit US-49. \n609 United States' first written submission, paras 146 and 153, citing Exhibit US-36. \n610 Exhibit US-61 referred to in the United States' first written submission, para. 120 and a newspaper \narticle in Exhibit US-25.  \n611 Appellate Body Report in US – Gambling, para. 140 (footnotes omitted). \n612 United States' first written submission, paras 113 and 143 to 147. \n\n\nWT/DS362/R \nPage 126 \n \n \n  \ncannot, whether the term wilful trademark counterfeiting or copyright piracy \"on a commercial scale\" \nrequires China to take these other indicia into account.613   \n7.634 This argument is premised on an assertion that China's criminal thresholds \"focus[] solely on \nbusiness volume, copy, and profit thresholds that can only be met by counting finished goods\".614  It is \nnot clear why the United States considers that thresholds expressed in these terms are tied exclusively \nto finished goods.  Its concern may relate to the definition of \"illegal business operation volume\" in \nArticle 12(1) of Judicial Interpretation No. 19 [2004]615 and to the use of the term 张 (份) in one \nthreshold616 but this is not explained.  It is not clear how its concern relates to \"illegal gains\".617  In \nsum, the United States does not sufficiently relate its assertion to the measures at issue. \n7.635 Further, the United States has challenged China's criminal thresholds as established by the \nCriminal Law, \"in particular\" certain Articles establishing the substantive crimes of infringing \nintellectual property rights and relevant Judicial Interpretations.618  However, the United States has \nnot properly addressed any other provisions of the Criminal Law, such as the general provisions, that \ncould have a bearing on questions of evidence.  Having cast the entire Criminal Law as a relevant \nmeasure, it is incumbent on the United States to explain how the thresholds established by that Law \noperate.  A complainant cannot avoid the burden of proof with respect to other apparently relevant \nprovisions of the Law at issue, particularly when it identified that whole Law in its request for \nestablishment of a panel, simply by neglecting to address those provisions, leaving it to the respondent \nto assert their relevance.  \n7.636 Instead, the United States provided a copy of Articles 1 to 12 of the Criminal Law, without \ncomment, and responded only briefly to the arguments of the respondent on the offences of \npreparation for a crime and attempted crime established by Articles 22 and 23 of the Criminal Law.  \nWhen asked whether Articles 22 and 23 of the Criminal Law permit courts to take into account other \nphysical evidence, such as unfinished products and packaging (which the United States asserts that \nthey cannot), the United States stated as follows: \n\"The United States is not aware of the extent to which the offenses of preparation and \nattempt permit courts to convict an offender based on physical evidence other than \nthe infringing products themselves, such as unfinished products and packaging, for \nthe purpose of meeting the thresholds.\"619 \n7.637 The Panel recalls its findings at paragraphs 7.434 to 7.437 above regarding the offences of \npreparation for a crime and attempted crime established by Articles 22 and 23 of the Criminal Law.  \nThe United States does not dispute that these general provisions apply to the substantive crimes of \ninfringing intellectual property rights, and acknowledges that certain courts (whose decisions were \nsubmitted by China) have applied them accordingly.620  Therefore, the United States does not \nsufficiently explain the operation of the measures at issue to support its assertion. \n7.638 To the extent that the crimes of preparation for a crime and attempted crime provide for \ncriminal prosecution and sanctions, it is not dispositive of the issue whether they may be taken into \naccount in relation to the crimes set out in Articles 213, 214, 215, 217 and 218 of the Criminal Law.  \n                                                   \n613 See paragraph 7.496 above. \n614 United States' first written submission, para. 143.  The same submission also referred to China's \nreliance on \"value and volume\" thresholds tied to finished goods:  see para. 113. \n615 See paragraph 7.401 above. \n616 See paragraph 7.411 above. \n617 United States' first written submission, para. 143, cf. para. 144. \n618 See the request for establishment of a panel, attached as Annex D-1 to this report. \n619 United States' response to Question No. 8. \n620 United States' rebuttal submission, para. 91. \n\n\n \nWT/DS362/R \n \nPage 127 \n \n \n  \nChina's obligation under the first sentence of Article 61 is to provide for criminal procedures and \npenalties to be applied.  