First the reasons why the judicial interpretation was controversial will be outlined, followed by the proposed changes by judge Xiong Xuanguo, vice-president of the Supreme People's Court.
Controversy around Interpretation 2004
The articles 213 through 220 Criminal Law state which IP infringements are penalised, but it was not clear when criminal liability will be triggered. The Interpretation by the Supreme People's Court and the Supreme People's Procuratorate on Several Issues of Concrete Application of Laws in Handling Criminal Cases of Infringing Intellectual Property  (Interpretation 2004) clarifies this. Compared with two earlier prosecution guidelines , the Interpretation 2004 has significantly reduced the monetary thresholds for trademarks . Nevertheless the judicial interpretation was much criticised. It can be argued that the difference in thresholds between enterprises and individuals is arbitrary . The Interpretation 2004 states three controversial methods  for calculating product values produced by infringers, which all undervalue the infringing goods . Unlike its predecessors, Interpretation 2004 lacks provisions that criminalise repeat offenders , the infringement of well-known trademarks , or trademarks on pharmaceuticals for human use , and where illegal methods such as bribery are used to promote the sale of the counterfeit trademarks .On the other hand the Interpretation 2004 takes into account the values of illegal business volume, gains and amount of sales of previous infringements, under the condition that such acts have not yet been given an administrative penalty or have not so far initiated criminal procedures .
According to Timothy Trainer , any numerical thresholds are outlawed by TRIPs. This opinion seems questionable, since there is no ban on numerical thresholds in TRIPs, and it is very common for WTO members’ legislations to have some kind of numerical thresholds for criminal liability, although these numerical thresholds may not be codified, unwritten rules for case dismissal do exist . The wording of article 61 TRIPs is not that remedies should provide a sufficient deterrent, but that they should be sufficient to provide a deterrent. So China’s implementation of article 61 TRIPs is only not compliant when there is no positive correlation between the thresholds and deterrence. Deterrence  is a relative term; a remedy might be a deterrent for some individuals, while neutral to others , assuming a correlation with their circumstances and perception . A good way to measure a lack of deterrence would be to determine the level of recidivism of IP infringers, as professor Hughes points out . Article 61 TRIPs promulgates in the second sentence that the deterrent should be consistent with the level of penalties applied for crimes of a corresponding gravity . Having severe and mandatory imprisonment sentences and monetary fines available on the books is not sufficient to provide a deterrent for criminal behaviour . Research shows that punishment certainty is far more consistently found to deter crime than punishment severity . This is especially relevant for China, because one of the prosecutorial ways is hardly used  and prison sentences and fees are often not served or paid. Also long delays between the criminal act and punishment are not conducive for the deterrence, since imminence is a constituent part of deterrence  .
Notes of Controversy around Interpretation 2004
 Interpretation by the Supreme People's Court and the Supreme People's Procuratorate on Several Issues of Concrete Application of Laws in Handling Criminal Cases of Infringing Intellectual Property, adopted at the 1331st Session of the Judicial Committee of the Supreme People's Court on November 2, 2004 and the 28th Session of the Tenth Procuratorial Committee of the Supreme People's Procuratorate on November 11, 2004 and to be effective as of December 22, 2004.
 Provisions of the Supreme People's Procuratorate and Ministry of Public Security Regarding Prosecution Standards for Cases Involving Economic Crimes, April 14, 2001; and the Interpretations of Some Issues Concerning the Application of Laws for the Trial of Cases on Criminal Cases of Illegal Publications issued by the Supreme People's Court in 1998.
 However, if the numerical thresholds are put in a broader historical context, the level of the thresholds have not necessarily been decreased. For example the thresholds for use of a counterfeit trademark was in 1993, under the Regulations Concerning Criteria for Placing on the Docket Cases Involving the Counterfeiting of Registered Trademarks, more than RMB 20,000, in 2001 under the Prosecution guideline equal or over RMB 500,000, and since the Interpretation 2004 more than RMB 30,000.
 The damage done to the right holders is the same regardless of who commits the crime. It is relatively easy for a Chinese citizen to start a company. By doing so he can easily avoid operating above the criminal thresholds.
