In a second presidential debate on October 16th, 2012, Romney pledged to declare China as a currency manipulator on his first day in office and also accused China of producing counterfeit American products and stealing American intellectual property. The of intellectual property in China is now the most serious problem in the history of the world.
The losses from counterfeit goods are enormous. The International Anti-Counterfeiting Coalition estimated that counterfeiting is a $600 billion industry worldwide and accounts for 5% to 7% of global trade. In the last two decades, counterfeiting has increased by more than 10,000%. In the United States alone, counterfeiting costs businesses $200 billion to $250 billion annually. This continued growth of counterfeiting rates has led the federal as well as state and local governments to implement criminal sanctions for violations of intellectual property laws.
The criminalization of the intellectual property infringement has met much difficulty and opposition. Many legal scholars and policy makers have largely relied on property law to justify the criminalization of intellectual property infringement. Certainly, one may argue that infringement of intellectual property is like criminal property offenses. When assuming that intellectual property is like tangible property, the intellectual property infringement can deprive an intellectual property owner of some economic value of a good as with the property crime such as theft.
Nevertheless, there are many problems with “propertizing” intellectual property due to substantial differences between intellectual property and tangible property. Unlike tangible property, intellectual property is intangible, non-exclusive, and non-rivalry. The value of intellectual property cannot be completely depleted, whereas the value of tangible property can be completely deprived when it is stolen. More than one person can use intellectual property without degrading its use. Thus, it becomes difficult to assess the harm caused by infringement and identify the victims of the crimes.
Some legal scholars have suggested that the failure of the civil remedies as a method to deter intellectual property law violations is due the fact that public fail to recognize that the intellectual property infringement is morally wrong. They further added that criminal sanctions should not be imposed until the civil remedies are exhausted. Others object to criminal enforcement arguing that overbroad intellectual property protections tend to limit the expansion of the public domain and the right of free speech. However, the ineffective deterrence provided by civil remedies and increase in value of intellectual properties to the United States economy have supported the imposition of tougher criminal sanctions.
One legal scholar points out that the Anti-Counterfeiting Trade Agreement (ACTA) is modeled after the United States’ copyright criminal provisions. Thus, one can view that the ACTA is the United States’ effort to criminalize the intellectual property infringement internationally in light of the continued proliferation of counterfeiting and piracy. The ACTA was negotiated by the Office of the U.S. Trade Representative (USTR) between over thirty countries over the course of five years. Prior to the ACTA, the Trade-Related Aspects of Intellectual Property Rights (TRIPS agreement) provided international standards for the enforcement of intellectual property rights. The TRIPS agreement contains only one article about procedures which was criticized to be ambiguous and overbroad. Scholars contended that Article 61, the only criminal enforcement provision in TRIPS agreement, provided vague minimum standard which was “crafted as broad legal standards, rather than as narrow rule” and made “difficult for right holders to effectively enforce their rights.” Further, it was worded to give member states discretions to follow its own traditions to implement enforcements. According to some commentators, the ACTA was negotiated by developed countries that were frustrated with these ineffective aspects of the TRIPS agreement.
The ACTA, which was ultimately finalized in May 2011, expands both the scope of behavior and the available punishments. The ACTA and the TRIPS agreement both require that parties “provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting or copyright [or related rights] piracy on a commercial scale.” However, the ACTA goes a step further than the TRIPS agreement by providing some definition of “commercial scale” which was the focal point of the US-China dispute in 2009. The United States argued that China had failed to comply with the TRIPS agreement by including in its laws high thresholds for applying criminal procedures and penalties to intellectual property infringement. Thus, in the ACTA unlike the TRIPS agreement, “commercial scale” is clearly defined as “acts carried out on a commercial scale include at least those carried out as commercial activities for direct or indirect economic or commercial advantage.”
One blogger jokingly questions whether the acronym ACTA stands for “Anti-China Trade Alliance.” China’s exclusion from the ACTA’s negotiating and drafting supports that the acronym is not baseless. Many argue that the ACTA’s drafters intentionally excluded China in the hope of pressuring them to comply with the agreement. As of October 31, 2012, China, however, has not signed to be a party to the ACTA. Considering that China is the biggest producer of the world’s counterfeit goods, critics point out that the ACTA is worthless without China. Besides that fact, there are several other reasons why many believe greater criminal enforcement is necessary in China. First of all, due to the considerably low penalties handed down by Chinese courts, foreign intellectual property holders in China are reluctant to go into litigation. Further, several right holders believe that tougher criminal sanctions would deter piracy and counterfeiting.
China, however, argues that it has the unique enforcement system that is different from western systems. China enforces the intellectual property laws through both administrative and judicial proceedings. Judicial proceedings have found to be ineffective due to several reasons: corruption of judicial officials, lack of precedents, and the slow and expensive process. These weaknesses made intellectual property holders turn to administrative proceedings instead. In fact, administrative proceedings are found to be “more effective under certain circumstances” and also “cheaper, quicker, more flexible, and less antagonistic.” This led one commentator to state that “even if China were to become a signatory to the treaty, IP theft in China would likely continue as usual. . . [and] any positive changes in the enforcement of IP rights in China will come about through internal means, and not through the imposition of a stringent treaty by China’s more economically developed neighbors.”
Certainly, there is no merit for China to join the ACTA as a party. Then, when China, the world’s biggest producer of counterfeit goods, is not a party to the ACTA, why is the ACTA still significant? When the TRIPS agreement introduced the criminal sanctions of intellectual property infringement for the first time in the international agreement, the ACTA laid out more comprehensive rules than TRIPS. Other international intellectual property agreements in the future are more likely to include criminal enforcement provisions like the ones in the ACTA. Thus, the ACTA signifies that criminal enforcement is accepted as an international norm. In the future, even if China does not join the ACTA, China’s trade partners will likely be influenced by the international standards requiring the criminalization of the intellectual property infringements.
Min Ji Ku
Blogger, Criminal Law Brief
Photo by: caitlinburke