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Research On Crimes Of Patent Infringement In Mainland China (II Of III)
date: 2013-03-07John Z. Wang, Hong Liu

2. Explanations on the Crime of Patent Counterfeiting from the Perspective of Current Legislation of mainland China on the Crime

2.1 Current Legislation

Article 216 of the "Criminal Law" of mainland China provides that whoever counterfeits a patent of another person shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of no more than three years or criminal detention and shall also, or shall only, be fined.

Article 63 of the "Patent Law" provides that where any person counterfeits a patent, he shall, in addition to bearing his civil liability according to law, be ordered by the administrative authority for patent affairs to correct his act, and the order shall be announced. His illegal earnings shall be confiscated and, in addition, he may also be imposed a fine of no more than four times of his illegal earnings and, if there are no illegal earnings, a fine of no more than RMB200,000. Where the act of infringement constitutes a crime, he shall be prosecuted for his criminal liability.

Article 4 of the "Interpretations of the Supreme People's Court and the Supreme People's Procuratorate on Issues concerning the Specific Application of Law When Handling Criminal Cases of Infringement of Intellectual Property Rights" provides that where any person counterfeits a patent of another person, any of the following circumstances shall be deemed "a serious circumstance" as provided in Article 216 of the Criminal Law, and the person shall be sentenced to fixed-term imprisonment of no more than three years or criminal detention and shall also, or shall only, be fined upon conviction of the crime of patent counterfeiting: (1) having an illegal business value of over RMB200,000 or an illegal income of over RMB100,000; (2) causing a direct economic loss of over RMB500,000 to the patentee; (3) counterfeiting two or more patents of another person, and having an illegal business value of over RMB100,000 or an illegal income of over RMB50,000; and (4) other serious circumstances.

Article 10 of the "Interpretations of the Supreme People's Court and the Supreme People's Procuratorate on Issues concerning the Specific Application of Law When Handling Criminal Cases of Infringement of Intellectual Property Rights" provides that any of the following acts shall be deemed "counterfeiting a patent of another person" as provided in Article 216 of the Criminal Law: (1) marking the patent number of another person on the products or their packages manufactured or sold by the actor without the permission of the patentee; (2) using the patent number of another person in advertisements or other promotional materials without the permission of the patentee so as to mislead the consumers to mistake the used technology therein for that of another person; (3) using the patent number of another person in contracts without the permission of the patentee so as to mislead the other party to the contract to mistake the used technology therein for that of another person; and (4) counterfeiting or transforming the patent certificate, patent document or patent application document of another person.

 

2.2 Explanation of the Legislation

As mentioned above, there are many types of patent infringement acts, such as the type of acts of exploiting a patent of another person without authorization and counterfeiting a patent of another person, etc. However, the current legislation under either the Patent Law or the Criminal Law of Mainland China provide criminal liabilities only for the type of unlawful acts of counterfeiting a patent of another person, which is defined as a criminal offence by law, and other acts of patent infringement, including the acts of exploiting a patent of another person without authorization, and are subject only to civil liabilities provided in the legislation of mainland China and will not be criminally penalized. On the basis of such legislation and in accordance with the principle of legally prescribed punishment for a specified crime, acts of counterfeiting a patent of another person with serious circumstances are subject to criminal penalties, while other acts of patent infringement, including exploiting a patent of another person without authorization, even if the circumstances are serious, are subject only to civil punishment rather than criminal penalties. The aforesaid notion is widely accepted on the basis of the essence of the principle of legally prescribed punishment for a specified crime, and "nullum crimen sine lege, nulla poena sine lege (there must be no crime or punishment except in accordance with fixed, predetermined law)". Nonetheless, why does the law provide for the crime and the corresponding criminal penalties for acts of patent counterfeiting and not provide for the crimes and their corresponding criminal penalties for other acts of patent infringement, such as exploiting a patent of another person without authorization? What are the reasons for the legislators to make the legislative choice? The above two questions are to be firstly interpreted, which will serve as preconditions of developing discussions in the later part of the article.

