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.[1] The counterfeiting of intellectual property in China is
now the most serious counterfeiting 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.[2] In the last two decades, counterfeiting
has increased by more than 10,000%.[3] In the United States alone,
counterfeiting costs businesses $200 billion to $250 billion annually.[4] 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.[5] 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.[6] 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.[7] 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 criminal 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.”[8] Further, it was worded to give
member states discretions to follow its own traditions to implement
enforcements.[9] According to
some commentators, the ACTA was negotiated by developed countries that were
frustrated with these ineffective aspects of the TRIPS agreement.[10]
The
ACTA, which was ultimately finalized in May 2011, expands both the scope of criminalized 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.”[11] 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.[12] 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.[13] Further, several right holders believe
that tougher criminal sanctions would deter piracy and counterfeiting.[14]
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.”[15] 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.”[16]
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
Great article! The sale of counterfeit goods not only costs the U.S. economy billions, but the profits have been traced to funding illegal activities abroad. It is a cost effective way for individuals as well as organized crime groups to raise funds at relatively little cost.
ReplyDelete