(2) imposing criminal convictions. The JI's key improvements and deficiencies include the following:
- Improvements – (a) lowers the criminal thresholds; (b) applies accomplice liability to importers, exporters, landlords and others who provide assistance to infringers; (c) permits goods produced in factories and/or kept in warehouses to be included in sales calculations; (d) authorizes using the number of illegally duplicated disks or advertising revenue for Internet infringements to satisfy the "for profit" requirement; and (e) expands the statutory definition of an infringing trademark.
- Deficiencies – (a) deletes special liability provisions for repeat administrative offenders (the "three strike rule"), dealers in counterfeit products that threaten public safety, and infringers of well-known trademarks; (b) determines whether criminal thresholds are met using the price of infringing goods rather than the price of legitimate goods; (c) criminalizes copyright infringements (including online piracy) only if undertaken to make a profit; (d) fails to independently criminalize the export of infringing goods; (e) fails to criminalize the unauthorized rental, translation, public performance, broadcasting, adaptation and "bootlegging" of performances, even when done "on a commercial scale;" (f) fails to address software end-user piracy; and (g) maintains thresholds three-times higher for units than for individuals.
The issuance of the JI and many of its provisions do signal top government and judicial level willingness to commit to addressing counterfeiting and piracy problems. The United States believes, however, that the JI did not go far enough to be an effective deterrent. China's efforts to draft a JI that would "increase penalties for IPR violations by subjecting a greater range of violations to criminal investigation, by applying criminal sanctions to import and export stages, storage and distribution of infringing products, and by applying criminal sanctions to online piracy," were hampered by institutional differences and the need to accommodate competing domestic interests. Had China made drafts of the JI widely available for public comment and consulted with the United States as requested, at least some of the deficiencies noted above could have been avoided. The United States will examine closely China's implementation of the JI to determine whether its application addresses its underlying deficiencies and actually deters counterfeiting and piracy.
With regard to Internet piracy in particular, the JI provides that: "Distributing a written work, musical work, motion picture, television program or other visual work, computer software or other works to the public by information network" falls under the definition of 'reproducing and distributing' stipulated in Article 217 of the Criminal Law." While this is a positive step, service providers are still not held liable for infringing material hosted on their networks and the profit motive requirement of the copyright thresholds may seriously hinder efforts to actually impose criminal liability.
Nationwide Crackdowns and Customs Enforcement
Crackdowns: Although China's central Government has made largely satisfactory progress in bringing China's IPR laws and regulations into line with China's WTO commitments,