That obligation is indifferent as to the means by which China provides for \nsuch procedures and penalties to be applied, whether by means of substantive crimes only or by \nmeans of accessorial liability in some cases. \n7.639 The United States cited in support of its concerns regarding physical evidence data collected \nby Nintendo of America in an anti-counterfeiting campaign in China.  The data shows that some \nseizures of infringing products included product components, packaging and materials and \nimplements.621  \n7.640 The Panel notes that the Nintendo data does not show whether China provides for criminal \nprocedures and penalties to be applied to cases where the authorities find only product components, \npackaging and materials and implements, nor does the United States sufficiently relate the seizure \ndata to that issue. \n7.641 The Panel notes that Nintendo emphasized its concerns regarding product components, \npackaging and materials and implements through a discussion of three criminal cases.  China \nsubmitted the judgement of a court in one of these cases.622  The judgement shows that the court did \ntake into account both finished and semi-finished infringing products in its evaluation of the \nsubstantive crime under Article 213 of the Criminal Law.  That case was decided before the entry into \nforce of Judicial Interpretation No. 19 [2004], but it is not clear if the interpretation of the thresholds \nin that Judicial Interpretation was the reason why the authorities in the two later cases did not \n(allegedly) take unfinished products into account.   \n7.642 The United States argues that the court should have taken into account unfinished products \nthat do not in fact infringe, and materials and implements.623  However, given that the court did take \naccount of all products that were trademark-infringing, and not simply finished products, it is not clear \nwhy or if the United States considers that the possession of non-infringing items should have been \nsufficient for conviction of an intellectual property crime. \n7.643 China submits another judgement that, in its view, shows that a court took into account \nunfinished components in its evaluation of a substantive crime under Article 213.  The court also \nconsidered machines and scales as evidence that the components were to be used to produce \ncounterfeit products.624   \n7.644 The United States dismisses this judgement, arguing that the reasoning is confused and that \nthe case is an \"outlier\".625  However, the United States does not deny that the court took the unfinished \ncomponents into account and, given that it has provided no information on judicial decisions on point, \nit is unable to substantiate its assertion that the case is in any way exceptional.  The United States does \npoint out that one other judicial decision submitted by China shows that a court did not count semi-\nfinished products, packaging and tools626, which the Panel has noted. \n                                                   \n621 United States' first written submission, para. 146, citing Nintendo data in Exhibit US-36. \n622 Exhibit CHN-16. \n623 United States' rebuttal submission, para. 92. \n624 Exhibit CHN-15, to which China referred in its rebuttal submission, para. 32. \n625 United States' rebuttal submission, para. 92. \n626 Exhibit CHN-9, to which the United States referred in its rebuttal submission, para. 93. The case \nconcerns the order, manufacture and sale of several thousand units of counterfeit alcoholic beverages over the \ncourse of six months.  At the time of arrest, 1,480 units of manufactured counterfeit alcoholic beverage and \nmore than 4,000 bottles of semi-finished beverage were seized, with a large amount of packaging materials and \ntools for manufacturing counterfeit products.  The judicial decision makes no mention of the semi-finished \n\n\nWT/DS362/R \nPage 128 \n \n \n  \n7.645 China submits that the inchoate crimes of preparation of a crime, and attempted crime, apply \nto all substantive crimes in Part Two of the Criminal Law, including the crimes of infringing \nintellectual property rights.  China argues that these inchoate crimes allow courts to take into account \nunsold goods, with respect to crimes of selling, and unfinished products, with respect to crimes of \nproduction.627 \n7.646 The Panel recalls its findings at paragraphs 7.436 and 7.437 above regarding the construction \nof the measures at issue.  