LongBench v2 / 66ed3148821e116aacb1f2ce / Why does the threshold of criminal liability for IPR infringement crimes…

WORLD TRADE 
ORGANIZATION 
 
 
WT/DS362/R 
26 January 2009 
 
(09-0240) 
 
 
 
Original: English 
 
 
 
 
 
 
 
 
 
 
 
CHINA – MEASURES AFFECTING THE PROTECTION AND 
ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS 
 
 
Report of the Panel  
 
 
 
 
 
 


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(a) 
Article 59 of the TRIPS Agreement is not applicable to the Customs measures insofar 
as those measures apply to goods destined for exportation; 
(b) 
the United States has not established that the Customs measures are inconsistent with 
Article 59 of the TRIPS Agreement, as it incorporates the principles set out in the 
first sentence of Article 46 of the TRIPS Agreement; and 
(c) 
the Customs measures are inconsistent with Article 59 of the TRIPS Agreement, as it 
incorporates the principle set out in the fourth sentence of Article 46 of the TRIPS 
Agreement. 
C. 
CRIMINAL THRESHOLDS 
1. 
Description of the measures at issue 
(a) 
Introduction  
7.396 This Section of the Panel's findings concerns criminal thresholds established by the following 
measures.  China's Criminal Law was adopted by the National People's Congress in 1979, revised by 
the National People's Congress in 1997 and promulgated by Order of the President of the People's 
Republic of China in 1997.  The Criminal Law is divided into two Parts:  Part One, setting out 
"General Provisions", and Part Two, setting out "Specific Provisions".  Part Two, Chapter III, 
provides for "Crimes of disrupting the order of the socialist market economy".  Chapter III, Section 7, 
provides for "Crimes of infringing intellectual property rights" and comprises Articles 213 to 220, 
considered below. 
7.397 The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate 
Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of 
Infringement of Intellectual Property Rights (Interpretation No. 19 [2004] of the Supreme People's 
Court) ("Judicial Interpretation No. 19 [2004]") was adopted in November 2004 and entered into 
force in December 2004.  It interprets certain terms used in Articles 213 to 219 of the Criminal Law 
and also deals with certain other matters.  
7.398 The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate 
Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of 
Infringement of Intellectual Property Rights – II (Interpretation No. 6 [2007] of the Supreme People's 
Court) ("Judicial Interpretation No. 6 [2007]") was adopted and entered into force in April 2007.  It 
interprets certain terms used in Article 217 of the Criminal Law and also deals with certain other 
matters. 
(b) 
Trademark provisions 
(i) 
Use of a counterfeit trademark  
7.399 Article 213 of the Criminal Law may be translated as follows: 
"Whoever, without permission from the owner of a registered trademark, uses a 
trademark which is identical with the registered trademark on the same kind of 
commodities shall, if the circumstances are serious, be sentenced to fixed-term 
imprisonment of not more than three years or criminal detention and shall also, or 
shall only, be fined; if the circumstances are especially serious, the offender shall be 


 
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sentenced to fixed-term imprisonment of not less than three years but not more than 
seven years and shall also be fined."368  (emphasis added) 
7.400 Article 1 of Judicial Interpretation No. 19 [2004] interprets the phrase "the circumstances are 
serious" in Article 213 of the Criminal Law and may be translated as follows: 
"Whoever, without permission from the owner of a registered trademark, uses a 
trademark which is identical with the registered trademark on the same kind of 
commodities, in any of the following circumstances which shall be deemed as 'the 
circumstances are serious' under Article 213 of the Criminal Law, shall be sentenced 
to fixed-term imprisonment of not more than three years or criminal detention for the 
crime of counterfeiting registered trademark, and shall also, or shall only, be fined: 
(1)  
the illegal business operation volume of not less than 50,000 Yuan369 or the 
amount of illegal gains of not less than 30,000 Yuan; 
(2)  
in the case of counterfeiting two or more registered trademarks, the illegal 
business operation volume of not less than 30,000 Yuan or the amount of illegal gains 
of not less than 20,000 Yuan; 
(3)  
other serious circumstances." 370  (emphasis added) 
7.401 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term "illegal business 
operation volume" and may be translated as follows: 
"The 'illegal business operation volume' herein means the value of the infringing 
products manufactured, stored, transported or sold during the course of commission 
of the act of infringing intellectual property rights.  The value of the sold infringing 
products shall be calculated at the actual sale price. The value of the infringing 
products manufactured, stored, transported and unsold shall be calculated at the 
labelled price or at the average actual sales price of the infringing products as verified. 
If there is no labelled price on the infringing products or the actual sales price is 
unable to be verified, the price of the infringing products shall be calculated at the 
middle market price of the infringed products."371 
7.402 Article 17 of Judicial Interpretation No. 30 [1998]372 defines the term "amount of illegal 
gains" and may be translated as follows: 
"The 'amount of illegal gains' in this Interpretation refers to the amount of profit 
obtained."373 
(ii) 
Selling counterfeit trademark commodities 
7.403 Article 214 of the Criminal Law may be translated as follows: 
                                                   
368 Mutually agreed translation no. 1. 
369 This corresponds to US$6,250 at average market exchange rates (¥8.013/US$ for 2004-2007).   
370 Mutually agreed translation no. 3. 
371 Mutually agreed translation no. 3. 
372 The Interpretation by the Supreme People's Court of Certain Questions Concerning the Specific 
Application of Law in Adjudicating Criminal Cases Involving Illegal Publications (Interpretation No. 30  [1998] 
of the Supreme People's Court) in Exhibits US-4 and CHN-3. 
373 Mutually agreed translation no. 4.  The parties agree that this definition is applicable under Judicial 
Interpretation No. 19 [2004]:  see United States' and China's respective responses to Question No. 3(a). 


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"Whoever sells commodities, knowing374 that such commodities bear counterfeit 
registered trademarks shall, if the amount of sales is relatively large, be sentenced to 
fixed-term imprisonment of not more than three years or criminal detention and shall 
also, or shall only, be fined; if the amount of sales is huge, the offender shall be 
sentenced to fixed-term imprisonment of not less than three years but not more than 
seven years and shall also be fined."375  (emphasis added) 
7.404 Article 2 of Judicial Interpretation No. 19 [2004] interpreted the phrase "the amount is 
relatively large" under Article 214 of the Criminal Law and may be translated as follows: 
"Whoever sells commodities, knowing that such commodities bear counterfeit 
registered trademarks, with the amount of sales of not less than 50,000 Yuan, this 
shall be deemed as 'the amount is relatively large' under Article 214 of the Criminal 
Law, and the offender shall be sentenced to fixed-term imprisonment of not more 
than three years or criminal detention for the crime of selling commodities bearing a 
counterfeit registered trademark, and shall also, or shall only, be fined."376 
(iii) 
Forgery of trademarks and sale of forged trademarks 
7.405 Article 215 of the Criminal Law may be translated as follows: 
"Whoever forges or, without the authorization of another person, makes 
representations of that person's registered trademarks, or sells representations of 
another person's registered trademark that are forged or made without authorization, 
shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of 
not more than three years, criminal detention or public surveillance and shall also, or 
shall only, be fined; if the circumstances are especially serious, the offender shall be 
sentenced to fixed-term imprisonment of not less than three years but not more than 
seven years and shall also be fined."377  (emphasis added) 
7.406 Article 3 of Judicial Interpretation No. 19 [2004] interpreted the phrase "the circumstances are 
serious" under Article 215 of the Criminal Law and may be translated as follows: 
"Whoever forges or, without the authorization of another person, makes 
representations of that person's registered trademarks or sells such representations, in 
any of the following circumstances which shall be deemed as 'the circumstances are 
serious' under Article 215 of the Criminal Law, shall be sentenced to fixed-term 
imprisonment of not more than three years, criminal detention or public surveillance 
for the crime of illegally producing or selling illegally made representations of the 
registered trademark, and shall also, or shall only, be fined: 
(1)  
forging or, without the authorization, making representations of the registered 
trademarks or selling such representations of not less than 20,000 pieces, or with the 
illegal business operation volume of not less than 50,000 Yuan, or the amount of 
illegal gains of not less than 30,000 Yuan; 
(2)  
forging or, without the authorization, making two or more kinds of 
representations of the registered trademarks or selling such representations of not less 
                                                   
374 Note in mutually agreed translation:  Please refer to Article 9 of the 2004 Judicial Interpretation. 
375 Mutually agreed translation no. 1. 
376 Mutually agreed translation no. 3. 
377 Mutually agreed translation no. 1. 


 
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than 10,000 pieces, or with the illegal business operation volume of not less than 
30,000 Yuan, or the amount of illegal gains of not less than 20,000 Yuan; 
(3)  
other serious circumstances."378 (emphasis added) 
7.407 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term "illegal business 
operation volume" as set out at paragraph 7.401 above.  Article 17 of Judicial Interpretation No. 30 
[1998] defines the term "amount of illegal gains" as set out at paragraph 7.402 above.  Article 12(3) of 
Judicial Interpretation No. 19 [2004] defines the term "piece" and may be translated as follows: 
"'Piece' (件)379 under Article 3 herein means one representation with the entire 
trademark pattern."380 
(c) 
Copyright provisions 
(i) 
Criminal copyright infringement 
7.408 Article 217 of the Criminal Law may be translated as follows: 
"Whoever, for the purpose of making profits, commits any of the following acts of 
infringement of copyright shall, if the amount of illegal gains is relatively large, or if 
there are other serious circumstances, be sentenced to fixed-term imprisonment of 
not more than three years or criminal detention and shall also, or shall only, be fined; 
if the amount of illegal gains is huge or if there are other especially serious 
circumstances, the offender shall be sentenced to fixed-term imprisonment of not less 
than three years but not more than seven years and shall also be fined: 
(1)  reproducing [/]381 distributing written works, musical works, cinematographic 
works, television or video works, computer software or other works without 
permission of the copyright owner; 
(2)  publishing a book of which the exclusive right of publication is enjoyed by 
another person; 
(3)  reproducing [/] distributing audio recording [/] video recording made by another 
person without permission of the maker;  
(4)  making, selling382 a work of fine art with the forged signature of another 
person."383 (emphasis added) 
7.409 Article 5 of Judicial Interpretation No. 19 [2004] interpreted the phrases "the amount of 
illegal gains is relatively large" and "there are other serious circumstances" under Article 217 of the 
Criminal Law and may be translated as follows: 
                                                   
378 Mutually agreed translation no. 3. 
379 Note in mutually agreed translation:  in this context, piece (件) is a "measure word" for a trademark 
representation. 
380 Mutually agreed translation no. 3. 
381 The parties advised the Panel orally at the second substantive meeting that the use of "[/]" in 
mutually agreed translations nos. 1, 2 and 3 did not indicate disagreement but rather reflected the fact that the 
original version did not use the word "and". 
382 Note in mutually agreed translation:  There is neither "and" or "or" between "making" and "selling", 
only a Chinese repetitive comma (、) or 顿号 which has no precise English equivalent. 
383 Mutually agreed translation no. 1. 


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"Whoever, for the purpose of making profits, commits any of the acts of infringement 
of copyright under Article 217 of the Criminal Law, with the amount of illegal gains 
of not less than 30,000 Yuan which shall be deemed as 'the amount of illegal gains is 
relatively large'; in any of the following circumstances which shall be deemed as 
'there are other serious circumstances', shall be sentenced to fixed-term imprisonment 
of not more than three years or criminal detention for the crime of infringement of 
copyright, and shall also, or shall only, be fined: 
(1)  
the illegal business operation volume of not less than 50,000 Yuan; 
(2)  
reproducing [/] distributing, without permission of the copyright owner, a 
written work, musical work, cinematographic work, television or other video works, 
computer software and other works of not less than 1,000384 张 (份)385 in total; 
(3)  
other serious circumstances."386 (emphasis added) 
7.410 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term "illegal business 
operation volume" as set out at paragraph 7.401 above.  Article 17 of Judicial Interpretation No. 30 
[1998] defines the term "amount of illegal gains" as set out at paragraph 7.402 above. 
7.411 Article 1 of Judicial Interpretation No. 6 [2007] re-interpreted the phrase "there are other 
serious circumstances" under Article 217 of the Criminal Law and may be translated as follows: 
"Whoever, for the purpose of making profits, reproduces [/] distributes, without 
permission of the copyright owner, a written work, musical work, cinematographic 
work, television or video works, computer software and other works of not less than 
500 张 (份)387 in total, [the offence] shall be deemed as 'there are other serious 
circumstances' under Article 217 of the Criminal Law …"388 
7.412 The number "500" in this provision conflicts with the number "1000" in the earlier Judicial 
Interpretation.  The number "500" therefore prevails by virtue of Article 7 of Judicial Interpretation 
No. 6 [2007], which may be translated as follows: 
"Where any previously promulgated judicial interpretation is in conflict with this 
Interpretation, this Interpretation shall prevail."389   
(ii) 
Selling copyright-infringing reproductions 
7.413 Article 218 of the Criminal Law may be translated as follows: 
"Whoever, for the purpose of making profits, sells infringing reproductions, knowing 
that such infringing reproductions are those stipulated in Article 217 of this Law shall, 
if the amount of illegal gains is huge, be sentenced to fixed-term imprisonment of not 
                                                   
384 The number "1000" has been superseded by "500":  see paragraphs 7.411 and 7.412 below. 
385 Note in mutually agreed translation:  张 is a Chinese "measure word" broadly used to count flat 
things (like optical disks, pages, etc.) and 份 is a "measure word" used to count copies in general. 
386 Mutually agreed translation no. 3. 
387 Note in mutually agreed translation: 张 is a Chinese "measure word" broadly used to count flat 
things (like optical disks, pages, etc.) and 份 is a "measure word" used to count copies in general. 
388 Mutually agreed translation no. 2. 
389 Mutually agreed translation no. 2 and the parties' respective responses to Question No. 3(a). 


 
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more than three years or criminal detention and shall also, or shall only, be fined."390 
(emphasis added) 
7.414 Article 6 of Judicial Interpretation No. 19 [2004] interpreted the phrase "the amount of illegal 
gains is huge" under Article 218 of the Criminal Law and may be translated as follows: 
"Whoever, for the purpose of making profits, commits any of the acts as stipulated in 
Article 218 of the Criminal Law, where the amount of illegal gains is not less than 
100,000 Yuan, this shall be deemed as 'the amount of illegal gains is huge', and the 
offender shall be sentenced to fixed-term imprisonment of not more than three years 
or criminal detention for the crime of selling infringing reproductions, and shall also, 
or shall only, be fined."391 
(d) 
Crimes of infringing intellectual property rights committed by a unit 
7.415 The Panel's terms of reference also refer to Article 220 of the Criminal Law on crimes under 
Articles 213 to 219 where committed by a unit.  The United States has not requested relief in respect 
of that Article.  Therefore, the Panel does not consider this aspect of the measure. 
2. 
Construction of the measures at issue 
(a) 
Introduction 
7.416 The Panel notes that this claim challenges China's criminal measures "as such".  The parties 
disagree on certain aspects of the measures at issue.  The Panel is therefore obliged, in accordance 
with its mandate, to make an objective assessment of the meaning of the relevant provisions of those 
measures.  The Panel recalls its observations at paragraph 7.28 above and confirms that it examines 
these measures solely for the purpose of determining their conformity with China's obligations under 
the TRIPS Agreement. 
(b) 
Normative effect of the Judicial Interpretations 
7.417 Under the 1982 Constitution of the People's Republic of China, the National People's 
Congress is the highest organ of State power and its permanent body is its Standing Committee.  The 
National People's Congress and its Standing Committee exercise the legislative power of the State.  
The National People's Congress enacts and amends basic laws, such as the Criminal Law, whilst its 
Standing Committee enacts and amends other statutes.392 
7.418 In 1981, the Standing Committee of the National People's Congress adopted a Resolution on 
Improving the Work of Interpreting the Law, in which it decided as follows:  
"Questions involving the specific application of laws and decrees in court trials shall 
be interpreted by the Supreme People's Court.  Questions involving the specific 
application of laws and decrees in procuratorial work shall be interpreted by the 
Supreme People's Procuratorate."393   
                                                   
390 Mutually agreed translation no. 1. 
391 Mutually agreed translation no. 3. 
392 1982 Constitution of the People's Republic of China, Articles 62 and 67, explained in China's WTO 
Trade Policy Review, Report by the Secretariat, WT/TPR/S/161, Chapter II(2), referenced in United States' first 
written submission, para. 22, set out in Exhibit US-16. 
393 1981 Resolution of the Standing Committee of the National People's Congress on Improving the 
Work of Interpreting the Law, paragraph 2, in Exhibit US-13. 


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7.419 In 1997, the Supreme People's Court formulated Certain Provisions on Judicial Interpretation 
Work.  In March 2007, it replaced these with new Provisions on Judicial Interpretation Work, which 
may be translated as follows: 
"Judicial interpretations issued by the Supreme People's Court shall have legal 
effect."394 
7.420 In 1996 the Supreme People's Procuratorate formulated Provisional Provisions on Judicial 
Interpretation Work.  In May 2006, it replaced these with Provisions on Judicial Interpretation Work, 
which may be translated as follows: 
"Judicial interpretations made by the Supreme People's Procuratorate have legal 
effect.  People's procuratorates may use provisions of judicial interpretation in legal 
documents such as bills of indictment or protest."395 
7.421 The Provisions of the Supreme People's Court on Judicial Interpretation Work and the 
Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work both provide for the 
joint formulation of judicial interpretations by the Supreme People's Court and the Supreme People's 
Procuratorate when an issue involves both judicial and prosecutorial work.396 
7.422 The United States submits that, in light of the above, the Judicial Interpretations at issue in 
this dispute are binding and have the force of law.397   
7.423 China submits that the Judicial Interpretations are issued "in order to ensure a uniform 
understanding and application of the law".398  China does not disagree with the United States' 
description of the legal basis and binding nature of the Judicial Interpretations at issue as set out in the 
United States' first written submission.399  China confirms that if an illegal act does not meet one of 
the pertinent thresholds set out in the Judicial Interpretations at issue, prosecution of that act is legally 
impossible.400 
7.424 In light of the above, the Panel finds that the Judicial Interpretations of the Articles of the 
Criminal Law at issue are binding and have the force of law. 
(c) 
Thresholds under the Criminal Law in general 
7.425 China informs the Panel that it employs thresholds across a range of commercial crimes, 
reflecting the significance of various illegal acts for overall public and economic order and China's 
prioritization of criminal enforcement, prosecution and judicial resources.  China submits that the 
criminal thresholds for counterfeiting and piracy are reasonable and appropriate in the context of this 
legal structure and the other laws on commercial crimes.401 
                                                   
394 Provisions of the Supreme People's Court on Judicial Interpretation Work, Article 5, 法发 [2007] 
No. 12 in Exhibit US-14. 
395 Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work, Article 5, 高检发
研字 [2006] No. 4 in Exhibit US-15. 
396 Provisions of the Supreme People's Court on Judicial Interpretation Work (referred to in note 394 
above), Article 7, and Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work 
(referred to in note 395 above), Article 21. 
397 United States' first written submission, para. 24. 
398 China's first written submission, para. 22. 
399 China's response to Question No. 10, referencing paras 20-24 of that submission. 
400 China's response to Question No. 55. 
401 China's first written submission, paras 122-127. 


 
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7.426 The United States responds that what China chooses to do with its domestic non-IPR criminal 
thresholds has no bearing on the Panel's assessment of whether China meets its international 
obligations under the first sentence of Article 61 of the TRIPS Agreement.402 
7.427 The Panel observes that Part One of the Criminal Law sets out general provisions.  Within 
Part One, Chapter II, Section 1 provides for "Crimes and Criminal Responsibility".  Article 13 defines 
a crime and may be translated in fine as follows:  
"However, if the circumstances are obviously minor and the harm done is not serious, 
the act shall not be considered a crime."403 
7.428 China submits that, throughout the Criminal Law, the definitions of various crimes are 
accompanied by rules for determining at what point the particular proscribed conduct becomes so 
serious as to constitute a crime.404  These are collated and issued in Prosecution Standards.  In 
response to a question from the Panel, China indicated that most substantive provisions in Chapter III 
on economic crimes, Chapter V on property violation and Chapter VI, Section 9 on producing, selling 
and disseminating pornographic materials405 are also subject to specific thresholds, such as those 
applicable to Articles 213, 214, 215, 217 and 218 of the Criminal Law that are at issue in this 
dispute.406   
7.429 The Panel notes China's acknowledgement that a total of 11 crimes out of 117 crimes set out 
in these relevant Parts and this relevant Section of the Criminal Law are not subject to any specific 
threshold.407  Therefore, whilst China may for internal policy reasons frequently use thresholds to 
define the point at which many classes of illegal act are considered serious enough to be criminalized, 
China's legal structure is capable of criminalizing certain acts without recourse to thresholds.  
(d) 
Thresholds for conviction or aggravation  
7.430 The Panel notes that some thresholds in the Criminal Law set minimum requirements for 
conviction ("conviction thresholds") whilst others set minimum requirements for higher penalties 
("aggravation thresholds").  Most of the Articles at issue in this dispute include both.  The conviction 
thresholds comprise "serious circumstances" in Articles 213 and 215, "relatively large amount of 
sales" in Article 214, "relatively large amount of illegal gains" or "other serious circumstances" in 
Article 217 and "huge amount of sales" in Article 218.  The aggravation thresholds comprise 
"especially serious circumstances" in Articles 213, 215 and 217 and "huge amount of sales" in 
Article 214.   
7.431 The United States only challenges the conviction thresholds as these render prosecution 
impossible in the absence of certain criteria.  Therefore, the Panel does not consider the aggravation 
thresholds further. 
                                                   
402 United States' rebuttal submission, paras 100-102. 
403 Exhibit CHN-1. 
404 China's first written submission, para. 121. 
405 Crimes under Part Two, Chapter VI, Section 9 of the Criminal Law were addressed together with 
copyright crimes under Articles 217 and 218 in Judicial Interpretation No. 30 [1998] (referred to in note 372 
above). 
406 See China's response to Question No. 57.   
407 China's response to Question No. 57. 


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(e) 
General provisions on inchoate crimes  
7.432 China refers to certain general provisions of the Criminal Law that it alleges apply to the 
crimes of infringing intellectual property rights.  These include Article 22 on preparation for a crime, 
and Article 23 on attempted crime, which may trigger criminal prosecution and penalties.408   
7.433 The United States replied that the extent to which these general provisions on inchoate crimes 
can address evidence of potential infringement is beside the point, as the thresholds rule out criminal 
liability based on evidence of actual infringement.409  In response to a question, the United States 
notes that neither the Criminal Law, Judicial Interpretation No. 19 [2004] nor Judicial Interpretation 
No. 6 [2007] contains any specific provisions concerning the offences of preparation or attempt 
relating to the completed crimes of trademark counterfeiting and copyright piracy.410 
7.434 The Panel observes that Part One, Chapter II, Section 2 of the Criminal Law sets out three 
inchoate crimes of preparation for a crime, criminal attempt and discontinuation of a crime.411  
Article 22 may be translated as follows: 
"Preparation for a crime refers to the preparation of the instruments or the creation of 
the conditions for a crime. 
An offender who prepares for a crime may, in comparison with one who completes 
the crime, be given a lighter or mitigated punishment or be exempted from 
punishment."412 
7.435 Article 23 may be translated, relevantly, as follows: 
"A criminal attempt refers to a case where an offender has already started to commit a 
crime but is prevented from completing it for reasons independent of his will. 
An offender who attempts to commit a crime may, in comparison with one who 
completes the crime, be given a lighter or mitigated punishment."413 
7.436 The Panel notes that each of these Articles contains provisions that appear to be of general 
application and that relate explicitly to "a crime" (犯罪).  The Articles to which China refers contain 
no express limitation to certain specific provisions of the Criminal Law.  They form part of Chapter II 
on "Crimes" found in Part One on "General Provisions", which also sets out the aim, basic principles 
and scope of application of the Criminal Law in Chapter I, provisions on punishments in Chapter III 
and the concrete application of punishments in Chapter IV.  On their face, there is no reason to 
suppose that Articles 22 and 23 do not apply to the crimes of infringing intellectual property rights in 
Articles 213, 214, 215, 217 and 218 of the Criminal Law.  This reading is confirmed by examples of 
judicial decisions submitted by China that show courts applying Articles 22 and 23 of the Criminal 
Law in cases of crimes of infringing intellectual property rights.414   
7.437 The Panel also notes that China has referred to the offences of preparation for a crime and 
attempted crime to show that packaging and product components can be taken into account in 
                                                   
408 China's first written submission, paras 35-37;  rebuttal submission, paras 36-41. 
409 United States' second oral statement, para. 34. 
410 United States' response to Question No. 8. 
411 The parties have not referred to Article 24 on discontinuation of a crime. 
412 Exhibit CHN-1. 
413 Exhibit CHN-1. 
414 The United States refers to these judicial decisions and appears to acknowledge that the Articles 
were applied in these cases: see United States' response to Question No. 8. 


 
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determining the availability of criminal procedures to enforce the substantive crimes of infringing 
intellectual property rights.  However, the Panel notes that China has not alleged that the offences of 
preparation and attempt render activities falling below the thresholds in Articles 213 to 220 generally 
subject to criminal prosecution. 
(f) 
General provisions on joint crimes 
7.438 Japan, supported by the European Communities, argues that quantitative thresholds would not 
capture counterfeiting activities of limited value or smaller quantities which are on a "commercial 
scale" due to their professional organization or the systematic cooperation with other persons.415 
Mexico further submits that small scale activity is "clearly meaningful" as it contributes to the chain 
of infringement.416 
7.439 In response to these third party submissions, China refers to Articles 25, 26 and 27 of the 
Criminal Law on joint liability, criminal groups and accomplices to show that the Criminal Law 
recognizes certain non-quantitative factors, such as evidence of collaboration between infringers.417  
China submits that they apply to the crimes of infringing intellectual property rights in Articles 213, 
214, 215, 217 and 218 of the Criminal Law.418   
7.440 The United States replies that this argument is of no consequence with respect to infringers 
that work alone. All the evidence demonstrates is that below-the-threshold activity could be captured 
if it existed as part of an above-the-threshold activity.419 
7.441 The Panel observes that Part One, Chapter II, Section 3 of the Criminal Law provides for 
"Joint crimes".  It sets out five provisions.  Article 25 may be translated, relevantly, as follows: 
"A joint crime refers to an intentional crime committed by two or more persons 
jointly. …" 420 
7.442 Article 26 may be translated as follows: 
"A principal criminal refers to any person who organizes and leads a criminal group 
in carrying out criminal activities or plays a principal role in a joint crime. 
A criminal group refers to a relatively stable criminal organization formed by three or 
more persons for the purpose of committing crimes jointly. 
Any ringleader who organizes or leads a criminal group shall be punished on the 
basis of all the crimes that the criminal group has committed. 
Any principal criminal not included in paragraph 3 shall be punished on the basis of 
all the crimes that he participates in or that he organizes or directs." 421 
                                                   
415 Japan's third party written submission, para. 17; European Communities' third party oral statement, 
para. 10. 
416 Mexico's third party oral statement, paras 6-7. 
417 China's rebuttal submission, paras 42-46. 
418 China's rebuttal submission, para. 33. 
419 United States' second oral statement, para. 35, referring to the application of the joint crime 
provision in one case (CHN-12), cited by China in its rebuttal submission, para. 44, and its response to Question 
No. 56. 
420 Exhibit CHN-1. 
421 Exhibit CHN-1. 


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7.443 Article 27 may be translated as follows: 
"An accomplice refers to any person who plays a secondary or auxiliary role in a joint 
crime. 
An accomplice shall be given a lighter or mitigated punishment or be exempted from 
punishment." 422 
7.444 The Panel observes that Articles 26 and 27 are limited to "joint crimes" which are defined by 
Article 25 as "intentional crimes".  On their face, there is no reason to suppose that Articles 25, 26 and 
27 do not apply to the crimes of infringing intellectual property rights in Articles 213, 214, 215, 217 
and 218 of the Criminal Law.  Several judicial decisions submitted by China show one or more of 
these Articles being cited in relation to Article 213.423  The decisions show that the relevant factors 
were aggregated among several offenders in order to reach a criminal threshold.   
7.445 China submitted that it may apply criminal procedures and penalties, on the basis of joint 
crimes and criminal group membership, to infringers that would not otherwise reach the criminal 
thresholds of the substantive criminal laws.424  However, in response to a question, China confirmed 
that the numerical thresholds under Articles 213, 214, 215, 217 and 218 of the Criminal Law apply to 
joint crimes under Articles 25, 26 and 27 of the Criminal Law.425   
7.446 Therefore, the Panel considers that the concept of joint crimes is relevant to the capacity of 
the Criminal Law to take into account an element of organization among different offenders.  
However, it does not alter the lack of criminal procedures and penalties for acts of infringement 
falling below the thresholds in Articles 213 to 220. 
(g) 
Specific features of the thresholds for crimes of infringing intellectual property rights 
(i) 
Profit-making purpose 
7.447 The United States submits that the thresholds "all require proof of an intention to make a 
financial gain or profit".426   
7.448 The Panel observes that, as regards the trademark offences, two of the thresholds under 
Article 213 of the Criminal Law, as interpreted by Article 1 of Judicial Interpretation No. 19 [2004], 
are set in terms of "illegal business operation volume" and "illegal gains" (i.e. amount of profits 
obtained427).  Article 214 of the Criminal Law applies to the act of selling, and the corresponding 
threshold in Article 2 of Judicial Interpretation No. 19 [2004] is set in terms of "amount of sales".  
These all imply a purpose of obtaining financial gain or making profits.  Article 215 of the Criminal 
Law does not expressly refer to a profit-making purpose. 
7.449 As regards the copyright offences, both Articles 217 and 218 of the Criminal Law expressly 
refer to acts carried out for "the purpose of making profits".  This language is reiterated in the 
corresponding interpretations in Articles 5 and 6 of Judicial Interpretation No. 19 [2004] and Article 1 
of Judicial Interpretation No. 6 [2007]. 
                                                   
422 Exhibit CHN-1. 
423 Exhibits CHN-4, CHN-6, CHN-9, CHN-12, CHN-13 and CHN-16. 
424 China's rebuttal submission, para. 46. 
425 China's response to Question No. 56. 
426 United States' response to Question No. 59. 
427 See paragraph 7.402 above. 


 
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7.450 Therefore, Articles 213, 214, 217 and 218 of the Criminal Law take account of at least one 
qualitative factor in conjunction with the numerical thresholds.  In this dispute, the United States does 
not challenge this aspect of the measure.428 
(ii) 
Alternative thresholds 
7.451 The parties agree that the thresholds refer to a range of different factors, comprising illegal 
business operation volume, amount of illegal gains (or profits), amount of sales, number of "copies" 
and "other serious circumstances".  The first three are, by their own terms, indicators of business 
activity and are either expressly, or impliedly, linked to selling, in other words, commercial activity.  
The first four are all expressed in numerical terms. 
7.452 China emphasizes that the multiple standards set forth in each of Articles 213, 215 and 217 of 
the Criminal Law are all alternatives.429 The United States agrees and claims that application of any or 
all of the alternative thresholds leaves many acts of commercial scale piracy and counterfeiting 
immune from criminal prosecution or conviction.430 
7.453 The Panel observes that Articles 213 and 215 of the Criminal Law each contain a single 
threshold.  However, these are interpreted by Articles 1 and 3 of Judicial Interpretation No. 19 [2004] 
in terms of a series of distinct circumstances.  It is clear from the text of Articles 1 and 3 that each of 
these circumstances applies in the alternative as Articles 1 and 3 each provide that the conviction 
threshold under the relevant Article of the Criminal Law shall be deemed satisfied in "any of the 
following circumstances".   
7.454 The Panel observes that Article 217 of the Criminal Law contains two conviction thresholds 
namely, "the amount of illegal gains" and "other serious circumstances".  The text of Article 217 
makes it clear that these are alternatives to each other by the use of the word "or".  Both of these 
thresholds are interpreted by Article 5 of Judicial Interpretation No. 19 [2004]:  the former in terms of 
a numerical amount and the latter in terms of a series of distinct circumstances.  It is clear from the 
text of Article 5 that each of these circumstances applies in the alternative as Article 5 provides that 
the conviction threshold of "other serious circumstances" under Article 217 of the Criminal Law shall 
be deemed satisfied in "any of the following circumstances".  Satisfaction of any one of those 
circumstances, or "the amount of illegal gains" threshold, shall be deemed to satisfy the relevant 
conviction threshold. 
7.455 This means, for example, that the use of a counterfeit trademark where the illegal business 
operation volume is, say, ¥40,000 (i.e. below the threshold of ¥50,000 applicable under Article 213 of 
the Criminal Law) is not exempt from criminal prosecution unless the amount of illegal gains, the 
number of registered trademarks involved in the offence, and other circumstances all fail to fulfil the 
other applicable thresholds.  However, where an act of infringement falls below all the applicable 
thresholds, criminal prosecution and penalties are not available. 
7.456 It is not disputed that the crimes of selling under Articles 214 and 218 of the Criminal Law 
each contain only one conviction threshold.  Therefore, those thresholds do not apply as alternatives. 
(iii) 
Cumulative calculation over time 
7.457 China submits that the thresholds are calculated over a prolonged period of time.  This is 
reflected in the general limitation period for crimes of a continuous nature, and the specific provision 
                                                   
428 See paragraphs 7.659 and 7.660 below. 
429 China's first written submission, paras 33-34. 
430 United States' rebuttal submission, para. 77. 


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on cumulative calculation in Article 12(2) of Judicial Interpretation No. 19 [2004].  China asserts that 
this principle also applies to thresholds in terms of numbers of copies.  Therefore, the thresholds for 
crimes infringing intellectual property rights can be calculated over the entire duration of the 
infringing activity.431   
7.458 The United States notes that Article 12(2) of Judicial Interpretation No. 19 [2004] is subject 
to a condition, namely, that no administrative penalty or criminal punishment has been imposed.432  
China responds that administrative enforcement forestalls the commission of the crime.433 
7.459 The Panel observes that Part One, Chapter IV, Section 8 of the Criminal Law sets out 
limitation periods for the prosecution of crimes.  Article 87 provides for limitation periods calculated 
according to the maximum punishment for the relevant crime, of which the shortest period is five 
years.  Article 89 of the Criminal Law provides that the limitation period for a criminal act of a 
continual or continuous nature shall be counted from the date the criminal act is terminated.434 
7.460 The Panel also notes that Article 12(2) of Judicial Interpretation No. 19 [2004] may be 
translated as follows: 
"In the case of infringement committed for [sic] more than once for which no 
administrative penalty or criminal punishment has been imposed, the illegal business 
operation volume, the amount of illegal gains, or the amount of sales shall be 
calculated accumulatively."435 
7.461 These provisions show that the thresholds may take into account multiple acts of infringement, 
and not simply the income, profits, sales or number of copies in a single transaction or at a single 
point in time.  This point is confirmed by examples of judicial decisions submitted by China showing 
that, when calculating whether thresholds had been met, courts have taken into account infringements 
during periods of up to five years.436  An administrative penalty for a particular act of infringement 
excludes that act from the cumulative calculation of the "illegal business operation volume", "the 
amount of illegal gains", or "the amount of sales" thresholds and, hence, from criminal procedures and 
penalties. 
(iv) 
Calculation of illegal business operation volume – goods 
7.462 China submits that the calculation of "illegal business operation volume" thresholds is not 
limited to goods in a single location at the same point in time.  Rather, the threshold covers all 
infringing goods associated with the infringer, even those no longer in the infringer's possession.437   
7.463 The United States acknowledges that, in certain circumstances, the definition of "illegal 
business operation volume" appears to permit an infringer's goods on different premises to be taken 
into account in calculation of the threshold.438 
7.464 The Panel observes that three conviction thresholds under Articles 213, 215 and 217 of the 
Criminal Law are set in terms of "illegal business operation volume".  The definition of "illegal 
                                                   
431 China's first written submission, paras 30-32;  rebuttal submission, paras 26-27. 
432 United States' response to Question No. 2(a). 
433 China's rebuttal submission, paras 28-29. 
434 Exhibit CHN-1. 
435 Mutually agreed translation no. 3. 
436 Exhibits CHN-4, CHN-13 and CHN-14. 
437 China's first written submission, paras 23-24. 
438 United States' response to Question No. 2(a). 


 
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business operation volume" in Article 12(1) of Judicial Interpretation No. 19 [2004]439 refers to 
infringing products "manufactured, stored, transported or sold" during the course of commission of 
the act of infringing intellectual property rights.  On its face, this does not restrict the calculation of 
these thresholds to the value of goods seized in a single place at the same point in time.  This 
interpretation is confirmed by examples of judicial decisions submitted by China showing that courts 
have taken into account the value of goods already sold440, as well as of goods seized at different 
locations441 when calculating the illegal business operation volume.   
(v) 
Calculation of illegal business operation volume – price 
7.465 The United States claimed that the calculation methodology required for "illegal business 
operation volume" was based on the prices of infringing goods, not the value of legitimate non-
infringing goods.442   
7.466 China responded that the calculation methodology is based on the actual, labelled or average 
sales price of the infringing goods but, where this cannot be determined, the price will be calculated 
based on the average market price of the infringed, i.e. genuine, goods.443  In response to a question 
from the Panel, China agreed that the price of the genuine goods is used as a last resort.444 
7.467 The Panel observes that three conviction thresholds under Articles 213, 215 and 217 of the 
Criminal Law are set in terms of "illegal business operation volume", which can be calculated by 
alternative methods.  Ultimately, the parties agree that, in accordance with the definition of "illegal 
business operation volume" in Article 12(1) of Judicial Interpretation No. 19 [2004]445, the primary 
method of calculation of those thresholds is based on the actual price at which infringing goods were 
sold or labelled or, if unsold, the average actual sales price of the infringing products as verified.  It is 
only where there is no labelled price or the actual sales price is unable to be verified that the illegal 
business operation volume is calculated according to the "middle" market price of the infringed 
products.  In other words, the threshold primarily relates to the value of the counterfeit trademark or 
copyright infringing goods but may, as a last resort, relate to the value of the genuine products.   
7.468 It is not disputed that the value of the counterfeit trademark goods or copyright infringing 
goods will be less than the value of the corresponding genuine goods.  This has the effect of making 
the illegal business operation threshold harder to satisfy in those cases where the price of the genuine 
goods is not used.  The number of cases that will fall below the thresholds is therefore greater than if 
the price of the infringed goods is used in all cases. 
(vi) 
Number of goods and prices  
7.469 China also submits that the illegal business operation threshold, in particular, is a flexible 
standard in its own right because it takes into account both the number and the value of infringing 
articles.446  The United States does not comment. 
                                                   
439 Set out at paragraph 7.401 above. 
440 Exhibits CHN-4, CHN-5 and CHN-6. 
441 Exhibit CHN-7. 
442 United States' first written submission, para. 119, relying on a translation in Exhibit US-2 that 
referred in fine to "products produced by infringing on intellectual property rights" rather than "the infringed 
products". 
443 China's first written submission, para. 28. 
444 China's response to Question No. 2(c). 
445 Set out at paragraph 7.401 above. 
446 China's rebuttal submission, paras 23-24. 


