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Guest post by IP Komodo Dragon
Showing posts with label criminal enforcement. Show all posts
Showing posts with label criminal enforcement. Show all posts
Monday, March 21, 2011
New rules on Criminal IP infringement released
Guest post by IP Komodo Dragon
Thursday, June 05, 2008
How to Prevent and Act Upon Intellectual Property Rights Infringements in China
I wrote an article for Duncan Bucknell Company, the Australian company specialised in Global IP Strategy about how to protect and enforce your IPR in China. Read it on the site of Duncan Bucknell Company or below:
By Danny Friedmann
Intellectual property infringements in China are prevalent and a challenge for every company in every industry. If companies that do business in China take adequate precautionary measures, and at the same time anticipate infringements and be prepared to aggressively enforce their rights, they can substantially minimise their risks and damages. Below you will find an overview of the ways to protect and enforce intellectual property rights infringements.
Be prepared
Be aware that your intellectual property is a high risk factor in China.
Be committed in the protection and enforcement of your most valuable property: your intellectual property rights.
Budget enough financial means to protect and enforce your intellectual property rights.
Raise the awareness in your whole organisation about the risks of intellectual property infringements in China.
Do your homework
One of the clichés about doing business in China is the importance of guanxi (relationships). Indeed, guanxi are very important in China, however, one should by no means overlook the phase before one enters into a relationship.
Do a due diligence research of your potential business partners. Were they in any way involved in an intellectual property infringement before?
Demand that potential business partners sign an confidentiality agreement before you hand over any sensitive business information.
Set up a contract that includes all aspects of intellectual property rights. Who owns what intellectual property right? In what way can the business partner use the intellectual property rights? What is the time frame he can use these? Spell out that you can visit the plant unexpectedly to control how your intellectual property is used. If a potential business partner refuses to sign the contract, find another business partner.
No registration equals no right
If you do not register your intellectual property rights (with the exception of copyrights) in China, you are unprotected and it makes it near impossible to stop counterfeiters.
Although with copyright there is no registration needed, according to the 'no formalities provision' of the Berne Convention to which China is a signatory, it can be very helpful to establish prima face evidence, for example ownership. So do register your copyright at the
National Copyright Authority of China. Register your trade marks in Chinese characters too. If you want to register the phonetic equivalence of your Western name, it is possible you need different sets of Chinese characters, because Chinese characters are pronounced differently in different Chinese dialects, such as Cantonese. Make sure the Chinese characters have a laudatory meaning appropriate for your brand.
Register your patents, utility models and design rights. In China designs are, together with inventions and utility models, part of the so called inventions-creations, which are protected by the Patent Law of China..
To trust is nice, to control better
Monitor the use of your intellectual property in the plant frequently.
Know who has access to your plant, to your intellectual property rights.
Use and combine several anti-counterfeit technologies.
Monitor whether there are intellectual property infringements in your market.
If there are counterfeit products, track the origin, gather the evidence.
Be ready to enforce
In case of an intellectual property infringement act in an optimal way. Different situations ask for different enforcement routes. Timing is important too. Strike the infringers at a moment when they have added maximum value to their infringed products, because of packaging and transport, in order to hit them hardest financially.
Administrative enforcement route
In China the administrative enforcement route is the most commonly used. The Administration for Industry and Commerce (AIC) enforces trade marks, the State Intellectual property Organisation (SIPO) enforces patents, utility models and design rights and the National Copyright Administration of China (NCAC) enforces copyrights. Apart from the enforcement of patents, SIPO is responsible for the patent work throughout the country. At the national level SIPO is also responsible for the examination of foreign and domestic patents (Patent Re-examination Board). The Trademark Office (TMO) is responsible for the registration of trade marks and the Trademark Review and Adjudication Board (TRAB), which deals with trade mark disputes, are both under the control of AIC.
The advantage of the administrative enforcement route is that it is an easy and a cost efficient way. The disadvantage is that no damages are awarded and that the punishment is often limited to the confiscation of the infringing goods and/or a fine for the infringers. And often the infringers use another company as vehicle to continue their infringements.
Customs is one of the underestimated routes of enforcement. The Chinese customs authorities are willing and able to cooperate with intellectual property right holders. So instruct them on how to recognise genuine from infringing goods and how to track down infringing cargo.
A lesser known way for trade mark and design rights holders is to base their case on infringements of the Product Quality Law at the Administration of Quality Supervision Inspection and Quarantine.
Civil enforcement route
If the complexity of the infringement is high and the scale serious, then going to the People’s courts is the preferred route of enforcement.
The advantage is that the People’s courts can award damages. Disadvantage is that this route is often time-consuming and costly.
Legal protectionism can be a problem outside the big cities, such as Beijing, Shanghai and Shenzhen, which makes forum shopping of crucial importance.
Criminal enforcement route
Alot is expected from the criminal enforcement route in China, because of the alleged deterrent effect. The advantage is that you can harm infringers by locking them up or punish them with serious fines. However, the disadvantage is that there are relatively high evidentiary thresholds before alleged criminal infringers are prosecuted.