These are confirmed by the judicial decisions submitted in evidence \nshowing courts applying either or both of the general provisions in Articles 22 and 23 of the Criminal \nLaw to various crimes of infringing intellectual property rights.628  Specifically, one of the courts gave \nits reason for applying Article 23 and, hence, sentencing the infringer to a lesser penalty, which was \nthat the infringer had not finished production at the time he was apprehended.629   \n7.647 The United States submits that Articles 22 and 23 of the Criminal Law do not apply to \nevidence of completed crimes, such as \"worn moulds\" for pressing pirated products or counterfeit \nmarks or other materials and implements of such an operation.630 \n7.648 China replies that its authorities consider materials and implements and other reliable indicia \nin determining criminal infringement, and would consider as relevant evidence a \"worn mould\" that \nshowed with reasonable certainty that it had produced sufficient number of items to cross the criminal \nthreshold.  China refers to a judicial decision in which the court considered the presence of materials \nand implements.631   \n7.649 The Panel notes that in the case referred to by China the court took into account packaging \nand tools as evidence of the intended use of product components seized on site, so that the value of \nthe product components was included in the assessment of illegal business operation volume.  The \ntools, though relevant, did not substitute for the thresholds. \n7.650 In any event, the Panel considers that the United States' allegation regarding physical \nevidence relates to the evidence sufficient to initiate a criminal prosecution more than to the definition \nof the crime itself.  Article 61 of the TRIPS Agreement does not address evidence.  The first sentence \nof Article 61 addresses the infringing activity in respect of which the minimum standards must apply.  \nEvidence, including in criminal procedures, is mentioned in Article 41.3, but that provision has no \nbearing on this claim.   \n7.651 Section 5 of Part III of the TRIPS Agreement, on criminal procedures, can be contrasted with \nSection 2, on civil and administrative procedures and remedies, which makes mention of evidence in \nArticle 42 and contains a dedicated provision addressing certain specific issues regarding evidence in \nArticle 43.  Even Article 43 does not address the detailed issue of sufficiency of evidence.  Rather, \nSection 2 leaves such questions to the judicial authorities who weigh that issue in the exercise of their \nauthority to order the remedies set out in Articles 44 to 46.  Given the brevity of Section 5, which \ndevotes two sentences to acts of infringement and two sentences to remedies (or penalties), it would \nbe surprising if it was intended to create a broader obligation addressing issues of evidence and \nprocedure.  The terms used in Article 61 do not suggest that it was so intended.  The different \n                                                                                                                                                              \nproducts, packaging materials or tools in the calculation of the thresholds of illegal business operation volume \nfor the purposes of conviction under Article 213 of the Criminal Law. \n627 China's rebuttal submission, paras 39-41, referring to Exhibits CHN-12, CHN-14, CHN-175. \n628 Exhibits CHN-12, CHN-14 and CHN-175. \n629 Exhibit CHN-175. \n630 United States' rebuttal submission, para. 85. \n631 China's rebuttal submission, para. 32, referring to Exhibit CHN-15. \n\n\n \nWT/DS362/R \n \nPage 129 \n \n \n  \nphrasing of the obligation to \"provide … to be applied\" in the first sentence does not have a bearing \non this issue.   \n7.652 For all of the above reasons, the Panel does not consider that the United States has made a \nprima facie case with respect to other indicia of infringement, such as physical evidence including \nproduct components, packaging and materials or implements. \n(xi) \nOther indicia – impact on the commercial marketplace  \n7.653 With respect to the second limb of this claim, the United States also alleges that China's \nthresholds are tied to finished goods and therefore ignore other indicia of commercial scale operations, \nsuch as the impact that the piracy or counterfeiting has on the commercial marketplace and by \nextension, right holders.632  The Panel will assess whether impact on the commercial marketplace can \nbe taken into account by China's thresholds and then whether the term wilful trademark counterfeiting \nor copyright piracy \"on a commercial scale\" requires China to take into account impact on the \ncommercial marketplace.633   \n7.654 The United States raises a concern in support of this argument related to the Internet and \ndigital technological advancements that can permit commercial piracy and counterfeiting that creates \nmajor damage to a market.634  The United States mentions the example of HDVDs (high-definition \ndigital video discs) that can hold up to ten episodes of a TV series or several films.635   \n7.655 The Panel notes that the United States has not attempted to substantiate its assertion regarding \nHDVDs.  This example appears to be based on the view that the term 张 (份) in the thresholds \n(\"copies\" for the sake of simplicity) refers only to physical discs and cannot be applied in any other \nway in a novel situation.  There is no evidence on the record indicating that the thresholds have ever \nbeen applied to HDVDs, so this example is merely speculation based on the indirect reference to flat \nobjects in the word 张and to copies in the word 份.636  This example can be compared to an assertion \nthat a copyright law does not provide protection to computer programs simply on the basis that the \nlegislation refers to the term \"literary and artistic works\" and computer programs are not obviously \nliterary or artistic.  Some evidence is required that the authorities could not or would not apply that \nmeasure in the appropriate manner to new technology.637  The Panel notes China's assertion that, at \nsuch time as this issue arises for consideration, its authorities can apply the threshold in terms of the \nnumber of films or episodes on each disc.638    \n7.656 More generally, the argument with respect to new technology appears to be premised on the \nview that a determination of whether trademark counterfeiting or copyright piracy is \"on a \ncommercial scale\" must be able to take into account the impact of piracy or counterfeiting on right \nholders.  However, the Panel recalls its findings at paragraph 7.577 above regarding the interpretation \nof the term \"on a commercial scale\".  Read in context, that term refers to \"wilful trademark \ncounterfeiting or copyright piracy\", which are acts of infringement.  The benchmark of a typical or \nusual commercial activity is relevant to the assessment of whether counterfeiting or piracy is covered \n                                                   \n632 United States' first written submission, paras 143 and 148 to 149;  rebuttal submission, para. 112. \n633 See paragraph 7.496 above. \n634 United States' first written submission, para. 149; rebuttal submission, para. 112. \n635 The United States refers to a China Daily article reproduced in Exhibit US-39. \n636 See note 387 above. \n637 The Panel notes that, in this regard, the parties did not refer to subparagraph (17) of the first \nparagraph of Article 10 of the Copyright Law which provides for other rights for a copyright owner due to new \ntechnology.  The United States' first written submission, para. 64, referred to this in relation to the Copyright \nLaw.   \n638 China's rebuttal submission, para. 25;  response to Question No. 6. \n\n\nWT/DS362/R \nPage 130 \n \n \n  \nby Article 61.  The impact is neither part of the act of infringement nor the benchmark of \"on a \ncommercial scale\".  Therefore, it does not appear to be a relevant consideration.   \n7.657 The Panel emphasizes that the terms used in the first sentence of Article 61, in particular \n\"commercial\", are technology-neutral.  A \"commercial scale\" can apply to various forms of commerce \nand, hence, various means of infringement.  The specific forms of commerce are not static but adapt \nto changing forms of competition due to technological development and the evolution of marketing \npractices.639  The Panel sees no reason why those forms of commerce should be limited to the forms \nof commerce that existed at the time of negotiation of the TRIPS Agreement.  Accordingly, the \napplication of the term \"commercial scale\" can adjust to different situations, and refer to a different \nrelative magnitude or extent, degree or proportion, depending on the facts.640  However, subsequent \ntechnological developments do not alter the considerations relevant to the interpretation of the terms \nused in Article 61.      \n7.658 The United States also mentions an example of a \"high-value niche market item\" such as a \nspecialized software application.  