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7.470 The Panel observes that, in accordance with the definition of "illegal business operation 
volume" in Article 12(1) of Judicial Interpretation No. 19 [2004]447, these thresholds are calculated in 
terms of the price of goods.  Naturally, the number of goods required to meet the threshold is 
inversely proportional to the value of those goods.  Therefore, the threshold is flexible enough to 
capture a small number of high-value goods or a large number of low-value goods.  However, where 
the number of goods multiplied by the value of the goods is less than the threshold and not captured 
by any alternative applicable threshold, no criminal procedures and penalties will apply. 
(vii) 
Residual thresholds 
7.471 The parties initially did not address another threshold, that of "other serious circumstances" 
applicable under Articles 213, 215 and 217 of the Criminal Law. 
7.472 In response to a question from the Panel for clarification of the meaning of these thresholds, 
the United States noted a case in which a prosecutor had invoked the similarly undefined aggravation 
threshold of "other especially serious circumstances" under Article 1 of Judicial Interpretation No. 19 
[2004].  That prosecutor had unsuccessfully cited "serious effects in both domestic and international 
society".448  
7.473 In response to the same question, China explained that the inclusion of "other serious 
circumstances" was a legislative device that preserves legal flexibility for courts and for the future 
development of laws.  The provisions allows a court to determine that a particular act, while not 
meeting the other defined thresholds, is comparable and equivalent to those thresholds and therefore 
deserves to be subject to criminal penalties.  China was unable in the time available to provide 
specific examples of cases in which this threshold had been used.449   
7.474 The Panel observes that, on the face of the measures at issue, one of the thresholds applicable 
to three crimes infringing intellectual property rights is a residual category of "other serious 
circumstances".  In the case of Articles 213 and 215 of the Criminal Law, this threshold only appears 
in the text of Judicial Interpretation No. 19 [2004].  In the case of Article 217 of the Criminal Law, 
this threshold actually appears in the text of the Article itself, but is later defined in terms of two 
specific thresholds plus an identically worded residual category of "other serious circumstances".  
This bears out China's explanation that this threshold is a legislative device that allows for the future 
development of laws.  However, it is not alleged that any other thresholds have yet been devised 
beyond those set out in this Report. 
7.475 Moreover, it is not alleged that the courts or prosecutors would treat all infringing acts that 
fall below the numerical thresholds as criminal acts by virtue of this residual threshold.  China 
confirms that if an illegal act does not meet one of the pertinent thresholds set out in the Judicial 
Interpretations at issue, prosecution of that act is legally impossible.450  China also confirms that these 
residual thresholds apply to other acts that are "comparable and equivalent" to the defined thresholds.  
Therefore, these residual thresholds do not significantly alter the legal position but rather help define 
the class of trademark- and copyright-infringing acts that are not treated as criminal.   
(viii) 
Administrative enforcement 
7.476 China draws the Panel's attention to its system of administrative enforcement of intellectual 
property infringement that operates separately from its criminal enforcement system.  It informs the 
                                                   
447 Set out at paragraph 7.401 above. 
448 United States' response to Question No. 9, citing Exhibit US-61. 
449 China's response to Questions Nos. 9 and 55;  rebuttal submission, para. 22.   
450 See paragraphs 7.423 and 7.455 above. 


 
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Panel that in China infringement on any scale is subject to administrative enforcement.  Public 
security authorities tend to focus more on infringement above the criminal thresholds, and copyright 
and commerce administrative authorities are more likely to target low-scale infringement.451   
7.477 The United States responds that only criminal procedures and penalties can fulfil the 
obligations in Article 61 of the TRIPS Agreement.  Administrative enforcement is not a substitute for 
criminal enforcement.452 
7.478 The Panel notes that administrative sanctions, including fines, are available for intellectual 
property infringement falling below the criminal thresholds in China.  Therefore, the thresholds do not 
create a "safe harbour".  However, neither party to the dispute 453 argues that administrative 
enforcement may fulfil the obligations on criminal procedures and remedies set out in Article 61 of 
the TRIPS Agreement.  Therefore, the Panel does not consider this issue further. 
(h) 
Conclusion regarding construction of the measures at issue 
7.479 For the above reasons, the Panel concludes that, whilst the structure of the thresholds and the 
method of calculation of some of them can take account of various circumstances, acts of trademark 
and copyright infringement falling below all the applicable thresholds are not subject to criminal 
procedures and penalties.  The Panel will now consider whether any of those acts of infringement 
constitute "wilful trademark counterfeiting or copyright piracy on a commercial scale" within the 
meaning of Article 61 of the TRIPS Agreement.  
3. 
Claim under the first sentence of Article 61 of the TRIPS Agreement  
(a) 
Main arguments of the parties 
7.480 The United States submits that the concept of "commercial scale" extends both to those who 
engage in commercial activities in order to make a "financial return" in the marketplace, and who are, 
by definition, therefore operating on a commercial scale, as well as to those whose actions, regardless 
of motive or purpose, are of a sufficient extent or magnitude to qualify as "commercial scale" in the 
relevant market.454  Later, it clarified that the concept of "commercial scale" referred to counterfeiting 
or piracy that reach a certain extent or magnitude with a link to the marketplace.  Whether a particular 
counterfeiting or piracy activity is "on a commercial scale" will depend on the facts and circumstances 
surrounding that activity.  Relevant factors would include the market for the infringed goods, the 
object of the infringement, the value of the infringed goods, the means of producing the infringed 
goods, and the impact of the infringement on the right holder.455  Some activity would be so trivial or 
of a de minimis character so as not to be "on a commercial scale" in some circumstances, such as 
occasional infringing acts of a purely personal nature carried out by consumers, or the sale of trivial 
volumes for trivial amounts (i.e., the sale of one copy for ¥1) unless there are circumstances indicating 
to the contrary.456   
7.481 China responds that "commercial scale" refers to a significant magnitude of infringement 
activity. This is a broad standard, subject to national discretion and local conditions.457  The United 
States fails to interpret "commercial scale" as a single term and its interpretation reads the word 
                                                   
451 China's first written submission, paras 39-43. 
452 United States' rebuttal submission, paras 116-119. 
453 Contrast Brazil's third party written submission, paras 39-42. 
454 United States' first written submission, para. 110. 
455 United States' response to Question No. 59. 
456 United States' response to Question No. 60. 
457 China's first written submission, paras 64 and 117; China's first oral statement, para. 30. 


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"scale" completely out of the definition.458  The context of Articles 1.1 and 41.5 of the TRIPS 
Agreement shows that Members retain considerable discretion with respect to law enforcement, and 
that the ability to define the standards of Article 61 is reserved for Members.459  Later, it clarified that 
while these Articles did not provide an absolute defence against the substantive obligation of 
Article 61, they did provide relevant context and counselled strongly against interpretations of 
Article 61 in ways that would be inconsistent with China's legal system and would require the 
diversion of enforcement resources.460  The negotiating record of the TRIPS Agreement, as well as 
subsequent actions of Members show that they understood "commercial scale" to impose only a high 
and broad standard which only covered significant infringement activity.461 
7.482 The United States claims that China's criminal thresholds require authorities to disregard 
other indicia of commercial scale counterfeiting and piracy from physical evidence to consideration of 
the impact the piracy or counterfeiting has on the commercial marketplace and by extension, right 
holders.462  The United States argues that a range of quantitative and qualitative factors should be 
taken into account to ensure all "commercial scale" activities are subject to Article 61.463 
7.483 China responds that Chinese courts do consider semi-finished or unfinished products, and that 
these are evidence of preparation and attempt, as well as of substantive crimes.464  Evidentiary 
procedures and impact on the right holder are irrelevant to Article 61 of the TRIPS Agreement.465  
The Criminal Law also addresses organizational elements of crimes in provisions on vicarious 
liability.466   
(b) 
Main arguments of third parties 
7.484 Argentina argues that China's measures do not appear to be inconsistent with Article 61 of the 
TRIPS Agreement, as Article 1.1 provided China with the flexibility to implement enforcement 
provisions in a way compatible with its existing constitutional and regulatory framework.467 
7.485 Australia argues that "commercial scale" encompasses any act or series of acts of trademark 
counterfeiting or copyright piracy that adversely affects the financial rewards available to a right 
holder within a Member territory and that the ordinary meaning of the word "scale" incorporates the 
notion of a comparative assessment. Whether an individual case is on a commercial scale can only be 
determined case-by-case, taking account of all relevant circumstances, including the potential impact 
of digitally-based technologies. 468  This can include infringement activities with no financial 
advantage for the infringer, which nevertheless have substantial prejudicial impact on the right holder 
because of the availability of infringing material on digital networks.469   
                                                   
458 China's first written submission, paras 67-71, China's first oral statement, paras 26-27. 
459 China's first written submission, paras 90, 92 and 98-101. 
460 China's second written submission, paras 102-107. 
461 China's first written submission, paras 104-108 and 109-116; China's second written submission, 
paras 116-134. 
462 United States' first written submission, paras 143-150.   
463 United States' rebuttal submission, para. 38. 
464 China's first written submission paras 35-37; rebuttal submission, para. 32. 
465 China's first written submission, paras 141 and 139. 
466 China's rebuttal submission, paras 42-46. 
467 Argentina's third party written submission, paras 20 and 23. 
468 Australia's third party written submission, paras 18-19, supporting the definition suggested in the 
United States' first written submission, para. 110. 
469 Australia's third party written submission, para. 16, Australia's response to Third Party Question 
No. 6. 


 
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7.486 Brazil argues that an interpretation of "commercial scale" must give meaning to both terms in 
this expression, which combine "order of magnitude" with the purpose of obtaining financial gains.   
Therefore, Brazil considers that Article 61 establishes a two-pronged minimum standard that requires 
Members to provide for criminal procedures and penalties at least for wilful trademark and copyright 
infringements that involve profit-seeking motivation and significant amounts of infringing goods.470    
7.487 Canada argues that China's authorities are precluded from applying criminal sanctions in 
many cases of wilful trademark counterfeiting or copyright piracy on a commercial scale because 
China's thresholds are arbitrary, too high and inflexible.  The concept of "commercial scale" includes 
different factors. It relates to more than just industrial production and includes cases of wilful 
trademark counterfeiting and copyright piracy undertaken on sufficient scale to constitute the pursuit 
of profit or the carrying out of a business. This is a qualitative test and requires discretion in order to 
consider the circumstances of a given case. While negligible volumes of counterfeit would probably 
not qualify, the wilful reproduction of hundreds of pirated copies for the equivalent value of 
thousands of dollars in sales revenue would, by any objective measure, be infringing on a commercial 
scale. This would be especially true in China where annual GDP per capita is just US2,500and57millionpeopleearnlessthanUS125 per year.  While Article 61 does not require prosecution of 
each case of wilful trademark counterfeiting and copyright piracy on a commercial scale, it does 
require Members to be in a position to do so, when circumstances merit the exercise of prosecutorial 
discretion.471  
7.488 The European Communities argues that Article 61 singles out two types of infringements 
because they have a particular potential of harming right holders. Therefore, "on a commercial scale" 
must comprise all activities with a particular potential for harm which results from them pertaining to 
a business or profit generation.  Quantitative thresholds alone are not enough to capture aspects of 
professional organization or systematic cooperation.  In order to capture all infringements on a 
commercial scale, criminal enforcement authorities must be able to take into account additional 
factors such as indications of business organization or profit orientation of an activity.472  The 
European Communities further argues that, because it provides for criminal procedures and penalties 
"to be applied", the first sentence of Article 61 obliges Members not just to criminalize, but also to 
prosecute the activities mentioned therein.473 
7.489 Japan argues that while quantitative thresholds could identify many instances of "commercial 
scale" counterfeiting they would not capture counterfeiting activities of limited value or smaller 
quantities which are on a "commercial scale" due to additional circumstances, such as their 
professional organization or easy repetition.  Mere quantification of "commercial scale" does not 
capture all instances of commercial scale counterfeiting, and additional qualitative elements need to 
be taken into account in order to consider such organizational characteristics of an activity.474  
7.490 Korea argues that China's thresholds arbitrarily carve out certain IPR crimes from the 
possibility of criminal sanction and are therefore inconsistent with the TRIPS Agreement. 
"Commercial scale" represents a level of magnitude that is realized by operating or maintaining a 
business activity, large or small, for the purpose of gaining financial return through IPR infringement 
in a somewhat systematic fashion. Therefore, anybody engaging in a business activity by infringing 
                                                   
470 Brazil's third party written submission, paras 35-38 
471 Canada's third party written submission, paras 4-8 and 11. 
472 European Communities' third party oral statement, paras 10 and 14. 
473 European Communities' third party written submission, para. 10-11; European Communities' 
response to Third Party Question No. 10, 
474 Japan's third party written submission, paras 17 and 30; Japan's third party oral statement, para. 13. 


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IPRs and realizing a financial return, regardless of the alleged amount at issue, should be regarded as 
violating IPRs on a "commercial scale".475 
7.491 Mexico submits that the concept of "commercial scale" encompasses activities that go beyond 
casual or occasional infringements that are not made for the purpose of generating revenue. In that 
context, the word "scale" is not necessarily bound to conditions of magnitude, but alternatively to that 
of quality.  Mexico further submits that small scale activity is "clearly meaningful" as it contributes to 
the chain of infringement.476 
7.492 Chinese Taipei submits that "commercial scale" is an abstract legal concept that involves 
multiple factors of local circumstances, such as nature of the infringed rights, value and price in the 
market, motive and purpose of act, method and scale of infringement, damage caused, profit gained, 
cultural background, advancement of modern technology and living standards, that need to be 
considered on a case-by-case basis.477 
7.493 Thailand argues that, as there is no definition of "commercial scale" in the TRIPS Agreement, 
this constitutes a built-in flexibility recognizing the different legal systems of Members.  Every 
Member can adopt the interpretation it deems appropriate.478 
(c) 
Consideration by the Panel 
(i) 
Nature of the claim 
7.494 The United States' claim relates to cases of wilful trademark counterfeiting and copyright 
piracy in respect of which China does not provide for criminal procedures and penalties to be applied 
but which the United States claims are "on a commercial scale".479  The claim is based on two alleged 
"fundamental problems" referred to in this Report as the two limbs of this claim.  The first limb 
concerns the level and method of calculation of the thresholds.  By specifying certain levels, the 
thresholds allegedly eliminate whole classes of counterfeiting and piracy from risk of criminal 
prosecution and conviction.480  The second limb concerns the limited set of numerical tests in the 
thresholds.  By focussing solely on these tests, the thresholds allegedly require law enforcement 
officials to disregard other indicia of counterfeiting and piracy.481  
7.495 The Panel notes that the first limb of the claim addresses the numbers specified in the 
numerical tests, and the way in which some of them are calculated, in order to show that the 
thresholds are too high.  These are quantitative issues.  The second limb addresses certain factors that 
the numerical tests do not take into account.  These are qualitative issues.  Neither limb is a broad 
claim that numerical thresholds cannot capture all cases "on a commercial scale".  In response to the 
Panel's requests for clarification of the claim after both the first and the second substantive meetings, 
the United States clarified that it did not object to the use of numerical thresholds per se. 482  
                                                   
475 Korea's third party written submission, paras 20 and 27; Korea's third party oral statement, para. 6. 
476 Mexico's third party written submission, paras 10; Mexico's third party oral statement, paras 6-7. 
477 Chinese Taipei's third party written submission, para. 21; Chinese Taipei's third party oral statement, 
para. 11. 
478 Thailand's third party oral statement, para. 3. 
479 United States' first written submission, paras 116 and 143. 
480 United States' first written submission, para. 112;  rebuttal submission, para. 74. 
481 United States' first oral statement, para. 36;  first oral statement (closing statement), para. 16. 
482 United States' responses to Questions Nos. 25 and 54.  It seems pertinent to note that during the 
negotiations of the terms of China's accession to the WTO, some members of the Working Party took a similar 
position.  In particular, they expressed concerns that the monetary thresholds were very high and seldom met.  
They considered that those thresholds should be lowered:  see the Working Party Report, para. 304.  China 


 
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Accordingly, the Panel is not asked to consider whether numerical thresholds, as a matter of principle, 
can implement an obligation in terms of cases "on a commercial scale".   
7.496 Therefore, in its assessment of this claim, the Panel will proceed as follows: 
(a) 
with respect to the first limb of the claim, the Panel will assess whether the levels in 
China's thresholds are too high to capture all cases on a commercial scale; and 
(b) 
with respect to the second limb of the claim, the Panel will assess whether the other 
factors raised by the United States can be taken into account by China's thresholds to 
capture all cases on a commercial scale and, if not, whether this is a TRIPS 
requirement. 
(ii) 
Procedural issues 
7.497 China argues that the United States bears "a significantly higher burden [of proof] than it 
would normally encounter" because this claim concerns criminal law matters.  China argues that the 
Panel should treat sovereign jurisdiction over police powers as a powerful default norm, departure 
from which can be authorized only in light of explicit and unequivocal consent of State parties.483  
China later clarified that it was not referring to a factual burden of proof but rather to the inability of 
the United States to provide the evidence to support its legal interpretation of Article 61 of the TRIPS 
Agreement.484  China also argues for the application of the "interpretative canon" of in dubio mitius 
which, it submits, has a particular justification in the realm of criminal law.485 
7.498 The United States responds that the fact that Article 61 of the TRIPS Agreement touches on 
criminal law does not change the provisions of Article 3.2 of the DSU or the customary rules of treaty 
interpretation reflected in the Vienna Convention on the Law of Treaties ("Vienna Convention").486  
In this dispute, the meaning of "commercial scale" is reached through the general rule of 
interpretation in Article 31 of the Vienna Convention.  There is no "doubt" which is a precondition of 
reliance on the concept of in dubio mitius.487 
7.499 The Panel notes that this claim is brought under Article 61 of the TRIPS Agreement, which 
concerns criminal procedures and penalties.488  Article 64.1 of that Agreement provides that:  
"The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied 
by the Dispute Settlement Understanding shall apply to consultations and the 
settlement of disputes under this Agreement except as otherwise specifically provided 
herein." 
7.500 The application of the rules and procedures of the DSU to the settlement of disputes under the 
TRIPS Agreement is confirmed by Article 1.1 of the DSU, in conjunction with Appendix 1 of the 
DSU which lists the TRIPS Agreement as a "covered agreement".  In accordance with Article 3.2 of 
the DSU, the Panel applies "the customary rules of interpretation of public international law" to its 
task of interpreting the TRIPS Agreement in this dispute.  The general rule of interpretation, 
                                                                                                                                                              
subsequently reduced certain thresholds with the adoption of Judicial Interpretation No. 19 [2004]:  see United 
States' first written submission, para. 27. 
483 China's first written submission, paras 49-59. 
484 China's first oral statement (closing statement), paras 4-7. 
485 China's rebuttal submission, paras 51-56. 
486 United States' rebuttal submission, paras 63-67. 
487 United States' rebuttal submission, para. 68. 
488 Despite use of the word "remedies" in the second and third sentences, it seems clear that criminal 
sanctions are "penalties". 


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expressed in Article 31 of the Vienna Convention, and the rules on supplementary means of 
interpretation in Article 32 of the Vienna Convention, have attained the status of rules of customary or 
general international law.489  The Panel will apply the general rule of interpretation and, to the extent 
warranted, supplementary means of interpretation.  The Panel is mindful that Article 3.2 of the DSU 
also provides that "recommendations and rulings of the DSB cannot add to or diminish the rights and 
obligations provided in the covered agreements".   
7.501 The Panel acknowledges the sensitive nature of criminal matters and attendant concerns 
regarding sovereignty.  These concerns may be expected to find reflection in the text and scope of 
treaty obligations regarding such matters as negotiated by States and other Members.490  Section 5 of 
Part III of the TRIPS Agreement, dedicated to criminal procedures and remedies, is considerably 
briefer and less detailed than the other Sections on enforcement in Part III.  Brief as it is, the text of 
Section 5 also contains significant limitations and flexibilities.  The customary rules of treaty 
interpretation oblige the treaty interpreter to take these limitations and flexibilities into account in 
interpreting the relevant provision.   
(iii) 
Nature of the obligation 
7.502 This claim is brought under the first sentence of Article 61 of the TRIPS Agreement.  
Article 61 constitutes the whole of Section 5 of Part III of that Agreement and provides as follows: 
"SECTION 5:  CRIMINAL PROCEDURES 
 
Article 61 
 
Members shall provide for criminal procedures and penalties to be applied at least in 
cases of wilful trademark counterfeiting or copyright piracy on a commercial scale.  
Remedies available shall include imprisonment and/or monetary fines sufficient to 
provide a deterrent, consistently with the level of penalties applied for crimes of a 
corresponding gravity.  In appropriate cases, remedies available shall also include the 
seizure, forfeiture and destruction of the infringing goods and of any materials and 
implements the predominant use of which has been in the commission of the offence.  
Members may provide for criminal procedures and penalties to be applied in other 
cases of infringement of intellectual property rights, in particular where they are 
committed wilfully and on a commercial scale." 
7.503 The first sentence of this Article uses the word "shall", indicating that it is mandatory.  This 
stands in contrast to the fourth sentence, which addresses the same issue with respect to other cases of 
infringement of intellectual property rights but uses the word "may", indicating that it is permissive.  
Unlike the third sentence, the first sentence contains no language such as "in appropriate cases" which 
might expressly introduce some margin of discretion.  The terms of the first sentence of Article 61, 
read in context, impose an obligation.  
7.504 This interpretation is confirmed by Article 41 of the TRIPS Agreement on "General 
Obligations", which is the first provision of Part III of the TRIPS Agreement and forms part of the 
context of Article 61.  Article 41.1 provides, relevantly, as follows: 
"Members shall ensure that enforcement procedures as specified in this Part are 
available under their law so as to permit effective action against any act of 
                                                   
489 Appellate Body Reports in US – Gasoline, at p. 17;  and Japan – Alcoholic Beverages II, at p. 10. 
490 Articles 3, 4 and 41, in particular paragraph 4, of the TRIPS Agreement inter alia also apply to 
criminal enforcement procedures. 


 
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infringement of intellectual property rights covered by this Agreement, including 
expeditious remedies to prevent infringements and remedies which constitute a 
deterrent to further infringements." 
7.505 In the Panel's view, the general obligation in Article 41.1 confirms that Article 61 contains 
obligations, as one of the specific provisions on enforcement procedures in Part III. 
7.506 China submits that the first sentence of Article 61 cannot set forth a specific obligation 
because it provides for enforcement against certain types of infringement but neither the TRIPS 
Agreement nor the Berne Convention (1971) define what constitutes substantive infringement.  Rather, 
they defer to national discretion to define the rights being infringed.491  
7.507 The Panel agrees with China that the first sentence of Article 61 contains a number of terms 
that are not defined by the Agreement and that this can affect the proper interpretation of the provision.  
However, even though the first sentence does not use the term "infringement", it is important to note 
that Part II of the TRIPS Agreement, including the provisions of the Paris Convention (1967) 
incorporated by Article 2.1, and the provisions of the Berne Convention (1971) incorporated by 
Article 9.1, provide for minimum standards concerning the availability, scope and use of intellectual 
property rights that apply irrespective of national treatment.  These provisions define the rights 
conferred by intellectual property and the circumstances in which those rights are infringed.  Part III 
of the TRIPS Agreement provides for the enforcement of those rights, to varying degrees.  Therefore, 
the Agreement contains substantive obligations that are not simply matters of national discretion. 
7.508 China submits that Article 61 of the TRIPS Agreement is less specific than the Anti-Dumping 
Agreement and the Agreement on Subsidies and Countervailing Measures and lacks the clarity 
required to demonstrate a specific, concrete obligation.  China also argues that the TRIPS Agreement 
lacks a provision such as Article 18.4 of the Anti-Dumping Agreement requiring Members to take 
steps to ensure the conformity of their laws with its provisions.492 
7.509 The Panel agrees that the TRIPS Agreement differs from trade remedy agreements.  However, 
the Panel will apply the usual rules of treaty interpretation to the terms used in the TRIPS Agreement 
and make its assessment on that basis in accordance with Article 11 of the DSU.  The Panel draws 
China's attention to Article XVI:4 of the WTO Agreement which provides as follows: 
"Each  Member shall ensure the conformity of its laws, regulations and administrative 
procedures with its obligations as provided in the annexed Agreements." 
7.510 The "annexed Agreements" include the TRIPS Agreement.  Therefore, Members are obliged 
to ensure conformity of their respective laws with their respective obligations as provided in the 
TRIPS Agreement. 
7.511 China submits that the third sentence of Article 1.1 of the TRIPS Agreement sets forth the 
overall context for interpreting the specificity of the standards in the TRIPS Agreement.  It describes 
Article 1.1 as a specific "caveat" that establishes boundaries on obligations, specifically in the realm 
of enforcement.493 
7.512 The Panel observes that Article 1.1 of the TRIPS Agreement provides as follows: 
                                                   
491 China's first written submission, paras 80-82.     
492 China's first written submission, paras 83-87. 
493 China's first written submission, paras 89-97. 


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"Members shall give effect to the provisions of this Agreement.  Members may, but 
shall not be obliged to, implement in their law more extensive protection than is 
required by this Agreement, provided that such protection does not contravene the 
provisions of this Agreement.  Members shall be free to determine the appropriate 
method of implementing the provisions of this Agreement within their own legal 
system and practice." 
7.513 The first sentence of Article 1.1 sets out the basic obligation that Members "shall give effect" 
to the provisions of this Agreement.  This means that the provisions of the Agreement are obligations 
where stated, and the first sentence of Article 61 so states.  The second sentence of Article 1.1 
clarifies that the provisions of the Agreement are minimum standards only, in that it gives Members 
the freedom to implement a higher standard, subject to a condition.  The third sentence of Article 1.1 
does not grant Members freedom to implement a lower standard, but rather grants freedom to 
determine the appropriate method of implementation of the provisions to which they are required to 
give effect under the first sentence.  The Panel agrees that differences among Members' respective 
legal systems and practices tend to be more important in the area of enforcement.  However, a 
coherent reading of the three sentences of Article 1.1 does not permit differences in domestic legal 
systems and practices to justify any derogation from the basic obligation to give effect to the 
provisions on enforcement.   
7.514 Therefore, the standard of compliance with Article 61 is the minimum internationally agreed 
standard set out in that Article.  The minimum standard in Article 61 does not defer to China's 
domestic practice on the definition of criminal liability and sanctions for other wrongful acts in areas 
not subject to international obligations under the TRIPS Agreement, unless it so states.  For example, 
the second sentence refers to "crimes of a corresponding gravity" which might refer to domestic 
practice in other areas.  However, the first sentence of Article 61 does not make any such reference. 
7.515 For the above reasons, the Panel confirms its view at paragraphs 7.503 to 7.505 above that the 
first sentence of Article 61 of the TRIPS Agreement imposes an obligation.  The Panel will now turn 
to the terms used in that provision, read in context and in light of the object and purpose of the 
Agreement, to determine the scope and content of that obligation. 
(iv) 
Scope of the obligation 
7.516 The terms of the obligation in the first sentence of Article 61 of the TRIPS Agreement are that 
Members shall "provide for criminal procedures and penalties to be applied".  That obligation applies 
to "wilful trademark counterfeiting or copyright piracy on a commercial scale".  Within that scope, 
there are no exceptions.  The obligation applies to all acts of wilful trademark counterfeiting or 
copyright piracy on a commercial scale.   
7.517 The Panel recalls its conclusion at paragraph 7.479 above that, in China, acts of trademark 
and copyright infringement falling below the applicable thresholds are not subject to criminal 
procedures and penalties.  The issue that arises is whether any of those acts of infringement constitute 
"wilful trademark counterfeiting or copyright piracy on a commercial scale" within the meaning of the 
first sentence of Article 61.  This requires the Panel to consider the interpretation of that phrase.   
7.518 The Panel notes that the first sentence of Article 61 contains no fewer than four limitations on 
the obligation that it sets forth.  These define the scope of the relevant obligation and are not 
exceptions.  The first limitation is that the obligation applies to trademarks and copyright rather than  
to all intellectual property rights covered by the TRIPS Agreement.  The fourth sentence of Article 61 
gives Members the option to criminalize other infringements of intellectual property rights, in 
particular where they are committed wilfully and on a commercial scale.  Despite the potential gravity 
of such infringements, Article 61 creates no obligation to criminalize them.  This can be contrasted 


 
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with Sections 2 and 3 of Part III of the TRIPS Agreement, regarding civil and administrative 
procedures and remedies, which apply to any act of infringement of intellectual property rights 
covered by the Agreement.  It can also be contrasted with Section 4 of Part III which attaches 
conditions to the option to apply its procedures to other infringements of intellectual property 
rights.494   
7.519 The second limitation in the first sentence of Article 61, which is related to the first, is that it 
applies to counterfeiting and piracy rather than to all infringements of trademarks and copyright.  This 
can also be contrasted with Sections 2 and 3 of Part III of the TRIPS Agreement.  This limitation, like 
the first, indicates an intention to reduce the scope of the obligation.  Indeed, the records of the 
negotiation of the TRIPS Agreement confirm that the term "infringements of trademarks and 
copyright" on a commercial scale was considered in the draft provision on criminal procedures but 
ultimately rejected.495   
7.520 The terms "trademark counterfeiting" and "copyright piracy" are not defined in the TRIPS 
Agreement.  They are distinct from the concepts of "trademark infringement" and "copyright 
infringement".  They are similar to the terms "counterfeit trademark goods" and "pirated copyright 
goods" which are defined for the purposes of the TRIPS Agreement496 in footnote 14 as follows: 
"For the purposes of this Agreement: 
(a) 
'counterfeit trademark goods' shall mean any goods, including packaging, 
bearing without authorization a trademark which is identical to the trademark validly 
registered in respect of such goods, or which cannot be distinguished in its essential 
aspects from such a trademark, and which thereby infringes the rights of the owner of 
the trademark in question under the law of the country of importation; 
(b) 
'pirated copyright goods' shall mean any goods which are copies made 
without the consent of the right holder or person duly authorized by the right holder 
in the country of production and which are made directly or indirectly from an article 
where the making of that copy would have constituted an infringement of a copyright 
or a related right under the law of the country of importation." 
7.521 The terms used in the first sentence of Article 61 denote classes of acts or activity whilst the 
terms used in footnote 14 denote classes of goods only.  This reflects the fact that Article 61 provides 
for criminal enforcement against infringing acts whilst Section 4 of Part III (in which the terms 
defined in footnote 14 are used) provides for enforcement at the border against infringing goods.  The 
definitions in footnote 14 also refer to the law of the country of "importation" whilst Article 61 relates 
to the law of the Member to which the obligation applies – generally speaking, the law of the Member 
where the infringing act occurs.  Subject to these observations, the Panel considers that the definitions 
in footnote 14 are relevant in understanding the terms used in Article 61.   
7.522 The United States does not claim that Articles 213, 214, 215, 217 and 218 of the Criminal 
Law fail to cover the full extent of the terms "trademark counterfeiting" and "copyright piracy" as 
                                                   
494 See paragraph 7.223 above. 
495 The Panel has recourse to this supplementary means of interpretation in accordance with Article 32 
of the Vienna Convention in order to confirm the meaning resulting from the application of the general rule of 
interpretation in Article 31.  See, for example, the Chairman's draft text of 23 July 1990 (document 
MTN.GNG/NG11/W/76). 
496 The terms "counterfeit trademark goods" and "pirated copyright goods" are used not only in 
Section 4 of Part III but also in Article 69 of the TRIPS Agreement.  The identical term "counterfeit trademark 
goods" is also used in Article 46. 


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used in Article 61 of the TRIPS Agreement.497  China does not contest that each of the thresholds 
established by the Criminal Law, in particular Articles 213, 214, 215, 217 and 218, applies to acts of 
"trademark counterfeiting" and "copyright piracy".  Therefore, it is unnecessary for the Panel to 
interpret those terms in greater detail at this stage. 
7.523 The third limitation in the first sentence of Article 61 is indicated by the word "wilful" that 
precedes the words "trademark counterfeiting or copyright piracy".  This word functions as a qualifier 
indicating that trademark counterfeiting or copyright piracy is not subject to the obligation in the first 
sentence of Article 61 unless it is "wilful".  This word, focussing on the infringer's intent, reflects the 
criminal nature of the enforcement procedures at issue.  It is absent from Section 4 of Part III, even 
though that Section is similarly limited, as a minimum, to counterfeit trademark goods and pirated 
copyright goods.  The penalties for criminal acts, such as imprisonment, fines and forfeiture of 
property, are relatively grave, as reflected in the second sentence of Article 61.  There is no obligation 
to make such penalties available with respect to acts of infringement committed without the requisite 
intent. 
7.524 The fourth limitation in the first sentence of Article 61 is indicated by the phrase "on a 
commercial scale" that follows the words "trademark counterfeiting or copyright piracy". This phrase, 
like the word "wilful", appears to qualify both "trademark counterfeiting" and "copyright piracy".  
The limitation to cases on a commercial scale, like the limitation to cases of wilfulness, stands in 
contrast to all other specific obligations on enforcement in Part III of the TRIPS Agreement.498 
7.525 The principal interpretative point in dispute is the meaning of the phrase "on a commercial 
scale".  This phrase functions in context as a qualifier, indicating that wilful trademark counterfeiting 
or copyright piracy is included in the scope of the obligation provided that it also satisfies the 
condition of being "on a commercial scale".  Accordingly, certain acts of wilful trademark 
counterfeiting or copyright piracy are excluded from the scope of the first sentence of Article 61.   
7.526 Despite the fact that trademark counterfeiting and copyright piracy infringe the rights of right 
holders, and despite the fact that they can be grave, the two qualifications of wilfulness and "on a 
commercial scale" indicate that Article 61 does not require Members to provide for criminal 
procedures and penalties to be applied to such counterfeiting and piracy per se unless they satisfy 
certain additional criteria.  This is highlighted by the fourth sentence of Article 61, which allows 
Members to provide for criminal procedures and penalties to be applied in other cases of infringement, 
"in particular" where they are committed wilfully and on a commercial scale.  This indicates that the 
negotiators considered cases of wilful infringement on a commercial scale to represent a subset of 
cases of infringement, comprising the graver cases.  This is useful context for interpreting the first 
sentence of Article 61, even though it does not refer to "infringement" in general, because the first 
sentence refers to both "counterfeiting" and "piracy" and wilfulness and commercial scale, evidently 
to limit the cases of infringement in different ways.  Therefore, the text of Article 61 indicates that it 
must not be assumed that the nature of counterfeiting and piracy per se is such that Members are 
obliged to provide for the application of criminal procedures and penalties. 
7.527 This is consistent with the nature of the obligation, being a minimum standard, as expressly 
confirmed by the use of the words "at least" in the first sentence of Article 61 and, more generally, by 
the second sentence of Article 1.1, quoted at paragraph 7.512 above.  Members may, and many do, 
criminalize other acts of trademark counterfeiting, other acts of copyright piracy, other acts of 
infringement of trademarks and copyright, and acts of infringement of other intellectual property 
rights such as patents, but there is no obligation to do so under the TRIPS Agreement. 
                                                   
497 United States' first written submission, paras 101 and 106. 
498 Section 4 contains a de minimis exception, discussed at paragraph 7.553 below. 


 
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7.528 Part III of the TRIPS Agreement distinguishes between the treatment of wilful trademark 
counterfeiting and copyright piracy on a commercial scale, on the one hand, and all other 
infringements of intellectual property rights, on the other hand, in that only the former are subject to 
an obligation regarding criminal procedures and penalties.  This indicates the shared view of the 
negotiators that the former are the most blatant and egregious acts of infringement.  This view must 
inform the interpretation of Article 61.  
7.529 The Panel recalls its findings at paragraph 7.241 above as to the circumstances of conclusion 
of the TRIPS Agreement with respect to enforcement procedures.  Whilst some of the pre-existing 
international intellectual property agreements or conventions contain provisions on the characteristics 
of enforcement mechanisms, it is striking that none of them create any specific minimum standard for 
criminal enforcement procedures.499  Among the international intellectual property agreements with 
wide membership, Article 61 of the TRIPS Agreement is, in this sense, unique. 
7.530 This reflects, in part, the fact that intellectual property rights are private rights, as recognized 
in the fourth recital of the Preamble to the TRIPS Agreement.  In contrast, criminal procedures are 
designed to punish acts that transgress societal values.  This is reflected in the use of the word 
"penalties" in Article 61. 
7.531 Bearing in mind these aspects of the context of the first sentence of Article 61, and the object 
and purpose of the TRIPS Agreement, the Panel now turns to the ordinary meaning of the words "on a 
commercial scale".   
(v) 
"on a commercial scale"  
7.532 The parties adopt different approaches to the task of interpreting the phrase "on a commercial 
scale".  The Panel will examine each of these approaches in turn, beginning with that of the 
complainant. 
7.533 The ordinary meaning of the word "scale" is uncontroversial.  It may be defined as "relative 
magnitude or extent; degree, proportion.  Freq. in on a grand, lavish, small, etc. scale".500  The 
ordinary meaning of the word includes both the concept of quantity, in terms of magnitude or extent, 
as well as the concept of relativity.  Both concepts are combined in the notions of degree and 
proportion.  Therefore, a particular "scale" compares certain things or actions in terms of their size.  
Some things or actions will be of the relevant size and others will not.   
7.534 The relevant size is indicated by the word "commercial".  The ordinary meaning of 
"commercial" may be defined in various ways.  The following two definitions have been raised in the 
course of these proceedings: 
"1.  Engaged in commerce;  of, pertaining to, or bearing on commerce.  
2.  (…)  
3.  Interested in financial return rather than artistry;  likely to make a profit;  regarded 
as a mere matter of business."501 
                                                   
499 The Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of 
their Phonograms, Article 3, expressly provides that each Contracting State may implement the Convention by 
means of penal sanctions. 
500 New Shorter Oxford English Dictionary (1993).  Mexico notes a definition in Spanish that refers to 
degree, but that is not apposite in context:  see Mexico's third party oral statement, fn. 8. 
501 New Shorter Oxford English Dictionary (1993). 


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7.535 The Panel considers the first definition to be apposite.  It includes the term "commerce" which 
may, in turn, be defined as "buying and selling; the exchange of merchandise or services, esp. on a 
large scale". 502   Reading this definition into the definition of "commercial" indicates that 
"commercial" means, basically, engaged in buying and selling, or pertaining to, or bearing on, buying 
and selling.503  A combination of that expanded definition of "commercial" and the definition of 
"scale" would render a meaning in terms of a relative magnitude or extent (of those) engaged in 
buying and selling, or a relative magnitude or extent pertaining to, or bearing on, buying and selling.  
This draws a link to the commercial marketplace. 
7.536 The United States also submits that the word "commercial" scale draws a link to the 
commercial marketplace.  However, it refers to elements of the first and third meanings in 
definition 3., but dismisses the relevance of the second meaning, "likely to make a profit", because it 
is different from the other two.504   
7.537 The Panel notes that the third definition, which includes the qualifiers "rather than artistry" 
and "mere", refers to usages such as a "commercial artist", "commercial film" or "commercial 
writing" in the sense of those who are more interested in financial return than the artistic merit of a 
work, works that are of such a nature that they are likely to make a profit and works that are regarded 
as a mere matter of business rather than as expressions of other values.  This definition is not apposite 
in the first sentence of Article 61.   
7.538 Therefore, the Panel considers that the first definition set out at paragraph 7.534 above is 
appropriate.  However, the combination of that definition of "commercial" with the definition of 
"scale" presents a problem in that scale is a quantitative concept whilst commercial is qualitative, in 
the sense that it refers to the nature of certain acts.  Some acts are in fact commercial, whilst others are 
not.  Any act of selling can be described as commercial in this primary sense, irrespective of its size or 
value.  If "commercial" is simply read as a qualitative term, referring to all acts pertaining to, or 
bearing on commerce, this would read the word "scale" out of the text.  Acts on a commercial scale 
would simply be commercial acts.  The phrase "on a commercial scale" would simply mean 
"commercial".  Such an interpretation fails to give meaning to all the terms used in the treaty and is 
inconsistent with the rule of effective treaty interpretation.505  
7.539 There are no other uses of the word "scale" in the TRIPS Agreement, besides the first and 
fourth sentences of Article 61.  However, the wider context shows that the TRIPS Agreement 
frequently uses the word "commercial" with many other nouns, although nowhere else with "scale".  
The other uses of the word "commercial" include "commercial rental"506, "commercial purposes"507, 
"commercial exploitation" 508 , "commercial terms" 509 , "public non-commercial use" 510 , "first 
commercial exploitation" 511, "honest commercial practices" 512, "commercial value" 513 , "unfair 
commercial use"514, "non-commercial nature"515 and "legitimate commercial interests".516   
                                                   
502 Ibid. 
503 The Panel also observes that the definition of "commerce" itself expressly includes a notion of 
"scale", but this appears to refer to commerce in a general sense, such as "trade and commerce", which does not 
appear apposite within the word "commercial". 
504 See United States' first written submission, paras 109, 110 and 123. 
505 See, for example, Appellate Body Reports in US – Gasoline, at p. 23; Japan – Alcoholic 
Beverages II, at p. 12. 
506 Articles 11 and 14.4 of the TRIPS Agreement. 
507 Articles 26.1 and 36 of the TRIPS Agreement. 
508 Article 27.2 of the TRIPS Agreement. 
509 Article 31(b) of the TRIPS Agreement. 
510 Article 31(b) and (c) of the TRIPS Agreement. 
511 Article 38.1 and 38.2 of the TRIPS Agreement. 


