Determining case value in trademark criminal cases

Existing rules for calculation of case value
Determining actual sales price of infringing goods
Determining average market price of genuine goods
Comment

"Case value" determines whether the criminal threshold is met and to what extent a penalty should be imposed. This could be the key issue for the court to determine if counterfeiting – a crime in China – is proven. New guidelines issued by the Shenzhen Intermediate Court bring some much-needed clarity to how courts can calculate the value of a case.(1) These guidelines provide various questions to be considered by courts in assessing the value of a case.

Existing rules for calculation of case value

The rules for calculating case value are set out in article 12 of the Interpretation of Supreme People's Court and the Supreme People's Procuratorate, published on 11 November 2004:

• The value of the products produced, stored, transported and sold by the offender are computed according to the price at which such counterfeit profucts were actually sold.
• Regarding products not yet sold, the value is "computed according to the labeled prices, or the actual average prices of the infringing products, verified through investigation".
• The value of products without label prices, or for which the price is impossible to ascertain, is computed "according to the middle market price of the genuine counterparts".

Notwithstanding these rules, until the release of the new guidelines, it remained unclear as to how the actual sales price and the average market price should be determined. Some of the guidance provided by the Shenzhen Intermediate Court was formulated to bring clarity to this matter.

Determining actual sales price of infringing goods

The Shenzhen Intermediate Court provides the following guidance for determining the actual sales price of infringing goods:

• The price of purported infringing goods as noted in financial records may be adopted if it is consistent with the defendant's confession and other evidence.
• The price shown in sales records obtained from an online marketplace may be adopted if the other evidence (eg, the defendant's confession, testimony or material evidence) proves that all the products sold by the defendant were counterfeits.
• The price shown in text message records (of internal messages between the producers and distributors of counterfeit goods) may also be adopted if it is consistent with the data collected from seized smartphones and computers.

Determining average market price of genuine goods

The Shenzhen Intermediate Court provides the following guidance for determining the average market price of genuine goods:

• When the genuine products are available only for export, the free on board price can be used as the reference price. If still unclear, reference is then made to the international market price or the price of similar products in the domestic market.
• When there is no identical genuine counterpart (that is, the counterfeiter simply affixes the trademark to the fake good without replicating the item), reference is made to the price of similar genuine products.
• Additionally, the price in the signed contract (between the producers and distributors of the counterfeit goods) can be considered as the price of unsold counterfeit goods.
• The value of unused spare parts to be used on or assembled into finished goods is also countable if they:
  • are to be used in the production of counterfeit goods; and
  • are individually packaged and bear counterfeit trademarks.
• The value is determined in the following order:
  • the actual sales price;
  • the costs of parts; and
  • the costs for replacement or maintenance.

Comment

While the guidelines are not binding on the courts, they are a good attempt to provide a framework for determining the value of seized counterfeit goods and calculating the overall case value. It will be interesting to see how the courts use the guidelines in future cases.

For further information on this topic please contact Wei He or Xiaoquan Zhang at Wanhuida Intellectual Property by telephone (+86 10 6892 1000) or email ([email protected] or [email protected]). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.

Endnotes

(1) Determination of the Case Value in Trademark Criminal Cases (Q&A).

This article was first published by INTA.