Office of the United StateS trade repreSentative

April 2015

 

 

        China remains on the Priority Watch List and subject to Section 306 monitoring in 2015.   

        China’s leadership has acknowledged the critical role that IPR plays in spurring innovation and the need to improve China’s protection and enforcement of IPR.  Consistent with China’s policy objectives, the country’s judicial, legislative, administrative, and enforcement authorities continue to pursue wide-ranging legal reform efforts relating to the protection and enforcement of IPR in China.  Individual rights holders report a greater ability to obtain relief, including temporary injunctive relief, against infringers in civil court actions.  The United States also notes increased cooperation between U.S. and Chinese law enforcement agencies in an effort to stem cross-border flows of infringing products.  The United States looks forward to strengthened cooperation, building on the increasing and positive cooperation between U.S. customs and investigative agencies and their Chinese counterparts, including the General Administration of China Customs (GACC) and the Ministry of Public Security (MPS).   

        Notwithstanding the generally positive effects of these reform efforts, several recent measures relating to ICT products, services, and technologies, have caused sharply adverse impacts on U.S. companies and raise serious concerns.  Although one of the measures is in draft form and the other was recently suspended, the measures would impose certain trade-restrictive IPR-, R&D-, and encryption-related requirements on ICT products, services and technologies used in certain sectors of China’s economy. The United States welcomes the recent suspension, but underscores that it is critical that China reconsider its approach to certain ICT issues and engage closely with governments and industry as it does so.   Independent of the new measures, a wide range of U.S. stakeholders in China continues to report serious obstacles to effective protection of IPR in all forms, including patents, copyrights, trademarks, trade secrets, and protection of pharmaceutical test data.  As a result, sales of IPRintensive goods and services in China remain disproportionately low when compared to sales in similar, or even less developed, markets that provide a stronger environment for IPR protection and market access.  Despite laudable policy objectives and a welcome ongoing reform effort, foreign rights holders in China continue to face a complex and challenging IPR environment. Given the size of China’s consumer marketplace and its global importance as a producer of a broad range of products, China’s protection and enforcement of IPR continues to be a focus of U.S. trade policy.    

         The theft of trade secrets remains a particular concern.  Such theft occurs inside and outside of China for the competitive advantage of Chinese state-owned and private companies.  Conditions are unlikely to improve as long as those committing such theft, and those benefitting, continue to operate with relative impunity, often taking advantage of the theft in order to compete unfairly or to enter into business relationships that disadvantage their victims.  The United States strongly urges the Chinese government to take serious steps to put an end to these activities and to deter any recurrence by rigorously investigating and prosecuting theft of trade secrets undertaken by cyber and conventional means.  

        Of longstanding concern are central, provincial, and local government measures and actions that appear to require or pressure rights holders to transfer IPR from foreign to domestic entities.  Sometimes guided by government measures or policy statements intended to promote indigenous innovation and the development of strategic industries, government authorities may condition eligibility for certain benefits (e.g., certain subsidies and tax preferences) or deny or delay access to certain markets (e.g., government procurement or the ICT market) upon IPR being owned or developed in China, or licensed to a Chinese entity.  The United States is concerned by the number of stakeholders reporting that Chinese government entities are using regulatory pressure to compel the licensing of important technologies or to dissuade the stakeholders from pursuing available legal avenues to enforce their IP.  China has made commitments to the United States on certain of these matters, and the United States continues to press China to comply with those commitments.    

 

        Legal Reform   

        The United States generally welcomes China’s ongoing legal reform efforts, despite serious reservations regarding certain recent legal changes.  Since 2012, China has undertaken revisions to, and invited comments on, draft revisions to its existing laws on civil procedure, patents, copyrights, trademarks, drug administration, and scientific and technological achievements.  In terms of procedure, effective January 1, 2013, China’s amended Civil Procedure Law includes provisions that may help U.S. rights holders to obtain preliminary measures and other actions to enforce their rights in civil court actions.  In early 2015, China’s Supreme People’s Court (SPC) invited comment on draft judicial Interpretations of the Supreme People’s Court on Issues Related to the Application of Laws in Reviewing Act Preservation Cases of Disputes over Intellectual Property Right and Competition, which would provide additional guidance relative to provisions of the Civil Procedure Law.  In addition to procedural reforms, on May 1, 2014, a revised Trademark Law and implementing regulations went into effect.  China’s State Council Legislative Affairs Office (SCLAO) is also reviewing and considering draft amendments to the Patent Law and Copyright Law.  Very recent draft amendments to the Patent Law appear not to address concerns identified by the United States and industry, and the amendments may introduce new provisions of substantial additional concern.  The United States welcomes the opportunity to comment and engage with China on this important subject matter before the law takes final form.  The United States believes that copyright reform in China is an urgent matter, but cautions that SCLAO must take the time to study carefully international developments and copyright industry practices to ensure that the new law provides adequate and effective protection and enforcement, including with respect to online piracy.  A careful revision of the Copyright Law aligned with international best practices would put China on a stronger footing for the economic growth of its domestic cultural industries.    