 
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7.540 The provisions of the Paris Convention (1967) incorporated by Article 2.1 of the TRIPS 
Agreement include uses of the word "commercial" in the phrase "industrial or commercial 
establishment" (in the singular or plural)517 and in the phrases "industrial or commercial matters" and 
"industrial or commercial activities".518  The provisions of the Berne Convention (1971) incorporated 
by Article 9.1 of the TRIPS Agreement include the phrase "any commercial purpose".519  The 
provisions of the IPIC Treaty incorporated by Article 35 of the TRIPS Agreement include the phrase 
"commercially exploited" and "exploits ordinarily commercially".520 
7.541 The context shows that the negotiators chose to qualify certain activities, such as rental, 
exploitation and use, as "commercial".  They also chose to qualify various nouns, such as "terms", 
"value", "nature" and "interests", as "commercial" or "non-commercial".  In a similar way, they could 
have agreed that the obligation in the first sentence of Article 61 would apply to cases of wilful and 
"commercial" trademark counterfeiting or copyright piracy.  This would have included all commercial 
activity.  Indeed, the records of the negotiation of the TRIPS Agreement show that this formulation 
was in fact suggested (by the United States) at an early stage. 521  
7.542 The context shows that the negotiators used the term "commercial purposes" in two 
provisions on the scope of protection of certain categories of intellectual property rights, and that the 
Appendix to the Berne Convention (1971) already did use that term in the singular in provisions on 
possible limitations to particular rights.  However, the negotiators did not agree that the obligation in 
the first sentence of Article 61 would apply to cases of wilful trademark counterfeiting or copyright 
piracy "for commercial purposes".  This would have included all activity for financial gain or profit.  
7.543 Instead, the negotiators agreed in Article 61 to use the distinct phrase "on a commercial scale".  
This indicates that the word "scale" was a deliberate choice and must be given due interpretative 
weight.  "Scale" denotes a relative size, and reflects the intention of the negotiators that the limitation 
on the obligation in the first sentence of the Article depended on the size of acts of counterfeiting and 
piracy.  Therefore, whilst "commercial" is a qualitative term, it would be an error to read it solely in 
those terms.  In context it must indicate a quantity.522   
7.544 A review of the uses of the word "commercial" throughout the TRIPS Agreement indicates 
that it links various activities, not simply selling, to the marketplace.  It also shows that "commercial" 
activities cannot be presumed to be on a larger scale than others, such as "public non-commercial" 
activities, even though they would generally be larger than, say, "personal" or "domestic" use.  The 
distinguishing characteristic of a commercial activity is that it is carried out for profit.523  The review 
                                                                                                                                                              
512 Article 39.2 of the TRIPS Agreement. 
513 Article 39.2(b) of the TRIPS Agreement. 
514 Article 39.3 of the TRIPS Agreement. 
515 Article 60 of the TRIPS Agreement. 
516 Article 63.4 of the TRIPS Agreement. 
517 Articles 3, 5C(3), 6quinquiesA(2) and 7bis(1)) of the Paris Convention (1967).  This phrase also 
appears in footnote 1 to the TRIPS Agreement. 
518 Article 10bis of the Paris Convention (1967).   
519 Articles II(9)(a)(iv) and IV(4)(c)(iii) of the Appendix to the Berne Convention (1971). 
520 Article 7(1) and (2), of the IPIC Treaty. 
521 The United States suggested in October 1988 a provision applying to trademark counterfeiting and 
copyright infringement that were "wilful and commercial" (see document MTN.GNG/NG11/W/14/Rev.1).  This 
suggestion was not taken up.  A later US proposal, like certain other proposals, used the phrase "on a 
commercial scale" (see document MTN.GNG/NG11/W/70). 
522 The Panel is not required, for the purposes of this claim, to express a view as to whether 
"commercial" also indicates certain qualitative factors, such as a profit-seeking purpose. 
523 At the same time, some activities – such as experimentation – may be conducted in the course of 
business or in connection with a business without a specific profit-making purpose. 


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of the uses of the word "commercial" also shows that, unlike all the others, Article 61 uses the word 
"commercial" to qualify a notion of size.   
7.545 In the Panel's view, the combination of the primary definition of "commercial" and the 
definition of "scale" can be reconciled with the context of Article 61 if it is assessed not solely 
according to the nature of an activity but also in terms of relative size, as a market benchmark.  As 
there is no other qualifier besides "commercial", that benchmark must be whatever "commercial" 
typically or usually connotes.  In quantitative terms, the benchmark would be the magnitude or extent 
at which engagement in commerce, or activities pertaining to or bearing on commerce, are typically or 
usually carried on, in other words, the magnitude or extent of typical or usual commercial activity.  
Given that the phrase uses the indefinite article "a", it refers to more than one magnitude or extent of 
typical or usual commercial activity.  The magnitude or extent will vary in the different "cases" of 
counterfeiting and piracy to which the obligation applies.  In the Panel's view, this reflects the fact 
that what is typical or usual varies according to the type of commerce concerned.     
7.546 Turning to the arguments of the parties and various third parties on this point, they have 
attempted to give due meaning to both the terms "commerce" and "scale" in different ways.  Initially, 
the United States submitted as follows: 
"those who engage in commercial activities in order to make a 'financial return' in the 
marketplace … are, by definition, therefore operating on a commercial scale"524   
7.547 Similarly, Canada submitted that "commercial scale" refers to activities undertaken with a 
view to profiting.525  The European Communities submitted that the terms "commercial" and "scale" 
denote activities that pertain to a business or to the generation of profits".526   
7.548 The Panel considers these interpretations unsatisfactory, as they seem to equate "commercial 
scale" with "commercial purpose" or merely "commercial", which are not the term used in Article 61.    
7.549 The United States then clarified that it does not read the word "scale" out of the term 
"commercial scale" and added a qualifier or two to its initial position, submitting that: 
"an infringer seriously engaged in pursuing financial gain in the marketplace is 
necessarily acting on a 'scale' that is 'commercial' and therefore falls within the 
ordinary meaning of the term." (emphasis added and removed)527; and 
"'commercial scale' certainly extends to those who are genuinely engaged in 
commercial activities in order to make a financial return."528 (emphasis added) 
7.550 In response to a request for clarification from the Panel, the United States explained:  
"The United States has employed the words 'seriously' or 'genuinely' to underscore 
that the IPR infringer must be actually engaged in pursuing financial gain through 
non-trivial commercial activities in the marketplace, as opposed to, for example, a 
one-off entry into the marketplace of a limited nature.   
                                                   
524 United States' first written submission, para. 110.  This submission also interpreted "scale": see 
paragraph 7.659 below. 
525 Canada's third party written submission, para. 5. 
526 European Communities' third party oral statement, paras 4 and 14. 
527 United States' rebuttal submission, para. 17. 
528 United States' closing oral statement at the second substantive meeting, para. 15. 


 
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Whether an infringer is 'seriously' or 'genuinely' engaged in commercial activities 
would depend on the facts and circumstances of the activity.  (…)" 529 
7.551 The Panel understands that this refined approach interprets "commercial scale" as basically 
everything that is "commercial" with the exception of some trivial or de minimis activities.  It is not 
clear how "seriously" and "genuinely" indicate "non-trivial" activities – if anything, "seriously" 
indicates something more important.  However, there is no need to consider its meaning further as the 
word "seriously" is not used in the terms of the treaty, nor is it implied by the terms that are used.   
7.552 Whilst the United States' refined approach has the merit of ensuring that its interpretation of 
"commercial scale" does not capture an identical class of acts as the term "commercial purpose", the 
difference seems minimal.  This refined approach does not read the word "scale" out of the text but 
nevertheless it reads the word down to such an extent that it lacks the significance that the negotiators 
evidently intended.  The negotiators chose the word "scale", which refers to size, rather than other 
words that they actually used elsewhere in the Agreement that do not exclude activities on the basis of 
size.  They also used the word "scale" in the fourth sentence of Article 61, together with the term "in 
particular", which would be virtually redundant if the sentence simply meant that Members could 
provide for criminal procedures and penalties to be applied "in particular" to more than trivial or 
de minimis cases.  The context throughout Part III shows that the limitations in Section 5 reflect an 
effort to address only the more blatant and egregious infringements. 
7.553 As to the view that "on a commercial scale" is basically a de minimis provision, the Panel 
need look no further than the preceding provision, Article 60, to see how the negotiators addressed 
that issue.  Article 60 forms part of Section 4 on special requirements related to border measures and 
serves an analogous purpose to the phrase "on a commercial scale" in Article 61 in that both define 
the lower end of infringement at which a particular type of enforcement procedure must be available.  
However, the terms of each are quite different:  Article 60 defines de minimis infringement in terms of 
volume ("small quantities"), nature ("of a non-commercial nature") and circumstances ("in travellers' 
personal luggage or sent in small consignments").  Had the negotiators wanted to exclude only 
de minimis infringement from the minimum standard of Article 61, they had a model in Article 60, or 
they could have used words such as "except for minor or personal use".  However, they did not.530  
Instead, Article 61 refers to size ("scale") qualified only by the word "commercial".  This indicates 
that the negotiators intended something different from de minimis.  Article 60 also indicates that the 
negotiators did not equate small with non-commercial, confirming that a "commercial" scale is not 
necessarily small-scale nor large-scale. 
7.554 Among the other third parties, Brazil referred to a "significant" or "large" enough level based 
on certain factors531, Mexico argued for a "meaningful" level532; Korea referred to operating a 
business "in a somewhat systematic fashion".533  Canada acknowledged as follows: 
"There is perhaps no easily quantifiable measure because none is provided for in 
TRIPS.  This omission suggests that the test is qualitative: what a reasonable person 
would think in the circumstances."534 
                                                   
529 United States' response to Question No. 63. 
530 Indeed, the United States expressed a similar view in order to explain why a reference to 
"exceptional cases" in Article 46 of the TRIPS Agreement is not a de minimis test (see paragraph 7.387 above).   
531 Brazil's third party written submission, para. 36. 
532 Mexico's third party oral statement, para. 6.   
533 Korea's third party written submission, para. 27. 
534 Canada's third party written submission, para. 7. 


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7.555 The Panel considers that these interpretations, whilst they may reflect sound domestic policy 
considerations, lack a clear basis in the rules of treaty interpretation which the Panel is obliged to 
apply.  All of these interpretations are valid explanations as to why such infringement should be 
unlawful but they do not explain why it must be a crime.  The answer to that question must be found 
in the terms of the treaty as finally agreed.   
7.556 In this connection it seems pertinent to recall that the negotiators chose a term that was 
different from the commercial purpose or financial return standards used in the national legislation of 
a number of the participants. 
7.557 Turning now to the respondent's approach to the interpretation of "on a commercial scale", 
China submits that these words should be interpreted as a single term.535  The United States proposes 
that each of the terms in the two-word term be interpreted and does not submit that there are other 
ordinary uses of the phrase that would be relevant.536 
7.558 The Panel observes that the general rule of treaty interpretation in Article 31 of the Vienna 
Convention refers in paragraph 1 to the ordinary meaning of the terms of the treaty, read in context.  
Where the terms are a single term, or ordinarily used together, then the treaty interpreter should refer 
to the ordinary meaning of that single term, or of each term in the particular context of each other.  
This is a distinct exercise from that in paragraph 4 of Article 31 of the Vienna Convention which 
requires a "special meaning" to be given to a term if it is established that the parties so intended.  No 
party to this dispute considers that a "special meaning" should be given to the phrase "on a 
commercial scale", and nor does the Panel. 
7.559 The Panel will follow the approach explained by the Appellate Body in EC – Chicken Cuts:  
"The Appellate Body has observed that dictionaries are a 'useful starting point' for the 
analysis of 'ordinary meaning' of a treaty term, but they are not necessarily dispositive.  
The ordinary meaning of a treaty term must be ascertained according to the particular 
circumstances of each case.  Importantly, the ordinary meaning of a treaty term must 
be seen in the light of the intention of the parties 'as expressed in the words used by 
them against the light of the surrounding circumstances'".537   
7.560 The Panel recalls that the dictionary definition of "scale" (quoted at paragraph 7.533 above) 
includes the entry "Freq. in on a grand, lavish, small, etc. scale".  These examples show that the 
phrase "on a … scale" is frequently used.  Therefore, the use of the words "on a commercial scale" as 
a phrase appears to be relevant to their ordinary meaning. 
7.561 The circumstances surrounding the inclusion of the phrase "on a commercial scale" show that 
the phrase has been used and, in some cases, defined in the intellectual property legislation of various 
countries for periods stretching back almost a century.  Specifically, the patent laws of these countries 
refer to the working of inventions, or failure to work inventions, "on a commercial scale".538  The term 
                                                   
535 China's first written submission, paras 69-71. 
536 United States' response to Question No. 68. 
537 Appellate Body Report in EC – Chicken Cuts, para. 175, quoting Appellate Body Report in US – 
Softwood Lumber IV, para. 59, and referring to Appellate Body Reports in US – Offset Act (Byrd Amendment), 
para. 248, and US – Gambling, para. 166, and quoting McNair, The Law of Treaties (Oxford, Clarendon Press, 
1961), p. 365.   
538 See, for example, the Australian Patent Act 1990, s. 135(1) (mentioned in response to Third Party 
Question No. 9);  Indian Patents Act 1970, ss. 83-84;  South African Patent Act 1978, s. 56;  United Kingdom 
Patent Act 1977-1988, s. 50; Zimbabwean Patents Act 1971, s. 31, in Exhibit CHN-198, and the patent laws of 
other Commonwealth countries.  Earlier, the United Kingdom Patents and Design Act 1919, s. 27, had referred 
to working a patent "on a commercial scale". 


 
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is used in relation to the exploitation of protected subject matter, as in Article 61, but the purpose of 
these non-working provisions, and the considerations relevant to their operation, are distinct from 
those of criminal procedures and penalties as addressed in Article 61 of the TRIPS Agreement.  There 
is insufficient indication that the meaning ascribed to the term "on a commercial scale" in such 
legislation was that intended by the negotiators of the TRIPS Agreement when they used the term in 
the first and fourth sentences of Article 61.  However, this circumstance shows the phrase in use in an 
intellectual property context long before the negotiation of the TRIPS Agreement.     
7.562 The term "on a commercial scale" was also used in the specific context of trademark 
counterfeiting and copyright piracy in the WIPO Committee of Experts on Measures Against 
Counterfeiting and Piracy in 1988 contemporaneously with the earlier part of the negotiations of the 
TRIPS Agreement.  Draft Model Provisions for National Laws set out in a Memorandum by the 
International Bureau of WIPO for that Committee included, in Article A(1), (2) and (3), three draft 
Model Provisions on manufacturing as an act of counterfeiting, manufacturing as an act of piracy and 
additional acts of counterfeiting and piracy, respectively.  Each of those draft Model Provisions 
contained a proviso that such goods were manufactured, or the act was committed, "on a commercial 
scale".  An explanatory observation accompanied the term "commercial scale" as a phrase.539   
7.563 The evidence on the record includes many other uses of the words "commercial scale" and 
"on a commercial scale" in a variety of contexts.  Accordingly, the Panel considers that the words 
"commercial" and "scale" provide important context for the ordinary meaning of each other when 
used together in the phrase "on a commercial scale" as in the first sentence of Article 61 of the TRIPS 
Agreement.   
7.564 China submits that the phrase "on a commercial scale" refers to "a significant magnitude of 
infringement activity".540  China refers to four isolated uses of the phrase "commercial scale" spread 
out over a period of forty years: one at the 1947-1948 Havana Conference, one in a 1985 GATT 
Council meeting, and two in US national legislation on alternative energy development.  From these 
uses, China posits an interpretation suggestive of industrial scale activity.541   
7.565 The Panel considers that this interpretation is predetermined by the context of the uses that 
China has selected, which refer to commercial scale activities at an industrial level.  This is inapposite 
in the context of Article 61 of the TRIPS Agreement which applies to acts of infringement of 
individual rights, including those subsisting in individual products.  This interpretation simply 
replaces the term "commercial", that is used in the text, with "significant", that is not used in the text, 
effectively reading out the term "commercial".   
7.566 China also argues that the explanatory observation that accompanied the draft Model 
Provisions is an example of ordinary usage of the term "commercial scale".542   
7.567 The Panel notes that the explanatory observation did not purport to be a definition but was 
prepared by the International Bureau of WIPO for the specific purpose of accompanying a provision 
on manufacturing in the draft Model Provisions.  The Report of the WIPO Committee of Experts on 
Measures against Counterfeiting and Piracy of April 1988 shows that the concept of "commercial 
                                                   
539 That explanatory observation read as follows:  
"'Commercial scale' is a notion which will have to be applied taking into consideration the 
circumstances accompanying the manufacture.  The quantity of the goods manufactured, the 
way in which they were, are or are intended to be used and the will to make profit are among 
the factors that the courts will have to take into consideration."   
See WIPO document C&P/CE/2 of 18, 19 February 1988, para. 17, set out in Exhibit CHN-43 
540 China's first written submission, para. 64. 
541 Exhibits CHN-44, CHN-45, CHN-46 and CHN-47. 
542 China's first written submission, para. 72;  rebuttal submission, para. 76. 


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scale" proved controversial.543  Accordingly, it is not an example of ordinary usage.  In any event, the 
draft Model Provisions of the Committee of Experts themselves were never agreed. 544  Therefore, it 
would not be appropriate to select an explanatory observation that accompanied them and elevate it to 
the status of the proper interpretation of a treaty text that was negotiated in another forum and that 
was finally agreed. 
7.568 Turning to other evidence on the record, two third parties contrasted "commercial scale" 
production with "pilot scale" production or "small scale test" production.545  The Panel finds these 
contrasting terms relevant because they indicate a quantity, and because production can be an act of 
counterfeiting or piracy.   
7.569 In response to questions from the Panel, China, but not the United States, provided other 
examples of ordinary uses of the phrase "commercial scale", including in company press releases, 
filings with the US Securities and Exchange Commission and patent applications.  The United States 
argues that these examples are functions of individuals' "own lexicography" and are not used in the 
same fashion or manner.546  The United States also notes that patent applications are unrelated to the 
first sentence of Article 61 of the TRIPS Agreement. 
7.570 The Panel considers that each of the uses on the record, being in the English language, 
reflects the understanding of the authors as to the ordinary meaning of those words and phrases in that 
language.  That is the reason why a language allows its speakers to render themselves mutually 
intelligible.  These are the very meanings that dictionaries catalogue.  Naturally, words and phrases in 
the same language may have more than one meaning, "common or rare, universal or specialized".547  
It is incumbent on the Panel to assess these usages in context to discern which is relevant to the 
question of interpretation at hand, just as the Panel has done when confronted with multiple 
definitions of the words "commercial" and "scale" in the same dictionary.  The Panel also notes that 
Article 61 of the TRIPS Agreement specifically relates the concept of infringement "on a commercial 
scale" to other intellectual property rights, which include patents, in the fourth sentence of that Article.   
7.571 Turning to the ordinary meaning of the term "on a commercial scale", the evidence includes 
examples of uses of that precise term and also the words "commercial scale" followed by a noun.  It is 
not suggested that this changes the meaning.  The nouns include "manufacturing", "production", 
"facility", "processes", "reactor", "composition" and "cultivation", and the term also follows 
"manufacture" and "employ".548  This confirms that the phrase can be used in different contexts as a 
single term.     
7.572 Some of these nouns, notably manufacturing and production, refer to acts that could constitute 
trademark counterfeiting and copyright piracy, and are therefore particularly apposite to the 
interpretation of the first sentence of Article 61 of the TRIPS Agreement.  However, counterfeiting 
and piracy include other acts besides manufacturing and production.  There are no uses on the record 
of the phrase with the word "sales" or "selling". 
                                                   
543 See Report adopted by the WIPO Committee of Experts on Measures Against Counterfeiting and 
Piracy, WIPO document C&P/CE/4 of 28 April 1988, reproduced in Exhibit CHN-72, at paras 71-81 and 94. 
544 The April 1988 session of the Committee of Experts could not complete its work and it was 
envisaged that a revised text would be prepared: see Report in note 543 above, at para. 177. 
545 Australia's and Mexico's respective responses to Third Party Question No. 4. 
546 United States' response to Question No. 69;  comments on China's response to Question No. 68.   
547 Appellate Body Report in US – Gambling, para. 164. 
548 Press releases of Novovax and Dupont, and US Securities and Exchange Commission filings of 
Amylin Pharmaceuticals, Inc., Biocryst Pharmaceuticals, Inc., Cambridge Display Technology, Inc. and 
Verenium Corporation in Exhibit CHN-196; and China's original evidence in Exhibits CHN-44, CHN-45, CHN-
46 and CHN-47. 


 
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7.573 Simple searches of online patent databases of the Patent Cooperation Treaty, the United 
States Patent and Trademark Office and the European Patent Office, reveal many patent applications 
that use the phrase "commercial scale".  China has provided abstracts of some applications that define 
the phrase "commercial scale" in precise, quantitative terms of volume, weight or speed.549 These 
definitions vary greatly and relate to different factors, according to the invention claimed in the 
application.  From this evidence, China concludes that: 
"In the context of patent applications, the phrase 'commercial scale' refers to a certain 
level of magnitude.  This magnitude is not necessarily objectively high, but it is 
relatively high in the context of the operation involved."550   
7.574 The United States finds this statement "telling" and recalls its view that: 
"[B]ased on its ordinary meaning, what qualifies as 'commercial scale' piracy or 
counterfeiting will vary among product and market, and therefore, what is 
'commercial scale' can be determined using factors relevant to a particular 
situation."551 
7.575 The United States argues that the uses in the press releases and SEC filings must be 
understood in context, as in some cases:   
"[W]hether a manufacturing activity is 'commercial scale' may well mean whether the 
activity is undertaken on a scale, or at a level of economic efficiency, that allows that 
public company to make a return on investment or profit for its shareholders."552 
7.576 The Panel observes a certain degree of convergence between the parties' views, as compared 
to their initial positions, when addressing these ordinary uses of the phrase "commercial scale".  The 
Panel considers that the contexts in which the term "on a commercial scale" or "commercial scale" is 
used, given their variety, indicate that each of the words "commercial" and "scale" provides important 
context for the interpretation of the other when used together.  Their combined meaning varies greatly 
according to the context around them and the lack of precision in the term is apparent.553  However, it 
is clear that none of these uses refer to activities that are simply commercial.  Rather, they are 
evidently intended to distinguish certain activities (or premises) from others that pertain to or have a 
bearing on commerce but which do not meet a market benchmark in terms of what is typical.  The 
precise benchmark in each case depends on the product and the market to which the phrase relates.   
7.577 The Panel recalls its view at paragraph 7.545 above and, in light of the evidence considered 
above, finds that a "commercial scale" is the magnitude or extent of typical or usual commercial 
activity.  Therefore, counterfeiting or piracy "on a commercial scale" refers to counterfeiting or piracy 
carried on at the magnitude or extent of typical or usual commercial activity with respect to a given 
product in a given market.  The magnitude or extent of typical or usual commercial activity with 
respect to a given product in a given market forms a benchmark by which to assess the obligation in 
the first sentence of Article 61.  It follows that what constitutes a commercial scale for counterfeiting 
or piracy of a particular product in a particular market will depend on the magnitude or extent that is 
typical or usual with respect to such a product in such a market, which may be small or large.  The 
                                                   
549 International applications published under the PCT: WO 00/61722;  WO 2004/054949 A1; WO 
2006/110534 A2; WO2008/020357 A2; United States patent no. 6,525,205 B2; United States patent application 
no. 2007/0202578 A1; in Exhibit CHN-197. 
550 China's response to Question No. 69. 
551 United States' comment on China's response to Question No. 69, citing its response to Question 
No. 16 and second oral statement (closing statement), paras 10-11. 
552 United States' comment on China's response to Question No. 68. 
553 The lack of precision is highlighted by the addition of specific definitions in the patent applications. 


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magnitude or extent of typical or usual commercial activity relates, in the longer term, to 
profitability.554   
7.578 The Panel observes that what is typical or usual in commerce is a flexible concept.  The 
immediate context in the second sentence of Article 61, which is closely related to the first, refers to 
the similarly flexible concepts of "deterrent" and "corresponding gravity".  Neither these terms nor 
"commercial scale" are precise but all depend on circumstances, which vary according to the differing 
forms of commerce and of counterfeiting and piracy to which these obligations apply.  
7.579 The parties have presented certain other facts and arguments in relation to the interpretation 
of "a commercial scale", which the Panel will now assess.  
(vi) 
Subsequent practice  
7.580 China refers to certain material as "subsequent practice" in the application of the TRIPS 
Agreement within the meaning of Article 31(3) of the Vienna Convention. The material comprises the 
enforcement policies of two authorities of two Members, a draft Directive of another Member and 
various free trade agreements entered into by the United States.555   
7.581 The Panel has reviewed the material and considers that it lacks the breadth to constitute a 
common, consistent, discernible pattern of acts or pronouncements.  Further, the content of the 
material does not imply agreement on the interpretation of Article 61 of the TRIPS Agreement.556  
Therefore, the Panel does not consider that it constitutes subsequent practice for the purposes of this 
interpretation.   
(vii) 
Supplementary means of interpretation 
7.582 China initially submitted that the draft Model Provisions contained a definition which formed 
the basis for discussion of the term in the negotiation of the TRIPS Agreement.557   
7.583 The United States responded that the status of this document under the Vienna Convention is 
unclear.  If the document could be used as a supplementary means of interpretation, it would confirm 
that a variety of factors would need to be taken into account to determine whether an act is on a 
commercial scale.558   
7.584 Canada and Japan refer to the explanatory observation on "commercial scale" that 
accompanied the draft Model Provisions, noting that it referred to quantitative as well as non-
quantitative factors.  The European Communities sees limited interest in recourse to supplementary 
means of interpretation but notes the same point.559   
7.585 The Panel recalls its observations regarding the explanatory observation that accompanied the 
draft Model Provisions at paragraph 7.567 above.  It appears that the explanatory observation did not 
represent the common intentions of the WIPO Committee of Experts on Measures Against 
                                                   
554 This finding is without prejudice to the qualitative aspect of "commercial scale" considered with 
respect to the second limb of this claim.   
555 China's first written submission, paras 104-108. 
556 See Appellate Body Reports in Japan – Alcoholic Beverages II, p. 13;  US – Gambling, paras 192-
193, and EC – Chicken Cuts, para. 259. 
557 China's first written submission, paras 72-75 and 110. 
558 United States' rebuttal submission, paras 26-37. 
559 Canada's third party written submission, para. 6; Japan's third party written submission, paras 22-23; 
European Communities' third party oral statement, paras 11-12. 


 
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Counterfeiting and Piracy, much less the common intentions of the participants in the negotiation of 
the TRIPS Agreement.  
7.586 The draft Model Provisions were mentioned in the records of the TRIPS negotiations, in May 
1988560 and August 1988561, in the context of a discussion of the scope of a framework on trade in 
counterfeit goods (that was never concluded).  Documents of the WIPO Committee of Experts, 
including the draft Model Provisions, were communicated to the TRIPS negotiating group and made 
available in the GATT Secretariat for consultation by interested delegations, but not circulated, in 
June 1988.562  The Panel considers that this evidence indicates that the negotiators of the TRIPS 
Agreement were aware of the explanatory observation by the International Bureau of WIPO 
addressing "commercial scale", but it does not indicate that the content of that explanatory 
observation represented their common intentions. 
7.587 There is a certain temporal correlation between the work of the WIPO Committee of Experts 
and the use of the term "commercial scale" in the drafting of Article 61 of the TRIPS Agreement.  The 
European Communities' proposal for the negotiations on the enforcement of trade-related intellectual 
property rights in May 1989 ("EC proposal")563 contained a draft provision on criminal procedures 
and sanctions that bears a strong similarity to the first, second and fourth sentences of Article 61 in the 
final text of the TRIPS Agreement.  It was also the first proposal to use the words "on a commercial 
scale".  In response to a question from the Panel, the European Communities informed the Panel that: 
"In spite of intense research, the European Communities has not been able to find any 
trace that the phrase 'on a commercial scale' in the EC proposal of 30 May 1989 was 
sourced from another instrument."564 
7.588 In any event, there are differences between the draft Model Provisions of the WIPO 
Committee of Experts, the EC proposal on criminal procedures and sanctions to the TRIPS 
negotiating group, and the terms of Article 61 of the TRIPS Agreement.  In particular, the draft Model 
Provisions incorporated the phrase "on a commercial scale" within the concepts of "counterfeiting" 
and "piracy" whilst Article 61 uses the phrase "on a commercial scale" to qualify the concepts of 
"wilful trademark counterfeiting or copyright piracy".  Further, the explanatory observation that 
accompanied the draft Model Provisions was limited to the act of manufacturing whilst Article 61 
encompasses the range of acts of counterfeiting and piracy.   
7.589 The records of the TRIPS negotiations do not disclose any discussion of the meaning of the 
phrase "on a commercial scale".   
7.590 Therefore, the Panel does not consider that the explanatory observation that accompanied the 
draft Model Provisions sheds any further light beyond that noted at paragraph 7.562 above on the 
intentions of the TRIPS negotiators when they used the term "commercial scale".   
                                                   
560 It was suggested that, in that connection, the negotiating group should take into account definitions 
established in national legislation, those under preparation in the WIPO Committee of Experts on Measures 
Against Counterfeiting and Piracy and the existing obligations of relevance in intellectual property conventions: 
see the minutes of the meeting in document MTN.GNG/NG11/7, paras 23 and 33, in Exhibit CHN-71. 
561 A participant suggested that, in determining the types of infringement to be covered by a framework 
on trade in counterfeit goods, the criteria suggested in the WIPO draft model legislation should be employed:  
see the minutes of the meeting in document MTN.GNG/NG11/8, at para. 52, in Exhibit CHN-55.   
562 See GATT document MTN.GNG/NG11/W/5/Add.6. 
563 GATT document MTN.GNG/NG11/W/31. 
564 European Communities' response to Third Party Question No. 8. 


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(viii) 
Article 41.5 of the TRIPS Agreement 
7.591 China submits that Article 41.5 of the TRIPS Agreement makes clear that none of the 
enforcement provisions can be read to require Members to set out low-scale – and therefore high 
resource – thresholds for the criminalization of intellectual property infringement.565  It later clarified 
that low-scale thresholds implied high amounts of resources because the first sentence of Article 61 is 
only satisfied by criminal measures that are actually applied.566   
7.592 The United States does not claim that China has an obligation to prosecute all counterfeiting 
and piracy falling within the scope of the first sentence of Article 61.567 
7.593 Article 41.5 provides as follows: 
"It is understood that this Part does not create any obligation to put in place a judicial 
system for the enforcement of intellectual property rights distinct from that for the 
enforcement of law in general, nor does it affect the capacity of Members to enforce 
their law in general.  Nothing in this Part creates any obligation with respect to the 
distribution of resources as between enforcement of intellectual property rights and 
the enforcement of law in general." 
7.594 The Panel considers that Article 41.5 is an important provision in the overall balance of rights 
and obligations in Part III of the TRIPS Agreement.  Both sentences apply to "this Part", which 
includes Article 61.   
7.595 The first sentence of Article 41.5 does not appear to be relevant to this dispute.  China has 
administrative agencies dedicated to intellectual property enforcement that are separate from its law 
enforcement agencies in general.  It is under no obligation to put in place a separate judicial system 
for IPR enforcement.   
7.596 The second sentence of Article 41.5 relates to the deployment of resources for enforcement.  
In the Panel's view, that plays an important role in relation to Article 41, in particular, paragraph 1568, 
and the actual exercise of authority to enforce intellectual property rights throughout Part III.  
However, the Panel's findings in this dispute regarding the first sentence of Article 61 are confined to 
the issue of what acts of infringement must be criminalized and not those which must be prosecuted.   
7.597 China refers to the second sentence of Article 61 on remedies and notes that it contains an 
element of flexibility in its reference to "the level of penalties applied for crimes of a corresponding 
gravity".  China argues that if Members are not required to impose meaningful punishment for low-
level crimes, they should not be required to enforce intellectual property crimes at a low level 
either.569  The Panel simply recalls its comment in paragraph 7.596 and confirms that it has not made 
a finding on any duty to prosecute. 
7.598 China asks the Panel to note that its criminal law allows for the possibility of private 
prosecution of certain crimes.  It speculates that defining a crime with too low a threshold "could 
unleash a large volume of private enforcement actions and impose a significant burden on the judicial 
                                                   
565 China's first written submission, paras 98-101. 
566 China's rebuttal submission, paras 122-124:  see also European Communities' response to Third 
Party Question No. 10.  Australia makes a similar point in relation to the second sentence of Article 61:  see its 
third party written submission, para. 25.   
567 United States' rebuttal submission, paras 47-48. 
568 Article 41.1 of the TRIPS Agreement is quoted at paragraph 7.170 above. 
569 China's rebuttal submission, paras 108-110. 


 
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system".570  However, in response to questions, China was unable to substantiate its concern.  In 
particular, it lacked any data relevant to its experience after it lowered thresholds for the crimes 
infringing intellectual property crimes in 2004.571  Therefore, the Panel does not need to consider that 
issue further. 
7.599 In light of the above, the Panel confirms its interpretation of "on a commercial scale" set out 
at paragraph 7.577 above.  The Panel will now apply that interpretation to the measures at issue. 
(ix) 
Conformity of the measures at issue with respect to the level of the thresholds 
7.600 The Panel recalls its finding at paragraph 7.545 above regarding the interpretation of the 
phrase "wilful trademark counterfeiting or copyright piracy 'on a commercial scale'", as used in 
Article 61 of the TRIPS Agreement.  The Panel recalls, in particular, that this is a relative standard, 
which will vary when applied to different fact situations. 
7.601 The Panel notes that it is the standard in the treaty obligation that varies as applied to different 
fact situations, and not necessarily the means by which Members choose to implement that standard.  
The Panel recalls that the third sentence of Article 1.1 of the TRIPS Agreement, quoted and discussed 
at paragraphs 7.512 and 7.513 above, provides as follows: 
"Members shall be free to determine the appropriate method of implementing the 
provisions of this Agreement within their own legal system and practice." 
7.602 This provision confirms that the TRIPS Agreement does not mandate specific forms of 
legislation.572  The Panel may not simply assume that a Member must give its authorities wide 
discretion to determine what is on a commercial scale in any given case, and may not simply assume 
that thresholds, including numerical tests, are inconsistent with the relative benchmark in the first 
sentence of Article 61 of the TRIPS Agreement.  As long as a Member in fact provides for criminal 
procedures and penalties to be applied in cases of wilful trademark counterfeiting or copyright piracy 
on a commercial scale, it will comply with this obligation.  If it is alleged that a Member's method of 
implementation does not so provide in such cases, that allegation must be proven with evidence.  
Therefore, the Panel will assess whether the evidence shows that China fails to provide for criminal 
procedures and penalties to be applied in any such cases. 
7.603 The Panel begins with the first limb of the claim.  In the first limb of the claim, the United 
States challenges the levels at which certain thresholds are set.  Having chosen to challenge the level 
of a series of numerical thresholds as compared to a relative standard, it is necessary for the 
United States to demonstrate that the levels are higher than that standard as applied in certain factual 
situations.   That calls for quantitative evidence.  Later, the Panel will address the second limb of the 
claim, in which the United States challenges the factors taken into account by the criminal thresholds.  
That calls for qualitative evidence. 
                                                   
570 China's first written submission, para. 38, referring to Article 170 of the Criminal Procedure Law, as 
restated in Article 5 of Judicial Interpretation No. 6 [2007]. 
571 China's response to Question No. 14.   
572 The United States accepts this: see its rebuttal submission, paras 42-44;  response to Question 
No. 54. 


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7.604 The parties agree that the standard of "a commercial scale" will vary by product and market 
and that the conformity of China's criminal thresholds with that standard must be assessed by 
reference to China's marketplace. 573  
7.605 The Panel recalls that a previous Panel had occasion to apply certain relative standards in the 
TRIPS Agreement in quantitative terms.  The Panel in US – Section 110(5) Copyright Act interpreted 
the phrase "certain special cases" inter alia in terms of a narrow scope or reach, and the phrase "a 
normal exploitation of the work" inter alia in an empirical or quantitative sense, as those phrases are 
used in Article 13 of the TRIPS Agreement.574  As in the present case, the parties in that dispute 
agreed that conformity had to be assessed wholly or primarily in relation to the respondent's market.  
The Panel in that dispute adopted the following approach in assessing the conformity of a measure 
with Article 13: 
"We note that while the WTO Members are free to choose the method of 
implementation, the minimum standards of protection are the same for all of them.  In 
the present case it is enough for our purposes to take account of the specific 
conditions applying in the US market in assessing whether the measure in question 
conflicts with a normal exploitation in that market, or whether the measure meets the 
other conditions of Article 13."575  (footnote deleted) 
7.606 In the present dispute, the Panel considers this approach appropriate as well.  The Panel needs 
to consider the specific conditions applying in China's marketplace in assessing whether the measures 
in question, which exclude certain acts of infringement from particular liability, conform to the 
relative standard in Article 61.576  This applies a fortiori as the relative standard is set in terms of what 
is "on a commercial scale", which varies not only by market but also by product within the same 
market.   
7.607 The nature of the measures at issue and the applicable treaty obligation under consideration in 
this Section of this Report can be contrasted with those considered in Section VII:A.  It was not 
necessary for the United States to demonstrate the particular class of works to which the Copyright 
Law denies copyright protection because it was clear that the measure at issue denies all copyright 
protection to some works and the relevant obligation in the TRIPS Agreement does not permit denial 
of all copyright protection to any such works.  In contrast, the measures that establish the criminal 
thresholds set forth levels that deny criminal procedures and penalties in some, but not all, cases of 
wilful trademark counterfeiting and copyright piracy, and the relevant obligation permits the denial of 
criminal procedures and penalties in some such cases.   
7.608 The United States argues that the criminal thresholds exclude certain commercial activity.  
The United States relies, in particular, on the text of the measures establishing the criminal thresholds 
themselves.577   
                                                   
573 United States' first written submission, fn. 78 and para. 118;  rebuttal submission, para. 17;  
responses to Questions Nos. 16 and 66;  China's first written submission, paras 133-137; response to Question 
No. 16. 
574 See Panel Report in US – Section 110(5) Copyright Act, paras 6.113 and 6.178. 
575 Ibid., para. 6.189.   
576 The Panel Report in Canada – Pharmaceutical Patents also considered the meaning of "normal" 
exploitation (in that case, of a patent) but in abstract terms.  However, it did so in an assessment of an exception 
that was challenged on the basis of the nature of the acts that the measures excused from liability, not their 
magnitude or extent.  Both parties also addressed the meaning of "normal" in that case in abstract terms: see 
paras 7.51-7.59. 
577 United States first written submission, para. 110;  rebuttal submission, para. 10. 


