China’s Supreme People’s Procuratorate Released 4 Typical Cases of Enforcement of Criminal Intellectual Property Laws

Share Post:

On March 1, 2022, the Supreme People’s Procuratorate (SPP) held a press conference on the theme of “Strengthening Intellectual Property Procuratorial Services to Guarantee Innovation-Driven Development in the New Era,” (检察机关知识产权综合性司法保护典型案例) releasing 4 typical cases of comprehensive judicial protection of intellectual property rights by procuratorial organs. The four cases cover criminal copyright infringement, trade secret misappropriation, and criminal trademark counterfeiting. Summaries of the 4 cases follow.

1. People v. Dayi Horizon Cultural Media Co., Ltd., Zhang, et al. (copyright infringement case)

In May 2017, Dayi Horizons Cultural Media Co., Ltd.  was established, Zhang and Li were responsible for the daily business management of the company, and Liu and Ma took charge of the content production department of the company. In May 2018, Dayi developed a video-playing app called Big Vision. After the app was released, without the permission of the rights holder, Dayi downloaded and edited a large number of domestic and overseas films, provided them to users for viewing through video apps, and made profits by charging a membership fee. On January 10, 2020, the public security authority arrested Zhang and three others. After extracting and authenticating the back-office data: Among the infringing films edited and uploaded by the “Big Vision” App, 302 copyrighted works by member companies of the American Film Association were watched more than 420,000 times by users and downloaded more than 19,000 times; Tencent has 70 copyrighted works, which have been viewed more than 81,000 times and downloaded more than 4,000 times. There were over 830,000 registered users of the  App, and over 90,000 recharge orders were paid, with a payment amount of over 1.4 million RMB.

In December 2019, the Market Inspection Bureau of Shenzhen City, Guangdong Province found that the app might be suspected of a criminal acts, and notified the People’s Procuratorate of Nanshan District, Shenzhen City of the relevant information.  In January 2020, the Market Investigation Bureau of Shenzhen Municipality transferred this clue to Nanshan Branch of the Public Security Bureau of Shenzhen Municipality, and the Procuratorate of Nanshan District timely intervened in the investigation and guided the public security organ in obtaining evidence. On February 13, 2020, the Procuratorate of Nanshan District approved the arrest of Zhang and three others on suspicion of the crime of copyright infringement and put forward opinions on further investigation.

On March 30, 2020, the public security authority transferred this case to the Procuratorate of Nanshan District for examination and prosecution. On April 29, 2020, the Procuratorate of Nanshan District instituted a public prosecution against Dayi Horizon Company, Zhang, Li, Liu, Ma Lv for the crime of copyright infringement.

On November 11, 2020, the People’s Court of Nanshan District, Shenzhen City sentenced the defendant, Dayi, to a fine of 400,000 RMBfor the crime of copyright infringement, sentenced the defendants, Zhang and three others to imprisonment of one year to three years, and imposed a fine of 20,000 RMB to 100,000 RMB. Some defendants appealed against the judgment of first instance. On March 11, 2021, the Intermediate People’s Court of Shenzhen Municipality rendered a ruling to dismiss the appeal and affirm the original judgment.

Per the SPP, the implications are:

(1) To crack down on crimes of copyright infringement on the Internet in accordance with the law, and to equally protect the legal rights of domestic and foreign copyright owners.

(2) Improve the intellectual property “execution connection” mechanism and form a joint force to protect intellectual property.

(3) Actively promote industry governance and urge enterprises to operate in compliance with regulations.

2. People v. Shandong Fuda Environmental Protection Engineering Co., Ltd., Ma Qiang and Guo (a case of trade secret infringement)

Ma Qiang and Guo were employees of Shandong Tian Energy Co., Ltd.  In October 2017, Ma Qiang formed Shandong Fuda Environmental Protection Engineering Co., Ltd.  by borrowing the identity of other persons after leaving Tian Company. Ma Qiang actually controlled and ran the company and employed Guo as its technical director. From October 2017 to August 2018, in violation of the confidentiality agreement and confidentiality provisions, Guo used technical information produced by Tian Company at Fuda to produce and operate fluidized bed drying device similar to Tian Company’s. The illegal income obtained therefrom all entered the account of Fuda Company. Upon identification, the technical information on the  device owned by Tiana Company was a trade secret, and the technical information on the device used by Fuda Company was the same as the aforesaid technical information on Tian Company. Upon audit, the infringement upon trade secrets conducted by Fuda Company caused losses of more than 4.8 million RMB to the Tian Company.

