Partly because of its greater deterrent effect, criminal action is often the preferred means of IP enforcement against counterfeiters in China. In 2008, Chinese courts handled 3,326 criminal cases involving IP infringement and 5,386 defendants were prosecuted. Recently issued draft Opinions foreshadow important developments in the application of the criminal law to IP infringement.
Opinions
Some of the most important matters dealt with are summarised below.
The draft provides guidance as to when the Public Security Bureau (PSB), i.e. the Police, may place trap orders, or authorise others to do so. It also makes it clear that the value of the infringing goods so purchased should be excluded from the 'illegal amount' for the purposes of determining whether or not the threshold for criminal liability has been reached.
Where the criminal threshold is likely to be reached, and there is a 'need' for PSB investigation, the PSB should carry out such investigation. Although proactive PSB investigation is often critical at the initial stages, it will currently often not be undertaken because of the amount of resources needed. Guidance is provided as to what is meant by 'need' in this context.
Because the criminal threshold for sellers/distributors is based on sales revenue, it is, in most regions, difficult to take criminal action against sellers/distributors who are holding unsold infringing goods in their warehouse. The draft provides that where, in trade mark actions, the value of the goods in stock is three times the criminal threshold, the criminal threshold will be deemed to have been reached.
Guidance is provided on how the PSB/court should deal with Defendants' invalidation or cancellation actions. Where there is a 'reasonable doubt' as to validity, the suspects may be released or bail granted. Where the IP is invalidated, the PSB/court should immediately bring the action to an end.
Clarification of the terms 'identical mark' and 'identical goods' is provided. Clarification is also provided in relation to the determination of criminal thresholds in the case of the online distribution of infringing works.
Our Comment
IP owners should review the draft carefully and where necessary raise concerns, or lobby, the relevant body.