 
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7.609 The Panel has reviewed the measures and agrees that, on their face, they do exclude certain 
commercial activity from criminal procedures and penalties.  For example, some of the criminal 
thresholds are set in terms that refer expressly to commercial activity, such as "illegal business 
operation volume", which is defined in terms of "manufacture, storage, transportation, or sales" of 
infringing products, and "illegal gains" which is defined in terms of profit.  However, based solely on 
the measures on their face, the Panel cannot distinguish between acts that, in China's marketplace, are 
on a commercial scale, and those that are not.   
7.610 Certain thresholds are set in monetary terms, ranging from ¥20,000 profit to ¥50,000 turnover 
or sales.  The measures, on their face, do not indicate what these amounts represent as compared to a 
relevant commercial benchmark in China.578  Each of these amounts represents a range of volumes of 
goods, which vary according to price.  Another factor to take into account is the period of time over 
which infringements can be cumulated to satisfy these thresholds.  One threshold is set not in 
monetary terms but rather at 500 张 (份) ("copies" for the sake of simplicity).  Whilst it is reasonably 
clear to the Panel how many goods that comprises with respect to certain traditional media, this is not, 
on its face, related to any relevant market benchmark in China either.   
7.611 The Panel has noted the United States' repeated assertions that certain amounts constitute 
counterfeiting or piracy on a commercial scale.  The most recurrent example concerns 499 copyright-
infringing "copies", although it is not related to the same product in all examples or, sometimes, to 
any product.579  The only facts in these examples are amounts equal to, or slightly less than, those in 
the measures themselves.  Those amounts, in combination with the monetary thresholds and the 
factors used in the thresholds, demonstrate the class of acts for which China does not provide criminal 
procedures and penalties to be applied.  Those numbers and factors do not, in themselves, demonstrate 
what constitutes a commercial scale for any product or in any market in China.   
7.612 China asserted the relevance of the scale of commerce in China in its first written submission 
and referred to Economic Census statistics (considered below).580   
7.613 The Panel asked both parties after the first substantive meeting whether "commercial scale" 
varies according to characteristics of markets, products and operators within a market, how 
"commercial scale" can be related to these considerations and what type of data could be relevant.581 
7.614 In response to the Panel's question, the United States referred to the interpretation of 
"commercial scale" that it had proposed in its first written submission, which included all commercial 
activity by definition.  The United States agreed that "commercial scale" must be viewed with 
reference to the marketplace, and acknowledged that the scale of what is commercial necessarily will 
vary by product and market.  It acknowledged that what is "commercial scale" can vary from situation 
to situation according to a number of factors.  It asserted that China's criminal thresholds fail to 
capture commercial scale in certain market situations.582  Nevertheless, the United States did not 
provide data regarding products and markets or other factors that would demonstrate what constituted 
"a commercial scale" in the specific situation of China's marketplace. 
                                                   
578 The parties agree that the thresholds should be assessed in the form in which they appear in China's 
measures, namely Renminbi (¥), which is the local currency used in China's marketplace:  see their respective 
responses to Question No. 5. 
579 United States' first written submission, para. 139;  response to Question No. 25;  rebuttal submission, 
para. 112;  response to Question No. 64. 
580 China's first written submission, paras 133-137. 
581 Question No. 16. 
582 United States' response to Question No. 16. 


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7.615 In its rebuttal of China's assertion regarding the scale of commerce in China, the United States 
noted that the "commercial scale" standard was a relative one.583  It commented on the Economic 
Census statistics submitted by China but at the same time dismissed their relevance as they are 
aggregate statistics related to undefined average economic units.  It also recalled an earlier assertion 
that the Chinese market, including the market for many copyright and trademark-bearing goods, is 
fragmented and characterized by a profusion of small manufacturers, middlemen, distributors, and 
small outlets at the retail level.584    
7.616 The Panel has reviewed the evidence in support of this assertion.585  The evidence comprises a 
quote from a short article from a US newspaper, the San Francisco Chronicle, titled "30,000-Store 
Wholesale Mall Keeps China Competitive" regarding the number of stores in a particular mall in 
Yiwu and the physical dimensions of some stalls586; a statistic quoted from an extract from a 
management consultant report titled "The 2005 Global Retail Development Index" that the top ten 
retailers in China hold less than 2 per cent of the market, and another statistic that the top 100 retailers 
have less than 6.4 per cent587; and a quote from an article in Time magazine titled "In China, There's 
Priceless, and for Everything Else, There's Cash" that a shopping mall in Luohu spans six floors of 
small stores.588   
7.617 The Panel finds that, even if these sources were suitable for the purpose of demonstration of 
contested facts in this proceeding, the information that was provided was too little and too random to 
demonstrate a level that constitutes a commercial scale for any product in China.   
7.618 The United States referred to Canada's third party written submission, which had provided an 
estimate of China's gross domestic product per capita.589  It did not explain specifically how this 
figure was comparable to China's numerical thresholds.   
7.619 The Panel considers GDP per capita a reliable indicator of average national income but not a 
sufficient indicator of a commercial scale, as it is calculated with a denominator of total population.590  
The Panel also notes that GDP is a far more aggregated figure than those in the Economic Census 
statistics that the United States dismissed. 
7.620 China submits that the United States must provide evidence that China's laws actually 
function to exclude a category of infringement that meets the "commercial scale" standard.  
Hypothetical examples do not qualify as sufficient evidence.591   
7.621 In response, the United States asserts that it, and a number of third parties, have provided 
"numerous, concrete illustrations" of commercial-scale piracy and counterfeiting that take place 
underneath China's thresholds.592  It refers to a "Report on Copyright Complaints, Raids and Resulting 
Criminal Actions in China" prepared by a coalition of trade associations in 2008 (the "CCA 
Report").593   
                                                   
583 United States' rebuttal submission, para. 104. 
584 United States' rebuttal submission, paras 106-107.   
585 The evidence was submitted with the United States' first written submission, para. 122. 
586 Exhibit US-28. 
587 A.T. Kearney: "Destination: China" in The 2005 Global Retail Development Index in Exhibit US-29. 
588 Exhibit US-30.  An article from the London Daily Telegraph is also submitted in Exhibit US-31. 
589 United States' rebuttal submission, para. 108, referring to Exhibit CDA-1.   
590 As noted in China's rebuttal submission, para. 142.   
591 China's rebuttal submission, para. 149. 
592 United States' second oral statement, para. 28, elaborating on its rebuttal submission, paras 9-10. 
593 The Report, contained in Exhibit US-41, was prepared by the "China Copyright Alliance", a 
coalition of six trade associations that represent several creative industry sectors.   


 
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7.622 The Panel has reviewed the CCA Report to determine whether it bears out the United States' 
assertion.  The CCA Report was originally submitted as a case example intended to show that the 
criminal thresholds create a "safe harbour" (an assertion not borne out by the data594) and also to show 
that significant quantities of retail sales of infringing product take place in China at levels below 
China's thresholds.595   
7.623 The Panel notes that the question whether retail sales of infringing product take place below 
the thresholds is not dispositive of the claim, as the first sentence of Article 61 does not require 
Members to provide for criminal procedures and penalties to be applied to all such cases.  Further, the 
CCA Report sets out for each raid "total units seized (DVD, CD, VCD)".  For some raids, the total 
units seized were as few as five.  Therefore, while the aggregate number of seizures below China's 
thresholds may or may not be "significant", the seizure data does not permit any deduction as to the 
scale of operations of the individual raided retail outlets.  The total units seized in many cases may be 
only part of, or even incidental to, a commercial operation. The seizure data illustrates the scale of 
infringing stock on hand (as it is intended to do) but it does not show the scale of the individual retail 
businesses or what constitutes a commercial scale for those products in that market.596 
7.624   China provided official statistics from its Economic Census.597  The statistics include figures 
for average annual revenue for enterprises engaged in different industrial sectors in China.  Annual 
revenue appears to be a concept capable of comparison with "illegal business operation volume" as 
defined in Judicial Interpretation No. 19 [2004] and set out at paragraph 7.401 above.  The statistics 
show that the illegal business operation volume threshold of ¥50,000 for counterfeiting one registered 
trademark in violation of Article 213 of the Criminal Law is equivalent to 0.41 per cent of the average 
annual revenue of  enterprises engaged in light industry;  0.8 per cent of the average annual revenue of 
small-size enterprises;  and 0.84 per cent of the average revenue of Chinese retail businesses.598   
7.625 The Economic Census statistics also refer to a concept of the "Individual Operation 
Household" which is defined as the smallest unit of commerce in Chinese economic statistics.  The 
                                                   
594 The CCA Report was submitted as a case example of how the thresholds allegedly create a "safe 
harbour" for commercial scale trademark counterfeiting and copyright piracy and provide "clear guideposts" as 
to how to avoid the risk of criminal prosecution.  It was alleged that the CCA Report shows that when the 
numerical thresholds are shifted down, commercial operations are adjusted and restructured to ensure that they 
remain at levels that fall under the thresholds.  The CCA Report covers the period January 2006 to November 
2007 - the period during which a threshold under Article 217 of the Criminal Law was lowered from 1000 
copies to 500 copies (see paragraphs 7.411 and 7.412 above).  The CCA Report highlights a congruence in the 
percentage of seizures below the threshold before and after it was lowered.  However, when further data was 
provided regarding the percentage of seizures below 500 copies before the threshold was lowered, when it was 
an irrelevant number, the Panel was able to observe a (somewhat lesser but still strong) congruence between 
that percentage and the percentage of seizures below the same level when it was the threshold.  Therefore, the 
Panel does not find that the data in the CCA Report supports the conclusion that the commercial operations of 
infringers are related to the levels of the thresholds.  See United States' first written submission, paras 151-161.  
The further data was provided by the United States in response to Question No. 1 posed by China.   
595 United States' first written submission, para. 157;  rebuttal submission, paras 93-97.   
596 The United States alleged in response to an unrelated question that if a person engaged in legitimate 
commercial activities is also engaged in infringing activities, the existence of the legitimate commercial 
platform to support the infringing activities would be a pertinent consideration in assessing whether the 
infringing activities are "on a commercial scale":  see United States' response to Question No. 62.   However, 
the Panel notes that the phrase "on a commercial scale" qualifies the terms "trademark counterfeiting or 
copyright piracy" and a legitimate commercial platform does not fall within the scope of either of those terms. 
597 China Economic Census Yearbook 2004, edited by the Executive Office of the First National 
Economic Census Leading Group of the State Council, published in Chinese and English by the China Statistics 
Press.  Extracts from the Volume of Secondary Industry (Section One) and the Volume of Synthesis, including 
interpretation of main indicators and rules on classification, are reproduced in Exhibit CHN-79. 
598 See China's response to Question No. 17. 


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statistics show that the illegal business operation volume threshold of ¥50,000 for counterfeiting one 
registered trademark is equivalent to 22.56 per cent of the average annual revenue of Individual 
Operation Households and 29.44 per cent of the average annual revenue of Individual Operation 
Households engaged in retail.599 
7.626 The Panel notes that these calculations are percentages of an average and may be relevant to 
establishing what is a typical or usual level of commercial activity in a general sense.  However, the 
statistics are highly aggregated and do not refer to any particular products, according to which the 
benchmark of "a commercial scale" necessarily varies.  Moreover, the statistics regarding individual 
operation households engaged in retail do not address the basic question of whether retail sales by 
individual operation households are typical or usual in China.  Therefore, the Panel does not consider 
that these statistics are sufficient for it to form a view as to whether the illegal business operation 
volume thresholds capture all trademark counterfeiting or copyright piracy on a commercial scale in 
China. 
7.627 The United States also submitted other press articles to illustrate points in its first written 
submission, particularly regarding the calculation of certain thresholds.  China objected at the outset 
arguing that "[t]he Panel can afford little or no weight to such anecdotal and potentially misinformed 
reports".600  The United States was puzzled by China's concern at its recourse to newspapers or other 
media.  It recalled its prior attempts to obtain information from China pursuant to Article 63.3 of the 
TRIPS Agreement.  China had declined to provide information and stated instead that its competent 
domestic IPR authorities had also made relevant information publicly available through their official 
websites, newspapers, magazines and other proper channels.  The United States added that the 
information in newspapers and magazines is "drawn from a variety of well-established and well-
regarded sources".601 
7.628 The Panel has reviewed the press articles and notes that none of them are corroborated, nor do 
they refer to events or statements that would not require corroboration.  Whilst the publications are 
reputable, most of these particular articles are brief and are quoted either for general statements or 
random pieces of information.  Most are anecdotal in tone, some repeating casual remarks about 
prices of fake goods, anonymous statements or speculation.  They have titles including "Fake Pens 
Write Their Own Ticket",  "Chasing copycats in a tiger economy", "Hollywood takes on fake Chinese 
DVDs", "Film not out yet on DVD?  You can find it in China" and "Inside China's teeming world of 
fake goods".602  Most of the press articles are printed in US or other foreign English-language media 
that are not claimed to be authoritative sources of information on prices and markets in China.  There 
are four press articles from Chinese sources, one from Xinhua News Agency and three from the 
English-language China Daily. Two are quoted simply to demonstrate the existence of certain goods 
in China603; another quotes a vague statement from unnamed "market insiders" on how illegal 
publishers tend to work604; and the other quotes an "insider" for the maximum and minimum prices of 
a range of pirated and genuine goods.605  One other alleged "recent news account" is not attributed to 
any source at all.606   
7.629 The Panel emphasizes that, in the absence of more reliable and relevant data, it has reviewed 
the evidence in the press articles with respect to a central point in this claim that is highly contested.  
                                                   
599 Ibid. 
600 China first written submission, para. 45. 
601 United States' rebuttal submission, para. 98 and fn. 102. 
602 Exhibits US-24, US-30, US-31, US-33, US-34, US-37.  
603 A Xinhua News Agency article refers to goods with high turnover and relatively low cost, in Exhibit 
US-26, and a China Daily article refers to the existence of HDVDs, in Exhibit US-39. 
604 Exhibit US-38. 
605 Exhibit US-32. 
606 United States' first written submission, para. 136, citing the price of a Spider Man 3 DVD. 


 
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The credibility and weight of that evidence are therefore critical to the Panel's task.  For the reasons 
set out above, the Panel does not ascribe any weight to the evidence in the press articles and finds that, 
even if it did, the information that these press articles contain is inadequate to demonstrate what is 
typical or usual in China for the purposes of the relevant treaty obligation.607  
7.630 There is no indication that probative evidence on this point would be difficult to obtain.  
Indeed, it can be noted that more specific information on prices and markets in China is contained in 
various US exhibits, notably information on prices of products in a report on Cinema and Home 
Entertainment in China prepared by Screen Digest and Nielsen NRG608 (submitted in support of the 
claim regarding the Copyright Law) and in annexes to a letter from Nintendo of America to the 
United States Trade Representative.609  The United States did not refer to this evidence in its 
submissions.  Further, in response to a question from the Panel, the United States had no apparent 
difficulty in providing a translation of a Chinese judicial decision that had been mentioned in one of 
the press articles.610   
7.631 The information in the exhibits would not necessarily have been sufficient and, even if it were, 
it would not be appropriate for the Panel to trawl them for evidence to which the United States did not 
refer to make the United States' case for it.  As the Appellate Body Report in US – Gambling states: 
"A prima facie case must be based on 'evidence  and  legal argument' put forward by 
the complaining party in relation to  each  of the elements of the claim.  A 
complaining party may not simply submit evidence and expect the panel to divine 
from it a claim of WTO-inconsistency.  Nor may a complaining party simply allege 
facts without relating them to its legal arguments."611 
7.632 For the above reasons, the Panel finds that the United States has not made a prima facie case 
with respect to the first limb of its claim under the first sentence of Article 61 of the TRIPS 
Agreement.  The Panel will now turn to the second limb of the claim. 
(x) 
Other indicia – physical evidence 
7.633 With respect to the second limb of this claim, the United States alleges that China's value and 
volume thresholds are tied to finished goods and therefore ignore other indicia of commercial scale 
operations, such as the presence of unfinished products and fake packaging.612   The Panel will assess 
whether these other indicia can be taken into account by China's thresholds and, to the extent that they 
                                                   
607 The Panel's approach is consistent with the approach of other international tribunals, notably the 
International Court of Justice: see Rosenne, S., The Law and Practice of the International Court 1920 – 2005, 
(M. Nijhoff, 2006), Volume III at para. 257, and Highet, K., "Evidence and Proof of Facts", in Damrosch, L., 
The International Court of Justice at a Crossroads, (Transnational, 1987) cited in the Panel Report in Australia 
– Automotive Leather II at para. 9.65, fn. 210.  The Panel's approach in the present dispute is also consistent 
with the approach in the Arbitrator's Award in EC – The ACP-EC Partnership Agreement II, at paras 57-58.  
Whilst the Appellate Body Report in Brazil – Retreaded Tyres referred to a newspaper article in a footnote, it 
did so after referencing two substantial reports on point, and the point was not central to the findings in that 
dispute: see Appellate Body Report, para. 207, fn. 393, citing the Panel Report, para. 7.201, fn. 1358. 
608 United States' first written submission, para. 200, citing Exhibit US-49. 
609 United States' first written submission, paras 146 and 153, citing Exhibit US-36. 
610 Exhibit US-61 referred to in the United States' first written submission, para. 120 and a newspaper 
article in Exhibit US-25.  
611 Appellate Body Report in US – Gambling, para. 140 (footnotes omitted). 
612 United States' first written submission, paras 113 and 143 to 147. 


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cannot, whether the term wilful trademark counterfeiting or copyright piracy "on a commercial scale" 
requires China to take these other indicia into account.613   
7.634 This argument is premised on an assertion that China's criminal thresholds "focus[] solely on 
business volume, copy, and profit thresholds that can only be met by counting finished goods".614  It is 
not clear why the United States considers that thresholds expressed in these terms are tied exclusively 
to finished goods.  Its concern may relate to the definition of "illegal business operation volume" in 
Article 12(1) of Judicial Interpretation No. 19 [2004]615 and to the use of the term 张 (份) in one 
threshold616 but this is not explained.  It is not clear how its concern relates to "illegal gains".617  In 
sum, the United States does not sufficiently relate its assertion to the measures at issue. 
7.635 Further, the United States has challenged China's criminal thresholds as established by the 
Criminal Law, "in particular" certain Articles establishing the substantive crimes of infringing 
intellectual property rights and relevant Judicial Interpretations.618  However, the United States has 
not properly addressed any other provisions of the Criminal Law, such as the general provisions, that 
could have a bearing on questions of evidence.  Having cast the entire Criminal Law as a relevant 
measure, it is incumbent on the United States to explain how the thresholds established by that Law 
operate.  A complainant cannot avoid the burden of proof with respect to other apparently relevant 
provisions of the Law at issue, particularly when it identified that whole Law in its request for 
establishment of a panel, simply by neglecting to address those provisions, leaving it to the respondent 
to assert their relevance.  
7.636 Instead, the United States provided a copy of Articles 1 to 12 of the Criminal Law, without 
comment, and responded only briefly to the arguments of the respondent on the offences of 
preparation for a crime and attempted crime established by Articles 22 and 23 of the Criminal Law.  
When asked whether Articles 22 and 23 of the Criminal Law permit courts to take into account other 
physical evidence, such as unfinished products and packaging (which the United States asserts that 
they cannot), the United States stated as follows: 
"The United States is not aware of the extent to which the offenses of preparation and 
attempt permit courts to convict an offender based on physical evidence other than 
the infringing products themselves, such as unfinished products and packaging, for 
the purpose of meeting the thresholds."619 
7.637 The Panel recalls its findings at paragraphs 7.434 to 7.437 above regarding the offences of 
preparation for a crime and attempted crime established by Articles 22 and 23 of the Criminal Law.  
The United States does not dispute that these general provisions apply to the substantive crimes of 
infringing intellectual property rights, and acknowledges that certain courts (whose decisions were 
submitted by China) have applied them accordingly.620  Therefore, the United States does not 
sufficiently explain the operation of the measures at issue to support its assertion. 
7.638 To the extent that the crimes of preparation for a crime and attempted crime provide for 
criminal prosecution and sanctions, it is not dispositive of the issue whether they may be taken into 
account in relation to the crimes set out in Articles 213, 214, 215, 217 and 218 of the Criminal Law.  
                                                   
613 See paragraph 7.496 above. 
614 United States' first written submission, para. 143.  The same submission also referred to China's 
reliance on "value and volume" thresholds tied to finished goods:  see para. 113. 
615 See paragraph 7.401 above. 
616 See paragraph 7.411 above. 
617 United States' first written submission, para. 143, cf. para. 144. 
618 See the request for establishment of a panel, attached as Annex D-1 to this report. 
619 United States' response to Question No. 8. 
620 United States' rebuttal submission, para. 91. 


 
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China's obligation under the first sentence of Article 61 is to provide for criminal procedures and 
penalties to be applied.  That obligation is indifferent as to the means by which China provides for 
such procedures and penalties to be applied, whether by means of substantive crimes only or by 
means of accessorial liability in some cases. 
7.639 The United States cited in support of its concerns regarding physical evidence data collected 
by Nintendo of America in an anti-counterfeiting campaign in China.  The data shows that some 
seizures of infringing products included product components, packaging and materials and 
implements.621  
7.640 The Panel notes that the Nintendo data does not show whether China provides for criminal 
procedures and penalties to be applied to cases where the authorities find only product components, 
packaging and materials and implements, nor does the United States sufficiently relate the seizure 
data to that issue. 
7.641 The Panel notes that Nintendo emphasized its concerns regarding product components, 
packaging and materials and implements through a discussion of three criminal cases.  China 
submitted the judgement of a court in one of these cases.622  The judgement shows that the court did 
take into account both finished and semi-finished infringing products in its evaluation of the 
substantive crime under Article 213 of the Criminal Law.  That case was decided before the entry into 
force of Judicial Interpretation No. 19 [2004], but it is not clear if the interpretation of the thresholds 
in that Judicial Interpretation was the reason why the authorities in the two later cases did not 
(allegedly) take unfinished products into account.   
7.642 The United States argues that the court should have taken into account unfinished products 
that do not in fact infringe, and materials and implements.623  However, given that the court did take 
account of all products that were trademark-infringing, and not simply finished products, it is not clear 
why or if the United States considers that the possession of non-infringing items should have been 
sufficient for conviction of an intellectual property crime. 
7.643 China submits another judgement that, in its view, shows that a court took into account 
unfinished components in its evaluation of a substantive crime under Article 213.  The court also 
considered machines and scales as evidence that the components were to be used to produce 
counterfeit products.624   
7.644 The United States dismisses this judgement, arguing that the reasoning is confused and that 
the case is an "outlier".625  However, the United States does not deny that the court took the unfinished 
components into account and, given that it has provided no information on judicial decisions on point, 
it is unable to substantiate its assertion that the case is in any way exceptional.  The United States does 
point out that one other judicial decision submitted by China shows that a court did not count semi-
finished products, packaging and tools626, which the Panel has noted. 
                                                   
621 United States' first written submission, para. 146, citing Nintendo data in Exhibit US-36. 
622 Exhibit CHN-16. 
623 United States' rebuttal submission, para. 92. 
624 Exhibit CHN-15, to which China referred in its rebuttal submission, para. 32. 
625 United States' rebuttal submission, para. 92. 
626 Exhibit CHN-9, to which the United States referred in its rebuttal submission, para. 93. The case 
concerns the order, manufacture and sale of several thousand units of counterfeit alcoholic beverages over the 
course of six months.  At the time of arrest, 1,480 units of manufactured counterfeit alcoholic beverage and 
more than 4,000 bottles of semi-finished beverage were seized, with a large amount of packaging materials and 
tools for manufacturing counterfeit products.  The judicial decision makes no mention of the semi-finished 


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7.645 China submits that the inchoate crimes of preparation of a crime, and attempted crime, apply 
to all substantive crimes in Part Two of the Criminal Law, including the crimes of infringing 
intellectual property rights.  China argues that these inchoate crimes allow courts to take into account 
unsold goods, with respect to crimes of selling, and unfinished products, with respect to crimes of 
production.627 
7.646 The Panel recalls its findings at paragraphs 7.436 and 7.437 above regarding the construction 
of the measures at issue.  These are confirmed by the judicial decisions submitted in evidence 
showing courts applying either or both of the general provisions in Articles 22 and 23 of the Criminal 
Law to various crimes of infringing intellectual property rights.628  Specifically, one of the courts gave 
its reason for applying Article 23 and, hence, sentencing the infringer to a lesser penalty, which was 
that the infringer had not finished production at the time he was apprehended.629   
7.647 The United States submits that Articles 22 and 23 of the Criminal Law do not apply to 
evidence of completed crimes, such as "worn moulds" for pressing pirated products or counterfeit 
marks or other materials and implements of such an operation.630 
7.648 China replies that its authorities consider materials and implements and other reliable indicia 
in determining criminal infringement, and would consider as relevant evidence a "worn mould" that 
showed with reasonable certainty that it had produced sufficient number of items to cross the criminal 
threshold.  China refers to a judicial decision in which the court considered the presence of materials 
and implements.631   
7.649 The Panel notes that in the case referred to by China the court took into account packaging 
and tools as evidence of the intended use of product components seized on site, so that the value of 
the product components was included in the assessment of illegal business operation volume.  The 
tools, though relevant, did not substitute for the thresholds. 
7.650 In any event, the Panel considers that the United States' allegation regarding physical 
evidence relates to the evidence sufficient to initiate a criminal prosecution more than to the definition 
of the crime itself.  Article 61 of the TRIPS Agreement does not address evidence.  The first sentence 
of Article 61 addresses the infringing activity in respect of which the minimum standards must apply.  
Evidence, including in criminal procedures, is mentioned in Article 41.3, but that provision has no 
bearing on this claim.   
7.651 Section 5 of Part III of the TRIPS Agreement, on criminal procedures, can be contrasted with 
Section 2, on civil and administrative procedures and remedies, which makes mention of evidence in 
Article 42 and contains a dedicated provision addressing certain specific issues regarding evidence in 
Article 43.  Even Article 43 does not address the detailed issue of sufficiency of evidence.  Rather, 
Section 2 leaves such questions to the judicial authorities who weigh that issue in the exercise of their 
authority to order the remedies set out in Articles 44 to 46.  Given the brevity of Section 5, which 
devotes two sentences to acts of infringement and two sentences to remedies (or penalties), it would 
be surprising if it was intended to create a broader obligation addressing issues of evidence and 
procedure.  The terms used in Article 61 do not suggest that it was so intended.  The different 
                                                                                                                                                              
products, packaging materials or tools in the calculation of the thresholds of illegal business operation volume 
for the purposes of conviction under Article 213 of the Criminal Law. 
627 China's rebuttal submission, paras 39-41, referring to Exhibits CHN-12, CHN-14, CHN-175. 
628 Exhibits CHN-12, CHN-14 and CHN-175. 
629 Exhibit CHN-175. 
630 United States' rebuttal submission, para. 85. 
631 China's rebuttal submission, para. 32, referring to Exhibit CHN-15. 


 
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phrasing of the obligation to "provide … to be applied" in the first sentence does not have a bearing 
on this issue.   
7.652 For all of the above reasons, the Panel does not consider that the United States has made a 
prima facie case with respect to other indicia of infringement, such as physical evidence including 
product components, packaging and materials or implements. 
(xi) 
Other indicia – impact on the commercial marketplace  
7.653 With respect to the second limb of this claim, the United States also alleges that China's 
thresholds are tied to finished goods and therefore ignore other indicia of commercial scale operations, 
such as the impact that the piracy or counterfeiting has on the commercial marketplace and by 
extension, right holders.632  The Panel will assess whether impact on the commercial marketplace can 
be taken into account by China's thresholds and then whether the term wilful trademark counterfeiting 
or copyright piracy "on a commercial scale" requires China to take into account impact on the 
commercial marketplace.633   
7.654 The United States raises a concern in support of this argument related to the Internet and 
digital technological advancements that can permit commercial piracy and counterfeiting that creates 
major damage to a market.634  The United States mentions the example of HDVDs (high-definition 
digital video discs) that can hold up to ten episodes of a TV series or several films.635   
7.655 The Panel notes that the United States has not attempted to substantiate its assertion regarding 
HDVDs.  This example appears to be based on the view that the term 张 (份) in the thresholds 
("copies" for the sake of simplicity) refers only to physical discs and cannot be applied in any other 
way in a novel situation.  There is no evidence on the record indicating that the thresholds have ever 
been applied to HDVDs, so this example is merely speculation based on the indirect reference to flat 
objects in the word 张and to copies in the word 份.636  This example can be compared to an assertion 
that a copyright law does not provide protection to computer programs simply on the basis that the 
legislation refers to the term "literary and artistic works" and computer programs are not obviously 
literary or artistic.  Some evidence is required that the authorities could not or would not apply that 
measure in the appropriate manner to new technology.637  The Panel notes China's assertion that, at 
such time as this issue arises for consideration, its authorities can apply the threshold in terms of the 
number of films or episodes on each disc.638    
7.656 More generally, the argument with respect to new technology appears to be premised on the 
view that a determination of whether trademark counterfeiting or copyright piracy is "on a 
commercial scale" must be able to take into account the impact of piracy or counterfeiting on right 
holders.  However, the Panel recalls its findings at paragraph 7.577 above regarding the interpretation 
of the term "on a commercial scale".  Read in context, that term refers to "wilful trademark 
counterfeiting or copyright piracy", which are acts of infringement.  The benchmark of a typical or 
usual commercial activity is relevant to the assessment of whether counterfeiting or piracy is covered 
                                                   
632 United States' first written submission, paras 143 and 148 to 149;  rebuttal submission, para. 112. 
633 See paragraph 7.496 above. 
634 United States' first written submission, para. 149; rebuttal submission, para. 112. 
635 The United States refers to a China Daily article reproduced in Exhibit US-39. 
636 See note 387 above. 
637 The Panel notes that, in this regard, the parties did not refer to subparagraph (17) of the first 
paragraph of Article 10 of the Copyright Law which provides for other rights for a copyright owner due to new 
technology.  The United States' first written submission, para. 64, referred to this in relation to the Copyright 
Law.   
638 China's rebuttal submission, para. 25;  response to Question No. 6. 


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by Article 61.  The impact is neither part of the act of infringement nor the benchmark of "on a 
commercial scale".  Therefore, it does not appear to be a relevant consideration.   
7.657 The Panel emphasizes that the terms used in the first sentence of Article 61, in particular 
"commercial", are technology-neutral.  A "commercial scale" can apply to various forms of commerce 
and, hence, various means of infringement.  The specific forms of commerce are not static but adapt 
to changing forms of competition due to technological development and the evolution of marketing 
practices.639  The Panel sees no reason why those forms of commerce should be limited to the forms 
of commerce that existed at the time of negotiation of the TRIPS Agreement.  Accordingly, the 
application of the term "commercial scale" can adjust to different situations, and refer to a different 
relative magnitude or extent, degree or proportion, depending on the facts.640  However, subsequent 
technological developments do not alter the considerations relevant to the interpretation of the terms 
used in Article 61.      
7.658 The United States also mentions an example of a "high-value niche market item" such as a 
specialized software application.  This example refers to a Seattle Times newspaper article titled 
"Inside China's teeming world of fake goods".641  The Panel accepts that the market for certain 
products may be small, but considers that a single, anecdotal newspaper article is insufficient 
evidence to demonstrate what is a commercial scale for such a product.  To the extent that this article 
concerns the impact on the right holder, it has been addressed in the second limb of the claim.   
7.659 The Panel observes a link between this argument and the issue of large-scale infringement 
with no commercial purpose.  The United States originally submitted that the term "commercial scale" 
included the following: 
"Thus, the concept of 'commercial scale' extends … to those whose actions, 
regardless of motive or purpose, are of a sufficient extent or magnitude to qualify as 
'commercial scale' in the relevant market."642    
7.660 The United States indicated that this was not the focus of its submission, and confirmed that 
in this dispute it does not challenge the thresholds on the basis that they require a "profit-making 
purpose".643  In response to a question from the Panel, the United States confirmed that its own 
Copyright Law was only amended in 1997 to deal with the problem of massive infringement, such as 
via the Internet, even if the infringing activity is not necessarily pursued for financial gain.644   
7.661 For all the above reasons, the Panel does not consider that the United States has made a 
prima facie case with respect to impact on the commercial marketplace. 
7.662 The Panel wishes to emphasize that its findings should not be taken to indicate any view as to 
whether the obligation in the first sentence of Article 61 of the TRIPS Agreement applies to acts of 
counterfeiting and piracy committed without any purpose of financial gain. 
                                                   
639 See also the Panel Reports in Canada – Pharmaceutical Patents (at para. 7.55) and US – 
Section 110(5 Copyright Act (at para. 6.187) with respect to the phrase "normal exploitation" in Articles 30 and 
13 of the TRIPS Agreement, respectively. 
640 The United States' concern regarding the volume of distribution by means of digital technology and 
the Internet is therefore relevant to the assessment of a "commercial scale": see United States' rebuttal 
submission, para. 112.   
641 United States' first written submission, para. 148, referring to Exhibit US-37. 
642 United States' first written submission, para. 110. 
643 United States' first written submission, paras 110 and 133, fn. 96;  response to Question No. 59.  See 
paragraphs 7.449 to 7.450 above, showing that Articles 213, 214, 217 and 218 of China's Criminal Law take 
account of a profit-making purpose. 
644 United States' response to Question No. 67. 


 
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(xii) 
Miscellaneous factors 
7.663 The United States asserted that the breadth of the term "on a commercial scale" presumes that 
a wide range of considerations should be probative of "commercial scale".645  However, it did not 
submit argument in support of any other considerations besides those discussed above. 
7.664 The Panel recalls its finding at paragraph 7.602 above that, if it is alleged that a Member's 
method of implementation does not provide for criminal procedures and penalties to be applied in 
cases in accordance with the first sentence of Article 61 of the TRIPS Agreement, that allegation must 
be proven with evidence.   
7.665 The United States briefly mentioned various factors and examples, most raised by third 
parties, and apparently considers that these may be relevant to a determination of a "commercial 
scale".646  It gave the example of "the manufacture of prototypes to test the infringer's production 
equipment"647 but did not explain why this would not attract criminal liability under the Criminal Law, 
including its general provisions, or why it would constitute trademark counterfeiting or copyright 
piracy.  It did not explain why "marketing and soliciting of business" would not attract criminal 
liability under the Criminal Law, including its general provisions, or why it would constitute 
trademark counterfeiting or copyright piracy.  It did not explain why a "previous history of 
infringement" could not be covered by the threshold of "other serious circumstances".   
7.666 Further, Japan, supported by the European Communities, and with whom the United States 
agreed, referred to a possible "organizational element" that can be taken into account in determining a 
commercial scale. 648  The Panel notes that Japan included this factor in its interpretation of 
"commercial scale" on the basis of a definition of "commerce" as a countable noun in French and 
Spanish that means, basically, a shop.  However, the English language does not include the word "a 
commerce" in that sense.  As the English version of the TRIPS Agreement is equally authentic649, the 
Panel does not consider this aspect of Japan's interpretation correct.  Further, if a typical or usual 
commercial activity included an element of organization, in terms of cooperation with other parties, 
the United States has not explained why the general provisions of China's Criminal Law (discussed at 
paragraphs 7.439 to 7.446 above) that allow aggregation of infringing acts by different persons 
cooperating in a joint crime, are inadequate, beyond the issue of the level of the thresholds, or why the 
cumulation of infringements over time, or cumulation of infringing products on different premises 
within the definition of "illegal business operation volume" would be inadequate. 
7.667 Therefore, the United States did not relate these factors sufficiently to the measures at issue or 
to its claim to discharge its burden of proof.   
7.668 The Panel recalls its findings at paragraphs 7.652, 7.661 and 7.667 above and finds that the 
United States has not made a prima facie case with respect to the second limb of its claim under the 
first sentence of Article 61 of the TRIPS Agreement. 
(xiii) 
Conclusion with respect to the claim under the first sentence of Article 61 
7.669 In light of the Panel's findings at paragraphs 7.632 and 7.668 above, the Panel concludes that 
the United States has not established that the criminal thresholds are inconsistent with China's 
obligations under the first sentence of Article 61 of the TRIPS Agreement. 
                                                   
645 United States' first written submission, para. 113;  see also rebuttal submission, para. 38. 
646 United States' response to Question No. 16;  rebuttal submission, fn. 35 and fn. 36. 
647 United States' response to Question No. 62. 
648 See note 415 and United States' rebuttal submission, para. 38. 
649 See the final clause of the WTO Agreement. 


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4. 
Claim under the second sentence of Article 61 of the TRIPS Agreement 
(a) 
Main arguments of the parties 
7.670 The United States claims that, as China's criminal measures do not comply with the first 
sentence of Article 61 of the TRIPS Agreement, they are accordingly also inconsistent with China's 
obligations under the second sentence of that Article.  In the United States' view, China can not make 
the necessary remedies "available" or sufficient to deter piracy and counterfeiting.650 
7.671 China responds that the obligation in the second sentence of Article 61 is supplementary to, 
and contingent on, that of the first sentence of that Article.  The obligation in the second sentence is 
only triggered in the event that a Member has an obligation under the first sentence to provide 
criminal procedures and penalties.651 
(b) 
Main arguments of third parties 
7.672 Australia argues that Article 61 creates an obligation of result, namely to put in place 
penalties that are sufficient to actively discourage others from engaging in such acts. A Member must 
actively prosecute and punish such acts.  The question whether punishments are sufficient to provide 
such a deterrent is assessed in light of the circumstances in a Member's territory but it is open to 
another Member to challenge the adequacy of a Member's remedies to achieve the deterrent effect 
under the DSU.652 
7.673 Brazil notes that the second sentence of Article 61 refers not only to imprisonment but also to 
monetary fines.  In China, low-level infringement seems to be punishable at least with monetary fines 
following administrative proceedings.  It seems to be overly formalistic to assume that because a 
domestic legal system qualifies monetary fines as administrative penalties, the core substantive issue 
of the deterrence capability of the remedy should be put aside.653 
7.674 Canada submits that China's thresholds may make available administrative remedies, but they 
preclude the application of criminal penalties in cases that fall below the thresholds for criminal 
liability.  The thresholds create "safe harbours" in which professional infringers are free to carry out 
wilful trademark counterfeiting and copyright piracy without risk of imprisonment or monetary fine.  
Rather than deterring infringement, the thresholds provide infringers clear parameters for committing 
wilful trademark counterfeiting or copyright piracy with immunity.654 
(c) 
Consideration by the Panel 
7.675 The Panel observes that the United States has made this claim contingent upon the outcome of 
its claims under the first sentence of Article 61 of the TRIPS Agreement.  Additional findings 
regarding this claim under the second sentence of Article 61 would not contribute further to a positive 
solution to this dispute.  Therefore, it is unnecessary for the Panel to rule on this claim. 
                                                   
650 United States' first written submission, paras 164-166. 
651 China's first written submission, paras 144-147. 
652 Australia's third party written submission, para. 25. 
653 Brazil's third party written submission, paras 39-42. 
654 Canada's third party written submission, para. 12. 


 
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5. 
Claim under Article 41.1 of the TRIPS Agreement 
(a) 
Main arguments of the parties 
7.676 The United States claims that China has failed to make the procedures and penalties required 
by the first and second sentences of Article 61 "available" as required by Article 41.1 of the TRIPS 
Agreement.655 
7.677 China responds that the United States has failed to show that China breaches its obligations 
under Article 61 and therefore fails to show that China breaches its obligations under Article 41.1.656 
(b) 
Main arguments of third parties 
7.678 Argentina submits that China's measures do not appear to be inconsistent with Article 41.1 of 
the TRIPS Agreement.  Article 41.1 should be read in light of Article 1.1, which provides flexibility 
in implementation;  Article 41.2 which requires Members to ensure that enforcement procedures are 
fair and equitable; and Article 41.5 which renders the obligation in Article 41.1 relative, not 
absolute.657 
7.679 Canada refers to its arguments regarding the claims under Article 61.  Further, the fact that "a 
plethora of counterfeit and pirated goods continues to be produced, reproduced and distributed in 
China, and exported from China", makes it clear that China does not provide effective action against 
wilful acts of infringement on a commercial scale and does not provide remedies that deter further 
infringements, contrary to Article 41.1.658 
(c) 
Consideration by the Panel 
7.680 The Panel observes that this claim is consequent upon the outcome of the claims regarding the 
criminal measures under Article 61 of the TRIPS Agreement.  Additional findings regarding this 
claim under Article 41.1 of the TRIPS Agreement would not contribute further to a positive solution 
to this dispute.  Therefore, it is unnecessary for the Panel to rule on this claim. 
6. 
Conclusions with respect to the criminal thresholds 
7.681 The Panel recalls its conclusion at paragraph 7.669 above that the United States has not 
established that the criminal thresholds are inconsistent with China's obligations under the first 
sentence of Article 61 of the TRIPS Agreement. 
7.682 The Panel exercises judicial economy with respect to the claims under Article 41.1 of the 
TRIPS Agreement and under the second sentence of Article 61 of the TRIPS Agreement (with respect 
to the criminal thresholds).   
VIII. 
CONCLUSIONS AND RECOMMENDATION 
8.1 
For the reasons set out in this Report, the Panel concludes as follows:  
(a) 
the Copyright Law, specifically the first sentence of Article 4, is inconsistent with 
China's obligations under: 
                                                   
655 United States' first written submission, paras 167-169. 
656 China's first written submission, paras 148-150. 
657 Argentina's third party written submission, paras 30-37. 
658 Canada's third party written submission, para. 13.