The first question regarding the reasons of criminalizing the acts of patent counterfeiting in the current legislation of mainland China and the considerations of the legislators when making such legislative choice can be answered by a quote made by Tang Zongshun, researcher and legal counsel of the Patent Office: "a patent is a kind of property right and, in many countries, acts of patent infringement are criminally penalized in the same way that robbery and theft are penalized, but with a lighter punishment. So the Draft provides both civil and criminal liabilities for the acts of patent infringement. The Legislative Affairs Commission argued it would be sufficient to provide for civil liabilities only. However, since there are express provisions of penalties for acts of trademark counterfeiting in the Criminal Law, the legislation will appear unbalanced if the provisions of criminal liabilities for acts of patent counterfeiting are excluded. We considered that civil liabilities alone are sufficient for penalizing acts of general patent infringement, while, due to the harm to the interests of consumers in general, it seemed that acts of patent counterfeiting may be subject to criminal penalties the same way that acts of trademark counterfeiting are penalized. The Legislative Affairs Commission then accepted the proposal." A patent is a kind of intangible asset. As today's knowledge economy is increasingly deepened and gradually leading the global economic development trends, patent rights, as a kind of intellectual property right, have the equally important property attributes of proprietary rights, and exercising patent rights are the same as exercising proprietary rights, which will bring enormous economic value to the rights holders. The material wealth generated by patent rights constitutes the foundation for people to constantly improve their material lives and the source for enterprises to expand their reproductions. Therefore, acts of patent counterfeiting should be criminally penalized in the same way that robbery and theft are penalized, and it is justified in providing for the crime of patent counterfeiting and criminalizing the acts of patent counterfeiting in mainland China. However, just as what was said by the researcher Tang Zongshun, "since there are express provisions of penalties for acts of trademark counterfeiting in the Criminal Law, the legislation will appear unbalanced if the provisions of criminal liabilities for acts of patent counterfeiting are excluded", the criminalization for acts of patent counterfeiting is to a large extent the analogical application of law. "Although the Criminal Law of our country has completely abolished the system of analogical application of law, people from judicial departments as well as theorists of criminal law still intentionally or unconsciously show their nostalgia towards the system." Given the prohibition of the analogical application of law, it is not allowed to criminalize acts of patent counterfeiting by imitating the criminalization of acts of trademark counterfeiting. The criminalization of acts of patent counterfeiting justified only through analogical application of law lacks jurisprudential support, which leads to many problems in judicial practice. The author will discuss the problems in the later part of the article.

As for the second question, i.e. why the current Criminal Law does not criminalize the acts of other patent infringements, such as acts of exploiting a patent of another person without authorization, the author believes such legislative choice has something to do with the modesty principle of criminal laws. The modesty principle of criminal laws refers to the principle where a criminal law should, in accordance with certain rules, control the scope of unlawful acts subject to criminal penalties and the severity of its criminal penalties, that is to say, when another law other than criminal law is sufficient to restrain a type of unlawful act and protect the legitimate rights and interests, there's no need to criminalize the unlawful act; and when a lighter criminal penalty is sufficient to restrain a type of criminal act and protect the legitimate rights and interests, there's no need to impose a heavier criminal penalty on the criminal offender. The core of the modesty principle is to require criminal law to control the scope of regulation, i.e. a certain act can only be defined as a crime and criminally penalized when it satisfies certain conditions. "Two conditions need to be met for resorting to criminal law to resolve a social conflict: one is that the act is harmful to society to a quite serious degree, and the other is that it is inevitable to impose criminal penalties in response to a harmful act...generally speaking, criminal penalties are not inevitably applied under any of the following circumstances, where: (i) criminal penalties have no effect on a harmful act, i.e. the harmful act can't be prevented or resisted by defining the act as a crime and imposing criminal penalties on the offender; (ii) criminal penalties are replaceable, i.e. instead of resorting to criminal law, a harmful act can be prevented or resisted by other social means or legal means, such as moral education, civil or administrative sanctions; or (iii) application of criminal penalties is too costly, i.e. the benefit of criminal penalties fails to outweigh its negative effects." An act of exploiting a patent of another person without authorization is an act of private right infringement, and the economic loss of the patentee can be recovered by making the infringer take on such civil liabilities as stopping the act of infringement and compensating the damages. The core benefit of a patent right is its huge economic benefit, which serves as the motivation of an infringer to risk condemnation of the public in conducting unlawful activities of infringing the property interests of a patentee. However, an act of exploiting a patent of another person without authorization infringes the property interests of a patentee only, and the public interests of society are not involved in such a case. Hence, the said acts discussed here should be limited to the scope of regulations of private laws rather than being subject to public laws, especially the criminal law.

