In this case, there was a wide gap between the calculation of the illegal turnover made by the Police during the raid (170,000 RMB) and the calculation proposed by the brand owner (nearly 1,400,000 RMB). The Procuratorate and the Court adopted the opinion of the victim’s attorney and the suspect was sentenced to 3 years imprisonment, with a fine of RMB 650,000.

Legal and Regulatory Background

“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 Infringement of Intellectual Property Rights (I)” provides as follows:

Article 1:  Any one of the situations below constitutes “especially serious” circumstance 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 250,000 RMB or the amount of illegal income reaches over 150,000 RMB;

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 infringe 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 infringing commodities in the manufacturing, storage and transportation process, and of those unsold shall be calculated in accordance with its list price or the average ascertainable sales price……"

Case Summary

In an exhibition of garden machinery, a famous German garden tools company found a Guangzhou factory engaged in counterfeiting its registered trademark. After thorough investigation, in March 2014, the German brand owner requested the police of Baiyun District, Guangzhou City to raid the aforementioned factory and its warehouse, and seized large amounts of finished counterfeit products. Upon the request of the brand owner, the Police searched the premises and found many delivery records and sales receipts of the counterfeiter.

The attorney of the German brand owner, representing his client, kept close communication with the police, the public prosecutor and the Court throughout the criminal investigation and prosecution.

In particular, the attorney duly 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 RMB 170,000. However, the delivery records attached to the file indicated that the sales volume exceeded RMB 1 million.  Furthermore, it was clear from the interrogation records, that even though most of the delivery documentation only mentioned the model number of the product with no mention of the counterfeited trademark, the suspect had 

confessed that the sold products actually bore the counterfeited trademark.

The attorney therefore submitted a written opinion to the Prosecutor, requesting 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 attorney, returned the file to the Police for supplementary investigation and for auditing the value of the products which had been sold.

During the trial of the case at Baiyun District Court, the attorney submitted his written opinion to the court, rebutting the defense made by the suspect about the sales records. Finally the court calculated the value of the products which had been sold together with the value of the products seized during the police raid by finding the amount involved in this case nearly RMB 1,400,000. Based on such finding, the suspect was sentenced to imprisonment of three years, with a fine of RMB 650,000.

Comments:

In criminal cases, it can make a great difference if the IP owner engages an attorney to actively participate in the proceedings. In this case, the Police only found that the illegal turnover was around RMB 170,000. If the Public Prosecutor had filed the lawsuit based on this finding, the sentence of the counterfeiter would have been less than three years and the counterfeiter would probably be granted probation. With the input and involvement of the brand owner’s attorney, the judicial organ finally adopted the victim’s opinion on the calculation of the “illegal turnover”, and imposed heavier punishment on the counterfeiter.