Summary

The Supreme People's Procuratorate and the Baiyun District Court have adopted the opinion of the brand owner in a criminal case with regard to the calculation of a trademark counterfeiter's illegal turnover.

In the present case, there was a wide gap between the illegal turnover calculation made by the police during the raid (Rmb170,000) and that proposed by the brand owner (nearly Rmb1.4 million). The procuratorate and the court adopted the calculation of the plaintiff, and the counterfeiter was sentenced to three years' imprisonment and fined Rmb650,000.

Background

The Interpretation of the Supreme People's Court and the Supreme People's Procuratorate on Several Issues Concerning the Specific Application of Laws in Handling Criminal Cases Involving the Infringement of Intellectual Property Rights provides as follows:

"Article 1: Any one of the situations below constitutes 'especially serious' circumstances as prescribed in Article 213 of the Criminal Law, for which the counterfeiter shall be sentenced to fixed-term imprisonment of not less than three years and not more than seven years, and concurrently be sentenced to a fine.

(1) The amount of illegal business turnover reaches over Rmb250,000 or the amount of illegal income reaches over Rmb150,000...

Article 12: The amount of illegal business turnover in the Interpretation refers to the value of the infringing products manufactured, stored, transported or sold by the infringer during the process of implementing acts that infringed others' intellectual property rights. The value of infringing commodities that have already been sold shall be calculated in accordance with the actual sales price. The value of the manufactured, stored, transported and unsold infringing commodities shall be calculated in accordance with the list price or the average ascertainable sales price."

Facts

At a garden machinery exhibition, a well-known German garden tools company found that a Guangzhou factory had counterfeited its registered trademark. After a thorough investigation, in March 2014 the German brand owner asked the police of the Baiyun District, Guangzhou City, to raid the factory and its warehouse. Large amounts of finished counterfeit products were seized. At the request of the brand owner, the police searched the premises and found many delivery records and sales receipts.

The brand owner kept in close communication with the police, the public prosecutor and the court throughout the criminal investigation and prosecution. In particular, the brand owner reviewed the case file transferred by the police to the prosecutor and noticed that according to the indictment opinion of the police, the total value of the fake goods manufactured and sold by the suspect was only Rmb170,000. However, the delivery records attached to the file indicated that the sales volume exceeded Rmb1 million. Further, it was clear from the interrogation records that even though most of the delivery documentation referred only to the model number of the product with no mention of the counterfeited trademark, the counterfeiter had confessed that the sold products actually bore the counterfeited trademark.

The brand owner therefore submitted a written opinion to the prosecutor, requesting it to count the value of all the sold products documented by the delivery records as being part of the illegal business turnover. The prosecutor adopted the opinion of the brand owner and returned the file to the police for supplementary investigation and auditing of the value of the products which had been sold.

Decision

During the trial before the Baiyun District Court, the brand owner submitted its written opinion to the court, rebutting the defence made by the suspect about the sales records. The court calculated the value of the products which had been sold together with the value of the products seized during the police raid, finding the amount involved in this case to be nearly Rmb1.4 million. Based on such findings, the counterfeiter was sentenced to three years' imprisonment and fined Rmb650,000.

Comment

In criminal cases, it can make a great difference if the IP owner actively participates in the proceedings. In this case, the police found that the illegal turnover was only around Rmb170,000. If the public prosecutor had filed suit based on this finding, the sentence imposed on the counterfeiter would have been less than three years' imprisonment and the counterfeiter would probably have been granted probation. In light of the input and involvement of the brand owner, the court imposed a heavier punishment on the counterfeiter.

For further information on this topic please contact Yi Luo or Shuhua Zhang at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000) or email ( luoyi@wanhuida.com or zhangshuhua@wanhuida.com). The Wan Hui Da Law Firm & Intellectual Property Agency website can be accessed at www.wanhuida.com.

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