        In particular, the United States and China share the goal of increased sales of legitimate copyright goods in China.  From the view of the United States, the best way to achieve growth in sales of legitimate Chinese works is to ensure that authors and copyright owners, both Chinese and foreign, can license their rights in a manner consistent with international copyright industry business practices and can effectively enforce their rights.  The United States believes that the deterrence provided by strong criminal remedies is essential to supporting an environment where rights holders can earn adequate revenue from their creations.  To this end, the United States also welcomes the planned revision of the Criminal Code and encourages China to strengthen the provisions criminalizing commercial-scale piracy.  Efforts to amendment of the Anti-Unfair Competition Law (AUCL), unrevised since first entering into force in 1993, are proceeding at a slower pace.  While applauding China’s consideration of U.S. Government and private sector perspectives and experiences, the United States notes the need to move forward expeditiously with remaining revisions to China’s IPR-related laws.  The United States underscores the urgent need to update and amend the AUCL and related trade secret laws, regulations, and judicial interpretations.  China is currently conducting a legislative study on a revised law on trade secrets.  

        In 2013 and 2014, China invited comment on various judicial interpretations, regulations, and departmental rules on a range of subjects including the remuneration of inventors, administrative and judicial enforcement of patents, and other matters that impact Chinese market access for U.S. entities that rely upon IPR protection, such as provisions involving the administration of online foreign films and television dramas.  The United States applauds China’s openness to receiving comments and looks forward to continued engagement as future drafts are developed and evaluated, and as drafts move through the SCLAO and the National People’s Congress, as required.  Additional legal reforms require action, including amending the Criminal Law and other relevant measures to correct continuing deficiencies in China’s criminal IPR enforcement.    

 

        In late 2014, China set in motion a three-year pilot program to study the merits of specialized intellectual property courts, currently including courts in Beijing, Shanghai, and Guangzhou.  

        Designated as intermediate courts in China’s judicial system, the intellectual property courts will have original jurisdiction over civil “technical cases,” or those involving patents, new plant varieties, integrated circuit layout designs, technical know-how, and computer software, as well as over determinations as to well-known trademarks.  These courts will also hear appeals of administrative IPR decisions handed down by government authorities on IPR and unfair competition matters.  The Beijing intellectual property court will have jurisdiction to hear appeals of patent and trademark validity determinations issued by the Patent Reexamination Board and Trademark Review and Adjudication Board.  The new courts will likely provide a venue with greater IPR expertise and experience, but the success of the courts will be judged in large part by their impartial consideration of the facts and law, and their efficient operation.    

 

        Following the completion of China’s 2010-2011 Special IPR Campaign, the State Council established a permanent office of the national leading group on combating IPR infringement (Leading Group) to better coordinate and improve China’s efforts to combat IPR infringement and the manufacture and sale of counterfeit and substandard goods.  In 2014, the Leading Group continued to coordinate enforcement actions and undertake special campaigns, including concerning online markets and cross-border infringement cases.  The United States encourages China to continue to work with foreign governments and rights holders to share information and demonstrate the constructive role the Leading Group can play to improve the protection and enforcement of IPR.   

 