On April 16, 2019, the High and New Technology Industry Development Zone Branch of the Public Security Bureau of Jinan City, Shandong Province transferred the criminal suspects, Ma Qiang and Guo, to the People’s Procuratorate of High and New Technology Industry Development Zone of Jinan City  for examination and prosecution for their suspected involvement in the crime of trade secret infringement. The Procuratorate of High-Tech Zone informed the party whose right had been infringed, Tian, of its litigation rights and obligations and solicited opinions therefrom according to the law. Tian Company filed an application for instituting a civil suit collateral to criminal proceedings to reduce the cost of rights protection and recover economic losses. The People’s Procuratorate of High-Tech Zone learned the technology involved through visiting the rightsholder, solicited opinions from persons with expertise, comprehensively reviewed the evidence of the entire case, consolidated the basis of relevant evidence, and determined that Fuda was suspected of a crime.

On October 14, 2019, the Procuratorate of High-Tech Zone instituted a public prosecution against the defendants, Fuda Company and Ma Qiang and Guo for the crime of trade secret infringement. On June 10, 2020, Tian Company filed a civil suit collateral to criminal proceedings. On August 3 of the same year, the People’s Court of Hi-tech Industry Development Zone of Jinan City rendered a judgment of first instance in civil matters incidental to criminal proceedings, and sentenced defendant Fuda Company to a fine of 300,000 RMB for the crime of trade secret infringement; sentenced defendants Ma Qiang and Guo to imprisonment of four years and three years and six months respectively with a fine of 60,000 RMB and 50,000 RMB; In the judgment, Fuda Company should compensate Tian Company for economic losses of more than 4.8 million RMB, and Ma Qiang and Guo should assume joint and several liability. After the judgment of first instance was pronounced, both the corporate defendant and the two individual defendants appealed. During the trial of the second instance, the procuratorial authority strengthened the interpretation of laws and reasoning, prompting the two defendants to voluntarily confess to their crimes and accept punishment. Before the trial of the second instance, Fuda Company and Tian Company entered into a Settlement Agreement, and Fuda voluntarily compensated the right holder for their economic losses. On April 2, 2021, the Intermediate People’s Court of Jinan City issued a civil mediation paper attached to the criminal case on the basis of the contents of the Settlement Agreement. Considering the discretionary circumstances of sentencing as to reaching civil mediation, the court of second instance decided on June 4, 2021 to impose a fine of 300,000 RMB on the defendant, Fuda Company, for the crime of trade secret infringement, sentenced defendants Ma Qiang and Guo to imprisonment of three years with four-year reprieve and sentenced to imprisonment of three years with three-year reprieve, and imposed a fine of 60,000 RMB and 50,000 RMB upon them respectively.

Per the SPP, the implications are:

(1) Timely inform rights holders of their litigation rights and obligations, and fully protect their legal rights.

(2) Strengthen the centralized and unified performance of intellectual property inspections, and give full play to the role of comprehensive judicial protection.

(3) Punish crimes of infringing business secrets in accordance with the law, and strengthen interpretation and reasoning to facilitate compensation and understanding.

3. Application of Shaanxi Baishui Kangjiu Co., Ltd. for Supervision over Administrative Litigation

Shaanxi Baishui Moukang Liquor Co., Ltd. (hereinafter referred to as Baishui Moukang Company) is the trademark owner of the “Baishui Moukang” trademark. Yichuan Moukang Jiuzu Asset Management Co., Ltd. (hereinafter referred to as Jiuzu Company) is the trademark owner of the trademark “Mokang”. The company permits Luoyang Moukang Holdings Co., Ltd. (hereinafter referred to as Luoyang Moukang Company) to use the trademark “Mokang” . On August 9, 2016, the Chaoyang Branch of the Beijing Administration for Industry and Commerce, based on the report of a company in Luoyang, issued an Notice on Ordering Correction to Chaoyang Beiyuan Branch of Beijing Yonghui Supermarket Co., Ltd. determining that the manufacturer of the Baishui Moukang Company liquor sold by the supermarket prominently used the word “Moukang”, which was similar to the “Mokang” trademark that Luoyang Moukang Company had rights to, and ordered Yonghui Supermarket Beiyuan branch to stop selling the above-mentioned products that infringe the exclusive right to use the registered trademark.

