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Laws & Regulations
11th Amendment to PRC Criminal Law Came into Effect on March 1 and the Maximum Penalty for Intellectual Property Rights Infringement is 10 Years
Issue Date: 2020-12-26
Effective Date: 2021-03-01
On 26 December 2020, the 24th meeting of the Standing Committee of the 13th National People's Congress adopted the 11th Amendment to the PRC Criminal Law (the “Amendment”), which came into force on 1 March 2021.
The Amendment revises the provisions relating to intellectual property crimes, highlights of which include raising the maximum penalty for intellectual property crimes to 10 years, adding the protection of "service marks" to the provisions on the crime of counterfeiting registered trademarks, and amending the provisions on crimes involving the infringement of copyright or copyright-related rights in accordance with the recently amended Copyright Law. According to the recently amended Copyright Law, the provisions on criminal acts involving the infringement of copyright or copyright-related rights were amended to strengthen the fight against copyright infringement, and the types of criminal acts on trade secret infringements were supplemented with the addition of "commercial espionage".
There are eight amendments specifically relating to intellectual property crimes, namely:
1. Article 213: "Where a party, without the permission of the owner of a registered trademark, uses the same trademark as its registered trademark on the same goods or services, and the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than three years and a fine or a single fine; if the circumstances are particularly serious, the offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and a fine."
2. Article 214: "Where a party knowingly sells goods with counterfeit registered trademarks, and the amount of illegal income is large or there are other serious circumstances, shall be sentenced to fixed-term imprisonment of not more than three years and shall be punished by a fine or a single fine; if the amount of illegal income is huge or there are other particularly serious circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than three years but not more than ten years and shall be punished by a fine. "
3. Article 215: "Where a party counterfeits or produces without authorisation representations of another’s registered trademark or logos or sells such representations, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than three years and a fine or a single fine; if the circumstances are particularly serious, the offender shall be sentenced to fixed-term imprisonment of not less than three years and not more than ten years and a fine."
4. Article 217: "Where a party, for the purpose of making profits, commits one of the following acts of infringement on copyright or copyright-related rights, and the amount of illegal income is large or if there are other serious circumstances, shall be sentenced to fixed-term imprisonment of less than three years and a fine or a single fine; if the amount of illegal income is huge or there are other particularly serious circumstances, the offender shall be sentenced to fixed-term imprisonment of more than three years and less than ten years fixed-term imprisonment and shall also be fined:
a. Copying and distributing, or disseminating to the public through information networks, written works, music, art, audiovisual works, computer software and other works provided for by laws and administrative regulations without the permission of the copyright owner;
b. publishing books in which others enjoy exclusive publishing rights;
c. reproducing or distributing audio and video recordings to the public through information networks without the permission of the producer of audio and video recordings;
d. reproducing and distributing audio and video recordings of performances, or disseminating performances through information networks to the public without the permission of the performer;
e. producing or selling works of art forged by others;
f. intentionally avoiding or destroying technical measures taken by the copyright owner or copyright-related rights holder to protect its works, sound and video recordings, etc. without the permission of the rights holder. "
5. Article 218: "Where a party, for the purpose of making profits, sells infringing copies knowingly specified in Article 217 of this Law, and the amount of illegal proceeds is huge or there are other serious circumstances, shall be sentenced to fixed-term imprisonment of not more than five years, and/or a fine."
6. Article 219: "Where a party commits one of the following acts of trade secret infringements, and the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than three years and/or a fine; if the circumstances are particularly serious, the offender shall be sentenced to fixed-term imprisonment of not less than three years and not more than ten years and a fine:
- obtaining trade secrets of the right holder by means of theft, bribery, fraud, coercion, electronic intrusion or other improper means;
- disclosing, using or allowing others to use the trade secrets of the right holder obtained by the previous means;
- disclosing, using or allowing others to use trade secrets in their possession, in violation of the confidentiality obligations or of the requirements of the right holder to safeguard the trade secrets.
Where a party knows of the acts listed in the preceding paragraph but accesses, discloses, uses or allows others to use the trade secrets, will be punished for trade secret infringement.
The ‘right holder’ referred to in this article refers to the owner of the trade secret and the parties using the trade secret with the permission of the trade secret owner."
7. Addition of a new article - Article 219-1: "Foreign institutions, organizations, or personnel that steal, spy, buy or illegally provide trade secrets, shall be sentenced to less than five years of fixed-term imprisonment and/or a fine; if the circumstances are serious, they shall be sentenced to more than five years of fixed-term imprisonment and a fine."
8. Article 220: "If a unit commits a crime under Article 213 to Article 219 of this section, the unit shall be sentenced to a fine and the persons directly in charge and other relevant personnel shall be punished in accordance with the provisions of the articles in this section."
IP Court of the Supreme People’s Court Issues its 2020 Annual Report
The Intellectual Property Court of the Supreme People's Court (the “IP Court”) held a press conference on the second anniversary of its establishment and released its 2020 Annual Report (the “Report”). According to the Report, in 2020, the IP court received a total of 3,176 new technical IP cases and concluded 2,787 cases, with a closing ratio of 88% and a closing rate of 76% (including 512 old cases in 2019). Compared to the same period in 2019, the number of cases received increased by 1,231, a year-on-year increase of 63%. The number of cases concluded increased by 1,354, a year-on-year increase of 95%. In 2020, approximately 82.5 cases were concluded per judge, a year-on-year increase of 110%. The average trial period for civil substantive cases was 121.5 days, and the average trial period for administrative cases was 130.7 days.