WORLD TRADE 
ORGANIZATION 
 
 
WT/DS362/R 
26 January 2009 
 
(09-0240) 
 
 
 
Original: English 
 
 
 
 
 
 
 
 
 
 
 
CHINA – MEASURES AFFECTING THE PROTECTION AND 
ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS 
 
 
Report of the Panel  
 
 
 
 
 
 


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(a) 
Article 59 of the TRIPS Agreement is not applicable to the Customs measures insofar 
as those measures apply to goods destined for exportation; 
(b) 
the United States has not established that the Customs measures are inconsistent with 
Article 59 of the TRIPS Agreement, as it incorporates the principles set out in the 
first sentence of Article 46 of the TRIPS Agreement; and 
(c) 
the Customs measures are inconsistent with Article 59 of the TRIPS Agreement, as it 
incorporates the principle set out in the fourth sentence of Article 46 of the TRIPS 
Agreement. 
C. 
CRIMINAL THRESHOLDS 
1. 
Description of the measures at issue 
(a) 
Introduction  
7.396 This Section of the Panel's findings concerns criminal thresholds established by the following 
measures.  China's Criminal Law was adopted by the National People's Congress in 1979, revised by 
the National People's Congress in 1997 and promulgated by Order of the President of the People's 
Republic of China in 1997.  The Criminal Law is divided into two Parts:  Part One, setting out 
"General Provisions", and Part Two, setting out "Specific Provisions".  Part Two, Chapter III, 
provides for "Crimes of disrupting the order of the socialist market economy".  Chapter III, Section 7, 
provides for "Crimes of infringing intellectual property rights" and comprises Articles 213 to 220, 
considered below. 
7.397 The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate 
Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of 
Infringement of Intellectual Property Rights (Interpretation No. 19 [2004] of the Supreme People's 
Court) ("Judicial Interpretation No. 19 [2004]") was adopted in November 2004 and entered into 
force in December 2004.  It interprets certain terms used in Articles 213 to 219 of the Criminal Law 
and also deals with certain other matters.  
7.398 The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate 
Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of 
Infringement of Intellectual Property Rights – II (Interpretation No. 6 [2007] of the Supreme People's 
Court) ("Judicial Interpretation No. 6 [2007]") was adopted and entered into force in April 2007.  It 
interprets certain terms used in Article 217 of the Criminal Law and also deals with certain other 
matters. 
(b) 
Trademark provisions 
(i) 
Use of a counterfeit trademark  
7.399 Article 213 of the Criminal Law may be translated as follows: 
"Whoever, without permission from the owner of a registered trademark, uses a 
trademark which is identical with the registered trademark on the same kind of 
commodities shall, if the circumstances are serious, be sentenced to fixed-term 
imprisonment of not more than three years or criminal detention and shall also, or 
shall only, be fined; if the circumstances are especially serious, the offender shall be 


 
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sentenced to fixed-term imprisonment of not less than three years but not more than 
seven years and shall also be fined."368  (emphasis added) 
7.400 Article 1 of Judicial Interpretation No. 19 [2004] interprets the phrase "the circumstances are 
serious" in Article 213 of the Criminal Law and may be translated as follows: 
"Whoever, without permission from the owner of a registered trademark, uses a 
trademark which is identical with the registered trademark on the same kind of 
commodities, in any of the following circumstances which shall be deemed as 'the 
circumstances are serious' under Article 213 of the Criminal Law, shall be sentenced 
to fixed-term imprisonment of not more than three years or criminal detention for the 
crime of counterfeiting registered trademark, and shall also, or shall only, be fined: 
(1)  
the illegal business operation volume of not less than 50,000 Yuan369 or the 
amount of illegal gains of not less than 30,000 Yuan; 
(2)  
in the case of counterfeiting two or more registered trademarks, the illegal 
business operation volume of not less than 30,000 Yuan or the amount of illegal gains 
of not less than 20,000 Yuan; 
(3)  
other serious circumstances." 370  (emphasis added) 
7.401 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term "illegal business 
operation volume" and may be translated as follows: 
"The 'illegal business operation volume' herein means the value of the infringing 
products manufactured, stored, transported or sold during the course of commission 
of the act of infringing intellectual property rights.  The value of the sold infringing 
products shall be calculated at the actual sale price. The value of the infringing 
products manufactured, stored, transported and unsold shall be calculated at the 
labelled price or at the average actual sales price of the infringing products as verified. 
If there is no labelled price on the infringing products or the actual sales price is 
unable to be verified, the price of the infringing products shall be calculated at the 
middle market price of the infringed products."371 
7.402 Article 17 of Judicial Interpretation No. 30 [1998]372 defines the term "amount of illegal 
gains" and may be translated as follows: 
"The 'amount of illegal gains' in this Interpretation refers to the amount of profit 
obtained."373 
(ii) 
Selling counterfeit trademark commodities 
7.403 Article 214 of the Criminal Law may be translated as follows: 
                                                   
368 Mutually agreed translation no. 1. 
369 This corresponds to US$6,250 at average market exchange rates (¥8.013/US$ for 2004-2007).   
370 Mutually agreed translation no. 3. 
371 Mutually agreed translation no. 3. 
372 The Interpretation by the Supreme People's Court of Certain Questions Concerning the Specific 
Application of Law in Adjudicating Criminal Cases Involving Illegal Publications (Interpretation No. 30  [1998] 
of the Supreme People's Court) in Exhibits US-4 and CHN-3. 
373 Mutually agreed translation no. 4.  The parties agree that this definition is applicable under Judicial 
Interpretation No. 19 [2004]:  see United States' and China's respective responses to Question No. 3(a). 


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"Whoever sells commodities, knowing374 that such commodities bear counterfeit 
registered trademarks shall, if the amount of sales is relatively large, be sentenced to 
fixed-term imprisonment of not more than three years or criminal detention and shall 
also, or shall only, be fined; if the amount of sales is huge, the offender shall be 
sentenced to fixed-term imprisonment of not less than three years but not more than 
seven years and shall also be fined."375  (emphasis added) 
7.404 Article 2 of Judicial Interpretation No. 19 [2004] interpreted the phrase "the amount is 
relatively large" under Article 214 of the Criminal Law and may be translated as follows: 
"Whoever sells commodities, knowing that such commodities bear counterfeit 
registered trademarks, with the amount of sales of not less than 50,000 Yuan, this 
shall be deemed as 'the amount is relatively large' under Article 214 of the Criminal 
Law, and the offender shall be sentenced to fixed-term imprisonment of not more 
than three years or criminal detention for the crime of selling commodities bearing a 
counterfeit registered trademark, and shall also, or shall only, be fined."376 
(iii) 
Forgery of trademarks and sale of forged trademarks 
7.405 Article 215 of the Criminal Law may be translated as follows: 
"Whoever forges or, without the authorization of another person, makes 
representations of that person's registered trademarks, or sells representations of 
another person's registered trademark that are forged or made without authorization, 
shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of 
not more than three years, criminal detention or public surveillance and shall also, or 
shall only, be fined; if the circumstances are especially serious, the offender shall be 
sentenced to fixed-term imprisonment of not less than three years but not more than 
seven years and shall also be fined."377  (emphasis added) 
7.406 Article 3 of Judicial Interpretation No. 19 [2004] interpreted the phrase "the circumstances are 
serious" under Article 215 of the Criminal Law and may be translated as follows: 
"Whoever forges or, without the authorization of another person, makes 
representations of that person's registered trademarks or sells such representations, in 
any of the following circumstances which shall be deemed as 'the circumstances are 
serious' under Article 215 of the Criminal Law, shall be sentenced to fixed-term 
imprisonment of not more than three years, criminal detention or public surveillance 
for the crime of illegally producing or selling illegally made representations of the 
registered trademark, and shall also, or shall only, be fined: 
(1)  
forging or, without the authorization, making representations of the registered 
trademarks or selling such representations of not less than 20,000 pieces, or with the 
illegal business operation volume of not less than 50,000 Yuan, or the amount of 
illegal gains of not less than 30,000 Yuan; 
(2)  
forging or, without the authorization, making two or more kinds of 
representations of the registered trademarks or selling such representations of not less 
                                                   
374 Note in mutually agreed translation:  Please refer to Article 9 of the 2004 Judicial Interpretation. 
375 Mutually agreed translation no. 1. 
376 Mutually agreed translation no. 3. 
377 Mutually agreed translation no. 1. 


 
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than 10,000 pieces, or with the illegal business operation volume of not less than 
30,000 Yuan, or the amount of illegal gains of not less than 20,000 Yuan; 
(3)  
other serious circumstances."378 (emphasis added) 
7.407 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term "illegal business 
operation volume" as set out at paragraph 7.401 above.  Article 17 of Judicial Interpretation No. 30 
[1998] defines the term "amount of illegal gains" as set out at paragraph 7.402 above.  Article 12(3) of 
Judicial Interpretation No. 19 [2004] defines the term "piece" and may be translated as follows: 
"'Piece' (件)379 under Article 3 herein means one representation with the entire 
trademark pattern."380 
(c) 
Copyright provisions 
(i) 
Criminal copyright infringement 
7.408 Article 217 of the Criminal Law may be translated as follows: 
"Whoever, for the purpose of making profits, commits any of the following acts of 
infringement of copyright shall, if the amount of illegal gains is relatively large, or if 
there are other serious circumstances, be sentenced to fixed-term imprisonment of 
not more than three years or criminal detention and shall also, or shall only, be fined; 
if the amount of illegal gains is huge or if there are other especially serious 
circumstances, the offender shall be sentenced to fixed-term imprisonment of not less 
than three years but not more than seven years and shall also be fined: 
(1)  reproducing [/]381 distributing written works, musical works, cinematographic 
works, television or video works, computer software or other works without 
permission of the copyright owner; 
(2)  publishing a book of which the exclusive right of publication is enjoyed by 
another person; 
(3)  reproducing [/] distributing audio recording [/] video recording made by another 
person without permission of the maker;  
(4)  making, selling382 a work of fine art with the forged signature of another 
person."383 (emphasis added) 
7.409 Article 5 of Judicial Interpretation No. 19 [2004] interpreted the phrases "the amount of 
illegal gains is relatively large" and "there are other serious circumstances" under Article 217 of the 
Criminal Law and may be translated as follows: 
                                                   
378 Mutually agreed translation no. 3. 
379 Note in mutually agreed translation:  in this context, piece (件) is a "measure word" for a trademark 
representation. 
380 Mutually agreed translation no. 3. 
381 The parties advised the Panel orally at the second substantive meeting that the use of "[/]" in 
mutually agreed translations nos. 1, 2 and 3 did not indicate disagreement but rather reflected the fact that the 
original version did not use the word "and". 
382 Note in mutually agreed translation:  There is neither "and" or "or" between "making" and "selling", 
only a Chinese repetitive comma (、) or 顿号 which has no precise English equivalent. 
383 Mutually agreed translation no. 1. 


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"Whoever, for the purpose of making profits, commits any of the acts of infringement 
of copyright under Article 217 of the Criminal Law, with the amount of illegal gains 
of not less than 30,000 Yuan which shall be deemed as 'the amount of illegal gains is 
relatively large'; in any of the following circumstances which shall be deemed as 
'there are other serious circumstances', shall be sentenced to fixed-term imprisonment 
of not more than three years or criminal detention for the crime of infringement of 
copyright, and shall also, or shall only, be fined: 
(1)  
the illegal business operation volume of not less than 50,000 Yuan; 
(2)  
reproducing [/] distributing, without permission of the copyright owner, a 
written work, musical work, cinematographic work, television or other video works, 
computer software and other works of not less than 1,000384 张 (份)385 in total; 
(3)  
other serious circumstances."386 (emphasis added) 
7.410 Article 12(1) of Judicial Interpretation No. 19 [2004] defines the term "illegal business 
operation volume" as set out at paragraph 7.401 above.  Article 17 of Judicial Interpretation No. 30 
[1998] defines the term "amount of illegal gains" as set out at paragraph 7.402 above. 
7.411 Article 1 of Judicial Interpretation No. 6 [2007] re-interpreted the phrase "there are other 
serious circumstances" under Article 217 of the Criminal Law and may be translated as follows: 
"Whoever, for the purpose of making profits, reproduces [/] distributes, without 
permission of the copyright owner, a written work, musical work, cinematographic 
work, television or video works, computer software and other works of not less than 
500 张 (份)387 in total, [the offence] shall be deemed as 'there are other serious 
circumstances' under Article 217 of the Criminal Law …"388 
7.412 The number "500" in this provision conflicts with the number "1000" in the earlier Judicial 
Interpretation.  The number "500" therefore prevails by virtue of Article 7 of Judicial Interpretation 
No. 6 [2007], which may be translated as follows: 
"Where any previously promulgated judicial interpretation is in conflict with this 
Interpretation, this Interpretation shall prevail."389   
(ii) 
Selling copyright-infringing reproductions 
7.413 Article 218 of the Criminal Law may be translated as follows: 
"Whoever, for the purpose of making profits, sells infringing reproductions, knowing 
that such infringing reproductions are those stipulated in Article 217 of this Law shall, 
if the amount of illegal gains is huge, be sentenced to fixed-term imprisonment of not 
                                                   
384 The number "1000" has been superseded by "500":  see paragraphs 7.411 and 7.412 below. 
385 Note in mutually agreed translation:  张 is a Chinese "measure word" broadly used to count flat 
things (like optical disks, pages, etc.) and 份 is a "measure word" used to count copies in general. 
386 Mutually agreed translation no. 3. 
387 Note in mutually agreed translation: 张 is a Chinese "measure word" broadly used to count flat 
things (like optical disks, pages, etc.) and 份 is a "measure word" used to count copies in general. 
388 Mutually agreed translation no. 2. 
389 Mutually agreed translation no. 2 and the parties' respective responses to Question No. 3(a). 


 
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more than three years or criminal detention and shall also, or shall only, be fined."390 
(emphasis added) 
7.414 Article 6 of Judicial Interpretation No. 19 [2004] interpreted the phrase "the amount of illegal 
gains is huge" under Article 218 of the Criminal Law and may be translated as follows: 
"Whoever, for the purpose of making profits, commits any of the acts as stipulated in 
Article 218 of the Criminal Law, where the amount of illegal gains is not less than 
100,000 Yuan, this shall be deemed as 'the amount of illegal gains is huge', and the 
offender shall be sentenced to fixed-term imprisonment of not more than three years 
or criminal detention for the crime of selling infringing reproductions, and shall also, 
or shall only, be fined."391 
(d) 
Crimes of infringing intellectual property rights committed by a unit 
7.415 The Panel's terms of reference also refer to Article 220 of the Criminal Law on crimes under 
Articles 213 to 219 where committed by a unit.  The United States has not requested relief in respect 
of that Article.  Therefore, the Panel does not consider this aspect of the measure. 
2. 
Construction of the measures at issue 
(a) 
Introduction 
7.416 The Panel notes that this claim challenges China's criminal measures "as such".  The parties 
disagree on certain aspects of the measures at issue.  The Panel is therefore obliged, in accordance 
with its mandate, to make an objective assessment of the meaning of the relevant provisions of those 
measures.  The Panel recalls its observations at paragraph 7.28 above and confirms that it examines 
these measures solely for the purpose of determining their conformity with China's obligations under 
the TRIPS Agreement. 
(b) 
Normative effect of the Judicial Interpretations 
7.417 Under the 1982 Constitution of the People's Republic of China, the National People's 
Congress is the highest organ of State power and its permanent body is its Standing Committee.  The 
National People's Congress and its Standing Committee exercise the legislative power of the State.  
The National People's Congress enacts and amends basic laws, such as the Criminal Law, whilst its 
Standing Committee enacts and amends other statutes.392 
7.418 In 1981, the Standing Committee of the National People's Congress adopted a Resolution on 
Improving the Work of Interpreting the Law, in which it decided as follows:  
"Questions involving the specific application of laws and decrees in court trials shall 
be interpreted by the Supreme People's Court.  Questions involving the specific 
application of laws and decrees in procuratorial work shall be interpreted by the 
Supreme People's Procuratorate."393   
                                                   
390 Mutually agreed translation no. 1. 
391 Mutually agreed translation no. 3. 
392 1982 Constitution of the People's Republic of China, Articles 62 and 67, explained in China's WTO 
Trade Policy Review, Report by the Secretariat, WT/TPR/S/161, Chapter II(2), referenced in United States' first 
written submission, para. 22, set out in Exhibit US-16. 
393 1981 Resolution of the Standing Committee of the National People's Congress on Improving the 
Work of Interpreting the Law, paragraph 2, in Exhibit US-13. 


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7.419 In 1997, the Supreme People's Court formulated Certain Provisions on Judicial Interpretation 
Work.  In March 2007, it replaced these with new Provisions on Judicial Interpretation Work, which 
may be translated as follows: 
"Judicial interpretations issued by the Supreme People's Court shall have legal 
effect."394 
7.420 In 1996 the Supreme People's Procuratorate formulated Provisional Provisions on Judicial 
Interpretation Work.  In May 2006, it replaced these with Provisions on Judicial Interpretation Work, 
which may be translated as follows: 
"Judicial interpretations made by the Supreme People's Procuratorate have legal 
effect.  People's procuratorates may use provisions of judicial interpretation in legal 
documents such as bills of indictment or protest."395 
7.421 The Provisions of the Supreme People's Court on Judicial Interpretation Work and the 
Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work both provide for the 
joint formulation of judicial interpretations by the Supreme People's Court and the Supreme People's 
Procuratorate when an issue involves both judicial and prosecutorial work.396 
7.422 The United States submits that, in light of the above, the Judicial Interpretations at issue in 
this dispute are binding and have the force of law.397   
7.423 China submits that the Judicial Interpretations are issued "in order to ensure a uniform 
understanding and application of the law".398  China does not disagree with the United States' 
description of the legal basis and binding nature of the Judicial Interpretations at issue as set out in the 
United States' first written submission.399  China confirms that if an illegal act does not meet one of 
the pertinent thresholds set out in the Judicial Interpretations at issue, prosecution of that act is legally 
impossible.400 
7.424 In light of the above, the Panel finds that the Judicial Interpretations of the Articles of the 
Criminal Law at issue are binding and have the force of law. 
(c) 
Thresholds under the Criminal Law in general 
7.425 China informs the Panel that it employs thresholds across a range of commercial crimes, 
reflecting the significance of various illegal acts for overall public and economic order and China's 
prioritization of criminal enforcement, prosecution and judicial resources.  China submits that the 
criminal thresholds for counterfeiting and piracy are reasonable and appropriate in the context of this 
legal structure and the other laws on commercial crimes.401 
                                                   
394 Provisions of the Supreme People's Court on Judicial Interpretation Work, Article 5, 法发 [2007] 
No. 12 in Exhibit US-14. 
395 Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work, Article 5, 高检发
研字 [2006] No. 4 in Exhibit US-15. 
396 Provisions of the Supreme People's Court on Judicial Interpretation Work (referred to in note 394 
above), Article 7, and Provisions of the Supreme People's Procuratorate on Judicial Interpretation Work 
(referred to in note 395 above), Article 21. 
397 United States' first written submission, para. 24. 
398 China's first written submission, para. 22. 
399 China's response to Question No. 10, referencing paras 20-24 of that submission. 
400 China's response to Question No. 55. 
401 China's first written submission, paras 122-127. 


 
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7.426 The United States responds that what China chooses to do with its domestic non-IPR criminal 
thresholds has no bearing on the Panel's assessment of whether China meets its international 
obligations under the first sentence of Article 61 of the TRIPS Agreement.402 
7.427 The Panel observes that Part One of the Criminal Law sets out general provisions.  Within 
Part One, Chapter II, Section 1 provides for "Crimes and Criminal Responsibility".  Article 13 defines 
a crime and may be translated in fine as follows:  
"However, if the circumstances are obviously minor and the harm done is not serious, 
the act shall not be considered a crime."403 
7.428 China submits that, throughout the Criminal Law, the definitions of various crimes are 
accompanied by rules for determining at what point the particular proscribed conduct becomes so 
serious as to constitute a crime.404  These are collated and issued in Prosecution Standards.  In 
response to a question from the Panel, China indicated that most substantive provisions in Chapter III 
on economic crimes, Chapter V on property violation and Chapter VI, Section 9 on producing, selling 
and disseminating pornographic materials405 are also subject to specific thresholds, such as those 
applicable to Articles 213, 214, 215, 217 and 218 of the Criminal Law that are at issue in this 
dispute.406   
7.429 The Panel notes China's acknowledgement that a total of 11 crimes out of 117 crimes set out 
in these relevant Parts and this relevant Section of the Criminal Law are not subject to any specific 
threshold.407  Therefore, whilst China may for internal policy reasons frequently use thresholds to 
define the point at which many classes of illegal act are considered serious enough to be criminalized, 
China's legal structure is capable of criminalizing certain acts without recourse to thresholds.  
(d) 
Thresholds for conviction or aggravation  
7.430 The Panel notes that some thresholds in the Criminal Law set minimum requirements for 
conviction ("conviction thresholds") whilst others set minimum requirements for higher penalties 
("aggravation thresholds").  Most of the Articles at issue in this dispute include both.  The conviction 
thresholds comprise "serious circumstances" in Articles 213 and 215, "relatively large amount of 
sales" in Article 214, "relatively large amount of illegal gains" or "other serious circumstances" in 
Article 217 and "huge amount of sales" in Article 218.  The aggravation thresholds comprise 
"especially serious circumstances" in Articles 213, 215 and 217 and "huge amount of sales" in 
Article 214.   
7.431 The United States only challenges the conviction thresholds as these render prosecution 
impossible in the absence of certain criteria.  Therefore, the Panel does not consider the aggravation 
thresholds further. 
                                                   
402 United States' rebuttal submission, paras 100-102. 
403 Exhibit CHN-1. 
404 China's first written submission, para. 121. 
405 Crimes under Part Two, Chapter VI, Section 9 of the Criminal Law were addressed together with 
copyright crimes under Articles 217 and 218 in Judicial Interpretation No. 30 [1998] (referred to in note 372 
above). 
406 See China's response to Question No. 57.   
407 China's response to Question No. 57. 


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(e) 
General provisions on inchoate crimes  
7.432 China refers to certain general provisions of the Criminal Law that it alleges apply to the 
crimes of infringing intellectual property rights.  These include Article 22 on preparation for a crime, 
and Article 23 on attempted crime, which may trigger criminal prosecution and penalties.408   
7.433 The United States replied that the extent to which these general provisions on inchoate crimes 
can address evidence of potential infringement is beside the point, as the thresholds rule out criminal 
liability based on evidence of actual infringement.409  In response to a question, the United States 
notes that neither the Criminal Law, Judicial Interpretation No. 19 [2004] nor Judicial Interpretation 
No. 6 [2007] contains any specific provisions concerning the offences of preparation or attempt 
relating to the completed crimes of trademark counterfeiting and copyright piracy.410 
7.434 The Panel observes that Part One, Chapter II, Section 2 of the Criminal Law sets out three 
inchoate crimes of preparation for a crime, criminal attempt and discontinuation of a crime.411  
Article 22 may be translated as follows: 
"Preparation for a crime refers to the preparation of the instruments or the creation of 
the conditions for a crime. 
An offender who prepares for a crime may, in comparison with one who completes 
the crime, be given a lighter or mitigated punishment or be exempted from 
punishment."412 
7.435 Article 23 may be translated, relevantly, as follows: 
"A criminal attempt refers to a case where an offender has already started to commit a 
crime but is prevented from completing it for reasons independent of his will. 
An offender who attempts to commit a crime may, in comparison with one who 
completes the crime, be given a lighter or mitigated punishment."413 
7.436 The Panel notes that each of these Articles contains provisions that appear to be of general 
application and that relate explicitly to "a crime" (犯罪).  The Articles to which China refers contain 
no express limitation to certain specific provisions of the Criminal Law.  They form part of Chapter II 
on "Crimes" found in Part One on "General Provisions", which also sets out the aim, basic principles 
and scope of application of the Criminal Law in Chapter I, provisions on punishments in Chapter III 
and the concrete application of punishments in Chapter IV.  On their face, there is no reason to 
suppose that Articles 22 and 23 do not apply to the crimes of infringing intellectual property rights in 
Articles 213, 214, 215, 217 and 218 of the Criminal Law.  This reading is confirmed by examples of 
judicial decisions submitted by China that show courts applying Articles 22 and 23 of the Criminal 
Law in cases of crimes of infringing intellectual property rights.414   
7.437 The Panel also notes that China has referred to the offences of preparation for a crime and 
attempted crime to show that packaging and product components can be taken into account in 
                                                   
408 China's first written submission, paras 35-37;  rebuttal submission, paras 36-41. 
409 United States' second oral statement, para. 34. 
410 United States' response to Question No. 8. 
411 The parties have not referred to Article 24 on discontinuation of a crime. 
412 Exhibit CHN-1. 
413 Exhibit CHN-1. 
414 The United States refers to these judicial decisions and appears to acknowledge that the Articles 
were applied in these cases: see United States' response to Question No. 8. 


 
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determining the availability of criminal procedures to enforce the substantive crimes of infringing 
intellectual property rights.  However, the Panel notes that China has not alleged that the offences of 
preparation and attempt render activities falling below the thresholds in Articles 213 to 220 generally 
subject to criminal prosecution. 
(f) 
General provisions on joint crimes 
7.438 Japan, supported by the European Communities, argues that quantitative thresholds would not 
capture counterfeiting activities of limited value or smaller quantities which are on a "commercial 
scale" due to their professional organization or the systematic cooperation with other persons.415 
Mexico further submits that small scale activity is "clearly meaningful" as it contributes to the chain 
of infringement.416 
7.439 In response to these third party submissions, China refers to Articles 25, 26 and 27 of the 
Criminal Law on joint liability, criminal groups and accomplices to show that the Criminal Law 
recognizes certain non-quantitative factors, such as evidence of collaboration between infringers.417  
China submits that they apply to the crimes of infringing intellectual property rights in Articles 213, 
214, 215, 217 and 218 of the Criminal Law.418   
7.440 The United States replies that this argument is of no consequence with respect to infringers 
that work alone. All the evidence demonstrates is that below-the-threshold activity could be captured 
if it existed as part of an above-the-threshold activity.419 
7.441 The Panel observes that Part One, Chapter II, Section 3 of the Criminal Law provides for 
"Joint crimes".  It sets out five provisions.  Article 25 may be translated, relevantly, as follows: 
"A joint crime refers to an intentional crime committed by two or more persons 
jointly. …" 420 
7.442 Article 26 may be translated as follows: 
"A principal criminal refers to any person who organizes and leads a criminal group 
in carrying out criminal activities or plays a principal role in a joint crime. 
A criminal group refers to a relatively stable criminal organization formed by three or 
more persons for the purpose of committing crimes jointly. 
Any ringleader who organizes or leads a criminal group shall be punished on the 
basis of all the crimes that the criminal group has committed. 
Any principal criminal not included in paragraph 3 shall be punished on the basis of 
all the crimes that he participates in or that he organizes or directs." 421 
                                                   
415 Japan's third party written submission, para. 17; European Communities' third party oral statement, 
para. 10. 
416 Mexico's third party oral statement, paras 6-7. 
417 China's rebuttal submission, paras 42-46. 
418 China's rebuttal submission, para. 33. 
419 United States' second oral statement, para. 35, referring to the application of the joint crime 
provision in one case (CHN-12), cited by China in its rebuttal submission, para. 44, and its response to Question 
No. 56. 
420 Exhibit CHN-1. 
421 Exhibit CHN-1. 


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7.443 Article 27 may be translated as follows: 
"An accomplice refers to any person who plays a secondary or auxiliary role in a joint 
crime. 
An accomplice shall be given a lighter or mitigated punishment or be exempted from 
punishment." 422 
7.444 The Panel observes that Articles 26 and 27 are limited to "joint crimes" which are defined by 
Article 25 as "intentional crimes".  On their face, there is no reason to suppose that Articles 25, 26 and 
27 do not apply to the crimes of infringing intellectual property rights in Articles 213, 214, 215, 217 
and 218 of the Criminal Law.  Several judicial decisions submitted by China show one or more of 
these Articles being cited in relation to Article 213.423  The decisions show that the relevant factors 
were aggregated among several offenders in order to reach a criminal threshold.   
7.445 China submitted that it may apply criminal procedures and penalties, on the basis of joint 
crimes and criminal group membership, to infringers that would not otherwise reach the criminal 
thresholds of the substantive criminal laws.424  However, in response to a question, China confirmed 
that the numerical thresholds under Articles 213, 214, 215, 217 and 218 of the Criminal Law apply to 
joint crimes under Articles 25, 26 and 27 of the Criminal Law.425   
7.446 Therefore, the Panel considers that the concept of joint crimes is relevant to the capacity of 
the Criminal Law to take into account an element of organization among different offenders.  
However, it does not alter the lack of criminal procedures and penalties for acts of infringement 
falling below the thresholds in Articles 213 to 220. 
(g) 
Specific features of the thresholds for crimes of infringing intellectual property rights 
(i) 
Profit-making purpose 
7.447 The United States submits that the thresholds "all require proof of an intention to make a 
financial gain or profit".426   
7.448 The Panel observes that, as regards the trademark offences, two of the thresholds under 
Article 213 of the Criminal Law, as interpreted by Article 1 of Judicial Interpretation No. 19 [2004], 
are set in terms of "illegal business operation volume" and "illegal gains" (i.e. amount of profits 
obtained427).  Article 214 of the Criminal Law applies to the act of selling, and the corresponding 
threshold in Article 2 of Judicial Interpretation No. 19 [2004] is set in terms of "amount of sales".  
These all imply a purpose of obtaining financial gain or making profits.  Article 215 of the Criminal 
Law does not expressly refer to a profit-making purpose. 
7.449 As regards the copyright offences, both Articles 217 and 218 of the Criminal Law expressly 
refer to acts carried out for "the purpose of making profits".  This language is reiterated in the 
corresponding interpretations in Articles 5 and 6 of Judicial Interpretation No. 19 [2004] and Article 1 
of Judicial Interpretation No. 6 [2007]. 
                                                   
422 Exhibit CHN-1. 
423 Exhibits CHN-4, CHN-6, CHN-9, CHN-12, CHN-13 and CHN-16. 
424 China's rebuttal submission, para. 46. 
425 China's response to Question No. 56. 
426 United States' response to Question No. 59. 
427 See paragraph 7.402 above. 


 
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7.450 Therefore, Articles 213, 214, 217 and 218 of the Criminal Law take account of at least one 
qualitative factor in conjunction with the numerical thresholds.  In this dispute, the United States does 
not challenge this aspect of the measure.428 
(ii) 
Alternative thresholds 
7.451 The parties agree that the thresholds refer to a range of different factors, comprising illegal 
business operation volume, amount of illegal gains (or profits), amount of sales, number of "copies" 
and "other serious circumstances".  The first three are, by their own terms, indicators of business 
activity and are either expressly, or impliedly, linked to selling, in other words, commercial activity.  
The first four are all expressed in numerical terms. 
7.452 China emphasizes that the multiple standards set forth in each of Articles 213, 215 and 217 of 
the Criminal Law are all alternatives.429 The United States agrees and claims that application of any or 
all of the alternative thresholds leaves many acts of commercial scale piracy and counterfeiting 
immune from criminal prosecution or conviction.430 
7.453 The Panel observes that Articles 213 and 215 of the Criminal Law each contain a single 
threshold.  However, these are interpreted by Articles 1 and 3 of Judicial Interpretation No. 19 [2004] 
in terms of a series of distinct circumstances.  It is clear from the text of Articles 1 and 3 that each of 
these circumstances applies in the alternative as Articles 1 and 3 each provide that the conviction 
threshold under the relevant Article of the Criminal Law shall be deemed satisfied in "any of the 
following circumstances".   
7.454 The Panel observes that Article 217 of the Criminal Law contains two conviction thresholds 
namely, "the amount of illegal gains" and "other serious circumstances".  The text of Article 217 
makes it clear that these are alternatives to each other by the use of the word "or".  Both of these 
thresholds are interpreted by Article 5 of Judicial Interpretation No. 19 [2004]:  the former in terms of 
a numerical amount and the latter in terms of a series of distinct circumstances.  It is clear from the 
text of Article 5 that each of these circumstances applies in the alternative as Article 5 provides that 
the conviction threshold of "other serious circumstances" under Article 217 of the Criminal Law shall 
be deemed satisfied in "any of the following circumstances".  Satisfaction of any one of those 
circumstances, or "the amount of illegal gains" threshold, shall be deemed to satisfy the relevant 
conviction threshold. 
7.455 This means, for example, that the use of a counterfeit trademark where the illegal business 
operation volume is, say, ¥40,000 (i.e. below the threshold of ¥50,000 applicable under Article 213 of 
the Criminal Law) is not exempt from criminal prosecution unless the amount of illegal gains, the 
number of registered trademarks involved in the offence, and other circumstances all fail to fulfil the 
other applicable thresholds.  However, where an act of infringement falls below all the applicable 
thresholds, criminal prosecution and penalties are not available. 
7.456 It is not disputed that the crimes of selling under Articles 214 and 218 of the Criminal Law 
each contain only one conviction threshold.  Therefore, those thresholds do not apply as alternatives. 
(iii) 
Cumulative calculation over time 
7.457 China submits that the thresholds are calculated over a prolonged period of time.  This is 
reflected in the general limitation period for crimes of a continuous nature, and the specific provision 
                                                   
428 See paragraphs 7.659 and 7.660 below. 
429 China's first written submission, paras 33-34. 
430 United States' rebuttal submission, para. 77. 


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on cumulative calculation in Article 12(2) of Judicial Interpretation No. 19 [2004].  China asserts that 
this principle also applies to thresholds in terms of numbers of copies.  Therefore, the thresholds for 
crimes infringing intellectual property rights can be calculated over the entire duration of the 
infringing activity.431   
7.458 The United States notes that Article 12(2) of Judicial Interpretation No. 19 [2004] is subject 
to a condition, namely, that no administrative penalty or criminal punishment has been imposed.432  
China responds that administrative enforcement forestalls the commission of the crime.433 
7.459 The Panel observes that Part One, Chapter IV, Section 8 of the Criminal Law sets out 
limitation periods for the prosecution of crimes.  Article 87 provides for limitation periods calculated 
according to the maximum punishment for the relevant crime, of which the shortest period is five 
years.  Article 89 of the Criminal Law provides that the limitation period for a criminal act of a 
continual or continuous nature shall be counted from the date the criminal act is terminated.434 
7.460 The Panel also notes that Article 12(2) of Judicial Interpretation No. 19 [2004] may be 
translated as follows: 
"In the case of infringement committed for [sic] more than once for which no 
administrative penalty or criminal punishment has been imposed, the illegal business 
operation volume, the amount of illegal gains, or the amount of sales shall be 
calculated accumulatively."435 
7.461 These provisions show that the thresholds may take into account multiple acts of infringement, 
and not simply the income, profits, sales or number of copies in a single transaction or at a single 
point in time.  This point is confirmed by examples of judicial decisions submitted by China showing 
that, when calculating whether thresholds had been met, courts have taken into account infringements 
during periods of up to five years.436  An administrative penalty for a particular act of infringement 
excludes that act from the cumulative calculation of the "illegal business operation volume", "the 
amount of illegal gains", or "the amount of sales" thresholds and, hence, from criminal procedures and 
penalties. 
(iv) 
Calculation of illegal business operation volume – goods 
7.462 China submits that the calculation of "illegal business operation volume" thresholds is not 
limited to goods in a single location at the same point in time.  Rather, the threshold covers all 
infringing goods associated with the infringer, even those no longer in the infringer's possession.437   
7.463 The United States acknowledges that, in certain circumstances, the definition of "illegal 
business operation volume" appears to permit an infringer's goods on different premises to be taken 
into account in calculation of the threshold.438 
7.464 The Panel observes that three conviction thresholds under Articles 213, 215 and 217 of the 
Criminal Law are set in terms of "illegal business operation volume".  The definition of "illegal 
                                                   
431 China's first written submission, paras 30-32;  rebuttal submission, paras 26-27. 
432 United States' response to Question No. 2(a). 
433 China's rebuttal submission, paras 28-29. 
434 Exhibit CHN-1. 
435 Mutually agreed translation no. 3. 
436 Exhibits CHN-4, CHN-13 and CHN-14. 
437 China's first written submission, paras 23-24. 
438 United States' response to Question No. 2(a). 


 
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business operation volume" in Article 12(1) of Judicial Interpretation No. 19 [2004]439 refers to 
infringing products "manufactured, stored, transported or sold" during the course of commission of 
the act of infringing intellectual property rights.  On its face, this does not restrict the calculation of 
these thresholds to the value of goods seized in a single place at the same point in time.  This 
interpretation is confirmed by examples of judicial decisions submitted by China showing that courts 
have taken into account the value of goods already sold440, as well as of goods seized at different 
locations441 when calculating the illegal business operation volume.   
(v) 
Calculation of illegal business operation volume – price 
7.465 The United States claimed that the calculation methodology required for "illegal business 
operation volume" was based on the prices of infringing goods, not the value of legitimate non-
infringing goods.442   
7.466 China responded that the calculation methodology is based on the actual, labelled or average 
sales price of the infringing goods but, where this cannot be determined, the price will be calculated 
based on the average market price of the infringed, i.e. genuine, goods.443  In response to a question 
from the Panel, China agreed that the price of the genuine goods is used as a last resort.444 
7.467 The Panel observes that three conviction thresholds under Articles 213, 215 and 217 of the 
Criminal Law are set in terms of "illegal business operation volume", which can be calculated by 
alternative methods.  Ultimately, the parties agree that, in accordance with the definition of "illegal 
business operation volume" in Article 12(1) of Judicial Interpretation No. 19 [2004]445, the primary 
method of calculation of those thresholds is based on the actual price at which infringing goods were 
sold or labelled or, if unsold, the average actual sales price of the infringing products as verified.  It is 
only where there is no labelled price or the actual sales price is unable to be verified that the illegal 
business operation volume is calculated according to the "middle" market price of the infringed 
products.  In other words, the threshold primarily relates to the value of the counterfeit trademark or 
copyright infringing goods but may, as a last resort, relate to the value of the genuine products.   
7.468 It is not disputed that the value of the counterfeit trademark goods or copyright infringing 
goods will be less than the value of the corresponding genuine goods.  This has the effect of making 
the illegal business operation threshold harder to satisfy in those cases where the price of the genuine 
goods is not used.  The number of cases that will fall below the thresholds is therefore greater than if 
the price of the infringed goods is used in all cases. 
(vi) 
Number of goods and prices  
7.469 China also submits that the illegal business operation threshold, in particular, is a flexible 
standard in its own right because it takes into account both the number and the value of infringing 
articles.446  The United States does not comment. 
                                                   
439 Set out at paragraph 7.401 above. 
440 Exhibits CHN-4, CHN-5 and CHN-6. 
441 Exhibit CHN-7. 
442 United States' first written submission, para. 119, relying on a translation in Exhibit US-2 that 
referred in fine to "products produced by infringing on intellectual property rights" rather than "the infringed 
products". 
443 China's first written submission, para. 28. 
444 China's response to Question No. 2(c). 
445 Set out at paragraph 7.401 above. 
446 China's rebuttal submission, paras 23-24. 