Institutions that regularly give information about IPR in China
Quality Brands Protection Committee (QBPC) http://www.qbpc.org.cn/, lobby group of 180 multinational companies that want to improve the protection and enforcement of intellectual property in China.
Business Action to Stop Counterfeiting and Piracy (BASCP) http://www.iccwbo.org/bascap/id1127/index.html address intellectual property rights issues and petition for greater commitments by local, national and international officials in the enforcement and protection of intellectual property rights.
Intellectual Property Owners Association http://www.ipo.org//AM/Template.cfm?Section=Home trade association for owners of patents, trademarks, copyrights and trade secrets.
International Trademark Association http://www.inta.org/ association of more than 5,500 trade mark owners.
American Chamber of Commerce in China http://www.amcham-china.org.cn/amcham/home/index.php.
European Union Chamber of Commerce in China http://www.euccc.com.cn.
British Chamber of Commerce in China http://www.britcham.org/index.php.
Australian Chamber of Commerce in China http://austcham.org/index.html.
Websites about IPR in China
Intellectual Property Protection in China http://english.ipr.gov.cn/en/index.shtml, official website about the activities of the Chinese government to improve protection and enforcement of intellectual property in China.
IP Dragon http://ipdragon.blogspot.com, weblog by Danny Friedmann. Gathering, commenting on and sharing information about intellectual property to make it more transparent, since 2005.
China Law Blog http://www.chinalawblog.com weblog by Daniel Harris has often interesting articles about IPR in China.
China Hearsay http://www.chinahearsay.com weblog by Stan Abrams, has often interesting posts about IPR in China.
Conclusion
Prevent as much infringement as possible, protect your intellectual property rights assertive, anticipate that infringements will still happen, enforce your rights aggressively. In other words build a fierce reputation that no one can infringe the intellectual property rights of your company without feeling the consequences.
Danny Friedmann
continue reading ...
By Danny Friedmann
Intellectual property infringements in China are prevalent and a challenge for every company in every industry. If companies that do business in China take adequate precautionary measures, and at the same time anticipate infringements and be prepared to aggressively enforce their rights, they can substantially minimise their risks and damages. Below you will find an overview of the ways to protect and enforce intellectual property rights infringements.
Be prepared
Be aware that your intellectual property is a high risk factor in China.
Be committed in the protection and enforcement of your most valuable property: your intellectual property rights.
Budget enough financial means to protect and enforce your intellectual property rights.
Raise the awareness in your whole organisation about the risks of intellectual property infringements in China.
Do your homework
One of the clichés about doing business in China is the importance of guanxi (relationships). Indeed, guanxi are very important in China, however, one should by no means overlook the phase before one enters into a relationship.
Do a due diligence research of your potential business partners. Were they in any way involved in an intellectual property infringement before?
Demand that potential business partners sign an confidentiality agreement before you hand over any sensitive business information.
Set up a contract that includes all aspects of intellectual property rights. Who owns what intellectual property right? In what way can the business partner use the intellectual property rights? What is the time frame he can use these? Spell out that you can visit the plant unexpectedly to control how your intellectual property is used. If a potential business partner refuses to sign the contract, find another business partner.
No registration equals no right
If you do not register your intellectual property rights (with the exception of copyrights) in China, you are unprotected and it makes it near impossible to stop counterfeiters.
Although with copyright there is no registration needed, according to the 'no formalities provision' of the Berne Convention to which China is a signatory, it can be very helpful to establish prima face evidence, for example ownership. So do register your copyright at the
National Copyright Authority of China. Register your trade marks in Chinese characters too. If you want to register the phonetic equivalence of your Western name, it is possible you need different sets of Chinese characters, because Chinese characters are pronounced differently in different Chinese dialects, such as Cantonese. Make sure the Chinese characters have a laudatory meaning appropriate for your brand.
Register your patents, utility models and design rights. In China designs are, together with inventions and utility models, part of the so called inventions-creations, which are protected by the Patent Law of China..
To trust is nice, to control better
Monitor the use of your intellectual property in the plant frequently.
Know who has access to your plant, to your intellectual property rights.
Use and combine several anti-counterfeit technologies.
Monitor whether there are intellectual property infringements in your market.
If there are counterfeit products, track the origin, gather the evidence.
Be ready to enforce
In case of an intellectual property infringement act in an optimal way. Different situations ask for different enforcement routes. Timing is important too. Strike the infringers at a moment when they have added maximum value to their infringed products, because of packaging and transport, in order to hit them hardest financially.
Administrative enforcement route
In China the administrative enforcement route is the most commonly used. The Administration for Industry and Commerce (AIC) enforces trade marks, the State Intellectual property Organisation (SIPO) enforces patents, utility models and design rights and the National Copyright Administration of China (NCAC) enforces copyrights. Apart from the enforcement of patents, SIPO is responsible for the patent work throughout the country. At the national level SIPO is also responsible for the examination of foreign and domestic patents (Patent Re-examination Board). The Trademark Office (TMO) is responsible for the registration of trade marks and the Trademark Review and Adjudication Board (TRAB), which deals with trade mark disputes, are both under the control of AIC.
