Supreme Court sets high threshold for imposing imprisonment in infringement cases

In Prosecutor General v CS (Case B-5484-13), the Supreme Court of Sweden has set a high threshold for imposing prison sentences on trademark infringers, and rejected the possibility of imposing such a penalty by reference to the nature of the crime ('Artbrott' in Swedish). 

TransmissionsTeamet i Stockholm AB imported, marketed and sold counterfeited ball bearings under the Community trademark SKF. The infringement was revealed when a consumer turned to SKF with a compensation claim due to damaged machinery. A police complaint was filed and, when the police searched the premises, they found and seized over 6,000 counterfeited ball bearings made in China. A follow-up search-and seize-visit a few months later found additional counterfeited goods.

Both the Stockholm District Court and the Svea Court of Appeal found the defendant guilty of trademark infringement; however, they disagreed as to the assessment of the penal value and, consequently, imposed different sentences. The District Court sentenced the owner of the company to one year in prison, but the Court of Appeal lowered the prison term. In order to bring clarity to the question of the determination of the penal value in trademark infringement cases, the attorney general appealed to the Supreme Court. 

The Supreme Court initially stated that the primary interest is to protect the rights conferred on trademark proprietors. However, when assessing the penal value, third-party interests should also be considered, as trademark infringement may mislead and harm consumers. This statement represents a positive step in the protection of brands and consumers, as it had so far been unclear whether or not third-party interests had an impact on the penal value. 

The court further declared that the infringement was of considerable proportion, that the defendant had criminal intent and was aware of the risk to third parties, and that its objective was clearly to benefit financially. Irrespective of these findings, the Supreme Court set the penal value at eight months' imprisonment, which was converted into a conditional sentence since the Swedish Criminal Code establishes a presumption against imprisonment when the penal value is less than 12 months. The sentence was combined with a day-fine of Skr14 000, Skr550 000 in damages, Skr400 000 in litigation costs, a ban on business activity for three years, a corporate fine of Skr50,000 and the destruction of the counterfeit products. 

Finally, the Supreme Court assessed whether the nature of trademark infringement as a criminal offence could rebut the presumption against imprisonment. The prosecutor general argued that counterfeiting and piracy represent an increasing, cross-border problem which poses a threat to the economy as a whole, as well as to public finances. In addition, trademark infringement endangers the welfare of consumers, whilst being easy to carry out and hard to detect. The prosecutor general concluded that these circumstances were sufficient to rebut the presumption against imprisonment.

This line of reasoning was dismissed by the Supreme Court on the basis that neither the legislature nor case law supports the proposition that trademark infringement be treated differently in order to impose imprisonment. It should be noted that it was possible for the Supreme Court to make such a decision, but the arguments presented in favour of such a ruling were, according to the court, not sufficiently persuasive. 

The judgment represents a breakthrough in Sweden regarding the assessment of the penal value in trademark infringement cases and the factors to be taken into account in this respect. However, the Supreme Court set a relatively low penal value for an infringement that was established to be of a serious nature - this begs the question of whether the court forwent an opportunity to demonstrate how seriously it takes IP rights infringement. 

Tom Kronhöffer and Miriam Röstberg Omari, von lode advokat ab, Stockholm