The author makes the speculations above on the original intentions of the current legislation concerning crimes of patent infringement with an attempt to clarify certain unclear issues therein, and the author will further discuss if such legislative choices are proper and if the original intentions of such legislation are reasonable.

 

2.3 Discussions on Issues concerning the Crime of Patent Counterfeiting

The current legislation of mainland China provides for only one type of crime of patent infringement, i.e. the crime of patent counterfeiting. The author briefly discusses below several issues concerning the crime in judicial practice. However, the article is not positioned as a pure academic paper on criminal law, but is focused on the criminal protections of patent rights, and the criminalization and decriminalization of an act of patent infringement; thus issues in relation to criminal jurisprudence are only briefly stated.

2.3.1 Constituent Elements of a Crime

Academic circles generally regard the so-called constituent elements of a crime as an organic unity of the objective elements (the form of existence of a crime) and the subjective elements (the culpability of a crime). Since the constitutive elements of a crime are the foundation of the criminal theory and the starting point for the study of criminal charges, it is inevitable to study the constituent elements of the crime of patent counterfeiting. Concerning the constituent elements of a crime, there has been a debate over the "four-element doctrine" and the "three-tier doctrine". The author, however, makes the discussions following the "four-element doctrine", i.e. subject, subjective element, object and objective element of the crime of patent counterfeiting.

Subject of the crime: Article 216 of the Criminal Law of Mainland China provides that whoever counterfeits a patent of another person shall, if the circumstances are serious, be sentenced to fixed-term imprisonment of no more than three years or criminal detention and shall also, or shall only, be fined. Article 220 provides that where a unit commits any of the crimes mentioned in the Articles from 213 through 219 of this Section, it shall be fined, and the persons who are directly in charge and the other persons who are directly responsible for the crime shall be punished in accordance with the provisions of the Articles respectively. Thus it can be seen that the subject of a crime of patent counterfeiting may be an individual or a unit.

Subjective element of the crime: "There is no disagreement over the subjective element of the crime of patent counterfeiting in patent laws and criminal laws of all countries, which acknowledge that only an intentional act may constitute the crime, and a negligent act does not constitute the crime. China is of course no exception." Besides, the legislation of mainland China does not provide for any special requirement on the purpose of the crime in respect of its subjective element: "purposes of committing such an offence do not affect the constitution of the crime of patent counterfeiting."

Object of the crime: the object of a crime refers to the legal interest infringed by a criminal act. The major object of the crime of patent counterfeiting is the patent management system, and the minor object of the crime is the patent right of a patentee and the legitimate right and interest of consumers.

Objective element of the crime: according to Article 10 of the "Interpretations of the Supreme People's Court and the Supreme People's Procuratorate on Issues concerning the Specific Application of Law When Handling Criminal Cases of Infringement of Intellectual Property Right" (the "Interpretations"), acts of patent counterfeiting include: (1) marking the patent number of another person on the products or their packages manufactured or sold by the actor without the permission of the patentee; (2) using the patent number of another person in advertisements or other promotional materials without the permission of the patentee so as to mislead the consumers to mistake the used technology therein for that of another person; (3) using the patent number of another person in contracts without the permission of the patentee so as to mislead the other party to the contract to mistake the used technology therein for that of another person; and (4) counterfeiting or transforming the patent certificate, patent document or patent application document of another person. In addition, the conditions constituting "serious circumstances" are prescribed for the purpose of the Interpretations.

 

2.3.2 Issues of Crime Quantity - Taking the Crime of Manufacturing and Selling Fake and Substandard Products as an Example

Crime quantity refers to the number of crimes in a case, i.e. whether acts in a case constitute a crime or several crimes, and the form of crime quantity refers to the form of a crime or the forms of several types of crimes in a case. In practice, acts of patent counterfeiting are usually interwoven with other unlawful acts. For example, it is possible that there are acts of patent counterfeiting as well as acts of manufacturing, and selling fake and substandard products in a case of manufacturing and selling fake and substandard products, so how should the crime quantity be determined under such a circumstance?