        Recent Chinese measures risk creating troubling barriers to the sale of ICT products, services, and technologies by non-Chinese firms.  China’s counterterror law, still in draft form, would appear to require telecommunications business operators and Internet service providers to, among other things, disclose critical proprietary intellectual property to regulators.  Of more immediate impact are the efforts to govern the use of ICT products, services, and technologies by financial institutions operating in China.  On December 26, 2014, China issued the Circular of the General Offices of China Banking Regulatory Commission (CBRC) and Ministry of Industry and Information Technology (MIIT) on Printing and Distributing the Guidelines for Promoting the Application of Secure and Controllable Information Technology in Banking Sector along with the Guidelines for Promoting the Application of Secure and Controllable Information Technology in Banking Sector, with an accompanying annexing classification catalogue.  This measure was a follow-up to the September 3, 2014, Guidelines for Applying Secure and Controllable Information Technology to Enhance Banking Industry Cybersecurity and Informatization Development (referred to collectively as the “ICT rules for banks”), issued by CBRC, MIIT, the National Development and Reform Commission, and the Ministry of Science and Technology.  The ICT rules for banks were not published in advance for public comment and were not published in their entirety in final form.  These rules would regulate the use of ICT products, services, and technologies by financial institutions operating in China by requiring that an increasing percentage of these products, services and technologies be purchased from suppliers whose IPR is indigenously Chinese.  In addition, the rules would require foreign firms to conduct ICT-related R&D in China and to divulge proprietary intellectual property as a condition for the sale of ICT products in China.  On April 13, 2015, China issued an official notice to its banking sector, including to Chinese and foreign-owned banks, suspending its September 2014 ICT rules for banks.  The United States welcomes this suspension and looks forward to receiving reports that conditions for U.S. ICT firms and market practices have returned to normal.  The United States calls on China to engage with the United States and other governments and industry as it develops ICT policies in line with its international commitments and consistent with global standards and industry best practices.  In discussions to follow, it is imperative to ensure that foreign and domestic IPR is treated the same and to ensure that product choice is decided by businesses independently and not as a pre-condition for market access.  

 

        Trade secret theft is a serious and growing problem in China.  Misappropriation of a trade secret may arise in a variety of circumstances, including those involving departing employees, failed joint ventures, and cyber intrusion and hacking.                         Particularly troubling is misappropriation reportedly arising from the misuse of information submitted to government entities for purposes of complying with regulatory obligations.  The misappropriation of trade secrets and their use by a competing enterprise can have a devastating impact on a company’s business, making the company’s recourse to adequate and effective legal remedies particularly important.  

        Under Chinese law, however, available remedies are difficult to obtain, given that civil, administrative, and criminal enforcement against misappropriation of trade secrets remains severely constrained.  Enforcement obstacles include deficiencies in China’s AUCL, constraints on gathering evidence for use in litigation, difficulties in meeting the criteria for establishing that information constitutes a trade secret, and criminal penalties that are not clearly deterrent.  In addition, the AUCL’s primary application is to “commercial undertakings” and not individual actors, and requires that a trade secret have “practical applicability,” which may limit the scope of protection for early stage research.  There are other important weaknesses in China’s civil enforcement system, which relate to mechanisms for gathering evidence, and procedures for obtaining preliminary injunctions.  Without changes to address these weaknesses, some of which are not specific to IPR but relate to China’s civil process generally, effective enforcement against misappropriation of trade secrets in China will remain challenging.   

        The United States is encouraged by China’s December 2013 Joint Commission on Commerce and Trade (JCCT) commitment to undertake an Action Program, which includes concrete actions to address enforcement, enhance public awareness, and require strict legal compliance with respect to trade secrets.  The United States also welcomed China’s December 2014 JCCT commitment to protect from improper disclosure trade secrets submitted to the government in administrative or regulatory proceedings.  China also affirmed that it is conducting a legislative study of a new trade secrets law.  The United States urges China to address past weaknesses in the law and to do so expeditiously.  The United States continues to engage with China as it advances legal and regulatory reforms to better protect trade secrets.   

Software Legalization by Government Entities, Online Copyright Piracy, and Other Concerns  

Software Legalization   

        The United States continues to urge all levels of the Chinese government, as well as state-owned enterprises (SOEs), to use only legitimate, licensed copies of software.  China reported that from 2011 to 2014, software legalization was completed at government offices of all levels. In 2014, inspection teams dispatched by the Inter-Ministerial Joint Conference on Promoting Use of Authorized Software Inspections identified problems among local governments, including the continued use of unauthorized software and incomplete implementation of software asset management tools.  Despite China’s attention to the concern, U.S. software companies have seen only a modest increase in sales to government agencies, and specific information about the procedures and tools used to ascertain budget or audit information remains unavailable.   

        Software legalization efforts have extended to China’s SOE sector.  Losses by software companies due to piracy at SOEs and other enterprises remain very high.  To the extent that Chinese firms do not pay for the software that runs many of their operations, they reap a cost advantage relative to competitors who pay for legally acquired software.  The United States remains committed to working with China to continue to address these challenges.   