The advantage of the administrative enforcement route is that it is an easy and a cost efficient way. The disadvantage is that no damages are awarded and that the punishment is often limited to the confiscation of the infringing goods and/or a fine for the infringers. And often the infringers use another company as vehicle to continue their infringements.
Customs is one of the underestimated routes of enforcement. The Chinese customs authorities are willing and able to cooperate with intellectual property right holders. So instruct them on how to recognise genuine from infringing goods and how to track down infringing cargo.
A lesser known way for trade mark and design rights holders is to base their case on infringements of the Product Quality Law at the Administration of Quality Supervision Inspection and Quarantine.
Civil enforcement route
If the complexity of the infringement is high and the scale serious, then going to the People’s courts is the preferred route of enforcement.
The advantage is that the People’s courts can award damages. Disadvantage is that this route is often time-consuming and costly.
Legal protectionism can be a problem outside the big cities, such as Beijing, Shanghai and Shenzhen, which makes forum shopping of crucial importance.
Criminal enforcement route
Alot is expected from the criminal enforcement route in China, because of the alleged deterrent effect. The advantage is that you can harm infringers by locking them up or punish them with serious fines. However, the disadvantage is that there are relatively high evidentiary thresholds before alleged criminal infringers are prosecuted.
Institutions that regularly give information about IPR in China
Quality Brands Protection Committee (QBPC) http://www.qbpc.org.cn/, lobby group of 180 multinational companies that want to improve the protection and enforcement of intellectual property in China.
Business Action to Stop Counterfeiting and Piracy (BASCP) http://www.iccwbo.org/bascap/id1127/index.html address intellectual property rights issues and petition for greater commitments by local, national and international officials in the enforcement and protection of intellectual property rights.
Intellectual Property Owners Association http://www.ipo.org//AM/Template.cfm?Section=Home trade association for owners of patents, trademarks, copyrights and trade secrets.
International Trademark Association http://www.inta.org/ association of more than 5,500 trade mark owners.
American Chamber of Commerce in China http://www.amcham-china.org.cn/amcham/home/index.php.
European Union Chamber of Commerce in China http://www.euccc.com.cn.
British Chamber of Commerce in China http://www.britcham.org/index.php.
Australian Chamber of Commerce in China http://austcham.org/index.html.
Websites about IPR in China
Intellectual Property Protection in China http://english.ipr.gov.cn/en/index.shtml, official website about the activities of the Chinese government to improve protection and enforcement of intellectual property in China.
IP Dragon http://ipdragon.blogspot.com, weblog by Danny Friedmann. Gathering, commenting on and sharing information about intellectual property to make it more transparent, since 2005.
China Law Blog http://www.chinalawblog.com weblog by Daniel Harris has often interesting articles about IPR in China.
China Hearsay http://www.chinahearsay.com weblog by Stan Abrams, has often interesting posts about IPR in China.
Conclusion
Prevent as much infringement as possible, protect your intellectual property rights assertive, anticipate that infringements will still happen, enforce your rights aggressively. In other words build a fierce reputation that no one can infringe the intellectual property rights of your company without feeling the consequences.
Danny Friedmann
Tuesday, April 17, 2007
Bluetooth Earphones Infringement One of Shenzhen AIC' Top 10 IP Cases 2006
The Southern Daily of March 13, reports (in Chinese) that the Shenzhen Administration for Industry and Commerce (AIC) announced the top 10 Intellectual Property Protection Cases for the year 2006 in Shenzhen on 12 March 2007. The cases have involved in household appliances, mobile phones, medicines and general daily supplies. One of the top 10 cases concerns the infringement of Bluetooth earphones.
A co-operative effort between Bluetooth SIG Inc., the local authorities and Asia’s Brand Protection Consultancy, I-OnAsia Ltd has led to the arrest of principals of Shenzhen BlueBird Hi-Tech Company for Infringement of the Bluetooth SIG, Inc registered Trademark. This case has now been transferred to the Public Security Bureau for criminal prosecution.
On 17 July last year, the Administration for Industry and Commerce conducted a search on Shenzhen Bluebird Technology Ltd (深圳藍鳥科技有限公司) which was located on the 4/F, Fanen Building, No. 14, YueHua Road, MeiLinYueHua Industrial Park, FuTian Area. (福田區梅林越華工業區越華路14號凡恩大廈4樓) On-the-scene, 2868 pieces of suspected counterfeit “Bluetooth” earphones, 23,000 pieces of labels and 7,460 pieces of packaging material with infringed “Bluetooth” trademark were seized. Due to the fact that the litigant is not authorized and is presumed to have produced counterfeit “Bluetooth” earphones, the behavior has been suspected a crime. The bureau has then transferred this case to the Public Security Bureau for further criminal prosecution. Two suspects have been arrested.
Update: Derek Elmer, founding partner and chief executive officer of I-OnAsia takes a deeper look at the crackdown of counterfeit in this case, read here.
continue reading ...