This example refers to a Seattle Times newspaper article titled \n\"Inside China's teeming world of fake goods\".641  The Panel accepts that the market for certain \nproducts may be small, but considers that a single, anecdotal newspaper article is insufficient \nevidence to demonstrate what is a commercial scale for such a product.  To the extent that this article \nconcerns the impact on the right holder, it has been addressed in the second limb of the claim.   \n7.659 The Panel observes a link between this argument and the issue of large-scale infringement \nwith no commercial purpose.  The United States originally submitted that the term \"commercial scale\" \nincluded the following: \n\"Thus, the concept of 'commercial scale' extends … to those whose actions, \nregardless of motive or purpose, are of a sufficient extent or magnitude to qualify as \n'commercial scale' in the relevant market.\"642    \n7.660 The United States indicated that this was not the focus of its submission, and confirmed that \nin this dispute it does not challenge the thresholds on the basis that they require a \"profit-making \npurpose\".643  In response to a question from the Panel, the United States confirmed that its own \nCopyright Law was only amended in 1997 to deal with the problem of massive infringement, such as \nvia the Internet, even if the infringing activity is not necessarily pursued for financial gain.644   \n7.661 For all the above reasons, the Panel does not consider that the United States has made a \nprima facie case with respect to impact on the commercial marketplace. \n7.662 The Panel wishes to emphasize that its findings should not be taken to indicate any view as to \nwhether the obligation in the first sentence of Article 61 of the TRIPS Agreement applies to acts of \ncounterfeiting and piracy committed without any purpose of financial gain. \n                                                   \n639 See also the Panel Reports in Canada – Pharmaceutical Patents (at para. 7.55) and US – \nSection 110(5 Copyright Act (at para. 6.187) with respect to the phrase \"normal exploitation\" in Articles 30 and \n13 of the TRIPS Agreement, respectively. \n640 The United States' concern regarding the volume of distribution by means of digital technology and \nthe Internet is therefore relevant to the assessment of a \"commercial scale\": see United States' rebuttal \nsubmission, para. 112.   \n641 United States' first written submission, para. 148, referring to Exhibit US-37. \n642 United States' first written submission, para. 110. \n643 United States' first written submission, paras 110 and 133, fn. 96;  response to Question No. 59.  See \nparagraphs 7.449 to 7.450 above, showing that Articles 213, 214, 217 and 218 of China's Criminal Law take \naccount of a profit-making purpose. \n644 United States' response to Question No. 67. \n\n\n \nWT/DS362/R \n \nPage 131 \n \n \n  \n(xii) \nMiscellaneous factors \n7.663 The United States asserted that the breadth of the term \"on a commercial scale\" presumes that \na wide range of considerations should be probative of \"commercial scale\".645  However, it did not \nsubmit argument in support of any other considerations besides those discussed above. \n7.664 The Panel recalls its finding at paragraph 7.602 above that, if it is alleged that a Member's \nmethod of implementation does not provide for criminal procedures and penalties to be applied in \ncases in accordance with the first sentence of Article 61 of the TRIPS Agreement, that allegation must \nbe proven with evidence.   \n7.665 The United States briefly mentioned various factors and examples, most raised by third \nparties, and apparently considers that these may be relevant to a determination of a \"commercial \nscale\".646  It gave the example of \"the manufacture of prototypes to test the infringer's production \nequipment\"647 but did not explain why this would not attract criminal liability under the Criminal Law, \nincluding its general provisions, or why it would constitute trademark counterfeiting or copyright \npiracy.  It did not explain why \"marketing and soliciting of business\" would not attract criminal \nliability under the Criminal Law, including its general provisions, or why it would constitute \ntrademark counterfeiting or copyright piracy.  It did not explain why a \"previous history of \ninfringement\" could not be covered by the threshold of \"other serious circumstances\".   \n7.666 Further, Japan, supported by the European Communities, and with whom the United States \nagreed, referred to a possible \"organizational element\" that can be taken into account in determining a \ncommercial scale. 