 

        Despite bilateral commitments to increase IPR enforcement, online piracy in China persists on a large scale.  China has the largest Internet user base in the world, estimated at around 650 million, with nearly 560 million mobile web users.  Despite national campaigns and the leadership of the Leading Group, widespread piracy affects industries involved in the distribution of legitimate music, motion pictures, books and journals, video games, and software.  For example, industry reports that in 2013, the revenues from digital music sales in China were $65.4 million, compared to potential sales of over $1.2 billion if China’s per capita spending were on par with that in Thailand, a country with a roughly equivalent per capita GDP and substantial piracy problems of its own.  Effects are also seen in the share of film revenues made up by box office receipts.  For U.S. films released in China, box office receipts make up over 90 percent of total revenues generated, compared to only 25-30 percent in the United States.  This difference is partly due to the widespread piracy of motion pictures over the Internet and on optical discs.  Reports indicate that unauthorized camcording of movies in theaters, one of the primary sources for online audiovisual infringements, remains a serious problem in China, especially in the South.  Online piracy extends to unauthorized access to, or unauthorized copies of, scientific, technical, and medical publications as well.    

        While these very substantial problems continue, a range of enforcement actions by China are welcome and could have increasingly beneficial impacts if sustained and expanded.  In 2014, China carried out the 10th “Sword-Net” campaign focused on protecting digital copyright.  Administrative authorities reportedly investigated 4,400 online piracy cases, issued substantial fines, made 66 referrals to criminal authorities, and took other actions against pirate websites.  Chinese courts and agencies entered deterrent-level penalties against a number of large major online piracy services including those offered by QVOD, Baidu, SiluHD, HDstar, DY161, and FunShion.  For instance, in June 2014, the Shenzhen Market Supervision Administration imposed a record $42 million fine against QVOD, a video streaming website, for making available pirated movies and TV shows to its subscribers.  In addition, National Copyright Administration of China (NCAC) entered administrative penalties against Yyets and Shooter.cn.  Another welcome development was China’s first criminal conviction for illegal camcording.    

        Parties in China are also facilitating online infringement, in China and third countries, through media box piracy.  Manufactured in China and exported abroad, media boxes can be preloaded with infringing content or links to content sources and plugged directly into televisions.  They enable the user to stream and download infringing online music and audiovisual content.  The vast majority of the infringing websites and apps to which media box users connect are reportedly located in China.  The United States urges China to continue efforts to improve IPR protection and enforcement in this area.   

 

        New regulations related to State Administration of Press, Publication, Radio, Film, and Television (SAPPRFT) review of foreign television content present a serious market access concern for the online distribution of imported films and television series.  Legitimate video streaming websites such as those operated by Sohu, Tencent, and others represent an important gateway for U.S. and other foreign television content providers to reach consumers in China.  The new regulations threaten legitimate commerce through the imposition of a number of onerous registration requirements, while doing little to curb infringing streaming sites.  The United States urges China to suspend the new regulations and to further consider the potential impacts of these far-reaching regulatory changes.  

 

        Despite increased enforcement efforts, USTR’s 2014 Notorious Markets List reported that many sources identify China as the source of counterfeit products sold illicitly in markets around the world.  Counterfeit goods produced in China that are shipped to the United States include:  food and beverages; apparel, footwear, and accessories; consumer electronics, computers and networking equipment; entertainment and business software; batteries; chemicals; appliances; pharmaceuticals; and auto parts.  As described in Section I, the effects of these counterfeit goods go beyond lost sales volumes and harm to the reputations of U.S. trademark owners.  Counterfeit pharmaceuticals potentially threaten the health of American consumers, and faulty or substandard goods that enter the supply chains of American manufacturers are dangerous as well.  For example, higher defect and failure rates among counterfeit semiconductors may cause malfunctions in medical devices and vehicle safety and braking systems.   

        The United States and China have committed to strengthened cooperation on IPR border enforcement.  In 2013, U.S. CBP and GACC conducted a successful joint customs IPR enforcement operation designed to interdict shipments of consumer electronics.  However, during Fiscal Year 2014, products from China accounted for an estimated 63 percent of the total value3 of the IPR infringing products seized at U.S. ports.  Products transshipped through, or designated as originating in, Hong Kong, many of which also were produced in China, accounted for 25 percent of the estimated total value of such seizures.  The United States welcomes additional opportunities for enhanced bilateral engagement with China on IPR border enforcement issues.  Such cooperation would include sharing best practices and customs-tocustoms information exchange for use in risk management and enforcement actions, and conducting joint customs enforcement operations designed to deter and interdict shipments of counterfeit and pirated goods destined to the United States both as cargo and through international mail and international express carriers.     