A co-operative effort between Bluetooth SIG Inc., the local authorities and Asia’s Brand Protection Consultancy, I-OnAsia Ltd has led to the arrest of principals of Shenzhen BlueBird Hi-Tech Company for Infringement of the Bluetooth SIG, Inc registered Trademark. This case has now been transferred to the Public Security Bureau for criminal prosecution.
On 17 July last year, the Administration for Industry and Commerce conducted a search on Shenzhen Bluebird Technology Ltd (深圳藍鳥科技有限公司) which was located on the 4/F, Fanen Building, No. 14, YueHua Road, MeiLinYueHua Industrial Park, FuTian Area. (福田區梅林越華工業區越華路14號凡恩大廈4樓) On-the-scene, 2868 pieces of suspected counterfeit “Bluetooth” earphones, 23,000 pieces of labels and 7,460 pieces of packaging material with infringed “Bluetooth” trademark were seized. Due to the fact that the litigant is not authorized and is presumed to have produced counterfeit “Bluetooth” earphones, the behavior has been suspected a crime. The bureau has then transferred this case to the Public Security Bureau for further criminal prosecution. Two suspects have been arrested.
Update: Derek Elmer, founding partner and chief executive officer of I-OnAsia takes a deeper look at the crackdown of counterfeit in this case, read here.
Thursday, April 12, 2007
Draft Judicial Interpretation Several Issues of Criminal Cases
DRAFT
Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues in the Concrete Application of the Law in Handling Criminal Cases of Intellectual Property Infringement
Adopted at the 1422nd Meeting of the Adjudication Commission of the Supreme People’s Court and 75th Meeting of the Supreme People’s Procuratorate April 4, 2007; effective April 5, 2007
To maintain order in the socialist market economy and the punish criminal acts of infringement of intellectual property in accordance with the law, several issues regarding the concrete application of the law in the handling of criminal cases of intellectual property infringement are hereby interpreted as follows in accordance with applicable provisions of the Criminal Code and the Criminal Procedure Code.
Article 1. Where for profit-making purposes and without the permission of the copyright owner there is reproduction and distribution of a literary work, a musical, cinematographic, television, or video recording work, computer software or other works, and the total quantity of reproductions is 500 units or more, this shall constitute “other serious circumstances” pursuant tot Article 217 of the Criminal Code; where the total quantiy of reproductions is 2500 units or more, this shall constitute “other exceptionally serious circumstances” under Article 217 of the Criminal Code.
Article 2. For the purposes of Article 217 of the Criminal Code, the term “reproduction and distribution” means reproduction and/or distribution.
Promotion of infringing products by the holder of the infringing products by means of advertisements, solicitation of subscription, etc., shall constitute “distribution” under Article 217 of the Criminal Code.
If anyone illegally publishes, reproduces and/or distributes another person’s work and such copyright infringement constitutes a crime, that person shall be convicted and punished for the crime of copyright infringement.
Article 3. If an intellectual property crime meets the conditions for suspended sentences as provided under the Criminal Code, the punishment shall be suspended in accordance with the law. In any of the following circumstances, suspended sentences shall generally not be applied:
(1) Where, despite the prior application of a criminal or administrative penalty for intellectual property infringement, another infringement of intellectual property which constitutes a crime takes place;
(2) There is no indication of remorse;
(3) There is refusal to give up the illegal income;
(4) Other circumstances where it is not appropriate to suspend sentences.
Article 4. In determining the fine for intellectual property crimes, the People’s Courts shall comprehensively take into account the illegal income, the illegal turnover, the damage caused to the rights owner, the harm to society and other circumstances of the crime. The amount of the fine shall generally range from one time up to five times the illegal income or 50 percent up to one time the illegal turnover.
Article 5. If the victim has evidence to prove an intellectual property crime and directly files a complaint with the People’s Court, the People’s Court shall accept the case in accordance with the law; where intellectual property crimes poses serious harm to social order and the interests of the nation, the People’s Procuratorate shall file a public prosecution in accordance with the law.
Article 6. If a unit engages in activities that constitute a crime under Articles 213 to 219 of the Criminal Code, it shall be convicted and sentenced in accordance with the corresponding criteria for individual offenders set forth in the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues in the Concrete Application of the Law in Handling Criminal Cases of Intellectual Property Infringement and this Interpretation.
Article 7. In the event of any conflict between prior judicial interpretations and this Interpretation, this Interpretation shall apply.
DRAFT
continue reading ...
Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues in the Concrete Application of the Law in Handling Criminal Cases of Intellectual Property Infringement
Adopted at the 1422nd Meeting of the Adjudication Commission of the Supreme People’s Court and 75th Meeting of the Supreme People’s Procuratorate April 4, 2007; effective April 5, 2007
To maintain order in the socialist market economy and the punish criminal acts of infringement of intellectual property in accordance with the law, several issues regarding the concrete application of the law in the handling of criminal cases of intellectual property infringement are hereby interpreted as follows in accordance with applicable provisions of the Criminal Code and the Criminal Procedure Code.
Article 1. Where for profit-making purposes and without the permission of the copyright owner there is reproduction and distribution of a literary work, a musical, cinematographic, television, or video recording work, computer software or other works, and the total quantity of reproductions is 500 units or more, this shall constitute “other serious circumstances” pursuant tot Article 217 of the Criminal Code; where the total quantiy of reproductions is 2500 units or more, this shall constitute “other exceptionally serious circumstances” under Article 217 of the Criminal Code.
