China proposes changes to strengthen the criminal judicial protection of IPR

On 17 June 2020, the Supreme People’s Court and the Supreme People’s Procuratorate issued the Interpretation on Several Issues Concerning the Specific Application of Law in Handling Criminal Cases of Intellectual Property Infringement (3) (Draft for Comment) (“the Draft”). The proposed changes deliver news for IPR holders as they are expected to strengthen the criminal judicial protection of intellectual property rights. Changes mainly include that a) defining the criminal judicial protection of three-dimensional (3D) trademarks for the first time; b) refining the regulations on the “identical trademark”; c) simplifying the criteria of identifying a “copyright holder”, as well as defining the circumstance of “without the permission of the copyright owner”; d) adding forward-looking provisions on ruling trade secret related criminal cases; e) adding new circumstances of restrictions on the grant of suspended sentences. IPR owners are given more opportunities to participate in the litigation proceedings, which would lead to achieving more favourable outcomes. The points are expanded on below:

1. Defining the criminal judicial protection of 3D trademarks for the first time

Judicial bodies often differ in handling the 3D trademark-related criminal cases due to the particular nature of such marks. The lack of clear guidelines in determining “an identical trademark with the registered 3D trademark” has led to a conservative attitude being held by the case-handling authorities towards the conviction and sentencing of infringers. Our firm has once represented a 3D trademark right holder in a criminal case. We found that significant time and effort was spent in lobbying into the case-handling departments on the necessity and feasibility of 3D trademarks protection in criminal cases. Though a positive outcome was eventually achieved and the infringer was convicted and sentenced, the costs were high. As now provided in Item 4 of the Draft Article 1, the criteria for determining “an identical mark with 3D registered trademark” in criminal proceedings has been clarified for the first time. The law is now that where there is “No visual difference from the three-dimensional registered trademark in terms of the three-dimensional symbol and plane elements” it shall be deemed as “an identical trademark with the registered trademark” (Art. 213 of the PRC Criminal Law). This provision will undoubtedly strengthen the criminal protection of three-dimensional trademarks.

2. Refining the regulations on the “same trademark”

Regarding the circumstances where persons only add a generic name and model of the merchandise to the registered trademark, or add words that directly indicate the quantity and quality of merchandise to the registered trademark, it can also be recognised as “an identical trademark with the registered trademark” in Art. 213 of the  PRC Criminal Law.

In judicial practice, infringers often argue that such acts as mentioned above have substantially changed the trademark. Thus it failed to constitute the circumstance of “an identical trademark with the registered trademark”. The preponderance of such a defence often led to uncertainty in cases. Fortunately, the relevant provisions of the Draft will help to remove obstacles for convictions.

Additionally, we noticed that the catch-all provision stated in Item 6 of Article 1 of the Draft was revised from “fundamentally and visually similar to the counterfeit registered trademark, enough to mislead the public” to “fundamentally similar to the counterfeit registered trademark, enough to mislead the public”. The qualifier “visually” was deleted. The modification leaves room for interpretation of the criminal protection of registered trademarks that present their distinctiveness in a non-visual manner, such as sound trademarks.

4. Simplifying the criteria of identifying “copyright holder” and defining the circumstance of “unauthorised”

In criminal cases related to copyright infringements, it is often difficult to provide the authentication documents, verifying the subject qualification of the copyright owner and the “unauthorisation by the copyright owner” as per the first paragraph of Article 217 of the PRC Criminal Law. This is due to the complexity and particularity of the copyright authorisation of the relevant publications. The lack of an authentication statement of the right holders could often stop the proceedings in some cases. In a number of cases handled by myself on behalf of the right holders, trademark infringement was selected as the main cause (aka, the registered trademark of the publisher is infringed) in order to circumvent this certification requirement for copyright infringement case.

Article 2 of the Draft applies the principle that any person of the signature on the works should be presumed to be the author, which is consistent with Article 11 of the Copyright Law. It did not retain the previous provisions on the collection of related ownership certificates. This change reflects a tendency to simplify the identification of “copyright holder” and “unauthorised”. The new regulations will help to enhance crackdown on copyright-related crimes.

4. Breakthrough regulations on the amount of losses of infringements of trade secrets

The Draft used almost half of the provisions to specify the application of law in dealing with infringements cases relating to trade secrets. It also included a series of refinements on the issues of infringement methods and the determination of the amount of losses.

In judicial practice, it is often difficult for right holders to effectively prove the personal losses caused by the infringements upon trade secrets. This results in the inability to proceed with many cases due to the lack of determination of the amount of losses. Item 1, first paragraph of Article 5 of the  Draft provides a breakthrough provision for the determination of the amount of losses: “If the trade secrets of the right holder were obtained by improper means and have not been disclosed, used or allowed to be used by others, the amount of losses may be determined based on the reasonable license fee for a trade secret.”

