By Xu Jing and Ye Wanli, King and Wood Mallesons’ IP group
On July 12, 2020, Zhejiang Higher People’s Court, Procuratorate and Public Security Bureau jointly released the Minutes for the Conference concerning the Issues of Application of Laws in IP Criminal Cases (Zhe Gao Fa  No. 83, the “Minutes”). The Minutes covers agreements among the authorities on some issues arising out of the IP criminal cases in Zhejiang. The Minutes has 15 provisions, 11 of which are related to crimes against rights of registered trademarks. Some highlights include:
- How to determine number of counterfeited trademarks (Article 2) – If a suspect uses two or more trademarks with different register numbers on the same good and the mark is associated with one specific source of good, it is not appropriate to hold that the suspect counterfeits two or more trademarks.
- Whether criminal protection is proper for a registered trademark that has never been used in commerce (Article 3) – It is not appropriate to protect a registered trademark that has never been used in commerce, as no confusion exists without commercial use, and the harmful effects to the registrant’s business interests and the market competition are nominal. Registrant may seek civil remedies under such circumstances.
- Whether OEM without proper authorization shall be criminally liable (Article 5) – For those OEMs without proper authorization, the authorities shall consider all the relevant factors, such as whether the suspect diligently examine the principal’s credential, whether the suspect properly uses the principal’s trademarks and whether the victim (i.e. the registrant for the PRC trademark) has sale of the same goods in the destination country. For those suspects that have caused actual harms to the PRC registrant and the market competition, and meet the criminal threshold, the authority may prosecute for the crime of counterfeiting trademarks.
- How to determine number of the illegal trademark labels for the crime of unauthorized production and sale of labels of registered trademarks (Article 7) – One mark label that can be used independently shall be deemed as one label under Article 215 of the Criminal Law. The Minutes gives an example: for a bottle of wine with marks on packaging, cap and label, then it should be deemed as three. But if more than one marks are printed on one single item and these marks cannot be used separately, then it should be deemed as one mark.
- How to determine unfinished goods with the registered trademark or finished goods without registered trademarks seized from the suspect (Article 8) – These two circumstances should be treated as attempted offense. But if evidence can show that the suspect isolate the mark from the good for avoiding criminal prosecution, then it can be deemed as a completed crime.
- Determination on Illegal Sales Volume (Article 13) – The authority shall not use the median market price of the registrant’s good unless all other methods of determination are not available, and shall consider the part that the suspect belongs to in the chain of counterfeits. Price appraisal conducted by a qualified agency is required for this method. If there is no corresponding registrant good can be referred, the authority may use a good or model that is most similar with the counterfeit; if no similar genuine goods or models can be referred, then the authority may use a median market price for a qualified good falling into the same category with the counterfeit, and the court shall consider all relevant factors in determination.
The Minutes gives clear guidance on some controversial legal issues in IP Criminal cases. While it is applied in Zhejiang only, but the issues are common in practice and the viewpoints in the Minutes can be used a reference for cases in other provinces.