Article 2. For the purposes of Article 217 of the Criminal Code, the term “reproduction and distribution” means reproduction and/or distribution.
Promotion of infringing products by the holder of the infringing products by means of advertisements, solicitation of subscription, etc., shall constitute “distribution” under Article 217 of the Criminal Code.
If anyone illegally publishes, reproduces and/or distributes another person’s work and such copyright infringement constitutes a crime, that person shall be convicted and punished for the crime of copyright infringement.
Article 3. If an intellectual property crime meets the conditions for suspended sentences as provided under the Criminal Code, the punishment shall be suspended in accordance with the law. In any of the following circumstances, suspended sentences shall generally not be applied:
(1) Where, despite the prior application of a criminal or administrative penalty for intellectual property infringement, another infringement of intellectual property which constitutes a crime takes place;
(2) There is no indication of remorse;
(3) There is refusal to give up the illegal income;
(4) Other circumstances where it is not appropriate to suspend sentences.
Article 4. In determining the fine for intellectual property crimes, the People’s Courts shall comprehensively take into account the illegal income, the illegal turnover, the damage caused to the rights owner, the harm to society and other circumstances of the crime. The amount of the fine shall generally range from one time up to five times the illegal income or 50 percent up to one time the illegal turnover.
Article 5. If the victim has evidence to prove an intellectual property crime and directly files a complaint with the People’s Court, the People’s Court shall accept the case in accordance with the law; where intellectual property crimes poses serious harm to social order and the interests of the nation, the People’s Procuratorate shall file a public prosecution in accordance with the law.
Article 6. If a unit engages in activities that constitute a crime under Articles 213 to 219 of the Criminal Code, it shall be convicted and sentenced in accordance with the corresponding criteria for individual offenders set forth in the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues in the Concrete Application of the Law in Handling Criminal Cases of Intellectual Property Infringement and this Interpretation.
Article 7. In the event of any conflict between prior judicial interpretations and this Interpretation, this Interpretation shall apply.
DRAFT
Thursday, February 01, 2007
Controversial Interpretation 2004 Will Be Amended, Stays Controversial
Emma Barraclough reports for Managing Intellectual Property from the Third Global Congress on Combating Counterfeiting and Piracy in Geneva, that the controversial judicial thresholds for criminal enforcement will be amended.
First the reasons why the judicial interpretation was controversial will be outlined, followed by the proposed changes by judge Xiong Xuanguo, vice-president of the Supreme People's Court.
Controversy around Interpretation 2004
The articles 213 through 220 Criminal Law state which IP infringements are penalised, but it was not clear when criminal liability will be triggered. The 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 [1] (Interpretation 2004) clarifies this. Compared with two earlier prosecution guidelines [2], the Interpretation 2004 has significantly reduced the monetary thresholds for trademarks [3]. Nevertheless the judicial interpretation was much criticised. It can be argued that the difference in thresholds between enterprises and individuals is arbitrary [4]. The Interpretation 2004 states three controversial methods [5] for calculating product values produced by infringers, which all undervalue the infringing goods [6]. Unlike its predecessors, Interpretation 2004 lacks provisions that criminalise repeat offenders [7], the infringement of well-known trademarks [8], or trademarks on pharmaceuticals for human use [9], and where illegal methods such as bribery are used to promote the sale of the counterfeit trademarks [10].On the other hand the Interpretation 2004 takes into account the values of illegal business volume, gains and amount of sales of previous infringements, under the condition that such acts have not yet been given an administrative penalty or have not so far initiated criminal procedures [11].
According to Timothy Trainer [12], any numerical thresholds are outlawed by TRIPs. This opinion seems questionable, since there is no ban on numerical thresholds in TRIPs, and it is very common for WTO members’ legislations to have some kind of numerical thresholds for criminal liability, although these numerical thresholds may not be codified, unwritten rules for case dismissal do exist [13]. The wording of article 61 TRIPs is not that remedies should provide a sufficient deterrent, but that they should be sufficient to provide a deterrent. So China’s implementation of article 61 TRIPs is only not compliant when there is no positive correlation between the thresholds and deterrence. Deterrence [14] is a relative term; a remedy might be a deterrent for some individuals, while neutral to others [15], assuming a correlation with their circumstances and perception [16]. A good way to measure a lack of deterrence would be to determine the level of recidivism of IP infringers, as professor Hughes points out [17]. Article 61 TRIPs promulgates in the second sentence that the deterrent should be consistent with the level of penalties applied for crimes of a corresponding gravity [18]. Having severe and mandatory imprisonment sentences and monetary fines available on the books is not sufficient to provide a deterrent for criminal behaviour [19]. Research shows that punishment certainty is far more consistently found to deter crime than punishment severity [20]. This is especially relevant for China, because one of the prosecutorial ways is hardly used [21] and prison sentences and fees are often not served or paid. Also long delays between the criminal act and punishment are not conducive for the deterrence, since imminence is a constituent part of deterrence [22] [23].