The determination of crime quantity can be explained as follows: according to Article 140 of the Criminal Law, acts of manufacturing and selling fake or substandard products are referred to as acts of mixing impurities into or adulterating a product, or passing a fake product off as a genuine one, a defective product as a high-quality one, or a substandard product as a standard one by a manufacturer or seller of the product. In order to make the fake or substandard products more deceptive, an illegal operator cheats consumers through acts of patent counterfeiting, including marking a patent number of another person on packages of his/its products and using a patent number of another person in advertisements or other promotional materials, misleading consumers to regard the products as those equipped with patented technology, so as to enhance the credibility of his/its products, attract consumers and gain illegal benefits thereby. Thus, the acts of patent counterfeiting are aimed at further disguising the fake or substandard products to attract more consumers and gain more economic interests, which can be deemed as the acts of means for the acts of manufacturing and selling fake or substandard products. The aforesaid two types of acts have an implicated relationship of means and ends, and constitute an implicated type of crime, which is subject to one of the two charges with prescribed heavier penalties.

2.3.3 Differences between Acts of Patent Counterfeiting and Acts of Patent Passing Off

Article 84 of the "Implementing Rules of the Patent Law" amended in 2002 provides that the following are acts of patent counterfeiting: (1) marking a patent number of another person on products or packages of products without the permission of the patent holder; (2) using a patent number of another person without authorization in advertisements or any other promotional materials so as to mislead the public to regard the technology concerned as a patented technology of the other person; (3) using a patent number of another person without authorization in a contract so as to mislead the public to regard the technology referred to in the contract as a patented technology of the other person; and (4) counterfeiting or transforming a patent certificate, patent document or patent application document of another person. Article 85 thereof provides that the following are acts of passing non-patented products off as patented products or passing non-patented methods off as patented methods, which mainly include the following circumstances: (1) manufacturing or selling non-patented products affixed with patent markings; (2) continuing the use of patent markings on products manufactured or sold after the patent concerned is declared invalid; (3) alleging any non-patented technology to be patented technology in advertisements or any other promotional materials; (4) stating any non-patented technology as patented technology in a contract; and (5) counterfeiting or transforming any patent certificate, patent document or patent application document.

According to the provisions, the primary difference between acts of patent counterfeiting and acts of patent passing off lies in the object of infringement. An act of patent passing off is either passing a non-patented product off as a patented product or passing a non-patented method off as a patented method, and what has been infringed by such an act is a patent that does not exist at all, which does not involving any real patent, and thus does not cause infringement on any patent right of a patentee. In short, such an act simply usurps the name of patent, and the objects of infringement of such an act are the patent management system of the state as well as the reliance interests of consumers. However, an act of patent counterfeiting infringes a real patent right of another person. The act of patent infringement does not only breach the national patent regime, but also impair the patent rights owned by the patentee.

Nevertheless, the "Implementing Rules of the Patent Law" amended in 2010 integrated the provisions of Articles 84 and 85 of the original "Implementing Rules of the Patent Law" into the current Article 84, and acts of patent passing off were assimilated into acts of patent counterfeiting. This is a significant change in criminal legislation on acts of patent infringement in mainland China, which will be specifically discussed later.

 

2.4 Judicial Practice of the Crime of Patent Counterfeiting in Mainland China

2.4.1 Overall Situations

Given the inadequacy of legislation on the crime of patent infringement in mainland China, there have been few cases of conviction of the crime of patent counterfeiting since the establishment of the crime in the new Criminal Law (1997) of mainland China. Beijing occupies an important position in social and economic life in mainland China, and it is one of the regions with the largest number of criminal cases concerning intellectual property right infringement tried by their judicial systems. However, according to the statistics released by the judicial system of Beijing on the number of criminal cases concerning intellectual property right infringement counted from 2006, no case of patent infringement has been tried. According to the statistics, the judicial system of Beijing totally concluded 373 criminal cases of first instance, which include 72 cases in 2006, 100 in 2008, 91 in 2009, and 43 between January and June in 2010. In terms of specific charges involved, 218 cases thereof were charged with selling commodities bearing a counterfeited registered trademark, 79 for counterfeiting registered trademarks, 49 for copyright infringement, 14 for illegally manufacturing marks of a registered trademark or selling marks of a registered trademark illegally manufactured, 12 for trade secret infringement and one for selling pirated goods.

According to well-documented data published by the local courts of mainland China, there has been only one patent counterfeiting case heard in the past three years, which was a case of private prosecution rather than public prosecution, and the defendant in the proceedings was finally acquitted due to the insufficiency of the evidence.