648  The Panel notes that Japan included this factor in its interpretation of \n\"commercial scale\" on the basis of a definition of \"commerce\" as a countable noun in French and \nSpanish that means, basically, a shop.  However, the English language does not include the word \"a \ncommerce\" in that sense.  As the English version of the TRIPS Agreement is equally authentic649, the \nPanel does not consider this aspect of Japan's interpretation correct.  Further, if a typical or usual \ncommercial activity included an element of organization, in terms of cooperation with other parties, \nthe United States has not explained why the general provisions of China's Criminal Law (discussed at \nparagraphs 7.439 to 7.446 above) that allow aggregation of infringing acts by different persons \ncooperating in a joint crime, are inadequate, beyond the issue of the level of the thresholds, or why the \ncumulation of infringements over time, or cumulation of infringing products on different premises \nwithin the definition of \"illegal business operation volume\" would be inadequate. \n7.667 Therefore, the United States did not relate these factors sufficiently to the measures at issue or \nto its claim to discharge its burden of proof.   \n7.668 The Panel recalls its findings at paragraphs 7.652, 7.661 and 7.667 above and finds that the \nUnited States has not made a prima facie case with respect to the second limb of its claim under the \nfirst sentence of Article 61 of the TRIPS Agreement. \n(xiii) \nConclusion with respect to the claim under the first sentence of Article 61 \n7.669 In light of the Panel's findings at paragraphs 7.632 and 7.668 above, the Panel concludes that \nthe United States has not established that the criminal thresholds are inconsistent with China's \nobligations under the first sentence of Article 61 of the TRIPS Agreement. \n                                                   \n645 United States' first written submission, para. 113;  see also rebuttal submission, para. 38. \n646 United States' response to Question No. 16;  rebuttal submission, fn. 35 and fn. 36. \n647 United States' response to Question No. 62. \n648 See note 415 and United States' rebuttal submission, para. 38. \n649 See the final clause of the WTO Agreement. \n\n\nWT/DS362/R \nPage 132 \n \n \n  \n4. \nClaim under the second sentence of Article 61 of the TRIPS Agreement \n(a) \nMain arguments of the parties \n7.670 The United States claims that, as China's criminal measures do not comply with the first \nsentence of Article 61 of the TRIPS Agreement, they are accordingly also inconsistent with China's \nobligations under the second sentence of that Article.  In the United States' view, China can not make \nthe necessary remedies \"available\" or sufficient to deter piracy and counterfeiting.650 \n7.671 China responds that the obligation in the second sentence of Article 61 is supplementary to, \nand contingent on, that of the first sentence of that Article.  The obligation in the second sentence is \nonly triggered in the event that a Member has an obligation under the first sentence to provide \ncriminal procedures and penalties.651 \n(b) \nMain arguments of third parties \n7.672 Australia argues that Article 61 creates an obligation of result, namely to put in place \npenalties that are sufficient to actively discourage others from engaging in such acts. A Member must \nactively prosecute and punish such acts.  The question whether punishments are sufficient to provide \nsuch a deterrent is assessed in light of the circumstances in a Member's territory but it is open to \nanother Member to challenge the adequacy of a Member's remedies to achieve the deterrent effect \nunder the DSU.652 \n7.673 Brazil notes that the second sentence of Article 61 refers not only to imprisonment but also to \nmonetary fines.  In China, low-level infringement seems to be punishable at least with monetary fines \nfollowing administrative proceedings.  It seems to be overly formalistic to assume that because a \ndomestic legal system qualifies monetary fines as administrative penalties, the core substantive issue \nof the deterrence capability of the remedy should be put aside.653 \n7.674 Canada submits that China's thresholds may make available administrative remedies, but they \npreclude the application of criminal penalties in cases that fall below the thresholds for criminal \nliability.  