Notes of Controversy around Interpretation 2004
[1] 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, adopted at the 1331st Session of the Judicial Committee of the Supreme People's Court on November 2, 2004 and the 28th Session of the Tenth Procuratorial Committee of the Supreme People's Procuratorate on November 11, 2004 and to be effective as of December 22, 2004.
[2] Provisions of the Supreme People's Procuratorate and Ministry of Public Security Regarding Prosecution Standards for Cases Involving Economic Crimes, April 14, 2001; and the Interpretations of Some Issues Concerning the Application of Laws for the Trial of Cases on Criminal Cases of Illegal Publications issued by the Supreme People's Court in 1998.
[3] However, if the numerical thresholds are put in a broader historical context, the level of the thresholds have not necessarily been decreased. For example the thresholds for use of a counterfeit trademark was in 1993, under the Regulations Concerning Criteria for Placing on the Docket Cases Involving the Counterfeiting of Registered Trademarks, more than RMB 20,000, in 2001 under the Prosecution guideline equal or over RMB 500,000, and since the Interpretation 2004 more than RMB 30,000.
[4] The damage done to the right holders is the same regardless of who commits the crime. It is relatively easy for a Chinese citizen to start a company. By doing so he can easily avoid operating above the criminal thresholds.
[5] Article 12 Interpretation 2004.
[6] The first method is the price at which such products are actually sold, instead of the price of the genuine products. The second: infringed products that are stored, transported and those that are not sold, shall be computed according to the labelled price or the actual prices for which they are sold after investigation. The third: to base the value of the infringed products without labelled prices or whose actual prices are impossible to ascertain, to be computed according to the median market prices of such products.
[7] Articles 61, 63 and 64 Prosecution guideline impose criminal liability even though numerical thresholds have not been reached, in case an individual has already been subject to administrative penalties on two or more occasions and is now again suspected of infringement. However, there has never been a threshold for the pure repeat offender, who has been subject to administrative penalties only once before.
[8] Articles 61 and 63 Prosecution guideline.
[9] Article 61 Prosecution guideline.
[10] Article 63 Prosecution guideline.
[11] Article 12 Interpretation 2004.
[12] Timothy Trainer, former president International Anti-Counterfeiting Coalition, representing US industry worth $ 650 billion, see here: http://www.iacc.org/.
[13] Paraphrasing professor Daniel Gervais in an interview, University of Amsterdam, July 11, 2006. And it might be better for these rules to remain unwritten, because otherwise infringers can easily produce and sell the infringed product in batches, each under the thresholds.
[14] A distinction must be made between general and special deterrence: special deterrence is deterring someone who has already offended form re-offending. General offending is dissuading potential offenders of offending at all by way of punishment administered for a particular offence. Definition by Barbara Hudson.
[15] Geoffrey York, ‘Jail time a mere irritant for Chinese video pirates’, Globe & Mail, January 7, 2007, available at: http://www.theglobeandmail.com/servlet/story/RTGAM.20070126.gtibletter26/BNStory/Technology/.
[16] “[..] deterrence theory neglects a growing list of personal traits that appear to predict offending [..]”, Daniel Nagin, ‘Integrating Celerity, Impulsivity, and Extralegal Sanctions Threats into a Model of General Deterrence: Theory and Evidence’, January 2000, pg. 5, available at: http://www.ssc.wisc.edu/econ/Durlauf/networkweb1/London/Criminology1-15-01.pdf
[17] “Evidence of substantial recidivism in any legal system shows that that system is not applying “remedies which constitute a deterrent” to the illegal activity being targeted,” Hughes, ‘Written statement IP Enforcement in China, a potential WTO case, and US-China relations,’ June 8, 2006, pg. 10, available at:
http://www.uscc.gov/hearings/2006hearings/written_testimonies/06_06_08wrts/06_06_7_8_hughes_justin.pdf.
[18] Crimes of a corresponding gravity could be determined by the monetary or physical damage that they cause. Even if China’s level of penalties for these crimes is of a corresponding gravity, if not higher than most other WTO members, this would not necessarily lead to a deterrence.
[19] Besides deterrence it should be noted that by factually imprisoning and fining criminals they may get incapacitated to continue their infringements.
[20] “Two prominent findings from this literature are that punishment certainty is far more consistently found to deter crime than punishment severity, [..]”, Nagin, see note 73, pg. 3.
[21] The administrative authorities scarcely refer criminal cases to the criminal prosecution, as aforementioned.
[22] “Going back to Beccaria, punishment imminence (“celerity”) has been accorded co-equal status with certainty and severity in theory, yet empirical tests of the celerity effect are scant,” Nagin, see note 73, pg. 3.
[23] There is a Pavlovian idea behind this theory, that the criminal is conditioned better if he is punished as soon as possible after the crime. Daniel Nagin has developed a discounting model for punishments to make imminence relevant in the deterrence theory. Nagin, see note 73, pg. 3.