Baishui Moukang Company brought an administrative lawsuit with the People’s Court of Chaoyang District, Beijing Municipality (hereinafter referred to as Chaoyang District Court). After examination, the Court held that the Written Notice on Ordering to Make Rectification had no actual impact on the lawful rights and interests of Baishui Moukang LLC, as it was not an interested party of the administrative action alleged in the case, and did not meet the statutory conditions for commencing an action, and ruled to dismiss the action of Baishui Moukang LLC. Both an appeal and a retrial petition filed by Baishui Moukang Company with the Beijing Intellectual Property Court and the Beijing Higher People’s Court respectively were not supported. Afterwards, Baishui Moukang Company applied for supervision to the No. 4 Branch of the People’s Procuratorate of Beijing Municipality.

After accepting the case, the Fourth Branch of Beijing People’s Procuratorate focused on the following work:
The first is to find out the history of the trademarks of both parties. In the 1970s, a certain distillery in Yichuan County, Henan Province, a certain distillery in Ruyang County, Henan Province, and a certain distillery in Baishui County, Shaanxi Province all produced “Mukang” wine, but did not apply for “Mukang” as a trademark and only used as a spcific name of the wine. After that, the three distilleries mentioned above had filed applications for trademark registration. Since there was no trademark co-ownership system at that time, after coordination with relevant departments, it was decided that a certain distillery in Yichuan County, Henan Province should register the trademark, and the other two would use it jointly. In the more than ten years of sharing the “Mukang” trademark, the three distilleries have gradually formed their own product characteristics and consumer groups by marking the company name on the product packaging. Significantly improved, all three distilleries have contributed to the development and growth of a Mukang brand. In September 1992, the trademark Mukang entered the renewal registration period, and the three distilleries had another dispute over the ownership and use of the trademark. Despite the coordination of relevant departments, a solution has never been reached. After the trademark authority approved the “Baishui Moukang” trademark for registration. The owner of the trademark for Mukang was changed to Jiuzu Company. The trademark rights of “Baishui Moukang” were transferred, and the trademark owner was changed to Baishui Moukang Company.

The second is to sort out the disputes between the two parties. Since 2015, Luoyang Moukang Company has successively complained to the administrative department of Baishui Moukang Company and filed civil lawsuits in some parts of the country on the grounds that Baishui Moukang Company has violated the exclusive right of registered trademark and unfair competition. Baishui Moukang Company filed a civil lawsuit on the grounds that Luoyang Moukang Company printed “the only enterprise holding the Moukang trademark” on the product packaging it produced and sold, which constituted commercial defamation.

After review, the procuratorial organ believes that the accused “Notice of Ordering Correction” clearly states that the manufacturer of the infringing goods involved is Baishui Moukang Company, and Yonghui Supermarket has removed the products produced by Baishui Moukang Company from the shelves nationwide. Baishui Moukang Company has a legal interest in the specific administrative act being sued, and is qualified as a subject of litigation. Due to the complex historical factors of the trademarks “Mukang” and “Baishui Mukang”, the two trademarks have coexisted in the market for many years, and the administrative organ’s order to stop the sale of the goods involved has had a substantial impact on Baishui Mukang Company, and the case should proceed to trial.

The Fourth Branch of the Beijing Municipal Procuratorate held a joint meeting of prosecutors to discuss the substantive resolution of administrative disputes.

The procuratorial organ believes that the case has the conditions for protest, but considering the need to completely solve the source problem behind the administrative lawsuit, it decided to guide Baishui Moukang Company and Luoyang Moukang Company to reconcile. The procuratorial organ communicated with both parties many times, and finally facilitated the two parties to reach a settlement agreement. The two parties agreed to use their respective trademarks in strict accordance with the provisions of the Trademark Law. When Baishui Moukang Company uses the trademark “Baishui Moukang”, the size of the trademark text shall be the same. After that, the two parties withdrew their lawsuits in 5 civil lawsuits. In addition, Baishui Moukang Company and Jiuzu Company reached a coexistence agreement on the trademarks of “Moukang and Figure” and “Moukang Manor”, and withdrew the lawsuit for two related trademark administrative litigation cases. On September 3, 2020, Baishui Moukang Company submitted the “Application for Withdrawal of Supervision Case” to the Fourth Branch of the Beijing Municipal People’s Procuratorate. After review, the court concluded that the withdrawal of the supervision application complied with relevant laws and regulations, and concluded the review of the case.