 Article 12 Interpretation 2004.
 The first method is the price at which such products are actually sold, instead of the price of the genuine products. The second: infringed products that are stored, transported and those that are not sold, shall be computed according to the labelled price or the actual prices for which they are sold after investigation. The third: to base the value of the infringed products without labelled prices or whose actual prices are impossible to ascertain, to be computed according to the median market prices of such products.
 Articles 61, 63 and 64 Prosecution guideline impose criminal liability even though numerical thresholds have not been reached, in case an individual has already been subject to administrative penalties on two or more occasions and is now again suspected of infringement. However, there has never been a threshold for the pure repeat offender, who has been subject to administrative penalties only once before.
 Articles 61 and 63 Prosecution guideline.
 Article 61 Prosecution guideline.
 Article 63 Prosecution guideline.
 Article 12 Interpretation 2004.
 Timothy Trainer, former president International Anti-Counterfeiting Coalition, representing US industry worth $ 650 billion, see here: http://www.iacc.org/.
 Paraphrasing professor Daniel Gervais in an interview, University of Amsterdam, July 11, 2006. And it might be better for these rules to remain unwritten, because otherwise infringers can easily produce and sell the infringed product in batches, each under the thresholds.
 A distinction must be made between general and special deterrence: special deterrence is deterring someone who has already offended form re-offending. General offending is dissuading potential offenders of offending at all by way of punishment administered for a particular offence. Definition by Barbara Hudson.
 Geoffrey York, ‘Jail time a mere irritant for Chinese video pirates’, Globe & Mail, January 7, 2007, available at: http://www.theglobeandmail.com/servlet/story/RTGAM.20070126.gtibletter26/BNStory/Technology/.
 “[..] deterrence theory neglects a growing list of personal traits that appear to predict offending [..]”, Daniel Nagin, ‘Integrating Celerity, Impulsivity, and Extralegal Sanctions Threats into a Model of General Deterrence: Theory and Evidence’, January 2000, pg. 5, available at: http://www.ssc.wisc.edu/econ/Durlauf/networkweb1/London/Criminology1-15-01.pdf
 “Evidence of substantial recidivism in any legal system shows that that system is not applying “remedies which constitute a deterrent” to the illegal activity being targeted,” Hughes, ‘Written statement IP Enforcement in China, a potential WTO case, and US-China relations,’ June 8, 2006, pg. 10, available at:
 Crimes of a corresponding gravity could be determined by the monetary or physical damage that they cause. Even if China’s level of penalties for these crimes is of a corresponding gravity, if not higher than most other WTO members, this would not necessarily lead to a deterrence.
 Besides deterrence it should be noted that by factually imprisoning and fining criminals they may get incapacitated to continue their infringements.
 “Two prominent findings from this literature are that punishment certainty is far more consistently found to deter crime than punishment severity, [..]”, Nagin, see note 73, pg. 3.
 The administrative authorities scarcely refer criminal cases to the criminal prosecution, as aforementioned.
 “Going back to Beccaria, punishment imminence (“celerity”) has been accorded co-equal status with certainty and severity in theory, yet empirical tests of the celerity effect are scant,” Nagin, see note 73, pg. 3.
 There is a Pavlovian idea behind this theory, that the criminal is conditioned better if he is punished as soon as possible after the crime. Daniel Nagin has developed a discounting model for punishments to make imminence relevant in the deterrence theory. Nagin, see note 73, pg. 3.
Xiong Xuanguo's proposals to amend the Interpretation 2004
Barraclough quoted Xiong saying that the Court had decided to make "appropriate supplements and improvements in the 2004 Interpretation so as to give full play to its role of punishing and preventing IPR related crimes".
- standards for sentencing in IP criminal trials would be "improved and unified";
- suspended sentences would be applied in a more standardized way;
- and sever punishments would be imposed according to the circumstances and the gravity of the harm done;
- application and enforcement of fines will be enhanced; more attention will be paid to the approaches depriving the perpetrators of their financial capacities to commit the crimes again, such as forfeiting illegal proceeds and criminal instruments, destroying IPR violating products, and ordering the perpetrator to compensate the victim for losses.
Read Barraclough's article here.