2.4.2 Public Prosecution and Private Prosecution

According to the "Interpretations of the Supreme People's Court and the Supreme People's Procuratorate on Issues concerning the Specific Application of Law When Handling Criminal Cases of Infringement of Intellectual Property Rights", an act of patent counterfeiting can only be prosecuted when the circumstance is serious. A victim of an act of patent infringement that seriously harms social order and national interest may report to the patent administration department and, if the circumstance of such act is deemed serious as prescribed in the Criminal Law, the patent administration department should transfer the case to the public security organ, who will, after supplementary investigations, officially file for public prosecution before a competent people's procuratorate. Where a victim has evidence of a criminal case of intellectual property right infringement, he/it may directly file a lawsuit before a people's court having jurisdiction, and the people's court shall accept the case.

However, the provisions allowing an intellectual property right holder to file a private criminal prosecution barely function due to the requirements imposed on the victim. In particular, while a victim is entitled to file a private prosecution when the circumstances meet the conditions prescribed by law, he/it is also required by law to bear the burden of proof. The principle of ruling out reasonable doubt is applied to a criminal case, that is, a person can't be convicted of an act if the judge has any reasonable doubt on the conviction. In a general public criminal prosecution, the evidence may only be obtained by exercising public power by organs of state power; however, in a private prosecution case, a right holder, who is only an ordinary citizen without the right of arrest and search, has a lower capacity and less possibility of collecting and fixing evidence compared with the organs of state power.

 

2.4.3 Jurisdiction

The criminal jurisdiction over the crime of intellectual property right infringement is subject to the general rules of the jurisdiction over common criminal cases, i.e. jurisdiction of the court where the crime is committed and jurisdiction of the court where the criminal defendant resides. As far as the current situation of intellectual property right protection is concerned, the aforesaid prescribed rules of jurisdiction are not very scientific. The overall characteristic of the current economic development trend of mainland China is the imbalance of the economic development output among different areas, where the coastal areas of east China and some major cities in the Midwest have higher levels of economic development, and most of the enterprises owning intellectual property rights are located in such areas. Thus, the demand for protection of intellectual property rights is at a higher level in such areas, and the judicial functionaries in such areas are more experienced in investigating and prosecuting crimes of intellectual property right infringement. However, the place where an intellectual property right infringer resides or an act of infringement is committed frequently changes, and acts of intellectual property right infringement are even committed in a guerilla way. Consequently, the competent authorities in a place where an intellectual property right infringer resides or an act of infringement is committed do not have initiatives to take measures in fighting against crimes of patent infringement. In contrast, the authorities in a place where an intellectual property right holder resides or operates are more willing to actively perform the functions of intellectual property right protection. Nevertheless, all criminal cases, including the cases concerning intellectual property right infringement, are subject to the general rules of jurisdiction under the Criminal Procedure Law, and how to find out a way that respects the rule of law as well as being practical and feasible to motivate the initiatives of society to investigate and prosecute crimes of intellectual property right infringement will be an issue presented in front of scholars and judiciary personnel.

2.4.4 Judicial Expertise and Evidence Collection

It is a very difficult issue to investigate and collect evidence in judicial practice in criminal cases of intellectual property right infringement, which include the criminal cases of patent counterfeiting. A case of patent counterfeiting involves complex comparisons of patent solutions and technical features, and the determination of whether the suspected counterfeited patent has the same technical features as the patented one will be crucial evidence of criminalization and decriminalization, which need to be concluded by an authoritative expertise institution.

Currently, there are many qualified judicial expertise institutions in mainland China, but no unified regulations are provided on the authority of such institutions. The judicial expertise institutions include private ones as well as those recognized by courts and investigation departments of public security organs. In practice, during the investigating stage of a case, an investigation department of a public security organ may appoint an expertise institution it recognizes to conduct expertise evaluation; however, when the case proceeds to the trial stage in a court, if the defendant questions the authority of the professional institution appointed by the public security organ as well as the expert conclusion and request for a new expert evaluation arranged by the court, the expert evaluation may be changed and the defendant may not be convicted thereby. Therefore, it is inevitable to solve the problem of difficulties in judicial expertise and evidence collection by strictly controlling the system of admittance for expertise institutions and unifying the standard of expertise evaluations.

The author suggests that, in order to ensure objectivity and impartiality, it may be a feasible way for a public security organ or a court to refer to the civil procedure concerning judicial expertise to select a qualified expertise institution agreed upon by both the defendant and the right holder before conducting the judicial expertise.

Reference

Tang Zongshun: "Recall of the Drafting of the Patent Law", contained in the "Intellectual Property System of China in the Past Two Decades" (Editor in chief: Liu Chuntian), Patent Literature Publishing House, 105(1998).

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