State Ministry of Public Security has awarded this case as top 10 influential IP criminal cases on September 19, 2014, and has selected it as top 5 IP criminal cases all over China in 2014.

The first “Cluster Action”

The action of this case is termed “cluster action” or “cluster case” which means national enforcement on a large scale that is approved by the Ministry of Public Security, against networks of criminals crossing at least three provinces, involving a large amount of criminal activity, and including manufacturers and distributors.

This case is the first cluster action in Jiangsu Province approved by State Ministry of Public Security through the intranet: compared with the more traditional way of approval which is in writing. This meant the pace of the cluster action was a lot quicker, and a case approved through the intranet also means higher importance in the system of police.

Pre-action Investigation

In May 2014, authorized by HYPERTHERM, HFG carried out a large number of investigations targeting two factories lead separately by two persons, last name MENG and XIAO in Changzhou City, Jiangsu Province. The two factories were manufacturing and selling counterfeit consumables of plasma cutting equipment with the “HYPERTHERM” trademark. HFG needed to overcome and find a way to penetrate the criminal networks from an external breaking point as MENG and XIAO had designed a detailed and meticulous arrangement of the whole process from the manufacturing to distribution of the equipment. Only through slick penetration and thorough investigation, was HFG able to gather a great deal of evidence and clues about the routine of production, storage and sales in the target factories, and the relevant upstream and downstream counterfeiting network.

“What we found most valuable from working with HFG was their investigation capacity, ability to locate key stakeholders and move in a timely fashion.  Without their understanding of the local enforcement agencies and solid relationships with local PSB it would have been a lot more difficult to have enabled the timely and thorough results that have been achieved so far.” says HYPERTHERM spokesperson.

The Police Accepting the Case

HFG further contacted Wujin District Branch of Changzhou City Public Security Bureau (hereinafter refer to as “Changzhou PSB”). Under the requirement of the PSB, HFG assisted Changzhou PSB in the investigation and the command of the periphery condition of the two factories and in helping work out a detailed action plan for the action required.

Executing the Plan

On May 20, 2014, assisted by HFG, Changzhou police succeeded in cracking down the two target factories, seizing over 10,000 pieces of counterfeit HYPERTHERM consumables of plasma cutting equipment, more than 200,000 pieces of counterfeit HYPERTHERM trademark labels, and over 20 sets of machine tools for Counterfeiting.

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The seized counterfeiting HYPERTHERM products.

Eradication of the Counterfeiting Network

The sales records seized in the action of raid showed that the two suspects MENG and XIAO sold the counterfeit HYPERTHERM products to 6 provinces and cities including Jiangsu, Shanghai, Hubei, Guangdong and Shandong with a total sales amount of RMB 5 million. HFG then offered further cooperation with the police in the 6 provinces and cities in tracing other targets in the upstream and downstream counterfeiting network.

On July 2, 2014, Jiangsu Provincial Public Security Department launched the cluster action with other police institutes in the provinces of Guangdong, Hubei, Shandong and Hebei. The police institutes examined the local suspect distributors, and finally uncovered and exposed 7 targets that were confirmed belonging to the criminal network.

HYPERTHERM spokesperson says “we are very happy with the thorough and in depth investigative work the team at HFG has done and the results they have helped us achieve so far. The outcome being the bulk of counterfeit samples seized, criminals arrested, company’s shut down, upstream and downstream distributors now being tracked and necessary action to follow.”

Media Coverage

Screen shots of case from Changzhou local media. Link to the TV report: http://www.wjyanghu.com/Tv/view/id/33753.html