        Although rights holders report increased enforcement activities, mostly but not exclusively on behalf of local brands, enforcement efforts have yet to slow the sale of counterfeit goods online.  This is particularly concerning in light of the rapid growth of e-commerce in China and from China to overseas markets.  Rights holders report that local Administrations for Industry and Commerce (AICs) typically confine their efforts to physical markets.  While both the State Administration for Industry and Commerce (SAIC) and local AICs have called on online trading websites to improve procedures for removing listings of IPR-infringing goods, these measures have not significantly deterred repeat and large-scale offenders who quickly place new postings offering infringing goods soon after complying with takedown notices.    

        In a welcome development, the SAIC published a report on IPR infringement and other concerns at the online sales platform Taobao.  The report indicated that only about a third of products offered at the site were authentic.  The United States commends SAIC’s commitment to address this concern and urges Taobao to promptly address concerns identified in the report, consistent with the recommendations in the 2014 Notorious Markets List.    

        In another welcome development, in July 2014 at the S&ED, China committed to develop regulatory amendments to assert better regulatory control over manufacturers of bulk chemicals that can be used as API in counterfeit drugs.  China recognized the goal of fighting against the illegal manufacture, distribution, and export of counterfeit and substandard pharmaceutical products.  The United States urges China to implement these reforms in short order.  

        In another positive note, over the past year, U.S. investigators and prosecutors have improved bilateral law enforcement cooperation with their Chinese counterparts on significant cross-border IPR cases.  This has allowed U.S. authorities not only to prosecute and convict distributors of counterfeit goods in the United States, but to further investigations by exchanging information with Chinese authorities about the companies in China that manufacture or traffic in those goods.  In one example last year, U.S. authorities convicted two individuals of trafficking in counterfeit airbags imported from China.  As part of the U.S. investigation, U.S. authorities shared evidence with Chinese authorities regarding the entities and individuals supplying the U.S. defendants with the airbags and the Chinese opened their own investigation.  Subsequently, Chinese police raided those sources, seizing counterfeit airbags and auto parts valued at about $200,000 and arresting four individuals.  According to Chinese authorities, based on business financial records, the operation made hundreds of thousands of dollars selling counterfeit auto parts primarily through e-commerce sites to customers in the United States, Canada, and elsewhere.  The United States looks forward to working with MPS, GACC, and other enforcement authorities in China to pursue additional coordinated actions against traffickers of counterfeit goods and to seize fake products.  

 

         In addition to challenges with IPR protection and enforcement, rights holders in China must also contend with government measures, policies and practices, such as the recently-suspended ICT measures discussed above, that are purportedly intended to hasten China’s development into an innovative economy, but that also disadvantage foreign rights holders.  The United States is concerned about reports that many of China’s innovation-related policies and other industrial policies, such as strategic emerging industry policies, may have negative impacts on U.S. exports or U.S. investors and their investments or IPR.  Chinese regulations, rules, and other measures frequently call for technology transfer and, in certain cases, appear to include criteria requiring that certain IPR is developed in China, or are owned by or licensed, in some cases exclusively, to a Chinese party.  Such government intervention, including imposed conditions or incentives, may distort licensing and other private business arrangements, resulting in commercially suboptimal outcomes for the firms involved and for innovation.     

        Sustained U.S.-China engagement through the JCCT, the U.S.-China S&ED and high-level government engagement has resulted in important Chinese commitments, including nowPresident Xi Jinping’s 2012 commitment “that technology transfer and technological cooperation shall be decided by businesses independently and will not be used by the Chinese government as a pre-condition for market access,” and China’s 2014 JCCT commitments that China must “treat intellectual property rights owned or developed in other countries the same as domestically owned or developed intellectual property rights,” and that “enterprises are free to base technology transfer decisions on business and market considerations, and are free to independently negotiate and decide whether and under what circumstances to assign or license intellectual property rights to affiliated or unaffiliated enterprises.”  In addition, at the 2012 JCCT, China “reaffirmed that technology transfer and technology cooperation are the autonomous decisions of enterprises” and pledged further that “[i]f departmental or local documents contain language inconsistent with the above commitment, China will correct them in a timely manner.”  At the 2013 JCCT, China committed not to implement rules or finalize a draft catalogue containing indigenous innovation criteria for the procurement of vehicles for official use that are inconsistent with China’s 2012 commitment.  The United States looks forward to China’s full implementation of its commitments, and the revision of measures as needed to ensure that they are consistent with such commitments, including with respect to ICT and elements of the High and New Technology Enterprise tax incentive, such as requirements that beneficiaries license core IPR exclusively to a party in China and make 60 percent of their global R&D expenditures in China.   