According to the provisions of the currently effective 2004 Higher Interpretation on Several Issues Concerning the Specific Application of Laws in Handling Criminal Cases of Infringement of Intellectual Property Rights and the 2010 Provisions on the Standards for Prosecution of Criminal Cases under the jurisdiction of Public Security Organs (2), if the trade secret concerned has not been disclosed, used, or allowed to be used by others and it has not caused the right holder to go bankrupt, it is often difficult to pursue the criminal liability of the infringer for infringing business secrets in practice because there is no specific loss amount and illegal income. The Draft adopted the regulation, adjusting the nature of the crime from a “consequential offense” to a “behavioral offense”, As long as the relevant infringement of trade secrets occurred, even if no specific losses have been caused, or related illegal gains have not been obtained, the amount of losses can still be determined based on the reasonable license fee for the trade secret. , If such provision is approved, it will greatly lower the threshold for the right holder of trade secrets to protect their rights.

In addition, Article 8 of the Draft stipulates that the right holder of trade secrets shall add the necessary remedy costs incurred to reduce the commercial losses directly caused by the infringements upon the trade secrets or restore the confidentiality measures, such as the security of the computer information system, to the amount of losses. This provision further expands the sources of losses that right holders can claim, which will significantly help right holders to pursue the criminal liabilities of the infringers.

Regrettably, Article 8 does not further clarify whether the right holder’s loss of rights protection can be added into the amount of losses, although there have been precedent judgments which confirmed such practice. In a trade secret related criminal case represented by myself, the public prosecutor adopted our argument that the fee spent in protecting the right holder’s right shall be included in the amount of the right holder’s loss, and such allegation was affirmed by the judgment.

Investigations and accusations of violations of the right owner’s trade secrets will often incur certain rights’ protection fees, which is a loss caused by the infringer’s infringement upon trade secrets. Thus, including rights protection cost in the loss amount of right holders is justifiable both theoretically and practically.

5. Adding restrictions on the application of suspended sentence, clarifying circumstance that mainly engaged in infringement of intellectual property rights is generally not applicable

On the basis of Article 3 of the 2007 Interpretation of Several Issues Concerning the Specific Application of Laws in Handling Criminal Cases of Intellectual Property Infringement (2), Article 11 of the Draft adds three types of circumstances where suspended sentence is generally not applicable. It is worth noting that it stipulates that the suspended sentence is generally not applicable to the circumstance of being “primarily engaged in infringement of intellectual property rights”. This provision will effectively increase the intensity of attacks against large scale, industrialised infringers who have been engaged in the crime of infringing IP rights for a long time.

6. “Obtaining the forgiveness of the right holder” can be punished lightly

In judicial practice, there have been several cases, including a few ones represented by myself, where infringers compensated the right holders for the loss of infringement in exchange of the forgiveness of right holders and lenient punishment.

The second paragraph of Article 12 of the Draft clarifies for the first time in the criminal justice interpretation of intellectual property that “who actively compensates the right holder for the economic loss caused by the infringement of intellectual property rights and obtains the forgiveness of the right holder” should generally be given a lenient punishment. In addition to providing more ways of resolving conflicts and disputes, this provision in fact gives right holders more opportunities to participate in criminal proceedings and more leverage to affect the outcome of the case.

7. Once the “later license” is obtained from the right holder, the infringer may be exempted from punishment

Article 13 of the Draft stipulates that if the right holder later license to the criminal suspect or defendant who previously used the registered trademark, trade secret or copied and distributed works, audio-visual recordings, etc., without authorisation, which may be deemed as a minor offence and may not be prosecuted or may be exempted from criminal punishment according to law.

Similarly, this provision also gives the right holder the right to substantively influence the outcome of the case. Right holders can weigh the advantages and disadvantages and choose the solution that is most conducive to protecting and realising their intellectual property rights.

8. Reaffirming the application of the ”prohibition order”

The Draft added provision ‘about prohibition order” against IPR infringers. Specifically, infringers can be banned from engaging in specific business activities once the penalty has been executed or within the period of suspended sentence, considering the specific situation of the crime and the need to prevent further crimes.

There have been many explorations of the application of “prohibition orders” to IP infringers in various jurisdictions. For example, both the 2019 Guidelines on Sentencing of Common Intellectual Property Crimes by the Intellectual Property Court of the Shanghai Higher People’s Court’ and the Guidelines on Sentencing of Intellectual Property Crimes (Trial) by the Jiangsu High Court in 2019, set relevant regulations. The author has also seen applications for many times when representing the right holders. The relevant provisions of the Draft will very most likely further promote the application of the “Prohibition Order” in Judicial practice, which will help strengthen deterrence.

In précis, the Draft clarifies many issues that right holders are concerned about with regards to judicial practice and the tendency shown is positive and encouraging. Once the Draft is promulgated and implemented, it will become a great weapon for effectively combating IPR crimes and safeguarding the legitimate rights and interests of IP right holders. We are looking forward to such an impact.









对于侵权人在注册商标上仅增加商品通用名称、型号或者直接表示商品的数量、质量的文字,但不影响体现注册商标的恶意规避情形,根据意见稿第一条第五项,可认定为刑法第二百一十三条规定的“与其注册商标相同的商标”。司法实践中,侵权人往往辩解其实施上述行为属于对商标的实质改动,故不构成 “与其注册商标相同的商标”,导致一些案件的定性出现争议。意见稿的相关规定无疑为权利人在该类案件的处理上扫除了障碍。





























This article was first published in China IP Magazine in June 2020.