Xiong Xuanguo's proposals to amend the Interpretation 2004
Barraclough quoted Xiong saying that the Court had decided to make "appropriate supplements and improvements in the 2004 Interpretation so as to give full play to its role of punishing and preventing IPR related crimes".
Read Barraclough's article here.
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First the reasons why the judicial interpretation was controversial will be outlined, followed by the proposed changes by judge Xiong Xuanguo, vice-president of the Supreme People's Court.
Controversy around Interpretation 2004
The articles 213 through 220 Criminal Law state which IP infringements are penalised, but it was not clear when criminal liability will be triggered. The 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 [1] (Interpretation 2004) clarifies this. Compared with two earlier prosecution guidelines [2], the Interpretation 2004 has significantly reduced the monetary thresholds for trademarks [3]. Nevertheless the judicial interpretation was much criticised. It can be argued that the difference in thresholds between enterprises and individuals is arbitrary [4]. The Interpretation 2004 states three controversial methods [5] for calculating product values produced by infringers, which all undervalue the infringing goods [6]. Unlike its predecessors, Interpretation 2004 lacks provisions that criminalise repeat offenders [7], the infringement of well-known trademarks [8], or trademarks on pharmaceuticals for human use [9], and where illegal methods such as bribery are used to promote the sale of the counterfeit trademarks [10].On the other hand the Interpretation 2004 takes into account the values of illegal business volume, gains and amount of sales of previous infringements, under the condition that such acts have not yet been given an administrative penalty or have not so far initiated criminal procedures [11].
According to Timothy Trainer [12], any numerical thresholds are outlawed by TRIPs. This opinion seems questionable, since there is no ban on numerical thresholds in TRIPs, and it is very common for WTO members’ legislations to have some kind of numerical thresholds for criminal liability, although these numerical thresholds may not be codified, unwritten rules for case dismissal do exist [13]. The wording of article 61 TRIPs is not that remedies should provide a sufficient deterrent, but that they should be sufficient to provide a deterrent. So China’s implementation of article 61 TRIPs is only not compliant when there is no positive correlation between the thresholds and deterrence. Deterrence [14] is a relative term; a remedy might be a deterrent for some individuals, while neutral to others [15], assuming a correlation with their circumstances and perception [16]. A good way to measure a lack of deterrence would be to determine the level of recidivism of IP infringers, as professor Hughes points out [17]. Article 61 TRIPs promulgates in the second sentence that the deterrent should be consistent with the level of penalties applied for crimes of a corresponding gravity [18]. Having severe and mandatory imprisonment sentences and monetary fines available on the books is not sufficient to provide a deterrent for criminal behaviour [19]. Research shows that punishment certainty is far more consistently found to deter crime than punishment severity [20]. This is especially relevant for China, because one of the prosecutorial ways is hardly used [21] and prison sentences and fees are often not served or paid. Also long delays between the criminal act and punishment are not conducive for the deterrence, since imminence is a constituent part of deterrence [22] [23].
Notes of Controversy around Interpretation 2004
[1] 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, adopted at the 1331st Session of the Judicial Committee of the Supreme People's Court on November 2, 2004 and the 28th Session of the Tenth Procuratorial Committee of the Supreme People's Procuratorate on November 11, 2004 and to be effective as of December 22, 2004.
[2] Provisions of the Supreme People's Procuratorate and Ministry of Public Security Regarding Prosecution Standards for Cases Involving Economic Crimes, April 14, 2001; and the Interpretations of Some Issues Concerning the Application of Laws for the Trial of Cases on Criminal Cases of Illegal Publications issued by the Supreme People's Court in 1998.
[3] However, if the numerical thresholds are put in a broader historical context, the level of the thresholds have not necessarily been decreased. For example the thresholds for use of a counterfeit trademark was in 1993, under the Regulations Concerning Criteria for Placing on the Docket Cases Involving the Counterfeiting of Registered Trademarks, more than RMB 20,000, in 2001 under the Prosecution guideline equal or over RMB 500,000, and since the Interpretation 2004 more than RMB 30,000.
[4] The damage done to the right holders is the same regardless of who commits the crime. It is relatively easy for a Chinese citizen to start a company. By doing so he can easily avoid operating above the criminal thresholds.
[5] Article 12 Interpretation 2004.
[6] The first method is the price at which such products are actually sold, instead of the price of the genuine products. The second: infringed products that are stored, transported and those that are not sold, shall be computed according to the labelled price or the actual prices for which they are sold after investigation. The third: to base the value of the infringed products without labelled prices or whose actual prices are impossible to ascertain, to be computed according to the median market prices of such products.
[7] Articles 61, 63 and 64 Prosecution guideline impose criminal liability even though numerical thresholds have not been reached, in case an individual has already been subject to administrative penalties on two or more occasions and is now again suspected of infringement. However, there has never been a threshold for the pure repeat offender, who has been subject to administrative penalties only once before.
[8] Articles 61 and 63 Prosecution guideline.
[9] Article 61 Prosecution guideline.
[10] Article 63 Prosecution guideline.
[11] Article 12 Interpretation 2004.
[12] Timothy Trainer, former president International Anti-Counterfeiting Coalition, representing US industry worth $ 650 billion, see here: http://www.iacc.org/.
