A recent decision shows that where an offender simultaneously commits the crimes of IP rights infringement and the manufacture and distribution of fake and inferior goods, he or she will be convicted of the crime for which the punishment is harshest.

On August 9 2012, during a raid against a local rental residence, the Dingzhou Public Security Bureau (PSB) seized large amounts of counterfeit alcohol bearing the marks RED LABEL, BLACK LABEL, JACK DANIEL'S and HENNESSY, among others, with a total value of $10,068, according to the Price Certifying Organisation.

In a post-raid investigation, the PSB later discovered that since March 2012, defendant Yang Kai had been purchasing the following fake products from Shandong, Guangxi and Guangdong, among other places:

  • whiskey bottles;
  • wine;
  • capsules;
  • trademark labels;
  • anti-fake labels; and
  • cartons.

Yang had hired the other defendant to bottle the fake spirits and distributed the finished products in Henan, Hebei, Zhejiang, Shannxi and Beijing, among others. In May 2012 Yang hired a third defendant to distribute the products and collect payments. At the time of the raid, the total sales had reached $9,584.

In March 2013 the Dingzhou Procuratorate prosecuted the three defendants for the manufacture and distribution of fake and inferior goods.

The brand owners argued that this indictment was incorrect, since the three defendants had committed the crime not only of manufacturing and distributing fake and inferior goods, but also of counterfeiting registered trademarks under Articles 140 and 213 of the Criminal Law. Under such circumstances, the defendants should have been indicted for counterfeiting registered trademarks, which incurs a harsher punishment.

The court agreed with the brand owners and ruled as follows:

  • With regard to the charge of counterfeiting registered trademarks, Yang was found guilty and sentenced to 10 months' imprisonment, together with a fine of $8,121.
  • The two other defendants were also found guilty of counterfeiting registered trademarks and were respectively sentenced to eight months' imprisonment (with one year probation), together with a fine of $6,508, and six months' imprisonment (with one year probation), together with a fine of $4,881.
  • All of the seized goods, including machines, raw materials and fake goods, should be confiscated.

In this case, the three defendants had committed two crimes simultaneously. Two judicial interpretations in China deal with such situations:

  • the Interpretation of the Supreme People's Court and Supreme People's Procuratorate on Several Issues Concerning the Application of the Laws in Handling Criminal Cases concerning the Manufacture and Distribution of Fake and Inferior Goods (released in 2001); and
  • the Opinions of the Supreme People's Court, Supreme People's Procuratorate and Ministry of Public Security on Several Issues Concerning the Application of the Laws in Handling Criminal Cases of IP Rights Infringement (promulgated in 2011).

Both interpretations provide that the infringer should receive the harshest punishment.

If an infringer is convicted of counterfeiting registered trademarks, according to Article 213 of the Criminal Law, the punishment will consist of incarceration or detention for no more than three years and may - additionally or exclusively - include a fine. However, if an infringer is convicted of manufacturing and distributing fake and inferior goods, according to Article 140 of the Criminal Law, the punishment will consist of incarceration or detention for no more than two years and may - additionally or exclusively - include a fine.

The court thus chose to convict the defendants of counterfeiting registered trademarks.

For further information on this topic please contact Zhang Yan or Wang Jue at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000), fax (+86 10 6894 8030) or email (zhangyan@wanhuida.com or wangjue@wanhuida.com).

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