Tuesday, June 13, 2006

Criminal Sanctions For IPR Infringers Will Not Silence Criticasters of Thresholds

Liu Li of China Daily covered 13 IPR violators that were sentenced to jail terms ranging from 1 to 7 year.

Beijing Daxing District People's Court:
Lin Rongzhou, who bought 29,800 pirated optical disks and sold 5,300 of them for profit last August, was sentenced to a two-year jail term and a 60,000 yuan (US$7,400) fine. Lin sold disks worth in total 59,500 yuan (US$7,300).

Shanghai Hongkou District People's Court:
Zhao Weixin, former chairman of a Taiwan-based company, along with two accomplices, stood accused of producing fake Toyota, Nissan, Mazda and Mitsubishi motor fittings since 2001.
Court sources said that the three produced over 2 million car spare parts worth 15.2 million yuan (US$1.9 million), and had recorded sales of 14.8 million yuan (US$1.8 million).
Zhao Weixin was sentenced to four years imprisonment and a fine of 400,000 yuan (US$49,000). The two accomplices, both also surnamed Zhao, were sentenced to two-year and three-year jail terms, as well as fines of 200,000 yuan (US$25,000) and 300,000 yuan (US$37,000) respectively.

Zhongshan Municipal Intermediate People's Court (Guangdong Province):
Lai Shouqiang, who produced and sold fake imported alcohol with Hennessy and Chivas brand names, on grounds that he produced and sold 4,000 bottles of imported wine worth 240,000 yuan (US$30,000) from 2004 to 2005, was sentenced to seven-years imprisonment and a
fine of 400,000 yuan (US$49,000).

Seven other people were sentenced to imprisonment of one to three years.

Suqian 'local court' (Jiangsu Province):
Zhang Qinghe was found guilty of producing and selling fake registered trademark symbols.
He was sentenced to three years imprisonment and fined 5,000 yuan (US$620).
He produced over 114,000 fake brand symbols and sold 14,000.

The 2004 Judicial Interpretation of Threshold for Criminal Liability lowered the financial threshold after which a violator may be punished. When a business brings in a minimum of 50,000 yuan (US$6,200) in revenue or 30,000 yuan (US$3,700) in illegal gains from selling counterfeit goods or infringing on copyright, it will be eligible for criminal punishment.
The previous standards were 100,000 yuan (US$12,300) and 200,000 yuan (US$25,000) respectively. This threshold has raised some criticism: "China uses the value of the infringing products, rather than the value of the genuine goods. According tot the US Trade Representative this method highly undervalues the infringing goods and effectively provides a "safe harbor" to infringers." See USTR, 2006 Special 301 Report (April 28, 2006 (pdf), pg. 4.

"The USTR Office is stepping up consideration of WTO dispute settlement options against China with regard to IPR issues. One such an issue are China's laws that require certain thresholds to be met before intellectual property rights violators can be hit with criminal penalties. Informed sources have said since March that USTR is looking at a case that attacks these thresholds, and industry sources this week agreed that the new Special 301 report offically declares that these thresholds are a serious problem."
USTR Hints at WTO Case Against China on IPR Criminal Thresholds, Inside US-China Trade (May3, 2006).
Source: USCC Hearing on China's Enforcement of IPR, Statement of Terence P. Steward, Esq., June 8, 2006 (pdf). pg. 18.

The official name of the interpretation is: Interpretation by the Supreme People's Court and the Supreme People's Procuratorate on Several Issues of Concrete Application of Laws in Handling Criminal Cases of Infringing Intellectual Property (December 22, 2004).
Read about the impact of the Interpretations on the Application of Relevant Laws on Criminal Cases of IP Infringement (including criminal thresholds) by August Zhang of Rouse & Co. here and another article about the thresholds by trademark attorney Fu Haiying of King & Wood here.

Read the China Daily article here.

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