 

        The growing importance of IPR and technological standards in China heightens U.S. concerns regarding a range of Chinese government policies and practices.  Whereas open, voluntary, and consensus-based standards best promote economic development, efficiency and innovation, standards development bodies in China reportedly often deny membership or participation rights to foreign parties based on opaque and exclusionary practices, and effectively prevent foreign parties from participating in the standard setting process.  In some cases, a firm’s ability to participate may be conditioned upon a requirement to act through a joint venture in which the firm only has a minority ownership stake, license IPR on concessional terms, or transfer technology against its will.  Based on a limited number of investigations conducted to date, there is also growing concern that Chinese competition authorities may target for investigation those foreign firms that hold IPR that may be essential to the implementation of certain technological standards.  Reports of intimidating and non-transparent investigative conduct contribute to these concerns.    

        In the related realm of national standards, the Standardization Administration of China (SAC) and the State Intellectual Property Organization (SIPO) published Regulatory Measures on National Standards Involving Patents (Interim) that went into effect on January 1, 2014.  Relative to prior drafts, the Measures appear to address a number of U.S. Government and industry concerns.  However, the United States continues to have serious concerns about potential requirements for entities not participating in the development of the standards to disclose relevant patents and make licensing commitments.  The United States recognizes that there is a lack of clarity as to whether the positions of standards setting bodies regarding voluntary disclosure and voluntary licensing of essential patents have been incorporated appropriately into the positions of the anti-monopoly law enforcement authorities.  In particular, the recently issued Regulation by the Administration for Industry and Commerce on the Prohibition of Conduct Eliminating or Restricting Competition by Abusing Intellectual Property Rights appears to retain provisions that may unnecessarily inhibit a patent holder’s exercise of discretion in making licensing commitments for standards essential patents, despite U.S. requests that such language be stricken from the final regulation.  The provisions appear in tension with China’s recognition at the 2014 JCCT that IPR protection and enforcement is important for companies that voluntarily agree to incorporate patents protecting technologies into a standard, and that concerns may exist relating to the licensing requirements of standard essential patents that are subject to licensing agreements.    

IPR Protection for Pharmaceutical Products   

        The United States has engaged intensively with China to address troubling obstacles to obtaining and maintaining patents on pharmaceutical innovations.  Although SIPO guidelines governing the review of patent applications were once generally consistent with those of the United States and leading patent offices in other countries, a revised interpretation of the guidelines has severely restricted a patent applicant’s ability to provide supplemental data in support of an application.  As a result, China has, in some cases, denied pharmaceutical patent applications and invalidated existing patents, while the United States and other jurisdictions have consistently granted patent protection in similar cases.  This problem was the subject of great attention during Vice President Biden’s visit to Beijing in November 2013 and the annual meeting of the JCCT the following month.  These engagements resulted in China’s revision of the policy on data supplementation in late 2013, and a commitment to work with the United States to follow up on implementation, including the examination of individual cases.  Industry generally reports progress as a result of the change, but implementation of the commitment has been inconsistent, resulting in patent invalidations that create uncertainty and potentially undermine incentives to innovate.    

        The United States continues to have concerns about the extent to which China provides effective protection against unfair commercial use of, as well as unauthorized disclosure of, and reliance on, undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.  China has undertaken commitments to ensure that no subsequent applicant may rely on the undisclosed test or other data submitted in support of an application for marketing approval of new pharmaceutical products for a period of at least six years from the date of marketing approval in China.  However, there are reports that generic manufacturers have, in fact, been granted marketing approvals by the China Food and Drug Administration (CFDA) prior to the expiration of this period, and in some cases, even before the originator’s product has been approved.  The United States was encouraged by China’s 2012 JCCT commitment to define “new chemical entity,” a term that is central to the application of data protection in the marketing approval process, in a manner consistent with international R&D practice.  Given that more than two years have passed since that time, the United States urges China to implement its commitment without delay.   

        The United States has engaged closely with China to increase efficiency in regulatory approval processes for pharmaceuticals and medical devices to accelerate patient access and incentives to innovate and market new products in China.  The United States welcomed China’s commitment at the 2014 JCCT to reform its authorization processes and to add personnel and funding.  The United States continues to engage with China in support of its reform agenda.    

        The United States looks forward to continuing to work with China to resolve these and other issues.