Procuratorate and court adopt brand owner's calculation of counterfeiter's illegal turnover

China

The Supreme People’s Procuratorate and the Baiyun District Court have adopted the opinion of the brand owner when calculating the illegal turnover of a trademark counterfeiter in a criminal case.

In the present case, there was a wide gap between the calculation of the illegal turnover made by the police during the raid (Rmb170,000) and the calculation proposed by the brand owner (nearly Rmb1,400,000). The procuratorate and the court adopted the calculation of the plaintiff and the suspect was sentenced to three years' imprisonment, with a fine of Rmb650,000.

The 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 the Infringement of Intellectual Property Rights provides as follows:

"Article 1: Any one of the situations below constitutes 'especially serious' circumstances 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 Rmb250,000 or the amount of illegal income reaches over Rmb150,000;

...

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 infringed 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 the manufactured, stored, transported and unsold infringing commodities shall be calculated in accordance with the list price or the average ascertainable sales price… 

The facts of the case were as follows. In a garden machinery exhibition, a famous German garden tools company found that a Guangzhou factory had counterfeited its registered trademark. After a thorough investigation, in March 2014 the German brand owner asked the police of the Baiyun District, Guangzhou City, to raid the factory and its warehouse. Large amounts of finished counterfeit products were seized. Upon the request of the brand owner, the police searched the premises and found many delivery records and sales receipts.

The German brand owner kept close communication with the police, the public prosecutor and the court throughout the criminal investigation and prosecution.

In particular, the brand owner 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 Rmb170,000. However, the delivery records attached to the file indicated that the sales volume exceeded Rmb1 million. Furthermore, it was clear from the interrogation records that, even though most of the delivery documentation only referred to 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 brand owner 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 brand owner, 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 the Baiyun District Court, the brand owner submitted its written opinion to the court, rebutting the defence made by the suspect about the sales records. The court calculated the value of the products which had been sold together with the value of the products seized during the police raid, finding the amount involved in this case to be nearly Rmb1,400,000. Based on such findings, the suspect was sentenced to three years' imprisonment, with a fine of Rmb650,000.

In criminal cases, it can make a great difference if the IP owner actively participates in the proceedings. In this case, the police found that the illegal turnover was only around Rmb170,000. If the Public Prosecutor had filed the lawsuit based on this finding, the sentence imposed on the counterfeiter would have been less than three years' imprisonment and the counterfeiter would probably have been granted probation. With the input and involvement of the brand owner, the judicial organ adopted the plaintiff’s opinion as to the calculation of the illegal turnover, and imposed a heavier punishment on the counterfeiter.

Luo Yi and Zhang Shuhua, Wan Hui Da Law Firm & Intellectual Property Agency, Beijing

Wan Hui Da represented the brand owner in this case

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