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7.470 The Panel observes that, in accordance with the definition of "illegal business operation 
volume" in Article 12(1) of Judicial Interpretation No. 19 [2004]447, these thresholds are calculated in 
terms of the price of goods.  Naturally, the number of goods required to meet the threshold is 
inversely proportional to the value of those goods.  Therefore, the threshold is flexible enough to 
capture a small number of high-value goods or a large number of low-value goods.  However, where 
the number of goods multiplied by the value of the goods is less than the threshold and not captured 
by any alternative applicable threshold, no criminal procedures and penalties will apply. 
(vii) 
Residual thresholds 
7.471 The parties initially did not address another threshold, that of "other serious circumstances" 
applicable under Articles 213, 215 and 217 of the Criminal Law. 
7.472 In response to a question from the Panel for clarification of the meaning of these thresholds, 
the United States noted a case in which a prosecutor had invoked the similarly undefined aggravation 
threshold of "other especially serious circumstances" under Article 1 of Judicial Interpretation No. 19 
[2004].  That prosecutor had unsuccessfully cited "serious effects in both domestic and international 
society".448  
7.473 In response to the same question, China explained that the inclusion of "other serious 
circumstances" was a legislative device that preserves legal flexibility for courts and for the future 
development of laws.  The provisions allows a court to determine that a particular act, while not 
meeting the other defined thresholds, is comparable and equivalent to those thresholds and therefore 
deserves to be subject to criminal penalties.  China was unable in the time available to provide 
specific examples of cases in which this threshold had been used.449   
7.474 The Panel observes that, on the face of the measures at issue, one of the thresholds applicable 
to three crimes infringing intellectual property rights is a residual category of "other serious 
circumstances".  In the case of Articles 213 and 215 of the Criminal Law, this threshold only appears 
in the text of Judicial Interpretation No. 19 [2004].  In the case of Article 217 of the Criminal Law, 
this threshold actually appears in the text of the Article itself, but is later defined in terms of two 
specific thresholds plus an identically worded residual category of "other serious circumstances".  
This bears out China's explanation that this threshold is a legislative device that allows for the future 
development of laws.  However, it is not alleged that any other thresholds have yet been devised 
beyond those set out in this Report. 
7.475 Moreover, it is not alleged that the courts or prosecutors would treat all infringing acts that 
fall below the numerical thresholds as criminal acts by virtue of this residual threshold.  China 
confirms that if an illegal act does not meet one of the pertinent thresholds set out in the Judicial 
Interpretations at issue, prosecution of that act is legally impossible.450  China also confirms that these 
residual thresholds apply to other acts that are "comparable and equivalent" to the defined thresholds.  
Therefore, these residual thresholds do not significantly alter the legal position but rather help define 
the class of trademark- and copyright-infringing acts that are not treated as criminal.   
(viii) 
Administrative enforcement 
7.476 China draws the Panel's attention to its system of administrative enforcement of intellectual 
property infringement that operates separately from its criminal enforcement system.  It informs the 
                                                   
447 Set out at paragraph 7.401 above. 
448 United States' response to Question No. 9, citing Exhibit US-61. 
449 China's response to Questions Nos. 9 and 55;  rebuttal submission, para. 22.   
450 See paragraphs 7.423 and 7.455 above. 


 
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Panel that in China infringement on any scale is subject to administrative enforcement.  Public 
security authorities tend to focus more on infringement above the criminal thresholds, and copyright 
and commerce administrative authorities are more likely to target low-scale infringement.451   
7.477 The United States responds that only criminal procedures and penalties can fulfil the 
obligations in Article 61 of the TRIPS Agreement.  Administrative enforcement is not a substitute for 
criminal enforcement.452 
7.478 The Panel notes that administrative sanctions, including fines, are available for intellectual 
property infringement falling below the criminal thresholds in China.  Therefore, the thresholds do not 
create a "safe harbour".  However, neither party to the dispute 453 argues that administrative 
enforcement may fulfil the obligations on criminal procedures and remedies set out in Article 61 of 
the TRIPS Agreement.  Therefore, the Panel does not consider this issue further. 
(h) 
Conclusion regarding construction of the measures at issue 
7.479 For the above reasons, the Panel concludes that, whilst the structure of the thresholds and the 
method of calculation of some of them can take account of various circumstances, acts of trademark 
and copyright infringement falling below all the applicable thresholds are not subject to criminal 
procedures and penalties.  The Panel will now consider whether any of those acts of infringement 
constitute "wilful trademark counterfeiting or copyright piracy on a commercial scale" within the 
meaning of Article 61 of the TRIPS Agreement.  
3. 
Claim under the first sentence of Article 61 of the TRIPS Agreement  
(a) 
Main arguments of the parties 
7.480 The United States submits that the concept of "commercial scale" extends both to those who 
engage in commercial activities in order to make a "financial return" in the marketplace, and who are, 
by definition, therefore operating on a commercial scale, as well as to those whose actions, regardless 
of motive or purpose, are of a sufficient extent or magnitude to qualify as "commercial scale" in the 
relevant market.454  Later, it clarified that the concept of "commercial scale" referred to counterfeiting 
or piracy that reach a certain extent or magnitude with a link to the marketplace.  Whether a particular 
counterfeiting or piracy activity is "on a commercial scale" will depend on the facts and circumstances 
surrounding that activity.  Relevant factors would include the market for the infringed goods, the 
object of the infringement, the value of the infringed goods, the means of producing the infringed 
goods, and the impact of the infringement on the right holder.455  Some activity would be so trivial or 
of a de minimis character so as not to be "on a commercial scale" in some circumstances, such as 
occasional infringing acts of a purely personal nature carried out by consumers, or the sale of trivial 
volumes for trivial amounts (i.e., the sale of one copy for ¥1) unless there are circumstances indicating 
to the contrary.456   
7.481 China responds that "commercial scale" refers to a significant magnitude of infringement 
activity. This is a broad standard, subject to national discretion and local conditions.457  The United 
States fails to interpret "commercial scale" as a single term and its interpretation reads the word 
                                                   
451 China's first written submission, paras 39-43. 
452 United States' rebuttal submission, paras 116-119. 
453 Contrast Brazil's third party written submission, paras 39-42. 
454 United States' first written submission, para. 110. 
455 United States' response to Question No. 59. 
456 United States' response to Question No. 60. 
457 China's first written submission, paras 64 and 117; China's first oral statement, para. 30. 


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"scale" completely out of the definition.458  The context of Articles 1.1 and 41.5 of the TRIPS 
Agreement shows that Members retain considerable discretion with respect to law enforcement, and 
that the ability to define the standards of Article 61 is reserved for Members.459  Later, it clarified that 
while these Articles did not provide an absolute defence against the substantive obligation of 
Article 61, they did provide relevant context and counselled strongly against interpretations of 
Article 61 in ways that would be inconsistent with China's legal system and would require the 
diversion of enforcement resources.460  The negotiating record of the TRIPS Agreement, as well as 
subsequent actions of Members show that they understood "commercial scale" to impose only a high 
and broad standard which only covered significant infringement activity.461 
7.482 The United States claims that China's criminal thresholds require authorities to disregard 
other indicia of commercial scale counterfeiting and piracy from physical evidence to consideration of 
the impact the piracy or counterfeiting has on the commercial marketplace and by extension, right 
holders.462  The United States argues that a range of quantitative and qualitative factors should be 
taken into account to ensure all "commercial scale" activities are subject to Article 61.463 
7.483 China responds that Chinese courts do consider semi-finished or unfinished products, and that 
these are evidence of preparation and attempt, as well as of substantive crimes.464  Evidentiary 
procedures and impact on the right holder are irrelevant to Article 61 of the TRIPS Agreement.465  
The Criminal Law also addresses organizational elements of crimes in provisions on vicarious 
liability.466   
(b) 
Main arguments of third parties 
7.484 Argentina argues that China's measures do not appear to be inconsistent with Article 61 of the 
TRIPS Agreement, as Article 1.1 provided China with the flexibility to implement enforcement 
provisions in a way compatible with its existing constitutional and regulatory framework.467 
7.485 Australia argues that "commercial scale" encompasses any act or series of acts of trademark 
counterfeiting or copyright piracy that adversely affects the financial rewards available to a right 
holder within a Member territory and that the ordinary meaning of the word "scale" incorporates the 
notion of a comparative assessment. Whether an individual case is on a commercial scale can only be 
determined case-by-case, taking account of all relevant circumstances, including the potential impact 
of digitally-based technologies. 468  This can include infringement activities with no financial 
advantage for the infringer, which nevertheless have substantial prejudicial impact on the right holder 
because of the availability of infringing material on digital networks.469   
                                                   
458 China's first written submission, paras 67-71, China's first oral statement, paras 26-27. 
459 China's first written submission, paras 90, 92 and 98-101. 
460 China's second written submission, paras 102-107. 
461 China's first written submission, paras 104-108 and 109-116; China's second written submission, 
paras 116-134. 
462 United States' first written submission, paras 143-150.   
463 United States' rebuttal submission, para. 38. 
464 China's first written submission paras 35-37; rebuttal submission, para. 32. 
465 China's first written submission, paras 141 and 139. 
466 China's rebuttal submission, paras 42-46. 
467 Argentina's third party written submission, paras 20 and 23. 
468 Australia's third party written submission, paras 18-19, supporting the definition suggested in the 
United States' first written submission, para. 110. 
469 Australia's third party written submission, para. 16, Australia's response to Third Party Question 
No. 6. 


 
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7.486 Brazil argues that an interpretation of "commercial scale" must give meaning to both terms in 
this expression, which combine "order of magnitude" with the purpose of obtaining financial gains.   
Therefore, Brazil considers that Article 61 establishes a two-pronged minimum standard that requires 
Members to provide for criminal procedures and penalties at least for wilful trademark and copyright 
infringements that involve profit-seeking motivation and significant amounts of infringing goods.470    
7.487 Canada argues that China's authorities are precluded from applying criminal sanctions in 
many cases of wilful trademark counterfeiting or copyright piracy on a commercial scale because 
China's thresholds are arbitrary, too high and inflexible.  The concept of "commercial scale" includes 
different factors. It relates to more than just industrial production and includes cases of wilful 
trademark counterfeiting and copyright piracy undertaken on sufficient scale to constitute the pursuit 
of profit or the carrying out of a business. This is a qualitative test and requires discretion in order to 
consider the circumstances of a given case. While negligible volumes of counterfeit would probably 
not qualify, the wilful reproduction of hundreds of pirated copies for the equivalent value of 
thousands of dollars in sales revenue would, by any objective measure, be infringing on a commercial 
scale. This would be especially true in China where annual GDP per capita is just US$2,500 and 
57 million people earn less than US$125 per year.  While Article 61 does not require prosecution of 
each case of wilful trademark counterfeiting and copyright piracy on a commercial scale, it does 
require Members to be in a position to do so, when circumstances merit the exercise of prosecutorial 
discretion.471  
7.488 The European Communities argues that Article 61 singles out two types of infringements 
because they have a particular potential of harming right holders. Therefore, "on a commercial scale" 
must comprise all activities with a particular potential for harm which results from them pertaining to 
a business or profit generation.  Quantitative thresholds alone are not enough to capture aspects of 
professional organization or systematic cooperation.  In order to capture all infringements on a 
commercial scale, criminal enforcement authorities must be able to take into account additional 
factors such as indications of business organization or profit orientation of an activity.472  The 
European Communities further argues that, because it provides for criminal procedures and penalties 
"to be applied", the first sentence of Article 61 obliges Members not just to criminalize, but also to 
prosecute the activities mentioned therein.473 
7.489 Japan argues that while quantitative thresholds could identify many instances of "commercial 
scale" counterfeiting they would not capture counterfeiting activities of limited value or smaller 
quantities which are on a "commercial scale" due to additional circumstances, such as their 
professional organization or easy repetition.  Mere quantification of "commercial scale" does not 
capture all instances of commercial scale counterfeiting, and additional qualitative elements need to 
be taken into account in order to consider such organizational characteristics of an activity.474  
7.490 Korea argues that China's thresholds arbitrarily carve out certain IPR crimes from the 
possibility of criminal sanction and are therefore inconsistent with the TRIPS Agreement. 
"Commercial scale" represents a level of magnitude that is realized by operating or maintaining a 
business activity, large or small, for the purpose of gaining financial return through IPR infringement 
in a somewhat systematic fashion. Therefore, anybody engaging in a business activity by infringing 
                                                   
470 Brazil's third party written submission, paras 35-38 
471 Canada's third party written submission, paras 4-8 and 11. 
472 European Communities' third party oral statement, paras 10 and 14. 
473 European Communities' third party written submission, para. 10-11; European Communities' 
response to Third Party Question No. 10, 
474 Japan's third party written submission, paras 17 and 30; Japan's third party oral statement, para. 13. 


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IPRs and realizing a financial return, regardless of the alleged amount at issue, should be regarded as 
violating IPRs on a "commercial scale".475 
7.491 Mexico submits that the concept of "commercial scale" encompasses activities that go beyond 
casual or occasional infringements that are not made for the purpose of generating revenue. In that 
context, the word "scale" is not necessarily bound to conditions of magnitude, but alternatively to that 
of quality.  Mexico further submits that small scale activity is "clearly meaningful" as it contributes to 
the chain of infringement.476 
7.492 Chinese Taipei submits that "commercial scale" is an abstract legal concept that involves 
multiple factors of local circumstances, such as nature of the infringed rights, value and price in the 
market, motive and purpose of act, method and scale of infringement, damage caused, profit gained, 
cultural background, advancement of modern technology and living standards, that need to be 
considered on a case-by-case basis.477 
7.493 Thailand argues that, as there is no definition of "commercial scale" in the TRIPS Agreement, 
this constitutes a built-in flexibility recognizing the different legal systems of Members.  Every 
Member can adopt the interpretation it deems appropriate.478 
(c) 
Consideration by the Panel 
(i) 
Nature of the claim 
7.494 The United States' claim relates to cases of wilful trademark counterfeiting and copyright 
piracy in respect of which China does not provide for criminal procedures and penalties to be applied 
but which the United States claims are "on a commercial scale".479  The claim is based on two alleged 
"fundamental problems" referred to in this Report as the two limbs of this claim.  The first limb 
concerns the level and method of calculation of the thresholds.  By specifying certain levels, the 
thresholds allegedly eliminate whole classes of counterfeiting and piracy from risk of criminal 
prosecution and conviction.480  The second limb concerns the limited set of numerical tests in the 
thresholds.  By focussing solely on these tests, the thresholds allegedly require law enforcement 
officials to disregard other indicia of counterfeiting and piracy.481  
7.495 The Panel notes that the first limb of the claim addresses the numbers specified in the 
numerical tests, and the way in which some of them are calculated, in order to show that the 
thresholds are too high.  These are quantitative issues.  The second limb addresses certain factors that 
the numerical tests do not take into account.  These are qualitative issues.  Neither limb is a broad 
claim that numerical thresholds cannot capture all cases "on a commercial scale".  In response to the 
Panel's requests for clarification of the claim after both the first and the second substantive meetings, 
the United States clarified that it did not object to the use of numerical thresholds per se. 482  
                                                   
475 Korea's third party written submission, paras 20 and 27; Korea's third party oral statement, para. 6. 
476 Mexico's third party written submission, paras 10; Mexico's third party oral statement, paras 6-7. 
477 Chinese Taipei's third party written submission, para. 21; Chinese Taipei's third party oral statement, 
para. 11. 
478 Thailand's third party oral statement, para. 3. 
479 United States' first written submission, paras 116 and 143. 
480 United States' first written submission, para. 112;  rebuttal submission, para. 74. 
481 United States' first oral statement, para. 36;  first oral statement (closing statement), para. 16. 
482 United States' responses to Questions Nos. 25 and 54.  It seems pertinent to note that during the 
negotiations of the terms of China's accession to the WTO, some members of the Working Party took a similar 
position.  In particular, they expressed concerns that the monetary thresholds were very high and seldom met.  
They considered that those thresholds should be lowered:  see the Working Party Report, para. 304.  China 


 
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Accordingly, the Panel is not asked to consider whether numerical thresholds, as a matter of principle, 
can implement an obligation in terms of cases "on a commercial scale".   
7.496 Therefore, in its assessment of this claim, the Panel will proceed as follows: 
(a) 
with respect to the first limb of the claim, the Panel will assess whether the levels in 
China's thresholds are too high to capture all cases on a commercial scale; and 
(b) 
with respect to the second limb of the claim, the Panel will assess whether the other 
factors raised by the United States can be taken into account by China's thresholds to 
capture all cases on a commercial scale and, if not, whether this is a TRIPS 
requirement. 
(ii) 
Procedural issues 
7.497 China argues that the United States bears "a significantly higher burden [of proof] than it 
would normally encounter" because this claim concerns criminal law matters.  China argues that the 
Panel should treat sovereign jurisdiction over police powers as a powerful default norm, departure 
from which can be authorized only in light of explicit and unequivocal consent of State parties.483  
China later clarified that it was not referring to a factual burden of proof but rather to the inability of 
the United States to provide the evidence to support its legal interpretation of Article 61 of the TRIPS 
Agreement.484  China also argues for the application of the "interpretative canon" of in dubio mitius 
which, it submits, has a particular justification in the realm of criminal law.485 
7.498 The United States responds that the fact that Article 61 of the TRIPS Agreement touches on 
criminal law does not change the provisions of Article 3.2 of the DSU or the customary rules of treaty 
interpretation reflected in the Vienna Convention on the Law of Treaties ("Vienna Convention").486  
In this dispute, the meaning of "commercial scale" is reached through the general rule of 
interpretation in Article 31 of the Vienna Convention.  There is no "doubt" which is a precondition of 
reliance on the concept of in dubio mitius.487 
7.499 The Panel notes that this claim is brought under Article 61 of the TRIPS Agreement, which 
concerns criminal procedures and penalties.488  Article 64.1 of that Agreement provides that:  
"The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied 
by the Dispute Settlement Understanding shall apply to consultations and the 
settlement of disputes under this Agreement except as otherwise specifically provided 
herein." 
7.500 The application of the rules and procedures of the DSU to the settlement of disputes under the 
TRIPS Agreement is confirmed by Article 1.1 of the DSU, in conjunction with Appendix 1 of the 
DSU which lists the TRIPS Agreement as a "covered agreement".  In accordance with Article 3.2 of 
the DSU, the Panel applies "the customary rules of interpretation of public international law" to its 
task of interpreting the TRIPS Agreement in this dispute.  The general rule of interpretation, 
                                                                                                                                                              
subsequently reduced certain thresholds with the adoption of Judicial Interpretation No. 19 [2004]:  see United 
States' first written submission, para. 27. 
483 China's first written submission, paras 49-59. 
484 China's first oral statement (closing statement), paras 4-7. 
485 China's rebuttal submission, paras 51-56. 
486 United States' rebuttal submission, paras 63-67. 
487 United States' rebuttal submission, para. 68. 
488 Despite use of the word "remedies" in the second and third sentences, it seems clear that criminal 
sanctions are "penalties". 


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expressed in Article 31 of the Vienna Convention, and the rules on supplementary means of 
interpretation in Article 32 of the Vienna Convention, have attained the status of rules of customary or 
general international law.489  The Panel will apply the general rule of interpretation and, to the extent 
warranted, supplementary means of interpretation.  The Panel is mindful that Article 3.2 of the DSU 
also provides that "recommendations and rulings of the DSB cannot add to or diminish the rights and 
obligations provided in the covered agreements".   
7.501 The Panel acknowledges the sensitive nature of criminal matters and attendant concerns 
regarding sovereignty.  These concerns may be expected to find reflection in the text and scope of 
treaty obligations regarding such matters as negotiated by States and other Members.490  Section 5 of 
Part III of the TRIPS Agreement, dedicated to criminal procedures and remedies, is considerably 
briefer and less detailed than the other Sections on enforcement in Part III.  Brief as it is, the text of 
Section 5 also contains significant limitations and flexibilities.  The customary rules of treaty 
interpretation oblige the treaty interpreter to take these limitations and flexibilities into account in 
interpreting the relevant provision.   
(iii) 
Nature of the obligation 
7.502 This claim is brought under the first sentence of Article 61 of the TRIPS Agreement.  
Article 61 constitutes the whole of Section 5 of Part III of that Agreement and provides as follows: 
"SECTION 5:  CRIMINAL PROCEDURES 
 
Article 61 
 
Members shall provide for criminal procedures and penalties to be applied at least in 
cases of wilful trademark counterfeiting or copyright piracy on a commercial scale.  
Remedies available shall include imprisonment and/or monetary fines sufficient to 
provide a deterrent, consistently with the level of penalties applied for crimes of a 
corresponding gravity.  In appropriate cases, remedies available shall also include the 
seizure, forfeiture and destruction of the infringing goods and of any materials and 
implements the predominant use of which has been in the commission of the offence.  
Members may provide for criminal procedures and penalties to be applied in other 
cases of infringement of intellectual property rights, in particular where they are 
committed wilfully and on a commercial scale." 
7.503 The first sentence of this Article uses the word "shall", indicating that it is mandatory.  This 
stands in contrast to the fourth sentence, which addresses the same issue with respect to other cases of 
infringement of intellectual property rights but uses the word "may", indicating that it is permissive.  
Unlike the third sentence, the first sentence contains no language such as "in appropriate cases" which 
might expressly introduce some margin of discretion.  The terms of the first sentence of Article 61, 
read in context, impose an obligation.  
7.504 This interpretation is confirmed by Article 41 of the TRIPS Agreement on "General 
Obligations", which is the first provision of Part III of the TRIPS Agreement and forms part of the 
context of Article 61.  Article 41.1 provides, relevantly, as follows: 
"Members shall ensure that enforcement procedures as specified in this Part are 
available under their law so as to permit effective action against any act of 
                                                   
489 Appellate Body Reports in US – Gasoline, at p. 17;  and Japan – Alcoholic Beverages II, at p. 10. 
490 Articles 3, 4 and 41, in particular paragraph 4, of the TRIPS Agreement inter alia also apply to 
criminal enforcement procedures. 


 
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infringement of intellectual property rights covered by this Agreement, including 
expeditious remedies to prevent infringements and remedies which constitute a 
deterrent to further infringements." 
7.505 In the Panel's view, the general obligation in Article 41.1 confirms that Article 61 contains 
obligations, as one of the specific provisions on enforcement procedures in Part III. 
7.506 China submits that the first sentence of Article 61 cannot set forth a specific obligation 
because it provides for enforcement against certain types of infringement but neither the TRIPS 
Agreement nor the Berne Convention (1971) define what constitutes substantive infringement.  Rather, 
they defer to national discretion to define the rights being infringed.491  
7.507 The Panel agrees with China that the first sentence of Article 61 contains a number of terms 
that are not defined by the Agreement and that this can affect the proper interpretation of the provision.  
However, even though the first sentence does not use the term "infringement", it is important to note 
that Part II of the TRIPS Agreement, including the provisions of the Paris Convention (1967) 
incorporated by Article 2.1, and the provisions of the Berne Convention (1971) incorporated by 
Article 9.1, provide for minimum standards concerning the availability, scope and use of intellectual 
property rights that apply irrespective of national treatment.  These provisions define the rights 
conferred by intellectual property and the circumstances in which those rights are infringed.  Part III 
of the TRIPS Agreement provides for the enforcement of those rights, to varying degrees.  Therefore, 
the Agreement contains substantive obligations that are not simply matters of national discretion. 
7.508 China submits that Article 61 of the TRIPS Agreement is less specific than the Anti-Dumping 
Agreement and the Agreement on Subsidies and Countervailing Measures and lacks the clarity 
required to demonstrate a specific, concrete obligation.  China also argues that the TRIPS Agreement 
lacks a provision such as Article 18.4 of the Anti-Dumping Agreement requiring Members to take 
steps to ensure the conformity of their laws with its provisions.492 
7.509 The Panel agrees that the TRIPS Agreement differs from trade remedy agreements.  However, 
the Panel will apply the usual rules of treaty interpretation to the terms used in the TRIPS Agreement 
and make its assessment on that basis in accordance with Article 11 of the DSU.  The Panel draws 
China's attention to Article XVI:4 of the WTO Agreement which provides as follows: 
"Each  Member shall ensure the conformity of its laws, regulations and administrative 
procedures with its obligations as provided in the annexed Agreements." 
7.510 The "annexed Agreements" include the TRIPS Agreement.  Therefore, Members are obliged 
to ensure conformity of their respective laws with their respective obligations as provided in the 
TRIPS Agreement. 
7.511 China submits that the third sentence of Article 1.1 of the TRIPS Agreement sets forth the 
overall context for interpreting the specificity of the standards in the TRIPS Agreement.  It describes 
Article 1.1 as a specific "caveat" that establishes boundaries on obligations, specifically in the realm 
of enforcement.493 
7.512 The Panel observes that Article 1.1 of the TRIPS Agreement provides as follows: 
                                                   
491 China's first written submission, paras 80-82.     
492 China's first written submission, paras 83-87. 
493 China's first written submission, paras 89-97. 


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"Members shall give effect to the provisions of this Agreement.  Members may, but 
shall not be obliged to, implement in their law more extensive protection than is 
required by this Agreement, provided that such protection does not contravene the 
provisions of this Agreement.  Members shall be free to determine the appropriate 
method of implementing the provisions of this Agreement within their own legal 
system and practice." 
7.513 The first sentence of Article 1.1 sets out the basic obligation that Members "shall give effect" 
to the provisions of this Agreement.  This means that the provisions of the Agreement are obligations 
where stated, and the first sentence of Article 61 so states.  The second sentence of Article 1.1 
clarifies that the provisions of the Agreement are minimum standards only, in that it gives Members 
the freedom to implement a higher standard, subject to a condition.  The third sentence of Article 1.1 
does not grant Members freedom to implement a lower standard, but rather grants freedom to 
determine the appropriate method of implementation of the provisions to which they are required to 
give effect under the first sentence.  The Panel agrees that differences among Members' respective 
legal systems and practices tend to be more important in the area of enforcement.  However, a 
coherent reading of the three sentences of Article 1.1 does not permit differences in domestic legal 
systems and practices to justify any derogation from the basic obligation to give effect to the 
provisions on enforcement.   
7.514 Therefore, the standard of compliance with Article 61 is the minimum internationally agreed 
standard set out in that Article.  The minimum standard in Article 61 does not defer to China's 
domestic practice on the definition of criminal liability and sanctions for other wrongful acts in areas 
not subject to international obligations under the TRIPS Agreement, unless it so states.  For example, 
the second sentence refers to "crimes of a corresponding gravity" which might refer to domestic 
practice in other areas.  However, the first sentence of Article 61 does not make any such reference. 
7.515 For the above reasons, the Panel confirms its view at paragraphs 7.503 to 7.505 above that the 
first sentence of Article 61 of the TRIPS Agreement imposes an obligation.  The Panel will now turn 
to the terms used in that provision, read in context and in light of the object and purpose of the 
Agreement, to determine the scope and content of that obligation. 
(iv) 
Scope of the obligation 
7.516 The terms of the obligation in the first sentence of Article 61 of the TRIPS Agreement are that 
Members shall "provide for criminal procedures and penalties to be applied".  That obligation applies 
to "wilful trademark counterfeiting or copyright piracy on a commercial scale".  Within that scope, 
there are no exceptions.  The obligation applies to all acts of wilful trademark counterfeiting or 
copyright piracy on a commercial scale.   
7.517 The Panel recalls its conclusion at paragraph 7.479 above that, in China, acts of trademark 
and copyright infringement falling below the applicable thresholds are not subject to criminal 
procedures and penalties.  The issue that arises is whether any of those acts of infringement constitute 
"wilful trademark counterfeiting or copyright piracy on a commercial scale" within the meaning of the 
first sentence of Article 61.  This requires the Panel to consider the interpretation of that phrase.   
7.518 The Panel notes that the first sentence of Article 61 contains no fewer than four limitations on 
the obligation that it sets forth.  These define the scope of the relevant obligation and are not 
exceptions.  The first limitation is that the obligation applies to trademarks and copyright rather than  
to all intellectual property rights covered by the TRIPS Agreement.  The fourth sentence of Article 61 
gives Members the option to criminalize other infringements of intellectual property rights, in 
particular where they are committed wilfully and on a commercial scale.  Despite the potential gravity 
of such infringements, Article 61 creates no obligation to criminalize them.  This can be contrasted 


 
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with Sections 2 and 3 of Part III of the TRIPS Agreement, regarding civil and administrative 
procedures and remedies, which apply to any act of infringement of intellectual property rights 
covered by the Agreement.  It can also be contrasted with Section 4 of Part III which attaches 
conditions to the option to apply its procedures to other infringements of intellectual property 
rights.494   
7.519 The second limitation in the first sentence of Article 61, which is related to the first, is that it 
applies to counterfeiting and piracy rather than to all infringements of trademarks and copyright.  This 
can also be contrasted with Sections 2 and 3 of Part III of the TRIPS Agreement.  This limitation, like 
the first, indicates an intention to reduce the scope of the obligation.  Indeed, the records of the 
negotiation of the TRIPS Agreement confirm that the term "infringements of trademarks and 
copyright" on a commercial scale was considered in the draft provision on criminal procedures but 
ultimately rejected.495   
7.520 The terms "trademark counterfeiting" and "copyright piracy" are not defined in the TRIPS 
Agreement.  They are distinct from the concepts of "trademark infringement" and "copyright 
infringement".  They are similar to the terms "counterfeit trademark goods" and "pirated copyright 
goods" which are defined for the purposes of the TRIPS Agreement496 in footnote 14 as follows: 
"For the purposes of this Agreement: 
(a) 
'counterfeit trademark goods' shall mean any goods, including packaging, 
bearing without authorization a trademark which is identical to the trademark validly 
registered in respect of such goods, or which cannot be distinguished in its essential 
aspects from such a trademark, and which thereby infringes the rights of the owner of 
the trademark in question under the law of the country of importation; 
(b) 
'pirated copyright goods' shall mean any goods which are copies made 
without the consent of the right holder or person duly authorized by the right holder 
in the country of production and which are made directly or indirectly from an article 
where the making of that copy would have constituted an infringement of a copyright 
or a related right under the law of the country of importation." 
7.521 The terms used in the first sentence of Article 61 denote classes of acts or activity whilst the 
terms used in footnote 14 denote classes of goods only.  This reflects the fact that Article 61 provides 
for criminal enforcement against infringing acts whilst Section 4 of Part III (in which the terms 
defined in footnote 14 are used) provides for enforcement at the border against infringing goods.  The 
definitions in footnote 14 also refer to the law of the country of "importation" whilst Article 61 relates 
to the law of the Member to which the obligation applies – generally speaking, the law of the Member 
where the infringing act occurs.  Subject to these observations, the Panel considers that the definitions 
in footnote 14 are relevant in understanding the terms used in Article 61.   
7.522 The United States does not claim that Articles 213, 214, 215, 217 and 218 of the Criminal 
Law fail to cover the full extent of the terms "trademark counterfeiting" and "copyright piracy" as 
                                                   
494 See paragraph 7.223 above. 
495 The Panel has recourse to this supplementary means of interpretation in accordance with Article 32 
of the Vienna Convention in order to confirm the meaning resulting from the application of the general rule of 
interpretation in Article 31.  See, for example, the Chairman's draft text of 23 July 1990 (document 
MTN.GNG/NG11/W/76). 
496 The terms "counterfeit trademark goods" and "pirated copyright goods" are used not only in 
Section 4 of Part III but also in Article 69 of the TRIPS Agreement.  The identical term "counterfeit trademark 
goods" is also used in Article 46. 


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used in Article 61 of the TRIPS Agreement.497  China does not contest that each of the thresholds 
established by the Criminal Law, in particular Articles 213, 214, 215, 217 and 218, applies to acts of 
"trademark counterfeiting" and "copyright piracy".  Therefore, it is unnecessary for the Panel to 
interpret those terms in greater detail at this stage. 
7.523 The third limitation in the first sentence of Article 61 is indicated by the word "wilful" that 
precedes the words "trademark counterfeiting or copyright piracy".  This word functions as a qualifier 
indicating that trademark counterfeiting or copyright piracy is not subject to the obligation in the first 
sentence of Article 61 unless it is "wilful".  This word, focussing on the infringer's intent, reflects the 
criminal nature of the enforcement procedures at issue.  It is absent from Section 4 of Part III, even 
though that Section is similarly limited, as a minimum, to counterfeit trademark goods and pirated 
copyright goods.  The penalties for criminal acts, such as imprisonment, fines and forfeiture of 
property, are relatively grave, as reflected in the second sentence of Article 61.  There is no obligation 
to make such penalties available with respect to acts of infringement committed without the requisite 
intent. 
7.524 The fourth limitation in the first sentence of Article 61 is indicated by the phrase "on a 
commercial scale" that follows the words "trademark counterfeiting or copyright piracy". This phrase, 
like the word "wilful", appears to qualify both "trademark counterfeiting" and "copyright piracy".  
The limitation to cases on a commercial scale, like the limitation to cases of wilfulness, stands in 
contrast to all other specific obligations on enforcement in Part III of the TRIPS Agreement.498 
7.525 The principal interpretative point in dispute is the meaning of the phrase "on a commercial 
scale".  This phrase functions in context as a qualifier, indicating that wilful trademark counterfeiting 
or copyright piracy is included in the scope of the obligation provided that it also satisfies the 
condition of being "on a commercial scale".  Accordingly, certain acts of wilful trademark 
counterfeiting or copyright piracy are excluded from the scope of the first sentence of Article 61.   
7.526 Despite the fact that trademark counterfeiting and copyright piracy infringe the rights of right 
holders, and despite the fact that they can be grave, the two qualifications of wilfulness and "on a 
commercial scale" indicate that Article 61 does not require Members to provide for criminal 
procedures and penalties to be applied to such counterfeiting and piracy per se unless they satisfy 
certain additional criteria.  This is highlighted by the fourth sentence of Article 61, which allows 
Members to provide for criminal procedures and penalties to be applied in other cases of infringement, 
"in particular" where they are committed wilfully and on a commercial scale.  This indicates that the 
negotiators considered cases of wilful infringement on a commercial scale to represent a subset of 
cases of infringement, comprising the graver cases.  This is useful context for interpreting the first 
sentence of Article 61, even though it does not refer to "infringement" in general, because the first 
sentence refers to both "counterfeiting" and "piracy" and wilfulness and commercial scale, evidently 
to limit the cases of infringement in different ways.  Therefore, the text of Article 61 indicates that it 
must not be assumed that the nature of counterfeiting and piracy per se is such that Members are 
obliged to provide for the application of criminal procedures and penalties. 
7.527 This is consistent with the nature of the obligation, being a minimum standard, as expressly 
confirmed by the use of the words "at least" in the first sentence of Article 61 and, more generally, by 
the second sentence of Article 1.1, quoted at paragraph 7.512 above.  Members may, and many do, 
criminalize other acts of trademark counterfeiting, other acts of copyright piracy, other acts of 
infringement of trademarks and copyright, and acts of infringement of other intellectual property 
rights such as patents, but there is no obligation to do so under the TRIPS Agreement. 
                                                   
497 United States' first written submission, paras 101 and 106. 
498 Section 4 contains a de minimis exception, discussed at paragraph 7.553 below. 


 
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7.528 Part III of the TRIPS Agreement distinguishes between the treatment of wilful trademark 
counterfeiting and copyright piracy on a commercial scale, on the one hand, and all other 
infringements of intellectual property rights, on the other hand, in that only the former are subject to 
an obligation regarding criminal procedures and penalties.  This indicates the shared view of the 
negotiators that the former are the most blatant and egregious acts of infringement.  This view must 
inform the interpretation of Article 61.  
7.529 The Panel recalls its findings at paragraph 7.241 above as to the circumstances of conclusion 
of the TRIPS Agreement with respect to enforcement procedures.  Whilst some of the pre-existing 
international intellectual property agreements or conventions contain provisions on the characteristics 
of enforcement mechanisms, it is striking that none of them create any specific minimum standard for 
criminal enforcement procedures.499  Among the international intellectual property agreements with 
wide membership, Article 61 of the TRIPS Agreement is, in this sense, unique. 
7.530 This reflects, in part, the fact that intellectual property rights are private rights, as recognized 
in the fourth recital of the Preamble to the TRIPS Agreement.  In contrast, criminal procedures are 
designed to punish acts that transgress societal values.  This is reflected in the use of the word 
"penalties" in Article 61. 
7.531 Bearing in mind these aspects of the context of the first sentence of Article 61, and the object 
and purpose of the TRIPS Agreement, the Panel now turns to the ordinary meaning of the words "on a 
commercial scale".   
(v) 
"on a commercial scale"  
7.532 The parties adopt different approaches to the task of interpreting the phrase "on a commercial 
scale".  The Panel will examine each of these approaches in turn, beginning with that of the 
complainant. 
7.533 The ordinary meaning of the word "scale" is uncontroversial.  It may be defined as "relative 
magnitude or extent; degree, proportion.  Freq. in on a grand, lavish, small, etc. scale".500  The 
ordinary meaning of the word includes both the concept of quantity, in terms of magnitude or extent, 
as well as the concept of relativity.  Both concepts are combined in the notions of degree and 
proportion.  Therefore, a particular "scale" compares certain things or actions in terms of their size.  
Some things or actions will be of the relevant size and others will not.   
7.534 The relevant size is indicated by the word "commercial".  The ordinary meaning of 
"commercial" may be defined in various ways.  The following two definitions have been raised in the 
course of these proceedings: 
"1.  Engaged in commerce;  of, pertaining to, or bearing on commerce.  
2.  (…)  
3.  Interested in financial return rather than artistry;  likely to make a profit;  regarded 
as a mere matter of business."501 
                                                   
499 The Convention for the Protection of Producers of Phonograms against Unauthorized Duplication of 
their Phonograms, Article 3, expressly provides that each Contracting State may implement the Convention by 
means of penal sanctions. 
500 New Shorter Oxford English Dictionary (1993).  Mexico notes a definition in Spanish that refers to 
degree, but that is not apposite in context:  see Mexico's third party oral statement, fn. 8. 
501 New Shorter Oxford English Dictionary (1993). 


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7.535 The Panel considers the first definition to be apposite.  It includes the term "commerce" which 
may, in turn, be defined as "buying and selling; the exchange of merchandise or services, esp. on a 
large scale". 502   Reading this definition into the definition of "commercial" indicates that 
"commercial" means, basically, engaged in buying and selling, or pertaining to, or bearing on, buying 
and selling.503  A combination of that expanded definition of "commercial" and the definition of 
"scale" would render a meaning in terms of a relative magnitude or extent (of those) engaged in 
buying and selling, or a relative magnitude or extent pertaining to, or bearing on, buying and selling.  
This draws a link to the commercial marketplace. 
7.536 The United States also submits that the word "commercial" scale draws a link to the 
commercial marketplace.  However, it refers to elements of the first and third meanings in 
definition 3., but dismisses the relevance of the second meaning, "likely to make a profit", because it 
is different from the other two.504   
7.537 The Panel notes that the third definition, which includes the qualifiers "rather than artistry" 
and "mere", refers to usages such as a "commercial artist", "commercial film" or "commercial 
writing" in the sense of those who are more interested in financial return than the artistic merit of a 
work, works that are of such a nature that they are likely to make a profit and works that are regarded 
as a mere matter of business rather than as expressions of other values.  This definition is not apposite 
in the first sentence of Article 61.   
7.538 Therefore, the Panel considers that the first definition set out at paragraph 7.534 above is 
appropriate.  However, the combination of that definition of "commercial" with the definition of 
"scale" presents a problem in that scale is a quantitative concept whilst commercial is qualitative, in 
the sense that it refers to the nature of certain acts.  Some acts are in fact commercial, whilst others are 
not.  Any act of selling can be described as commercial in this primary sense, irrespective of its size or 
value.  If "commercial" is simply read as a qualitative term, referring to all acts pertaining to, or 
bearing on commerce, this would read the word "scale" out of the text.  Acts on a commercial scale 
would simply be commercial acts.  The phrase "on a commercial scale" would simply mean 
"commercial".  Such an interpretation fails to give meaning to all the terms used in the treaty and is 
inconsistent with the rule of effective treaty interpretation.505  
7.539 There are no other uses of the word "scale" in the TRIPS Agreement, besides the first and 
fourth sentences of Article 61.  However, the wider context shows that the TRIPS Agreement 
frequently uses the word "commercial" with many other nouns, although nowhere else with "scale".  
The other uses of the word "commercial" include "commercial rental"506, "commercial purposes"507, 
"commercial exploitation" 508 , "commercial terms" 509 , "public non-commercial use" 510 , "first 
commercial exploitation" 511, "honest commercial practices" 512, "commercial value" 513 , "unfair 
commercial use"514, "non-commercial nature"515 and "legitimate commercial interests".516   
                                                   
502 Ibid. 
503 The Panel also observes that the definition of "commerce" itself expressly includes a notion of 
"scale", but this appears to refer to commerce in a general sense, such as "trade and commerce", which does not 
appear apposite within the word "commercial". 
504 See United States' first written submission, paras 109, 110 and 123. 
505 See, for example, Appellate Body Reports in US – Gasoline, at p. 23; Japan – Alcoholic 
Beverages II, at p. 12. 
506 Articles 11 and 14.4 of the TRIPS Agreement. 
507 Articles 26.1 and 36 of the TRIPS Agreement. 
508 Article 27.2 of the TRIPS Agreement. 
509 Article 31(b) of the TRIPS Agreement. 
510 Article 31(b) and (c) of the TRIPS Agreement. 
511 Article 38.1 and 38.2 of the TRIPS Agreement. 