[13] Paraphrasing professor Daniel Gervais in an interview, University of Amsterdam, July 11, 2006. And it might be better for these rules to remain unwritten, because otherwise infringers can easily produce and sell the infringed product in batches, each under the thresholds.
[14] A distinction must be made between general and special deterrence: special deterrence is deterring someone who has already offended form re-offending. General offending is dissuading potential offenders of offending at all by way of punishment administered for a particular offence. Definition by Barbara Hudson.
[15] Geoffrey York, ‘Jail time a mere irritant for Chinese video pirates’, Globe & Mail, January 7, 2007, available at: http://www.theglobeandmail.com/servlet/story/RTGAM.20070126.gtibletter26/BNStory/Technology/.
[16] “[..] deterrence theory neglects a growing list of personal traits that appear to predict offending [..]”, Daniel Nagin, ‘Integrating Celerity, Impulsivity, and Extralegal Sanctions Threats into a Model of General Deterrence: Theory and Evidence’, January 2000, pg. 5, available at: http://www.ssc.wisc.edu/econ/Durlauf/networkweb1/London/Criminology1-15-01.pdf
[17] “Evidence of substantial recidivism in any legal system shows that that system is not applying “remedies which constitute a deterrent” to the illegal activity being targeted,” Hughes, ‘Written statement IP Enforcement in China, a potential WTO case, and US-China relations,’ June 8, 2006, pg. 10, available at:
http://www.uscc.gov/hearings/2006hearings/written_testimonies/06_06_08wrts/06_06_7_8_hughes_justin.pdf.
[18] Crimes of a corresponding gravity could be determined by the monetary or physical damage that they cause. Even if China’s level of penalties for these crimes is of a corresponding gravity, if not higher than most other WTO members, this would not necessarily lead to a deterrence.
[19] Besides deterrence it should be noted that by factually imprisoning and fining criminals they may get incapacitated to continue their infringements.
[20] “Two prominent findings from this literature are that punishment certainty is far more consistently found to deter crime than punishment severity, [..]”, Nagin, see note 73, pg. 3.
[21] The administrative authorities scarcely refer criminal cases to the criminal prosecution, as aforementioned.
[22] “Going back to Beccaria, punishment imminence (“celerity”) has been accorded co-equal status with certainty and severity in theory, yet empirical tests of the celerity effect are scant,” Nagin, see note 73, pg. 3.
[23] There is a Pavlovian idea behind this theory, that the criminal is conditioned better if he is punished as soon as possible after the crime. Daniel Nagin has developed a discounting model for punishments to make imminence relevant in the deterrence theory. Nagin, see note 73, pg. 3.
Xiong Xuanguo's proposals to amend the Interpretation 2004
Barraclough quoted Xiong saying that the Court had decided to make "appropriate supplements and improvements in the 2004 Interpretation so as to give full play to its role of punishing and preventing IPR related crimes".
- standards for sentencing in IP criminal trials would be "improved and unified";
- suspended sentences would be applied in a more standardized way;
- and sever punishments would be imposed according to the circumstances and the gravity of the harm done;
- application and enforcement of fines will be enhanced; more attention will be paid to the approaches depriving the perpetrators of their financial capacities to commit the crimes again, such as forfeiting illegal proceeds and criminal instruments, destroying IPR violating products, and ordering the perpetrator to compensate the victim for losses.
Read Barraclough's article here.
Tuesday, January 02, 2007
Jail Time For Exporters Of Phones That Are Genuine Inside, Counterfeited Outside
Interfax China reports about four people that were found guilty in October by a people's court in Guangzhou of infringing trademark rights because they were exporting counterfeit phones. Zhang and Xu were sentenced to nine months and two persons both named Lin were sentenced eight months in prison
The inside of the phones consisted out of second hand components and the outside were new shells branded as Motorola or Philips.
Customs of Huangpu, a city 15 kilometers from Guangzhou, "captured 17,893 counterfeit Motorola and Philips phones at the port and the factories valued at approximately RMB 730,000 ($93,590), along with a large number of second-hand mobile phones, phone components and tools used in the reassembly. In April, the Huangpu Customs transferred the captured phones to the local police department and provided the police the exporting company's customs clearance record since December 2004."
After much criticism China committed itself to transferring more cases from customs or other administrative authorities to the Public Security Bureau (police) or the people's procuratorate for criminal enforcement.
Read the Infofax China article here.
continue reading ...
The inside of the phones consisted out of second hand components and the outside were new shells branded as Motorola or Philips.
Customs of Huangpu, a city 15 kilometers from Guangzhou, "captured 17,893 counterfeit Motorola and Philips phones at the port and the factories valued at approximately RMB 730,000 ($93,590), along with a large number of second-hand mobile phones, phone components and tools used in the reassembly. In April, the Huangpu Customs transferred the captured phones to the local police department and provided the police the exporting company's customs clearance record since December 2004."
After much criticism China committed itself to transferring more cases from customs or other administrative authorities to the Public Security Bureau (police) or the people's procuratorate for criminal enforcement.
Read the Infofax China article here.
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