Among the 1,948 new civil second instance cases, 435 cases were on the infringement of invention patent rights, 754 cases were on the infringement of utility model patent rights, 163 cases were on the infringement of patent application rights and patent ownership, 360 cases were disputes over computer software, 67 cases were disputes over technology contracts, 44 cases were disputes over technology secrets, 40 cases were disputes over new plant varieties, 30 cases were disputes over monopolies, 5 cases were disputes over integrated circuit layout designs and 50 cases were on other types of disputes.
Overall, the court concluded a total of 2,787 cases in 2020. Among them, 1,667 cases were closed by upholding the original judgment, 539 cases were closed by withdrawal (including approved withdrawals of the appeal and deemed withdrawals of the appeal, of which approved withdrawals of the appeal were mostly applied by the parties to reach a settlement), and 158 cases were closed by mediation (with the issuing of civil mediation letters). The withdrawal rate was 25% and 405 cases were closed by retrial or change of judgement. The rate of remittance was 15%, and 18 cases were settled by other means.
IP Court of SPC Issued 10 Typical Cases of Technological Intellectual Property in 2020
Recently, the Intellectual Property Court of the Supreme People's Court (the “IP Court”) issued the 10 typical cases of technological intellectual property of 2020, which are as follows:
1. In the three cases on the "anti-suit injunction" against standard-essential patents for wireless communications, the IP Court made its first ever "anti-suit injunction" in the field of intellectual property in China, which is subject to continuous daily fines to ensure the ruling is properly implemented.
2. The case on the “Vanilin” technology trade secret, which involved the highest compensation awarded for trade secret infringement in China.
3. The case on the “Kabo” trade secret, which was the first case where punitive damages were imposed by the Supreme People’s Court.
4. The NX computer software copyright infringement case, which equally protects the legitimate rights and interests of foreign subjects in accordance with the law, clarifies the consequences of the litigation participants' interference with the preservation of evidence, and takes the performance of the accused infringer in the litigation in consideration when determining the damages.
5. The “selfie stick” and “lighter” series of cases, where the IP Court actively promoted the investigation on the sources of the rights protection and litigation for bulk utility model patent rights.
6. The case on the invalidity of the "secondary lithium-ion battery" patent. The significance of this case is to clarify the criteria of whether the claims with two or more groups of different numerical ranges can be supported by the description.
7. In the two cases on “web portal access”, the IP Court took advantage of the integrated technical intellectual property rights system by jointly hearing the civil and administrative appeals, effectively solving the problem of "picking up one case after another" in the case of cross-overs between the administrative and civil patent procedures. The IP Court has also solved the procedural delay caused by the customary "first refusal and separate prosecution", along with the inconsistency in interpretating claims, and coordinated the adjudication of results between administrative and civil patent infringement cases.
8. The "lithium battery protection chip" integrated circuit layout design infringement case, which was the first case on infringement of the exclusive rights of integrated circuit layout designs accepted by the Supreme People's Court for the second instance.
9. The “TMall” case, which is the first case on reverse act preservation by the Supreme People’s Court.
10. The "Brick and Tile Association" monopoly case, which clarified the purpose and direction of civil remedies for monopolies. The case clarifies that the voluntary implementation of horizontal monopoly agreements is not the objective intended by the anti-monopoly law, and reveals that the essence of the horizontal monopoly agreements is to divide up the benefits caused by the monopoly by having the implementers demand compensation from other implementers for the losses caused by monopoly agreements. This is of great significance for combating horizontal monopolies and maintaining fair competition.
Damages Awarded for Trade Secret Infringement Reaches a Record-breaking RMB 159 Million in the Vanillin Case
After the former employees of Jiaxing Zhonghua Chemical Co., Ltd. ("Jiaxing") received remuneration from Wanglong Group Co., Ltd. ("Wanglong "), they disclosed the Jiaxin’s trade secrets on its vanillin production process to the supervisor of Wanglong Group and Ningbo Wanglong Technology Co., Ltd. ("Ningbo Wanglong"). Since then, Wanglong began to produce vanillin and became the third largest vanillin manufacturer in the world in a short time. As a result, the market share of Jiaxing was greatly reduced and Jiaxing suffered serious economic losses. Jiaxing filed a lawsuit with Zhejiang Provincial Higher People's court against Wanglong, and the first instance court ordered the defendant to stop the infringement and to compensate the plaintiff for economic losses of RMB 3 million and RMB 500,000 as costs incurred to stop the infringement. Apart from the defendant Wang Guojun, all the parties in this case did not accept the first instance judgement and appealed to the Supreme People's Court.
After hearing the case, the Intellectual Property Court of the Supreme People's Court (the “IP Court”) found that the defendants infringed all the trade secrets involved in the case. Firstly, the case involved serious infringement circumstances, malicious infringement methods, and obvious subjective intention of the infringers over a lengthy time period. Secondly, some of the infringers in this case (e.g. Wanglong) were actually engaged in the infringing acts, and the purpose of their establishment and operations was mainly to produce vanillin by using other’s trade secrets. In addition, the right holder and the infringer in this case are the main entities producing vanillin in China. As the infringer illegally obtained and used the trade secrets of the right holder to enter the market, it resulted in a sharp decline in the price of the right holder's products and a significant reduction in market share, causing huge losses to the right holder. Therefore, the sales profit generated by the infringement became the basis for calculating the compensation. The court of second instance chose the infringer's actual annual sales of at least 2,000 tons during 2011-2017 as the sales volume, multiplied by the price and profit margin of the right holder's sales of vanillin, in order to arrive at the sales profit generated by the infringement. In summary, the court of second instance ordered each infringer to jointly and severally compensate Jiaxing a total of RMB 159 million.