 
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7.540 The provisions of the Paris Convention (1967) incorporated by Article 2.1 of the TRIPS 
Agreement include uses of the word "commercial" in the phrase "industrial or commercial 
establishment" (in the singular or plural)517 and in the phrases "industrial or commercial matters" and 
"industrial or commercial activities".518  The provisions of the Berne Convention (1971) incorporated 
by Article 9.1 of the TRIPS Agreement include the phrase "any commercial purpose".519  The 
provisions of the IPIC Treaty incorporated by Article 35 of the TRIPS Agreement include the phrase 
"commercially exploited" and "exploits ordinarily commercially".520 
7.541 The context shows that the negotiators chose to qualify certain activities, such as rental, 
exploitation and use, as "commercial".  They also chose to qualify various nouns, such as "terms", 
"value", "nature" and "interests", as "commercial" or "non-commercial".  In a similar way, they could 
have agreed that the obligation in the first sentence of Article 61 would apply to cases of wilful and 
"commercial" trademark counterfeiting or copyright piracy.  This would have included all commercial 
activity.  Indeed, the records of the negotiation of the TRIPS Agreement show that this formulation 
was in fact suggested (by the United States) at an early stage. 521  
7.542 The context shows that the negotiators used the term "commercial purposes" in two 
provisions on the scope of protection of certain categories of intellectual property rights, and that the 
Appendix to the Berne Convention (1971) already did use that term in the singular in provisions on 
possible limitations to particular rights.  However, the negotiators did not agree that the obligation in 
the first sentence of Article 61 would apply to cases of wilful trademark counterfeiting or copyright 
piracy "for commercial purposes".  This would have included all activity for financial gain or profit.  
7.543 Instead, the negotiators agreed in Article 61 to use the distinct phrase "on a commercial scale".  
This indicates that the word "scale" was a deliberate choice and must be given due interpretative 
weight.  "Scale" denotes a relative size, and reflects the intention of the negotiators that the limitation 
on the obligation in the first sentence of the Article depended on the size of acts of counterfeiting and 
piracy.  Therefore, whilst "commercial" is a qualitative term, it would be an error to read it solely in 
those terms.  In context it must indicate a quantity.522   
7.544 A review of the uses of the word "commercial" throughout the TRIPS Agreement indicates 
that it links various activities, not simply selling, to the marketplace.  It also shows that "commercial" 
activities cannot be presumed to be on a larger scale than others, such as "public non-commercial" 
activities, even though they would generally be larger than, say, "personal" or "domestic" use.  The 
distinguishing characteristic of a commercial activity is that it is carried out for profit.523  The review 
                                                                                                                                                              
512 Article 39.2 of the TRIPS Agreement. 
513 Article 39.2(b) of the TRIPS Agreement. 
514 Article 39.3 of the TRIPS Agreement. 
515 Article 60 of the TRIPS Agreement. 
516 Article 63.4 of the TRIPS Agreement. 
517 Articles 3, 5C(3), 6quinquiesA(2) and 7bis(1)) of the Paris Convention (1967).  This phrase also 
appears in footnote 1 to the TRIPS Agreement. 
518 Article 10bis of the Paris Convention (1967).   
519 Articles II(9)(a)(iv) and IV(4)(c)(iii) of the Appendix to the Berne Convention (1971). 
520 Article 7(1) and (2), of the IPIC Treaty. 
521 The United States suggested in October 1988 a provision applying to trademark counterfeiting and 
copyright infringement that were "wilful and commercial" (see document MTN.GNG/NG11/W/14/Rev.1).  This 
suggestion was not taken up.  A later US proposal, like certain other proposals, used the phrase "on a 
commercial scale" (see document MTN.GNG/NG11/W/70). 
522 The Panel is not required, for the purposes of this claim, to express a view as to whether 
"commercial" also indicates certain qualitative factors, such as a profit-seeking purpose. 
523 At the same time, some activities – such as experimentation – may be conducted in the course of 
business or in connection with a business without a specific profit-making purpose. 


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of the uses of the word "commercial" also shows that, unlike all the others, Article 61 uses the word 
"commercial" to qualify a notion of size.   
7.545 In the Panel's view, the combination of the primary definition of "commercial" and the 
definition of "scale" can be reconciled with the context of Article 61 if it is assessed not solely 
according to the nature of an activity but also in terms of relative size, as a market benchmark.  As 
there is no other qualifier besides "commercial", that benchmark must be whatever "commercial" 
typically or usually connotes.  In quantitative terms, the benchmark would be the magnitude or extent 
at which engagement in commerce, or activities pertaining to or bearing on commerce, are typically or 
usually carried on, in other words, the magnitude or extent of typical or usual commercial activity.  
Given that the phrase uses the indefinite article "a", it refers to more than one magnitude or extent of 
typical or usual commercial activity.  The magnitude or extent will vary in the different "cases" of 
counterfeiting and piracy to which the obligation applies.  In the Panel's view, this reflects the fact 
that what is typical or usual varies according to the type of commerce concerned.     
7.546 Turning to the arguments of the parties and various third parties on this point, they have 
attempted to give due meaning to both the terms "commerce" and "scale" in different ways.  Initially, 
the United States submitted as follows: 
"those who engage in commercial activities in order to make a 'financial return' in the 
marketplace … are, by definition, therefore operating on a commercial scale"524   
7.547 Similarly, Canada submitted that "commercial scale" refers to activities undertaken with a 
view to profiting.525  The European Communities submitted that the terms "commercial" and "scale" 
denote activities that pertain to a business or to the generation of profits".526   
7.548 The Panel considers these interpretations unsatisfactory, as they seem to equate "commercial 
scale" with "commercial purpose" or merely "commercial", which are not the term used in Article 61.    
7.549 The United States then clarified that it does not read the word "scale" out of the term 
"commercial scale" and added a qualifier or two to its initial position, submitting that: 
"an infringer seriously engaged in pursuing financial gain in the marketplace is 
necessarily acting on a 'scale' that is 'commercial' and therefore falls within the 
ordinary meaning of the term." (emphasis added and removed)527; and 
"'commercial scale' certainly extends to those who are genuinely engaged in 
commercial activities in order to make a financial return."528 (emphasis added) 
7.550 In response to a request for clarification from the Panel, the United States explained:  
"The United States has employed the words 'seriously' or 'genuinely' to underscore 
that the IPR infringer must be actually engaged in pursuing financial gain through 
non-trivial commercial activities in the marketplace, as opposed to, for example, a 
one-off entry into the marketplace of a limited nature.   
                                                   
524 United States' first written submission, para. 110.  This submission also interpreted "scale": see 
paragraph 7.659 below. 
525 Canada's third party written submission, para. 5. 
526 European Communities' third party oral statement, paras 4 and 14. 
527 United States' rebuttal submission, para. 17. 
528 United States' closing oral statement at the second substantive meeting, para. 15. 


 
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Whether an infringer is 'seriously' or 'genuinely' engaged in commercial activities 
would depend on the facts and circumstances of the activity.  (…)" 529 
7.551 The Panel understands that this refined approach interprets "commercial scale" as basically 
everything that is "commercial" with the exception of some trivial or de minimis activities.  It is not 
clear how "seriously" and "genuinely" indicate "non-trivial" activities – if anything, "seriously" 
indicates something more important.  However, there is no need to consider its meaning further as the 
word "seriously" is not used in the terms of the treaty, nor is it implied by the terms that are used.   
7.552 Whilst the United States' refined approach has the merit of ensuring that its interpretation of 
"commercial scale" does not capture an identical class of acts as the term "commercial purpose", the 
difference seems minimal.  This refined approach does not read the word "scale" out of the text but 
nevertheless it reads the word down to such an extent that it lacks the significance that the negotiators 
evidently intended.  The negotiators chose the word "scale", which refers to size, rather than other 
words that they actually used elsewhere in the Agreement that do not exclude activities on the basis of 
size.  They also used the word "scale" in the fourth sentence of Article 61, together with the term "in 
particular", which would be virtually redundant if the sentence simply meant that Members could 
provide for criminal procedures and penalties to be applied "in particular" to more than trivial or 
de minimis cases.  The context throughout Part III shows that the limitations in Section 5 reflect an 
effort to address only the more blatant and egregious infringements. 
7.553 As to the view that "on a commercial scale" is basically a de minimis provision, the Panel 
need look no further than the preceding provision, Article 60, to see how the negotiators addressed 
that issue.  Article 60 forms part of Section 4 on special requirements related to border measures and 
serves an analogous purpose to the phrase "on a commercial scale" in Article 61 in that both define 
the lower end of infringement at which a particular type of enforcement procedure must be available.  
However, the terms of each are quite different:  Article 60 defines de minimis infringement in terms of 
volume ("small quantities"), nature ("of a non-commercial nature") and circumstances ("in travellers' 
personal luggage or sent in small consignments").  Had the negotiators wanted to exclude only 
de minimis infringement from the minimum standard of Article 61, they had a model in Article 60, or 
they could have used words such as "except for minor or personal use".  However, they did not.530  
Instead, Article 61 refers to size ("scale") qualified only by the word "commercial".  This indicates 
that the negotiators intended something different from de minimis.  Article 60 also indicates that the 
negotiators did not equate small with non-commercial, confirming that a "commercial" scale is not 
necessarily small-scale nor large-scale. 
7.554 Among the other third parties, Brazil referred to a "significant" or "large" enough level based 
on certain factors531, Mexico argued for a "meaningful" level532; Korea referred to operating a 
business "in a somewhat systematic fashion".533  Canada acknowledged as follows: 
"There is perhaps no easily quantifiable measure because none is provided for in 
TRIPS.  This omission suggests that the test is qualitative: what a reasonable person 
would think in the circumstances."534 
                                                   
529 United States' response to Question No. 63. 
530 Indeed, the United States expressed a similar view in order to explain why a reference to 
"exceptional cases" in Article 46 of the TRIPS Agreement is not a de minimis test (see paragraph 7.387 above).   
531 Brazil's third party written submission, para. 36. 
532 Mexico's third party oral statement, para. 6.   
533 Korea's third party written submission, para. 27. 
534 Canada's third party written submission, para. 7. 


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7.555 The Panel considers that these interpretations, whilst they may reflect sound domestic policy 
considerations, lack a clear basis in the rules of treaty interpretation which the Panel is obliged to 
apply.  All of these interpretations are valid explanations as to why such infringement should be 
unlawful but they do not explain why it must be a crime.  The answer to that question must be found 
in the terms of the treaty as finally agreed.   
7.556 In this connection it seems pertinent to recall that the negotiators chose a term that was 
different from the commercial purpose or financial return standards used in the national legislation of 
a number of the participants. 
7.557 Turning now to the respondent's approach to the interpretation of "on a commercial scale", 
China submits that these words should be interpreted as a single term.535  The United States proposes 
that each of the terms in the two-word term be interpreted and does not submit that there are other 
ordinary uses of the phrase that would be relevant.536 
7.558 The Panel observes that the general rule of treaty interpretation in Article 31 of the Vienna 
Convention refers in paragraph 1 to the ordinary meaning of the terms of the treaty, read in context.  
Where the terms are a single term, or ordinarily used together, then the treaty interpreter should refer 
to the ordinary meaning of that single term, or of each term in the particular context of each other.  
This is a distinct exercise from that in paragraph 4 of Article 31 of the Vienna Convention which 
requires a "special meaning" to be given to a term if it is established that the parties so intended.  No 
party to this dispute considers that a "special meaning" should be given to the phrase "on a 
commercial scale", and nor does the Panel. 
7.559 The Panel will follow the approach explained by the Appellate Body in EC – Chicken Cuts:  
"The Appellate Body has observed that dictionaries are a 'useful starting point' for the 
analysis of 'ordinary meaning' of a treaty term, but they are not necessarily dispositive.  
The ordinary meaning of a treaty term must be ascertained according to the particular 
circumstances of each case.  Importantly, the ordinary meaning of a treaty term must 
be seen in the light of the intention of the parties 'as expressed in the words used by 
them against the light of the surrounding circumstances'".537   
7.560 The Panel recalls that the dictionary definition of "scale" (quoted at paragraph 7.533 above) 
includes the entry "Freq. in on a grand, lavish, small, etc. scale".  These examples show that the 
phrase "on a … scale" is frequently used.  Therefore, the use of the words "on a commercial scale" as 
a phrase appears to be relevant to their ordinary meaning. 
7.561 The circumstances surrounding the inclusion of the phrase "on a commercial scale" show that 
the phrase has been used and, in some cases, defined in the intellectual property legislation of various 
countries for periods stretching back almost a century.  Specifically, the patent laws of these countries 
refer to the working of inventions, or failure to work inventions, "on a commercial scale".538  The term 
                                                   
535 China's first written submission, paras 69-71. 
536 United States' response to Question No. 68. 
537 Appellate Body Report in EC – Chicken Cuts, para. 175, quoting Appellate Body Report in US – 
Softwood Lumber IV, para. 59, and referring to Appellate Body Reports in US – Offset Act (Byrd Amendment), 
para. 248, and US – Gambling, para. 166, and quoting McNair, The Law of Treaties (Oxford, Clarendon Press, 
1961), p. 365.   
538 See, for example, the Australian Patent Act 1990, s. 135(1) (mentioned in response to Third Party 
Question No. 9);  Indian Patents Act 1970, ss. 83-84;  South African Patent Act 1978, s. 56;  United Kingdom 
Patent Act 1977-1988, s. 50; Zimbabwean Patents Act 1971, s. 31, in Exhibit CHN-198, and the patent laws of 
other Commonwealth countries.  Earlier, the United Kingdom Patents and Design Act 1919, s. 27, had referred 
to working a patent "on a commercial scale". 


 
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is used in relation to the exploitation of protected subject matter, as in Article 61, but the purpose of 
these non-working provisions, and the considerations relevant to their operation, are distinct from 
those of criminal procedures and penalties as addressed in Article 61 of the TRIPS Agreement.  There 
is insufficient indication that the meaning ascribed to the term "on a commercial scale" in such 
legislation was that intended by the negotiators of the TRIPS Agreement when they used the term in 
the first and fourth sentences of Article 61.  However, this circumstance shows the phrase in use in an 
intellectual property context long before the negotiation of the TRIPS Agreement.     
7.562 The term "on a commercial scale" was also used in the specific context of trademark 
counterfeiting and copyright piracy in the WIPO Committee of Experts on Measures Against 
Counterfeiting and Piracy in 1988 contemporaneously with the earlier part of the negotiations of the 
TRIPS Agreement.  Draft Model Provisions for National Laws set out in a Memorandum by the 
International Bureau of WIPO for that Committee included, in Article A(1), (2) and (3), three draft 
Model Provisions on manufacturing as an act of counterfeiting, manufacturing as an act of piracy and 
additional acts of counterfeiting and piracy, respectively.  Each of those draft Model Provisions 
contained a proviso that such goods were manufactured, or the act was committed, "on a commercial 
scale".  An explanatory observation accompanied the term "commercial scale" as a phrase.539   
7.563 The evidence on the record includes many other uses of the words "commercial scale" and 
"on a commercial scale" in a variety of contexts.  Accordingly, the Panel considers that the words 
"commercial" and "scale" provide important context for the ordinary meaning of each other when 
used together in the phrase "on a commercial scale" as in the first sentence of Article 61 of the TRIPS 
Agreement.   
7.564 China submits that the phrase "on a commercial scale" refers to "a significant magnitude of 
infringement activity".540  China refers to four isolated uses of the phrase "commercial scale" spread 
out over a period of forty years: one at the 1947-1948 Havana Conference, one in a 1985 GATT 
Council meeting, and two in US national legislation on alternative energy development.  From these 
uses, China posits an interpretation suggestive of industrial scale activity.541   
7.565 The Panel considers that this interpretation is predetermined by the context of the uses that 
China has selected, which refer to commercial scale activities at an industrial level.  This is inapposite 
in the context of Article 61 of the TRIPS Agreement which applies to acts of infringement of 
individual rights, including those subsisting in individual products.  This interpretation simply 
replaces the term "commercial", that is used in the text, with "significant", that is not used in the text, 
effectively reading out the term "commercial".   
7.566 China also argues that the explanatory observation that accompanied the draft Model 
Provisions is an example of ordinary usage of the term "commercial scale".542   
7.567 The Panel notes that the explanatory observation did not purport to be a definition but was 
prepared by the International Bureau of WIPO for the specific purpose of accompanying a provision 
on manufacturing in the draft Model Provisions.  The Report of the WIPO Committee of Experts on 
Measures against Counterfeiting and Piracy of April 1988 shows that the concept of "commercial 
                                                   
539 That explanatory observation read as follows:  
"'Commercial scale' is a notion which will have to be applied taking into consideration the 
circumstances accompanying the manufacture.  The quantity of the goods manufactured, the 
way in which they were, are or are intended to be used and the will to make profit are among 
the factors that the courts will have to take into consideration."   
See WIPO document C&P/CE/2 of 18, 19 February 1988, para. 17, set out in Exhibit CHN-43 
540 China's first written submission, para. 64. 
541 Exhibits CHN-44, CHN-45, CHN-46 and CHN-47. 
542 China's first written submission, para. 72;  rebuttal submission, para. 76. 


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scale" proved controversial.543  Accordingly, it is not an example of ordinary usage.  In any event, the 
draft Model Provisions of the Committee of Experts themselves were never agreed. 544  Therefore, it 
would not be appropriate to select an explanatory observation that accompanied them and elevate it to 
the status of the proper interpretation of a treaty text that was negotiated in another forum and that 
was finally agreed. 
7.568 Turning to other evidence on the record, two third parties contrasted "commercial scale" 
production with "pilot scale" production or "small scale test" production.545  The Panel finds these 
contrasting terms relevant because they indicate a quantity, and because production can be an act of 
counterfeiting or piracy.   
7.569 In response to questions from the Panel, China, but not the United States, provided other 
examples of ordinary uses of the phrase "commercial scale", including in company press releases, 
filings with the US Securities and Exchange Commission and patent applications.  The United States 
argues that these examples are functions of individuals' "own lexicography" and are not used in the 
same fashion or manner.546  The United States also notes that patent applications are unrelated to the 
first sentence of Article 61 of the TRIPS Agreement. 
7.570 The Panel considers that each of the uses on the record, being in the English language, 
reflects the understanding of the authors as to the ordinary meaning of those words and phrases in that 
language.  That is the reason why a language allows its speakers to render themselves mutually 
intelligible.  These are the very meanings that dictionaries catalogue.  Naturally, words and phrases in 
the same language may have more than one meaning, "common or rare, universal or specialized".547  
It is incumbent on the Panel to assess these usages in context to discern which is relevant to the 
question of interpretation at hand, just as the Panel has done when confronted with multiple 
definitions of the words "commercial" and "scale" in the same dictionary.  The Panel also notes that 
Article 61 of the TRIPS Agreement specifically relates the concept of infringement "on a commercial 
scale" to other intellectual property rights, which include patents, in the fourth sentence of that Article.   
7.571 Turning to the ordinary meaning of the term "on a commercial scale", the evidence includes 
examples of uses of that precise term and also the words "commercial scale" followed by a noun.  It is 
not suggested that this changes the meaning.  The nouns include "manufacturing", "production", 
"facility", "processes", "reactor", "composition" and "cultivation", and the term also follows 
"manufacture" and "employ".548  This confirms that the phrase can be used in different contexts as a 
single term.     
7.572 Some of these nouns, notably manufacturing and production, refer to acts that could constitute 
trademark counterfeiting and copyright piracy, and are therefore particularly apposite to the 
interpretation of the first sentence of Article 61 of the TRIPS Agreement.  However, counterfeiting 
and piracy include other acts besides manufacturing and production.  There are no uses on the record 
of the phrase with the word "sales" or "selling". 
                                                   
543 See Report adopted by the WIPO Committee of Experts on Measures Against Counterfeiting and 
Piracy, WIPO document C&P/CE/4 of 28 April 1988, reproduced in Exhibit CHN-72, at paras 71-81 and 94. 
544 The April 1988 session of the Committee of Experts could not complete its work and it was 
envisaged that a revised text would be prepared: see Report in note 543 above, at para. 177. 
545 Australia's and Mexico's respective responses to Third Party Question No. 4. 
546 United States' response to Question No. 69;  comments on China's response to Question No. 68.   
547 Appellate Body Report in US – Gambling, para. 164. 
548 Press releases of Novovax and Dupont, and US Securities and Exchange Commission filings of 
Amylin Pharmaceuticals, Inc., Biocryst Pharmaceuticals, Inc., Cambridge Display Technology, Inc. and 
Verenium Corporation in Exhibit CHN-196; and China's original evidence in Exhibits CHN-44, CHN-45, CHN-
46 and CHN-47. 


 
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7.573 Simple searches of online patent databases of the Patent Cooperation Treaty, the United 
States Patent and Trademark Office and the European Patent Office, reveal many patent applications 
that use the phrase "commercial scale".  China has provided abstracts of some applications that define 
the phrase "commercial scale" in precise, quantitative terms of volume, weight or speed.549 These 
definitions vary greatly and relate to different factors, according to the invention claimed in the 
application.  From this evidence, China concludes that: 
"In the context of patent applications, the phrase 'commercial scale' refers to a certain 
level of magnitude.  This magnitude is not necessarily objectively high, but it is 
relatively high in the context of the operation involved."550   
7.574 The United States finds this statement "telling" and recalls its view that: 
"[B]ased on its ordinary meaning, what qualifies as 'commercial scale' piracy or 
counterfeiting will vary among product and market, and therefore, what is 
'commercial scale' can be determined using factors relevant to a particular 
situation."551 
7.575 The United States argues that the uses in the press releases and SEC filings must be 
understood in context, as in some cases:   
"[W]hether a manufacturing activity is 'commercial scale' may well mean whether the 
activity is undertaken on a scale, or at a level of economic efficiency, that allows that 
public company to make a return on investment or profit for its shareholders."552 
7.576 The Panel observes a certain degree of convergence between the parties' views, as compared 
to their initial positions, when addressing these ordinary uses of the phrase "commercial scale".  The 
Panel considers that the contexts in which the term "on a commercial scale" or "commercial scale" is 
used, given their variety, indicate that each of the words "commercial" and "scale" provides important 
context for the interpretation of the other when used together.  Their combined meaning varies greatly 
according to the context around them and the lack of precision in the term is apparent.553  However, it 
is clear that none of these uses refer to activities that are simply commercial.  Rather, they are 
evidently intended to distinguish certain activities (or premises) from others that pertain to or have a 
bearing on commerce but which do not meet a market benchmark in terms of what is typical.  The 
precise benchmark in each case depends on the product and the market to which the phrase relates.   
7.577 The Panel recalls its view at paragraph 7.545 above and, in light of the evidence considered 
above, finds that a "commercial scale" is the magnitude or extent of typical or usual commercial 
activity.  Therefore, counterfeiting or piracy "on a commercial scale" refers to counterfeiting or piracy 
carried on at the magnitude or extent of typical or usual commercial activity with respect to a given 
product in a given market.  The magnitude or extent of typical or usual commercial activity with 
respect to a given product in a given market forms a benchmark by which to assess the obligation in 
the first sentence of Article 61.  It follows that what constitutes a commercial scale for counterfeiting 
or piracy of a particular product in a particular market will depend on the magnitude or extent that is 
typical or usual with respect to such a product in such a market, which may be small or large.  The 
                                                   
549 International applications published under the PCT: WO 00/61722;  WO 2004/054949 A1; WO 
2006/110534 A2; WO2008/020357 A2; United States patent no. 6,525,205 B2; United States patent application 
no. 2007/0202578 A1; in Exhibit CHN-197. 
550 China's response to Question No. 69. 
551 United States' comment on China's response to Question No. 69, citing its response to Question 
No. 16 and second oral statement (closing statement), paras 10-11. 
552 United States' comment on China's response to Question No. 68. 
553 The lack of precision is highlighted by the addition of specific definitions in the patent applications. 


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magnitude or extent of typical or usual commercial activity relates, in the longer term, to 
profitability.554   
7.578 The Panel observes that what is typical or usual in commerce is a flexible concept.  The 
immediate context in the second sentence of Article 61, which is closely related to the first, refers to 
the similarly flexible concepts of "deterrent" and "corresponding gravity".  Neither these terms nor 
"commercial scale" are precise but all depend on circumstances, which vary according to the differing 
forms of commerce and of counterfeiting and piracy to which these obligations apply.  
7.579 The parties have presented certain other facts and arguments in relation to the interpretation 
of "a commercial scale", which the Panel will now assess.  
(vi) 
Subsequent practice  
7.580 China refers to certain material as "subsequent practice" in the application of the TRIPS 
Agreement within the meaning of Article 31(3) of the Vienna Convention. The material comprises the 
enforcement policies of two authorities of two Members, a draft Directive of another Member and 
various free trade agreements entered into by the United States.555   
7.581 The Panel has reviewed the material and considers that it lacks the breadth to constitute a 
common, consistent, discernible pattern of acts or pronouncements.  Further, the content of the 
material does not imply agreement on the interpretation of Article 61 of the TRIPS Agreement.556  
Therefore, the Panel does not consider that it constitutes subsequent practice for the purposes of this 
interpretation.   
(vii) 
Supplementary means of interpretation 
7.582 China initially submitted that the draft Model Provisions contained a definition which formed 
the basis for discussion of the term in the negotiation of the TRIPS Agreement.557   
7.583 The United States responded that the status of this document under the Vienna Convention is 
unclear.  If the document could be used as a supplementary means of interpretation, it would confirm 
that a variety of factors would need to be taken into account to determine whether an act is on a 
commercial scale.558   
7.584 Canada and Japan refer to the explanatory observation on "commercial scale" that 
accompanied the draft Model Provisions, noting that it referred to quantitative as well as non-
quantitative factors.  The European Communities sees limited interest in recourse to supplementary 
means of interpretation but notes the same point.559   
7.585 The Panel recalls its observations regarding the explanatory observation that accompanied the 
draft Model Provisions at paragraph 7.567 above.  It appears that the explanatory observation did not 
represent the common intentions of the WIPO Committee of Experts on Measures Against 
                                                   
554 This finding is without prejudice to the qualitative aspect of "commercial scale" considered with 
respect to the second limb of this claim.   
555 China's first written submission, paras 104-108. 
556 See Appellate Body Reports in Japan – Alcoholic Beverages II, p. 13;  US – Gambling, paras 192-
193, and EC – Chicken Cuts, para. 259. 
557 China's first written submission, paras 72-75 and 110. 
558 United States' rebuttal submission, paras 26-37. 
559 Canada's third party written submission, para. 6; Japan's third party written submission, paras 22-23; 
European Communities' third party oral statement, paras 11-12. 


 
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Counterfeiting and Piracy, much less the common intentions of the participants in the negotiation of 
the TRIPS Agreement.  
7.586 The draft Model Provisions were mentioned in the records of the TRIPS negotiations, in May 
1988560 and August 1988561, in the context of a discussion of the scope of a framework on trade in 
counterfeit goods (that was never concluded).  Documents of the WIPO Committee of Experts, 
including the draft Model Provisions, were communicated to the TRIPS negotiating group and made 
available in the GATT Secretariat for consultation by interested delegations, but not circulated, in 
June 1988.562  The Panel considers that this evidence indicates that the negotiators of the TRIPS 
Agreement were aware of the explanatory observation by the International Bureau of WIPO 
addressing "commercial scale", but it does not indicate that the content of that explanatory 
observation represented their common intentions. 
7.587 There is a certain temporal correlation between the work of the WIPO Committee of Experts 
and the use of the term "commercial scale" in the drafting of Article 61 of the TRIPS Agreement.  The 
European Communities' proposal for the negotiations on the enforcement of trade-related intellectual 
property rights in May 1989 ("EC proposal")563 contained a draft provision on criminal procedures 
and sanctions that bears a strong similarity to the first, second and fourth sentences of Article 61 in the 
final text of the TRIPS Agreement.  It was also the first proposal to use the words "on a commercial 
scale".  In response to a question from the Panel, the European Communities informed the Panel that: 
"In spite of intense research, the European Communities has not been able to find any 
trace that the phrase 'on a commercial scale' in the EC proposal of 30 May 1989 was 
sourced from another instrument."564 
7.588 In any event, there are differences between the draft Model Provisions of the WIPO 
Committee of Experts, the EC proposal on criminal procedures and sanctions to the TRIPS 
negotiating group, and the terms of Article 61 of the TRIPS Agreement.  In particular, the draft Model 
Provisions incorporated the phrase "on a commercial scale" within the concepts of "counterfeiting" 
and "piracy" whilst Article 61 uses the phrase "on a commercial scale" to qualify the concepts of 
"wilful trademark counterfeiting or copyright piracy".  Further, the explanatory observation that 
accompanied the draft Model Provisions was limited to the act of manufacturing whilst Article 61 
encompasses the range of acts of counterfeiting and piracy.   
7.589 The records of the TRIPS negotiations do not disclose any discussion of the meaning of the 
phrase "on a commercial scale".   
7.590 Therefore, the Panel does not consider that the explanatory observation that accompanied the 
draft Model Provisions sheds any further light beyond that noted at paragraph 7.562 above on the 
intentions of the TRIPS negotiators when they used the term "commercial scale".   
                                                   
560 It was suggested that, in that connection, the negotiating group should take into account definitions 
established in national legislation, those under preparation in the WIPO Committee of Experts on Measures 
Against Counterfeiting and Piracy and the existing obligations of relevance in intellectual property conventions: 
see the minutes of the meeting in document MTN.GNG/NG11/7, paras 23 and 33, in Exhibit CHN-71. 
561 A participant suggested that, in determining the types of infringement to be covered by a framework 
on trade in counterfeit goods, the criteria suggested in the WIPO draft model legislation should be employed:  
see the minutes of the meeting in document MTN.GNG/NG11/8, at para. 52, in Exhibit CHN-55.   
562 See GATT document MTN.GNG/NG11/W/5/Add.6. 
563 GATT document MTN.GNG/NG11/W/31. 
564 European Communities' response to Third Party Question No. 8. 


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(viii) 
Article 41.5 of the TRIPS Agreement 
7.591 China submits that Article 41.5 of the TRIPS Agreement makes clear that none of the 
enforcement provisions can be read to require Members to set out low-scale – and therefore high 
resource – thresholds for the criminalization of intellectual property infringement.565  It later clarified 
that low-scale thresholds implied high amounts of resources because the first sentence of Article 61 is 
only satisfied by criminal measures that are actually applied.566   
7.592 The United States does not claim that China has an obligation to prosecute all counterfeiting 
and piracy falling within the scope of the first sentence of Article 61.567 
7.593 Article 41.5 provides as follows: 
"It is understood that this Part does not create any obligation to put in place a judicial 
system for the enforcement of intellectual property rights distinct from that for the 
enforcement of law in general, nor does it affect the capacity of Members to enforce 
their law in general.  Nothing in this Part creates any obligation with respect to the 
distribution of resources as between enforcement of intellectual property rights and 
the enforcement of law in general." 
7.594 The Panel considers that Article 41.5 is an important provision in the overall balance of rights 
and obligations in Part III of the TRIPS Agreement.  Both sentences apply to "this Part", which 
includes Article 61.   
7.595 The first sentence of Article 41.5 does not appear to be relevant to this dispute.  China has 
administrative agencies dedicated to intellectual property enforcement that are separate from its law 
enforcement agencies in general.  It is under no obligation to put in place a separate judicial system 
for IPR enforcement.   
7.596 The second sentence of Article 41.5 relates to the deployment of resources for enforcement.  
In the Panel's view, that plays an important role in relation to Article 41, in particular, paragraph 1568, 
and the actual exercise of authority to enforce intellectual property rights throughout Part III.  
However, the Panel's findings in this dispute regarding the first sentence of Article 61 are confined to 
the issue of what acts of infringement must be criminalized and not those which must be prosecuted.   
7.597 China refers to the second sentence of Article 61 on remedies and notes that it contains an 
element of flexibility in its reference to "the level of penalties applied for crimes of a corresponding 
gravity".  China argues that if Members are not required to impose meaningful punishment for low-
level crimes, they should not be required to enforce intellectual property crimes at a low level 
either.569  The Panel simply recalls its comment in paragraph 7.596 and confirms that it has not made 
a finding on any duty to prosecute. 
7.598 China asks the Panel to note that its criminal law allows for the possibility of private 
prosecution of certain crimes.  It speculates that defining a crime with too low a threshold "could 
unleash a large volume of private enforcement actions and impose a significant burden on the judicial 
                                                   
565 China's first written submission, paras 98-101. 
566 China's rebuttal submission, paras 122-124:  see also European Communities' response to Third 
Party Question No. 10.  Australia makes a similar point in relation to the second sentence of Article 61:  see its 
third party written submission, para. 25.   
567 United States' rebuttal submission, paras 47-48. 
568 Article 41.1 of the TRIPS Agreement is quoted at paragraph 7.170 above. 
569 China's rebuttal submission, paras 108-110. 


 
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system".570  However, in response to questions, China was unable to substantiate its concern.  In 
particular, it lacked any data relevant to its experience after it lowered thresholds for the crimes 
infringing intellectual property crimes in 2004.571  Therefore, the Panel does not need to consider that 
issue further. 
7.599 In light of the above, the Panel confirms its interpretation of "on a commercial scale" set out 
at paragraph 7.577 above.  The Panel will now apply that interpretation to the measures at issue. 
(ix) 
Conformity of the measures at issue with respect to the level of the thresholds 
7.600 The Panel recalls its finding at paragraph 7.545 above regarding the interpretation of the 
phrase "wilful trademark counterfeiting or copyright piracy 'on a commercial scale'", as used in 
Article 61 of the TRIPS Agreement.  The Panel recalls, in particular, that this is a relative standard, 
which will vary when applied to different fact situations. 
7.601 The Panel notes that it is the standard in the treaty obligation that varies as applied to different 
fact situations, and not necessarily the means by which Members choose to implement that standard.  
The Panel recalls that the third sentence of Article 1.1 of the TRIPS Agreement, quoted and discussed 
at paragraphs 7.512 and 7.513 above, provides as follows: 
"Members shall be free to determine the appropriate method of implementing the 
provisions of this Agreement within their own legal system and practice." 
7.602 This provision confirms that the TRIPS Agreement does not mandate specific forms of 
legislation.572  The Panel may not simply assume that a Member must give its authorities wide 
discretion to determine what is on a commercial scale in any given case, and may not simply assume 
that thresholds, including numerical tests, are inconsistent with the relative benchmark in the first 
sentence of Article 61 of the TRIPS Agreement.  As long as a Member in fact provides for criminal 
procedures and penalties to be applied in cases of wilful trademark counterfeiting or copyright piracy 
on a commercial scale, it will comply with this obligation.  If it is alleged that a Member's method of 
implementation does not so provide in such cases, that allegation must be proven with evidence.  
Therefore, the Panel will assess whether the evidence shows that China fails to provide for criminal 
procedures and penalties to be applied in any such cases. 
7.603 The Panel begins with the first limb of the claim.  In the first limb of the claim, the United 
States challenges the levels at which certain thresholds are set.  Having chosen to challenge the level 
of a series of numerical thresholds as compared to a relative standard, it is necessary for the 
United States to demonstrate that the levels are higher than that standard as applied in certain factual 
situations.   That calls for quantitative evidence.  Later, the Panel will address the second limb of the 
claim, in which the United States challenges the factors taken into account by the criminal thresholds.  
That calls for qualitative evidence. 
                                                   
570 China's first written submission, para. 38, referring to Article 170 of the Criminal Procedure Law, as 
restated in Article 5 of Judicial Interpretation No. 6 [2007]. 
571 China's response to Question No. 14.   
572 The United States accepts this: see its rebuttal submission, paras 42-44;  response to Question 
No. 54. 


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7.604 The parties agree that the standard of "a commercial scale" will vary by product and market 
and that the conformity of China's criminal thresholds with that standard must be assessed by 
reference to China's marketplace. 573  
7.605 The Panel recalls that a previous Panel had occasion to apply certain relative standards in the 
TRIPS Agreement in quantitative terms.  The Panel in US – Section 110(5) Copyright Act interpreted 
the phrase "certain special cases" inter alia in terms of a narrow scope or reach, and the phrase "a 
normal exploitation of the work" inter alia in an empirical or quantitative sense, as those phrases are 
used in Article 13 of the TRIPS Agreement.574  As in the present case, the parties in that dispute 
agreed that conformity had to be assessed wholly or primarily in relation to the respondent's market.  
The Panel in that dispute adopted the following approach in assessing the conformity of a measure 
with Article 13: 
"We note that while the WTO Members are free to choose the method of 
implementation, the minimum standards of protection are the same for all of them.  In 
the present case it is enough for our purposes to take account of the specific 
conditions applying in the US market in assessing whether the measure in question 
conflicts with a normal exploitation in that market, or whether the measure meets the 
other conditions of Article 13."575  (footnote deleted) 
7.606 In the present dispute, the Panel considers this approach appropriate as well.  The Panel needs 
to consider the specific conditions applying in China's marketplace in assessing whether the measures 
in question, which exclude certain acts of infringement from particular liability, conform to the 
relative standard in Article 61.576  This applies a fortiori as the relative standard is set in terms of what 
is "on a commercial scale", which varies not only by market but also by product within the same 
market.   
7.607 The nature of the measures at issue and the applicable treaty obligation under consideration in 
this Section of this Report can be contrasted with those considered in Section VII:A.  It was not 
necessary for the United States to demonstrate the particular class of works to which the Copyright 
Law denies copyright protection because it was clear that the measure at issue denies all copyright 
protection to some works and the relevant obligation in the TRIPS Agreement does not permit denial 
of all copyright protection to any such works.  In contrast, the measures that establish the criminal 
thresholds set forth levels that deny criminal procedures and penalties in some, but not all, cases of 
wilful trademark counterfeiting and copyright piracy, and the relevant obligation permits the denial of 
criminal procedures and penalties in some such cases.   
7.608 The United States argues that the criminal thresholds exclude certain commercial activity.  
The United States relies, in particular, on the text of the measures establishing the criminal thresholds 
themselves.577   
                                                   
573 United States' first written submission, fn. 78 and para. 118;  rebuttal submission, para. 17;  
responses to Questions Nos. 16 and 66;  China's first written submission, paras 133-137; response to Question 
No. 16. 
574 See Panel Report in US – Section 110(5) Copyright Act, paras 6.113 and 6.178. 
575 Ibid., para. 6.189.   
576 The Panel Report in Canada – Pharmaceutical Patents also considered the meaning of "normal" 
exploitation (in that case, of a patent) but in abstract terms.  However, it did so in an assessment of an exception 
that was challenged on the basis of the nature of the acts that the measures excused from liability, not their 
magnitude or extent.  Both parties also addressed the meaning of "normal" in that case in abstract terms: see 
paras 7.51-7.59. 
577 United States first written submission, para. 110;  rebuttal submission, para. 10. 


