By Luo Yanjie
The trademark infringement in China, honestly though reluctant to admit, is very serious. That made the administration and the judicial organ pay more attention to the infringement investigation, and on the other hand, foreign invested companies could also be dragged into the conflict concerning the trademark, like Apple encountered enforcement by local administration for iPad trademark. In such circumstance, the calculation to the illegal income amount shall be important to the infringer, which shall influence their legal liability in direct way.
By Article 52 of the Implementing Regulations of the Trademark Law of the People’s Republic of China, the penalty for the infringement against registered trademark is:
“Three times the amount of the illegal business turnover. Where it is impossible to calculate the amount of the illegal business turnover, the fine shall be no more than RMB l00,000 yuan.”
And by Interpretations on Several Issues concerning Law Application in Criminal Cases concerning IPR Matters, the threshold of the crime of illegal manufacture & sales of illegal manufactured trademarks, shall be RMB 50, 000 yuan, yet by the prosecution standard of economy crimes; the threshold is RMB 100, 000 yuan. Through this essay, we would like to share our knowledge on the calculation to the illegal operation income amount:
I. The principle of illegal income calculation
Neither Trademark Law nor the Implementing Regulations for Trademark Law regulates in details the method or standard for the illegal income calculation. In practices, the punishment by the department of industry and commerce shall be subject to the method set in Interpretations on Several Issues concerning Law Application in Criminal Cases concerning IPR Matters, promulgated jointly by Supreme People’s Court and Supreme Procuratorate. And the Interpretation says in Article 12 that
“the “illegal operation income amount” shall refer to the value of the infringing products manufactured, stored or transported in the infringement by the infringer. And the value of the sold infringing products shall be calculated by the actual sales price. The value of the manufactured, stored, transported and unsold products shall be determined as per the labeling price or the investigated average price of the infringing products. In case there is no labeled price or the actual price could not be investigated, the value shall be calculated by the average market price.”
II. The determination of the middle market price of infringing products
With the above judicial interpretations, there shall be no doubt over the illegal income calculation for those products labeled with price of having an actual sales price. Yet one might still question about the value of those with no label or no actual prices for sale as investigated, and the main reason is, no legal definition of “middle market price” for whether it shall be the price of the genuine or the price of the knockoffs.
However in the administrative and judicial practices, the middle market price of infringing products shall be calculated by the price of the genuine products. Like in the action by Wenzhou Administration of Commerce and Industry against the counterfeited trademark of Zippo (note: the link is in Chiese), the official determined the middle market price basing on the price of RMB 188 yuan provided by Zippo.
III. Illegal income amount for infringement aiding
Except the obviously manufacture and sale of infringing products, what is the way to calculate the income occurred from the infringement aiding, like transportation, storage or processing, instead of the direct infringement of manufacture. For this, our opinion is, with the reference to the joint offense, the income amount shall be determined by all the value of the manufactured infringing products for their participation in the infringement accompanied with the manufacturer. And the gains of the processing shall be the illegal gains rather than the illegal turnover. Also such practices could be adopted in administrative enforcement.
Moreover, as to the processing, the yet labeled infringing products shall be included in the illegal turnovers? Like the zip head etched with YKK, but yet combined with the rest components, is concealed by the department of industry and commerce, then shall the value of the knockoff be calculated with the whole set of zip of only the head?
By Article 7 of the Interpretation,
“for the knockoffs not labeled or not fully labeled, when calculating its value as manufactured, stored, transported, unsold, once there could collected a solid proof they will be used for the infringement against others’ trademarks, the value of them shall be calculated into the turnover. ”
Therefore, in the aforesaid case, unless the infringer could prove the head and other components are separated products for sale, the enforcement official could combine calculation the turnover with them together.
Other recommended posts on our website:
1. The Actual Term of Trademark Registration in China
2. How to Apply for the Trademark Record in China Custom
3. How to improve the success rate of trademark registration in China?
4. Matters for Attention in Trademark Refusal Review in China
5. Introduction of China’s Legal System of Trademark Renewal
6. Introduction on the Regulations concerning the Capital Contribution in IPR or Domain Name in China
7. The Copyright Registration in China Could Be FREE?
8. China Copyright Protection Term Longer than EU’s?
9. Matters for Attention in the Patent Preliminary Injunction Application in China(I)
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