Implications per the SPP:

(1) Accurately grasp the historical factors of trademark disputes and strengthen trademark protection in accordance with the law.

(2) Actively extend the procuratorial function and promote the substantive resolution of trademark administrative disputes.

4. Yuyao Hao Lubricant Firm Selling Commodities with Counterfeit Registered Trademarks

Hao Lubricant Firm in Yuyao City, Zhejiang Province  is a sole proprietorship enterprise, and the investor is Han. On September 16, 2019, Hao firm was given administrative punishment by Yuyao Market Supervision Bureau for selling antifreeze, lubricating oil and other commodities with counterfeit registered trademarks, and ordered to immediately stop the infringement. The infringing goods were seized and a fine of RMB 30,000 was imposed. Hao firm did not apply for administrative reconsideration or file an administrative lawsuit within the statutory time limit, nor did it fulfill its obligation to pay the fine after the notice was served. The Yuyao City Court issued an administrative ruling, approving the compulsory execution and filing the case for execution. Haomou firm paid part of the execution payment of RMB 15,000 on the day of the execution of the case.

On December 24, 2020, the Yuyao City Court ruled to terminate the execution procedure because the Hao firm had no property available for execution.

In February 2021, in performing its duties, the People’s Procuratorate of Yuyao City, Zhejiang Province  found that the Hao firm was a sole proprietorship enterprise, and pursuant to the Law on Sole Proprietorship Enterprises, the sole proprietor of the sole proprietorship enterprise assumes unlimited liabilities for the debts of the enterprise with his own property, while the Market Supervision Bureau of Yuyao City failed to legally apply for adding Han as the enforcee after the court ruled to terminate the enforcement procedure, and initiated the supervision procedure according to its powers. The People’s Procuratorate of Yuyao City paid visits to the Market Supervision Bureau of Yuyao City and the People’s Court of Yuyao City to verify the administrative punishment and the enforcement thereof, and communicated with the Supreme People’s Court on the issues concerning the application of law to the enforcement of administrative non-litigation by individual proprietorship enterprises, clarifying that paragraph 1 of Article 13 of the Provisions of the Supreme People’s Court on Several Issues concerning the Modification and Addition of Parties in Civil Enforcement shall apply: “A sole proprietorship, as the person subject to enforcement, cannot pay off the debts determined by the effective legal documents, and the applicant for enforcement applies for changing or adding its capital contributor as the person subject to enforcement, the people’s court shall support it.” The Market Supervision Bureau of Yuyao did not apply for adding the party against whom enforcement is sought, which did not comply with the relevant legal provisions.

On April 25, 2021, the People’s Procuratorate of Yuyao City made and issued a Procuratorial Proposal to the Market Supervision Bureau of Yuyao City, advising the Procuratorate to apply to the court for resuming the enforcement of the case regarding Hao Firm and concurrently applying for adding Han, the capital contributor, as the enforcee.

On May 6, 2021, the Market Supervision Bureau of Yuyao City adopted the prosecutorial advice and applied to the court. After the enforcement was resumed, the People’s Court of Yuyao City rendered a ruling to add Han as the enforcee, taking enforcement measures and completing the enforcement in full.

Implications per SPP:

(1) Suggesting additional persons subject to execution in accordance with the law to ensure that the administrative punishment is properly executed.

(2) Make full use of big data to mine clues of similar cases and improve the quality and efficiency of supervision.

The full text of the release is available here (Chinese only).

 

 

Author: Aaron Wininger

Aaron Wininger is a Senior Attorney and Director of China Intellectual Property at Schwegman Lundberg & Woessner.

Author: Aaron Wininger

Aaron Wininger is a Senior Attorney and Director of China Intellectual Property at Schwegman Lundberg & Woessner.