 
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7.609 The Panel has reviewed the measures and agrees that, on their face, they do exclude certain 
commercial activity from criminal procedures and penalties.  For example, some of the criminal 
thresholds are set in terms that refer expressly to commercial activity, such as "illegal business 
operation volume", which is defined in terms of "manufacture, storage, transportation, or sales" of 
infringing products, and "illegal gains" which is defined in terms of profit.  However, based solely on 
the measures on their face, the Panel cannot distinguish between acts that, in China's marketplace, are 
on a commercial scale, and those that are not.   
7.610 Certain thresholds are set in monetary terms, ranging from ¥20,000 profit to ¥50,000 turnover 
or sales.  The measures, on their face, do not indicate what these amounts represent as compared to a 
relevant commercial benchmark in China.578  Each of these amounts represents a range of volumes of 
goods, which vary according to price.  Another factor to take into account is the period of time over 
which infringements can be cumulated to satisfy these thresholds.  One threshold is set not in 
monetary terms but rather at 500 张 (份) ("copies" for the sake of simplicity).  Whilst it is reasonably 
clear to the Panel how many goods that comprises with respect to certain traditional media, this is not, 
on its face, related to any relevant market benchmark in China either.   
7.611 The Panel has noted the United States' repeated assertions that certain amounts constitute 
counterfeiting or piracy on a commercial scale.  The most recurrent example concerns 499 copyright-
infringing "copies", although it is not related to the same product in all examples or, sometimes, to 
any product.579  The only facts in these examples are amounts equal to, or slightly less than, those in 
the measures themselves.  Those amounts, in combination with the monetary thresholds and the 
factors used in the thresholds, demonstrate the class of acts for which China does not provide criminal 
procedures and penalties to be applied.  Those numbers and factors do not, in themselves, demonstrate 
what constitutes a commercial scale for any product or in any market in China.   
7.612 China asserted the relevance of the scale of commerce in China in its first written submission 
and referred to Economic Census statistics (considered below).580   
7.613 The Panel asked both parties after the first substantive meeting whether "commercial scale" 
varies according to characteristics of markets, products and operators within a market, how 
"commercial scale" can be related to these considerations and what type of data could be relevant.581 
7.614 In response to the Panel's question, the United States referred to the interpretation of 
"commercial scale" that it had proposed in its first written submission, which included all commercial 
activity by definition.  The United States agreed that "commercial scale" must be viewed with 
reference to the marketplace, and acknowledged that the scale of what is commercial necessarily will 
vary by product and market.  It acknowledged that what is "commercial scale" can vary from situation 
to situation according to a number of factors.  It asserted that China's criminal thresholds fail to 
capture commercial scale in certain market situations.582  Nevertheless, the United States did not 
provide data regarding products and markets or other factors that would demonstrate what constituted 
"a commercial scale" in the specific situation of China's marketplace. 
                                                   
578 The parties agree that the thresholds should be assessed in the form in which they appear in China's 
measures, namely Renminbi (¥), which is the local currency used in China's marketplace:  see their respective 
responses to Question No. 5. 
579 United States' first written submission, para. 139;  response to Question No. 25;  rebuttal submission, 
para. 112;  response to Question No. 64. 
580 China's first written submission, paras 133-137. 
581 Question No. 16. 
582 United States' response to Question No. 16. 


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7.615 In its rebuttal of China's assertion regarding the scale of commerce in China, the United States 
noted that the "commercial scale" standard was a relative one.583  It commented on the Economic 
Census statistics submitted by China but at the same time dismissed their relevance as they are 
aggregate statistics related to undefined average economic units.  It also recalled an earlier assertion 
that the Chinese market, including the market for many copyright and trademark-bearing goods, is 
fragmented and characterized by a profusion of small manufacturers, middlemen, distributors, and 
small outlets at the retail level.584    
7.616 The Panel has reviewed the evidence in support of this assertion.585  The evidence comprises a 
quote from a short article from a US newspaper, the San Francisco Chronicle, titled "30,000-Store 
Wholesale Mall Keeps China Competitive" regarding the number of stores in a particular mall in 
Yiwu and the physical dimensions of some stalls586; a statistic quoted from an extract from a 
management consultant report titled "The 2005 Global Retail Development Index" that the top ten 
retailers in China hold less than 2 per cent of the market, and another statistic that the top 100 retailers 
have less than 6.4 per cent587; and a quote from an article in Time magazine titled "In China, There's 
Priceless, and for Everything Else, There's Cash" that a shopping mall in Luohu spans six floors of 
small stores.588   
7.617 The Panel finds that, even if these sources were suitable for the purpose of demonstration of 
contested facts in this proceeding, the information that was provided was too little and too random to 
demonstrate a level that constitutes a commercial scale for any product in China.   
7.618 The United States referred to Canada's third party written submission, which had provided an 
estimate of China's gross domestic product per capita.589  It did not explain specifically how this 
figure was comparable to China's numerical thresholds.   
7.619 The Panel considers GDP per capita a reliable indicator of average national income but not a 
sufficient indicator of a commercial scale, as it is calculated with a denominator of total population.590  
The Panel also notes that GDP is a far more aggregated figure than those in the Economic Census 
statistics that the United States dismissed. 
7.620 China submits that the United States must provide evidence that China's laws actually 
function to exclude a category of infringement that meets the "commercial scale" standard.  
Hypothetical examples do not qualify as sufficient evidence.591   
7.621 In response, the United States asserts that it, and a number of third parties, have provided 
"numerous, concrete illustrations" of commercial-scale piracy and counterfeiting that take place 
underneath China's thresholds.592  It refers to a "Report on Copyright Complaints, Raids and Resulting 
Criminal Actions in China" prepared by a coalition of trade associations in 2008 (the "CCA 
Report").593   
                                                   
583 United States' rebuttal submission, para. 104. 
584 United States' rebuttal submission, paras 106-107.   
585 The evidence was submitted with the United States' first written submission, para. 122. 
586 Exhibit US-28. 
587 A.T. Kearney: "Destination: China" in The 2005 Global Retail Development Index in Exhibit US-29. 
588 Exhibit US-30.  An article from the London Daily Telegraph is also submitted in Exhibit US-31. 
589 United States' rebuttal submission, para. 108, referring to Exhibit CDA-1.   
590 As noted in China's rebuttal submission, para. 142.   
591 China's rebuttal submission, para. 149. 
592 United States' second oral statement, para. 28, elaborating on its rebuttal submission, paras 9-10. 
593 The Report, contained in Exhibit US-41, was prepared by the "China Copyright Alliance", a 
coalition of six trade associations that represent several creative industry sectors.   


 
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7.622 The Panel has reviewed the CCA Report to determine whether it bears out the United States' 
assertion.  The CCA Report was originally submitted as a case example intended to show that the 
criminal thresholds create a "safe harbour" (an assertion not borne out by the data594) and also to show 
that significant quantities of retail sales of infringing product take place in China at levels below 
China's thresholds.595   
7.623 The Panel notes that the question whether retail sales of infringing product take place below 
the thresholds is not dispositive of the claim, as the first sentence of Article 61 does not require 
Members to provide for criminal procedures and penalties to be applied to all such cases.  Further, the 
CCA Report sets out for each raid "total units seized (DVD, CD, VCD)".  For some raids, the total 
units seized were as few as five.  Therefore, while the aggregate number of seizures below China's 
thresholds may or may not be "significant", the seizure data does not permit any deduction as to the 
scale of operations of the individual raided retail outlets.  The total units seized in many cases may be 
only part of, or even incidental to, a commercial operation. The seizure data illustrates the scale of 
infringing stock on hand (as it is intended to do) but it does not show the scale of the individual retail 
businesses or what constitutes a commercial scale for those products in that market.596 
7.624   China provided official statistics from its Economic Census.597  The statistics include figures 
for average annual revenue for enterprises engaged in different industrial sectors in China.  Annual 
revenue appears to be a concept capable of comparison with "illegal business operation volume" as 
defined in Judicial Interpretation No. 19 [2004] and set out at paragraph 7.401 above.  The statistics 
show that the illegal business operation volume threshold of ¥50,000 for counterfeiting one registered 
trademark in violation of Article 213 of the Criminal Law is equivalent to 0.41 per cent of the average 
annual revenue of  enterprises engaged in light industry;  0.8 per cent of the average annual revenue of 
small-size enterprises;  and 0.84 per cent of the average revenue of Chinese retail businesses.598   
7.625 The Economic Census statistics also refer to a concept of the "Individual Operation 
Household" which is defined as the smallest unit of commerce in Chinese economic statistics.  The 
                                                   
594 The CCA Report was submitted as a case example of how the thresholds allegedly create a "safe 
harbour" for commercial scale trademark counterfeiting and copyright piracy and provide "clear guideposts" as 
to how to avoid the risk of criminal prosecution.  It was alleged that the CCA Report shows that when the 
numerical thresholds are shifted down, commercial operations are adjusted and restructured to ensure that they 
remain at levels that fall under the thresholds.  The CCA Report covers the period January 2006 to November 
2007 - the period during which a threshold under Article 217 of the Criminal Law was lowered from 1000 
copies to 500 copies (see paragraphs 7.411 and 7.412 above).  The CCA Report highlights a congruence in the 
percentage of seizures below the threshold before and after it was lowered.  However, when further data was 
provided regarding the percentage of seizures below 500 copies before the threshold was lowered, when it was 
an irrelevant number, the Panel was able to observe a (somewhat lesser but still strong) congruence between 
that percentage and the percentage of seizures below the same level when it was the threshold.  Therefore, the 
Panel does not find that the data in the CCA Report supports the conclusion that the commercial operations of 
infringers are related to the levels of the thresholds.  See United States' first written submission, paras 151-161.  
The further data was provided by the United States in response to Question No. 1 posed by China.   
595 United States' first written submission, para. 157;  rebuttal submission, paras 93-97.   
596 The United States alleged in response to an unrelated question that if a person engaged in legitimate 
commercial activities is also engaged in infringing activities, the existence of the legitimate commercial 
platform to support the infringing activities would be a pertinent consideration in assessing whether the 
infringing activities are "on a commercial scale":  see United States' response to Question No. 62.   However, 
the Panel notes that the phrase "on a commercial scale" qualifies the terms "trademark counterfeiting or 
copyright piracy" and a legitimate commercial platform does not fall within the scope of either of those terms. 
597 China Economic Census Yearbook 2004, edited by the Executive Office of the First National 
Economic Census Leading Group of the State Council, published in Chinese and English by the China Statistics 
Press.  Extracts from the Volume of Secondary Industry (Section One) and the Volume of Synthesis, including 
interpretation of main indicators and rules on classification, are reproduced in Exhibit CHN-79. 
598 See China's response to Question No. 17. 


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statistics show that the illegal business operation volume threshold of ¥50,000 for counterfeiting one 
registered trademark is equivalent to 22.56 per cent of the average annual revenue of Individual 
Operation Households and 29.44 per cent of the average annual revenue of Individual Operation 
Households engaged in retail.599 
7.626 The Panel notes that these calculations are percentages of an average and may be relevant to 
establishing what is a typical or usual level of commercial activity in a general sense.  However, the 
statistics are highly aggregated and do not refer to any particular products, according to which the 
benchmark of "a commercial scale" necessarily varies.  Moreover, the statistics regarding individual 
operation households engaged in retail do not address the basic question of whether retail sales by 
individual operation households are typical or usual in China.  Therefore, the Panel does not consider 
that these statistics are sufficient for it to form a view as to whether the illegal business operation 
volume thresholds capture all trademark counterfeiting or copyright piracy on a commercial scale in 
China. 
7.627 The United States also submitted other press articles to illustrate points in its first written 
submission, particularly regarding the calculation of certain thresholds.  China objected at the outset 
arguing that "[t]he Panel can afford little or no weight to such anecdotal and potentially misinformed 
reports".600  The United States was puzzled by China's concern at its recourse to newspapers or other 
media.  It recalled its prior attempts to obtain information from China pursuant to Article 63.3 of the 
TRIPS Agreement.  China had declined to provide information and stated instead that its competent 
domestic IPR authorities had also made relevant information publicly available through their official 
websites, newspapers, magazines and other proper channels.  The United States added that the 
information in newspapers and magazines is "drawn from a variety of well-established and well-
regarded sources".601 
7.628 The Panel has reviewed the press articles and notes that none of them are corroborated, nor do 
they refer to events or statements that would not require corroboration.  Whilst the publications are 
reputable, most of these particular articles are brief and are quoted either for general statements or 
random pieces of information.  Most are anecdotal in tone, some repeating casual remarks about 
prices of fake goods, anonymous statements or speculation.  They have titles including "Fake Pens 
Write Their Own Ticket",  "Chasing copycats in a tiger economy", "Hollywood takes on fake Chinese 
DVDs", "Film not out yet on DVD?  You can find it in China" and "Inside China's teeming world of 
fake goods".602  Most of the press articles are printed in US or other foreign English-language media 
that are not claimed to be authoritative sources of information on prices and markets in China.  There 
are four press articles from Chinese sources, one from Xinhua News Agency and three from the 
English-language China Daily. Two are quoted simply to demonstrate the existence of certain goods 
in China603; another quotes a vague statement from unnamed "market insiders" on how illegal 
publishers tend to work604; and the other quotes an "insider" for the maximum and minimum prices of 
a range of pirated and genuine goods.605  One other alleged "recent news account" is not attributed to 
any source at all.606   
7.629 The Panel emphasizes that, in the absence of more reliable and relevant data, it has reviewed 
the evidence in the press articles with respect to a central point in this claim that is highly contested.  
                                                   
599 Ibid. 
600 China first written submission, para. 45. 
601 United States' rebuttal submission, para. 98 and fn. 102. 
602 Exhibits US-24, US-30, US-31, US-33, US-34, US-37.  
603 A Xinhua News Agency article refers to goods with high turnover and relatively low cost, in Exhibit 
US-26, and a China Daily article refers to the existence of HDVDs, in Exhibit US-39. 
604 Exhibit US-38. 
605 Exhibit US-32. 
606 United States' first written submission, para. 136, citing the price of a Spider Man 3 DVD. 


 
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The credibility and weight of that evidence are therefore critical to the Panel's task.  For the reasons 
set out above, the Panel does not ascribe any weight to the evidence in the press articles and finds that, 
even if it did, the information that these press articles contain is inadequate to demonstrate what is 
typical or usual in China for the purposes of the relevant treaty obligation.607  
7.630 There is no indication that probative evidence on this point would be difficult to obtain.  
Indeed, it can be noted that more specific information on prices and markets in China is contained in 
various US exhibits, notably information on prices of products in a report on Cinema and Home 
Entertainment in China prepared by Screen Digest and Nielsen NRG608 (submitted in support of the 
claim regarding the Copyright Law) and in annexes to a letter from Nintendo of America to the 
United States Trade Representative.609  The United States did not refer to this evidence in its 
submissions.  Further, in response to a question from the Panel, the United States had no apparent 
difficulty in providing a translation of a Chinese judicial decision that had been mentioned in one of 
the press articles.610   
7.631 The information in the exhibits would not necessarily have been sufficient and, even if it were, 
it would not be appropriate for the Panel to trawl them for evidence to which the United States did not 
refer to make the United States' case for it.  As the Appellate Body Report in US – Gambling states: 
"A prima facie case must be based on 'evidence  and  legal argument' put forward by 
the complaining party in relation to  each  of the elements of the claim.  A 
complaining party may not simply submit evidence and expect the panel to divine 
from it a claim of WTO-inconsistency.  Nor may a complaining party simply allege 
facts without relating them to its legal arguments."611 
7.632 For the above reasons, the Panel finds that the United States has not made a prima facie case 
with respect to the first limb of its claim under the first sentence of Article 61 of the TRIPS 
Agreement.  The Panel will now turn to the second limb of the claim. 
(x) 
Other indicia – physical evidence 
7.633 With respect to the second limb of this claim, the United States alleges that China's value and 
volume thresholds are tied to finished goods and therefore ignore other indicia of commercial scale 
operations, such as the presence of unfinished products and fake packaging.612   The Panel will assess 
whether these other indicia can be taken into account by China's thresholds and, to the extent that they 
                                                   
607 The Panel's approach is consistent with the approach of other international tribunals, notably the 
International Court of Justice: see Rosenne, S., The Law and Practice of the International Court 1920 – 2005, 
(M. Nijhoff, 2006), Volume III at para. 257, and Highet, K., "Evidence and Proof of Facts", in Damrosch, L., 
The International Court of Justice at a Crossroads, (Transnational, 1987) cited in the Panel Report in Australia 
– Automotive Leather II at para. 9.65, fn. 210.  The Panel's approach in the present dispute is also consistent 
with the approach in the Arbitrator's Award in EC – The ACP-EC Partnership Agreement II, at paras 57-58.  
Whilst the Appellate Body Report in Brazil – Retreaded Tyres referred to a newspaper article in a footnote, it 
did so after referencing two substantial reports on point, and the point was not central to the findings in that 
dispute: see Appellate Body Report, para. 207, fn. 393, citing the Panel Report, para. 7.201, fn. 1358. 
608 United States' first written submission, para. 200, citing Exhibit US-49. 
609 United States' first written submission, paras 146 and 153, citing Exhibit US-36. 
610 Exhibit US-61 referred to in the United States' first written submission, para. 120 and a newspaper 
article in Exhibit US-25.  
611 Appellate Body Report in US – Gambling, para. 140 (footnotes omitted). 
612 United States' first written submission, paras 113 and 143 to 147. 


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cannot, whether the term wilful trademark counterfeiting or copyright piracy "on a commercial scale" 
requires China to take these other indicia into account.613   
7.634 This argument is premised on an assertion that China's criminal thresholds "focus[] solely on 
business volume, copy, and profit thresholds that can only be met by counting finished goods".614  It is 
not clear why the United States considers that thresholds expressed in these terms are tied exclusively 
to finished goods.  Its concern may relate to the definition of "illegal business operation volume" in 
Article 12(1) of Judicial Interpretation No. 19 [2004]615 and to the use of the term 张 (份) in one 
threshold616 but this is not explained.  It is not clear how its concern relates to "illegal gains".617  In 
sum, the United States does not sufficiently relate its assertion to the measures at issue. 
7.635 Further, the United States has challenged China's criminal thresholds as established by the 
Criminal Law, "in particular" certain Articles establishing the substantive crimes of infringing 
intellectual property rights and relevant Judicial Interpretations.618  However, the United States has 
not properly addressed any other provisions of the Criminal Law, such as the general provisions, that 
could have a bearing on questions of evidence.  Having cast the entire Criminal Law as a relevant 
measure, it is incumbent on the United States to explain how the thresholds established by that Law 
operate.  A complainant cannot avoid the burden of proof with respect to other apparently relevant 
provisions of the Law at issue, particularly when it identified that whole Law in its request for 
establishment of a panel, simply by neglecting to address those provisions, leaving it to the respondent 
to assert their relevance.  
7.636 Instead, the United States provided a copy of Articles 1 to 12 of the Criminal Law, without 
comment, and responded only briefly to the arguments of the respondent on the offences of 
preparation for a crime and attempted crime established by Articles 22 and 23 of the Criminal Law.  
When asked whether Articles 22 and 23 of the Criminal Law permit courts to take into account other 
physical evidence, such as unfinished products and packaging (which the United States asserts that 
they cannot), the United States stated as follows: 
"The United States is not aware of the extent to which the offenses of preparation and 
attempt permit courts to convict an offender based on physical evidence other than 
the infringing products themselves, such as unfinished products and packaging, for 
the purpose of meeting the thresholds."619 
7.637 The Panel recalls its findings at paragraphs 7.434 to 7.437 above regarding the offences of 
preparation for a crime and attempted crime established by Articles 22 and 23 of the Criminal Law.  
The United States does not dispute that these general provisions apply to the substantive crimes of 
infringing intellectual property rights, and acknowledges that certain courts (whose decisions were 
submitted by China) have applied them accordingly.620  Therefore, the United States does not 
sufficiently explain the operation of the measures at issue to support its assertion. 
7.638 To the extent that the crimes of preparation for a crime and attempted crime provide for 
criminal prosecution and sanctions, it is not dispositive of the issue whether they may be taken into 
account in relation to the crimes set out in Articles 213, 214, 215, 217 and 218 of the Criminal Law.  
                                                   
613 See paragraph 7.496 above. 
614 United States' first written submission, para. 143.  The same submission also referred to China's 
reliance on "value and volume" thresholds tied to finished goods:  see para. 113. 
615 See paragraph 7.401 above. 
616 See paragraph 7.411 above. 
617 United States' first written submission, para. 143, cf. para. 144. 
618 See the request for establishment of a panel, attached as Annex D-1 to this report. 
619 United States' response to Question No. 8. 
620 United States' rebuttal submission, para. 91. 


 
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China's obligation under the first sentence of Article 61 is to provide for criminal procedures and 
penalties to be applied.  That obligation is indifferent as to the means by which China provides for 
such procedures and penalties to be applied, whether by means of substantive crimes only or by 
means of accessorial liability in some cases. 
7.639 The United States cited in support of its concerns regarding physical evidence data collected 
by Nintendo of America in an anti-counterfeiting campaign in China.  The data shows that some 
seizures of infringing products included product components, packaging and materials and 
implements.621  
7.640 The Panel notes that the Nintendo data does not show whether China provides for criminal 
procedures and penalties to be applied to cases where the authorities find only product components, 
packaging and materials and implements, nor does the United States sufficiently relate the seizure 
data to that issue. 
7.641 The Panel notes that Nintendo emphasized its concerns regarding product components, 
packaging and materials and implements through a discussion of three criminal cases.  China 
submitted the judgement of a court in one of these cases.622  The judgement shows that the court did 
take into account both finished and semi-finished infringing products in its evaluation of the 
substantive crime under Article 213 of the Criminal Law.  That case was decided before the entry into 
force of Judicial Interpretation No. 19 [2004], but it is not clear if the interpretation of the thresholds 
in that Judicial Interpretation was the reason why the authorities in the two later cases did not 
(allegedly) take unfinished products into account.   
7.642 The United States argues that the court should have taken into account unfinished products 
that do not in fact infringe, and materials and implements.623  However, given that the court did take 
account of all products that were trademark-infringing, and not simply finished products, it is not clear 
why or if the United States considers that the possession of non-infringing items should have been 
sufficient for conviction of an intellectual property crime. 
7.643 China submits another judgement that, in its view, shows that a court took into account 
unfinished components in its evaluation of a substantive crime under Article 213.  The court also 
considered machines and scales as evidence that the components were to be used to produce 
counterfeit products.624   
7.644 The United States dismisses this judgement, arguing that the reasoning is confused and that 
the case is an "outlier".625  However, the United States does not deny that the court took the unfinished 
components into account and, given that it has provided no information on judicial decisions on point, 
it is unable to substantiate its assertion that the case is in any way exceptional.  The United States does 
point out that one other judicial decision submitted by China shows that a court did not count semi-
finished products, packaging and tools626, which the Panel has noted. 
                                                   
621 United States' first written submission, para. 146, citing Nintendo data in Exhibit US-36. 
622 Exhibit CHN-16. 
623 United States' rebuttal submission, para. 92. 
624 Exhibit CHN-15, to which China referred in its rebuttal submission, para. 32. 
625 United States' rebuttal submission, para. 92. 
626 Exhibit CHN-9, to which the United States referred in its rebuttal submission, para. 93. The case 
concerns the order, manufacture and sale of several thousand units of counterfeit alcoholic beverages over the 
course of six months.  At the time of arrest, 1,480 units of manufactured counterfeit alcoholic beverage and 
more than 4,000 bottles of semi-finished beverage were seized, with a large amount of packaging materials and 
tools for manufacturing counterfeit products.  The judicial decision makes no mention of the semi-finished 


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7.645 China submits that the inchoate crimes of preparation of a crime, and attempted crime, apply 
to all substantive crimes in Part Two of the Criminal Law, including the crimes of infringing 
intellectual property rights.  China argues that these inchoate crimes allow courts to take into account 
unsold goods, with respect to crimes of selling, and unfinished products, with respect to crimes of 
production.627 
7.646 The Panel recalls its findings at paragraphs 7.436 and 7.437 above regarding the construction 
of the measures at issue.  These are confirmed by the judicial decisions submitted in evidence 
showing courts applying either or both of the general provisions in Articles 22 and 23 of the Criminal 
Law to various crimes of infringing intellectual property rights.628  Specifically, one of the courts gave 
its reason for applying Article 23 and, hence, sentencing the infringer to a lesser penalty, which was 
that the infringer had not finished production at the time he was apprehended.629   
7.647 The United States submits that Articles 22 and 23 of the Criminal Law do not apply to 
evidence of completed crimes, such as "worn moulds" for pressing pirated products or counterfeit 
marks or other materials and implements of such an operation.630 
7.648 China replies that its authorities consider materials and implements and other reliable indicia 
in determining criminal infringement, and would consider as relevant evidence a "worn mould" that 
showed with reasonable certainty that it had produced sufficient number of items to cross the criminal 
threshold.  China refers to a judicial decision in which the court considered the presence of materials 
and implements.631   
7.649 The Panel notes that in the case referred to by China the court took into account packaging 
and tools as evidence of the intended use of product components seized on site, so that the value of 
the product components was included in the assessment of illegal business operation volume.  The 
tools, though relevant, did not substitute for the thresholds. 
7.650 In any event, the Panel considers that the United States' allegation regarding physical 
evidence relates to the evidence sufficient to initiate a criminal prosecution more than to the definition 
of the crime itself.  Article 61 of the TRIPS Agreement does not address evidence.  The first sentence 
of Article 61 addresses the infringing activity in respect of which the minimum standards must apply.  
Evidence, including in criminal procedures, is mentioned in Article 41.3, but that provision has no 
bearing on this claim.   
7.651 Section 5 of Part III of the TRIPS Agreement, on criminal procedures, can be contrasted with 
Section 2, on civil and administrative procedures and remedies, which makes mention of evidence in 
Article 42 and contains a dedicated provision addressing certain specific issues regarding evidence in 
Article 43.  Even Article 43 does not address the detailed issue of sufficiency of evidence.  Rather, 
Section 2 leaves such questions to the judicial authorities who weigh that issue in the exercise of their 
authority to order the remedies set out in Articles 44 to 46.  Given the brevity of Section 5, which 
devotes two sentences to acts of infringement and two sentences to remedies (or penalties), it would 
be surprising if it was intended to create a broader obligation addressing issues of evidence and 
procedure.  The terms used in Article 61 do not suggest that it was so intended.  The different 
                                                                                                                                                              
products, packaging materials or tools in the calculation of the thresholds of illegal business operation volume 
for the purposes of conviction under Article 213 of the Criminal Law. 
627 China's rebuttal submission, paras 39-41, referring to Exhibits CHN-12, CHN-14, CHN-175. 
628 Exhibits CHN-12, CHN-14 and CHN-175. 
629 Exhibit CHN-175. 
630 United States' rebuttal submission, para. 85. 
631 China's rebuttal submission, para. 32, referring to Exhibit CHN-15. 


 
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phrasing of the obligation to "provide … to be applied" in the first sentence does not have a bearing 
on this issue.   
7.652 For all of the above reasons, the Panel does not consider that the United States has made a 
prima facie case with respect to other indicia of infringement, such as physical evidence including 
product components, packaging and materials or implements. 
(xi) 
Other indicia – impact on the commercial marketplace  
7.653 With respect to the second limb of this claim, the United States also alleges that China's 
thresholds are tied to finished goods and therefore ignore other indicia of commercial scale operations, 
such as the impact that the piracy or counterfeiting has on the commercial marketplace and by 
extension, right holders.632  The Panel will assess whether impact on the commercial marketplace can 
be taken into account by China's thresholds and then whether the term wilful trademark counterfeiting 
or copyright piracy "on a commercial scale" requires China to take into account impact on the 
commercial marketplace.633   
7.654 The United States raises a concern in support of this argument related to the Internet and 
digital technological advancements that can permit commercial piracy and counterfeiting that creates 
major damage to a market.634  The United States mentions the example of HDVDs (high-definition 
digital video discs) that can hold up to ten episodes of a TV series or several films.635   
7.655 The Panel notes that the United States has not attempted to substantiate its assertion regarding 
HDVDs.  This example appears to be based on the view that the term 张 (份) in the thresholds 
("copies" for the sake of simplicity) refers only to physical discs and cannot be applied in any other 
way in a novel situation.  There is no evidence on the record indicating that the thresholds have ever 
been applied to HDVDs, so this example is merely speculation based on the indirect reference to flat 
objects in the word 张and to copies in the word 份.636  This example can be compared to an assertion 
that a copyright law does not provide protection to computer programs simply on the basis that the 
legislation refers to the term "literary and artistic works" and computer programs are not obviously 
literary or artistic.  Some evidence is required that the authorities could not or would not apply that 
measure in the appropriate manner to new technology.637  The Panel notes China's assertion that, at 
such time as this issue arises for consideration, its authorities can apply the threshold in terms of the 
number of films or episodes on each disc.638    
7.656 More generally, the argument with respect to new technology appears to be premised on the 
view that a determination of whether trademark counterfeiting or copyright piracy is "on a 
commercial scale" must be able to take into account the impact of piracy or counterfeiting on right 
holders.  However, the Panel recalls its findings at paragraph 7.577 above regarding the interpretation 
of the term "on a commercial scale".  Read in context, that term refers to "wilful trademark 
counterfeiting or copyright piracy", which are acts of infringement.  The benchmark of a typical or 
usual commercial activity is relevant to the assessment of whether counterfeiting or piracy is covered 
                                                   
632 United States' first written submission, paras 143 and 148 to 149;  rebuttal submission, para. 112. 
633 See paragraph 7.496 above. 
634 United States' first written submission, para. 149; rebuttal submission, para. 112. 
635 The United States refers to a China Daily article reproduced in Exhibit US-39. 
636 See note 387 above. 
637 The Panel notes that, in this regard, the parties did not refer to subparagraph (17) of the first 
paragraph of Article 10 of the Copyright Law which provides for other rights for a copyright owner due to new 
technology.  The United States' first written submission, para. 64, referred to this in relation to the Copyright 
Law.   
638 China's rebuttal submission, para. 25;  response to Question No. 6. 


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by Article 61.  The impact is neither part of the act of infringement nor the benchmark of "on a 
commercial scale".  Therefore, it does not appear to be a relevant consideration.   
7.657 The Panel emphasizes that the terms used in the first sentence of Article 61, in particular 
"commercial", are technology-neutral.  A "commercial scale" can apply to various forms of commerce 
and, hence, various means of infringement.  The specific forms of commerce are not static but adapt 
to changing forms of competition due to technological development and the evolution of marketing 
practices.639  The Panel sees no reason why those forms of commerce should be limited to the forms 
of commerce that existed at the time of negotiation of the TRIPS Agreement.  Accordingly, the 
application of the term "commercial scale" can adjust to different situations, and refer to a different 
relative magnitude or extent, degree or proportion, depending on the facts.640  However, subsequent 
technological developments do not alter the considerations relevant to the interpretation of the terms 
used in Article 61.      
7.658 The United States also mentions an example of a "high-value niche market item" such as a 
specialized software application.  This example refers to a Seattle Times newspaper article titled 
"Inside China's teeming world of fake goods".641  The Panel accepts that the market for certain 
products may be small, but considers that a single, anecdotal newspaper article is insufficient 
evidence to demonstrate what is a commercial scale for such a product.  To the extent that this article 
concerns the impact on the right holder, it has been addressed in the second limb of the claim.   
7.659 The Panel observes a link between this argument and the issue of large-scale infringement 
with no commercial purpose.  The United States originally submitted that the term "commercial scale" 
included the following: 
"Thus, the concept of 'commercial scale' extends … to those whose actions, 
regardless of motive or purpose, are of a sufficient extent or magnitude to qualify as 
'commercial scale' in the relevant market."642    
7.660 The United States indicated that this was not the focus of its submission, and confirmed that 
in this dispute it does not challenge the thresholds on the basis that they require a "profit-making 
purpose".643  In response to a question from the Panel, the United States confirmed that its own 
Copyright Law was only amended in 1997 to deal with the problem of massive infringement, such as 
via the Internet, even if the infringing activity is not necessarily pursued for financial gain.644   
7.661 For all the above reasons, the Panel does not consider that the United States has made a 
prima facie case with respect to impact on the commercial marketplace. 
7.662 The Panel wishes to emphasize that its findings should not be taken to indicate any view as to 
whether the obligation in the first sentence of Article 61 of the TRIPS Agreement applies to acts of 
counterfeiting and piracy committed without any purpose of financial gain. 
                                                   
639 See also the Panel Reports in Canada – Pharmaceutical Patents (at para. 7.55) and US – 
Section 110(5 Copyright Act (at para. 6.187) with respect to the phrase "normal exploitation" in Articles 30 and 
13 of the TRIPS Agreement, respectively. 
640 The United States' concern regarding the volume of distribution by means of digital technology and 
the Internet is therefore relevant to the assessment of a "commercial scale": see United States' rebuttal 
submission, para. 112.   
641 United States' first written submission, para. 148, referring to Exhibit US-37. 
642 United States' first written submission, para. 110. 
643 United States' first written submission, paras 110 and 133, fn. 96;  response to Question No. 59.  See 
paragraphs 7.449 to 7.450 above, showing that Articles 213, 214, 217 and 218 of China's Criminal Law take 
account of a profit-making purpose. 
644 United States' response to Question No. 67. 


 
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(xii) 
Miscellaneous factors 
7.663 The United States asserted that the breadth of the term "on a commercial scale" presumes that 
a wide range of considerations should be probative of "commercial scale".645  However, it did not 
submit argument in support of any other considerations besides those discussed above. 
7.664 The Panel recalls its finding at paragraph 7.602 above that, if it is alleged that a Member's 
method of implementation does not provide for criminal procedures and penalties to be applied in 
cases in accordance with the first sentence of Article 61 of the TRIPS Agreement, that allegation must 
be proven with evidence.   
7.665 The United States briefly mentioned various factors and examples, most raised by third 
parties, and apparently considers that these may be relevant to a determination of a "commercial 
scale".646  It gave the example of "the manufacture of prototypes to test the infringer's production 
equipment"647 but did not explain why this would not attract criminal liability under the Criminal Law, 
including its general provisions, or why it would constitute trademark counterfeiting or copyright 
piracy.  It did not explain why "marketing and soliciting of business" would not attract criminal 
liability under the Criminal Law, including its general provisions, or why it would constitute 
trademark counterfeiting or copyright piracy.  It did not explain why a "previous history of 
infringement" could not be covered by the threshold of "other serious circumstances".   
7.666 Further, Japan, supported by the European Communities, and with whom the United States 
agreed, referred to a possible "organizational element" that can be taken into account in determining a 
commercial scale. 648  The Panel notes that Japan included this factor in its interpretation of 
"commercial scale" on the basis of a definition of "commerce" as a countable noun in French and 
Spanish that means, basically, a shop.  However, the English language does not include the word "a 
commerce" in that sense.  As the English version of the TRIPS Agreement is equally authentic649, the 
Panel does not consider this aspect of Japan's interpretation correct.  Further, if a typical or usual 
commercial activity included an element of organization, in terms of cooperation with other parties, 
the United States has not explained why the general provisions of China's Criminal Law (discussed at 
paragraphs 7.439 to 7.446 above) that allow aggregation of infringing acts by different persons 
cooperating in a joint crime, are inadequate, beyond the issue of the level of the thresholds, or why the 
cumulation of infringements over time, or cumulation of infringing products on different premises 
within the definition of "illegal business operation volume" would be inadequate. 
7.667 Therefore, the United States did not relate these factors sufficiently to the measures at issue or 
to its claim to discharge its burden of proof.   
7.668 The Panel recalls its findings at paragraphs 7.652, 7.661 and 7.667 above and finds that the 
United States has not made a prima facie case with respect to the second limb of its claim under the 
first sentence of Article 61 of the TRIPS Agreement. 
(xiii) 
Conclusion with respect to the claim under the first sentence of Article 61 
7.669 In light of the Panel's findings at paragraphs 7.632 and 7.668 above, the Panel concludes that 
the United States has not established that the criminal thresholds are inconsistent with China's 
obligations under the first sentence of Article 61 of the TRIPS Agreement. 
                                                   
645 United States' first written submission, para. 113;  see also rebuttal submission, para. 38. 
646 United States' response to Question No. 16;  rebuttal submission, fn. 35 and fn. 36. 
647 United States' response to Question No. 62. 
648 See note 415 and United States' rebuttal submission, para. 38. 
649 See the final clause of the WTO Agreement. 


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4. 
Claim under the second sentence of Article 61 of the TRIPS Agreement 
(a) 
Main arguments of the parties 
7.670 The United States claims that, as China's criminal measures do not comply with the first 
sentence of Article 61 of the TRIPS Agreement, they are accordingly also inconsistent with China's 
obligations under the second sentence of that Article.  In the United States' view, China can not make 
the necessary remedies "available" or sufficient to deter piracy and counterfeiting.650 
7.671 China responds that the obligation in the second sentence of Article 61 is supplementary to, 
and contingent on, that of the first sentence of that Article.  The obligation in the second sentence is 
only triggered in the event that a Member has an obligation under the first sentence to provide 
criminal procedures and penalties.651 
(b) 
Main arguments of third parties 
7.672 Australia argues that Article 61 creates an obligation of result, namely to put in place 
penalties that are sufficient to actively discourage others from engaging in such acts. A Member must 
actively prosecute and punish such acts.  The question whether punishments are sufficient to provide 
such a deterrent is assessed in light of the circumstances in a Member's territory but it is open to 
another Member to challenge the adequacy of a Member's remedies to achieve the deterrent effect 
under the DSU.652 
7.673 Brazil notes that the second sentence of Article 61 refers not only to imprisonment but also to 
monetary fines.  In China, low-level infringement seems to be punishable at least with monetary fines 
following administrative proceedings.  It seems to be overly formalistic to assume that because a 
domestic legal system qualifies monetary fines as administrative penalties, the core substantive issue 
of the deterrence capability of the remedy should be put aside.653 
7.674 Canada submits that China's thresholds may make available administrative remedies, but they 
preclude the application of criminal penalties in cases that fall below the thresholds for criminal 
liability.  The thresholds create "safe harbours" in which professional infringers are free to carry out 
wilful trademark counterfeiting and copyright piracy without risk of imprisonment or monetary fine.  
Rather than deterring infringement, the thresholds provide infringers clear parameters for committing 
wilful trademark counterfeiting or copyright piracy with immunity.654 
(c) 
Consideration by the Panel 
7.675 The Panel observes that the United States has made this claim contingent upon the outcome of 
its claims under the first sentence of Article 61 of the TRIPS Agreement.  Additional findings 
regarding this claim under the second sentence of Article 61 would not contribute further to a positive 
solution to this dispute.  Therefore, it is unnecessary for the Panel to rule on this claim. 
                                                   
650 United States' first written submission, paras 164-166. 
651 China's first written submission, paras 144-147. 
652 Australia's third party written submission, para. 25. 
653 Brazil's third party written submission, paras 39-42. 
654 Canada's third party written submission, para. 12. 


 
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5. 
Claim under Article 41.1 of the TRIPS Agreement 
(a) 
Main arguments of the parties 
7.676 The United States claims that China has failed to make the procedures and penalties required 
by the first and second sentences of Article 61 "available" as required by Article 41.1 of the TRIPS 
Agreement.655 
7.677 China responds that the United States has failed to show that China breaches its obligations 
under Article 61 and therefore fails to show that China breaches its obligations under Article 41.1.656 
(b) 
Main arguments of third parties 
7.678 Argentina submits that China's measures do not appear to be inconsistent with Article 41.1 of 
the TRIPS Agreement.  Article 41.1 should be read in light of Article 1.1, which provides flexibility 
in implementation;  Article 41.2 which requires Members to ensure that enforcement procedures are 
fair and equitable; and Article 41.5 which renders the obligation in Article 41.1 relative, not 
absolute.657 
7.679 Canada refers to its arguments regarding the claims under Article 61.  Further, the fact that "a 
plethora of counterfeit and pirated goods continues to be produced, reproduced and distributed in 
China, and exported from China", makes it clear that China does not provide effective action against 
wilful acts of infringement on a commercial scale and does not provide remedies that deter further 
infringements, contrary to Article 41.1.658 
(c) 
Consideration by the Panel 
7.680 The Panel observes that this claim is consequent upon the outcome of the claims regarding the 
criminal measures under Article 61 of the TRIPS Agreement.  Additional findings regarding this 
claim under Article 41.1 of the TRIPS Agreement would not contribute further to a positive solution 
to this dispute.  Therefore, it is unnecessary for the Panel to rule on this claim. 
6. 
Conclusions with respect to the criminal thresholds 
7.681 The Panel recalls its conclusion at paragraph 7.669 above that the United States has not 
established that the criminal thresholds are inconsistent with China's obligations under the first 
sentence of Article 61 of the TRIPS Agreement. 
7.682 The Panel exercises judicial economy with respect to the claims under Article 41.1 of the 
TRIPS Agreement and under the second sentence of Article 61 of the TRIPS Agreement (with respect 
to the criminal thresholds).   
VIII. 
CONCLUSIONS AND RECOMMENDATION 
8.1 
For the reasons set out in this Report, the Panel concludes as follows:  
(a) 
the Copyright Law, specifically the first sentence of Article 4, is inconsistent with 
China's obligations under: 
                                                   
655 United States' first written submission, paras 167-169. 
656 China's first written submission, paras 148-150. 
657 Argentina's third party written submission, paras 30-37. 
658 Canada's third party written submission, para. 13.