The thresholds create \"safe harbours\" in which professional infringers are free to carry out \nwilful trademark counterfeiting and copyright piracy without risk of imprisonment or monetary fine.  \nRather than deterring infringement, the thresholds provide infringers clear parameters for committing \nwilful trademark counterfeiting or copyright piracy with immunity.654 \n(c) \nConsideration by the Panel \n7.675 The Panel observes that the United States has made this claim contingent upon the outcome of \nits claims under the first sentence of Article 61 of the TRIPS Agreement.  Additional findings \nregarding this claim under the second sentence of Article 61 would not contribute further to a positive \nsolution to this dispute.  Therefore, it is unnecessary for the Panel to rule on this claim. \n                                                   \n650 United States' first written submission, paras 164-166. \n651 China's first written submission, paras 144-147. \n652 Australia's third party written submission, para. 25. \n653 Brazil's third party written submission, paras 39-42. \n654 Canada's third party written submission, para. 12. \n\n\n \nWT/DS362/R \n \nPage 133 \n \n \n  \n5. \nClaim under Article 41.1 of the TRIPS Agreement \n(a) \nMain arguments of the parties \n7.676 The United States claims that China has failed to make the procedures and penalties required \nby the first and second sentences of Article 61 \"available\" as required by Article 41.1 of the TRIPS \nAgreement.655 \n7.677 China responds that the United States has failed to show that China breaches its obligations \nunder Article 61 and therefore fails to show that China breaches its obligations under Article 41.1.656 \n(b) \nMain arguments of third parties \n7.678 Argentina submits that China's measures do not appear to be inconsistent with Article 41.1 of \nthe TRIPS Agreement.  Article 41.1 should be read in light of Article 1.1, which provides flexibility \nin implementation;  Article 41.2 which requires Members to ensure that enforcement procedures are \nfair and equitable; and Article 41.5 which renders the obligation in Article 41.1 relative, not \nabsolute.657 \n7.679 Canada refers to its arguments regarding the claims under Article 61.  Further, the fact that \"a \nplethora of counterfeit and pirated goods continues to be produced, reproduced and distributed in \nChina, and exported from China\", makes it clear that China does not provide effective action against \nwilful acts of infringement on a commercial scale and does not provide remedies that deter further \ninfringements, contrary to Article 41.1.658 \n(c) \nConsideration by the Panel \n7.680 The Panel observes that this claim is consequent upon the outcome of the claims regarding the \ncriminal measures under Article 61 of the TRIPS Agreement.  Additional findings regarding this \nclaim under Article 41.1 of the TRIPS Agreement would not contribute further to a positive solution \nto this dispute.  Therefore, it is unnecessary for the Panel to rule on this claim. \n6. \nConclusions with respect to the criminal thresholds \n7.681 The Panel recalls its conclusion at paragraph 7.669 above that the United States has not \nestablished that the criminal thresholds are inconsistent with China's obligations under the first \nsentence of Article 61 of the TRIPS Agreement. \n7.682 The Panel exercises judicial economy with respect to the claims under Article 41.1 of the \nTRIPS Agreement and under the second sentence of Article 61 of the TRIPS Agreement (with respect \nto the criminal thresholds).   \nVIII. \nCONCLUSIONS AND RECOMMENDATION \n8.1 \nFor the reasons set out in this Report, the Panel concludes as follows:  \n(a) \nthe Copyright Law, specifically the first sentence of Article 4, is inconsistent with \nChina's obligations under: \n                                                   \n655 United States' first written submission, paras 167-169. \n656 China's first written submission, paras 148-150. \n657 Argentina's third party written submission, paras 30-37. \n658 Canada's third party written submission, para. 13.","difficulty":"hard","domain":"Single-Document QA","length":"short","question":"Why does the threshold of criminal liability for IPR infringement crimes stipulated in the Criminal Law of China and relevant judicial interpretations not violate Article 61 of the TRIPS Agreement?","sub_domain":"Legal"}

Source: https://huggingface.co/datasets/zai-org/LongBench-v2

initial import

Posting: /agents

GET /api/v1/write?intent=publish&task_id=b8beca1d-aba0-599c-88ef-ef3a14ef9203&body={url_encoded_text}&agent_name={optional_name}&nonce={optional_random_id}