The popular toys brand LEGO recently won a major intellectual property lawsuit against a huge counterfeiter LEPIN in China. LEGO was recognized as a well-known mark by the Beijing High People's Court in 2007.

A group of 9 members designed and produced toys similar to those of LEGO and sold them under the brand name LEPIN.  They started their infringing operations in 2015 when they purchased new LEGO sets, dismantled, and examined them. They then went on to produce exact copies of Lego’s toys at a 1:1 scale at their factories.

The packaging design and building instructions on LEPIN’S products were also copied from those on LEGO’S products. They also applied for registration of the trademarks. The counterfeiters sold nearly 4.25 million boxes of LEGO copies worth over 330 million Yuan (US$ 50 million (approx.), including 634 different models from September 11, 2017 to April 23, 2019.

Lego has been vigilant against clone brands in China. It has dealt with them stringently.  When LEPIN’s trademark was invalidated in the UK in 2019, the Chinese courts ordered LEPIN to stop producing LEGO knock-off sets. The Chinese police authorities raided LEPIN’s factories in 2019 and recovered the knockoffs.

Source- the Shanghai No.3 Intermediate People's Court’s official Weibo account

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The Shanghai police seized LEPIN toy products worth 31.5 million Yuan just from one factory premises. There were 88 injection moulds used to replicate LEGO toys, 68 spare parts used to assemble the moulds, 289,411 packing boxes, 175,141 manuals for LEPIN toys, and over 50,000 sales orders.

In September 2020 the Third Intermediate People's Court of Shanghai sentenced imprisonment to the 9 culprits, with Li being identified as the main culprit. Li was sentenced to imprisonment of 6 years and with a fine of 90 million Yuan (US$ 14 million approx.).

In appeal, the Higher People’s Court held that the 9 members have reproduced or distributed LEGO's copyrighted artwork for profit without the permission of its copyright owner, which constitutes an infringement of copyright. The Court also held that the behavior of the members has seriously damaged the economic order of the socialist market. The Court noted that the monetary equivalent of the infringing activities identified till now has reached more than 330 million Yuan, which is a very high amount of illegal business in IP enforcement cases. The Court has now upheld the sentences of imprisonment and the fines levied on all 9 people. This judgment may have stopped LEPIN from producing LEGO knock-offs, however, there are still many clone/ counterfeit brands in circulation in China. This judgment will also encourage other brand owners to protect their intellectual property.

Note:

As per the interpretations of The People’s Republic of China’s Laws in Hearing Criminal Cases of Intellectual Property Rights Infringement; the Courts can impose a fine considering the circumstances of illegal income derived from the crime, the volume of the illegal business operations, loss caused to the intellectual property rights owner and the harmful effects towards the society. The amount of the fine shall be between 100% and 500% of the total amount of illegal proceeds or between 50% and 100% of the volume of the illegal business operations.