26/04/2020
Shanghai White Paper on Prosecution of Intellectual Property Crimes(2019)
The White Paper, based on the procuratorial function, is a systematic analysis of the intellectual property right (hereinafter referred to as the “IPR”) criminal cases handled by the procuratorates in Shanghai in 2019. Moreover, the trend and features of such crime are studied and judged, and the countermeasures and suggestions are offered. Meanwhile, Shanghai People’s Procuratorate also published typical cases of the IPR crime in 2019, providing more professional, more standardized, and more powerful judicial safeguard to optimize the business environment through the rule of law and to create the innovative and entrepreneurial atmosphere.
I. The IPR criminal cases in Shanghai
(I) Basic situation of cases
The procuratorates in Shanghai took cognizance of 922 IPR criminal cases involving 2,092 persons in 2019. Upon examination, 959 persons were under arrest in 443 cases and 1,133 person were prosecuted in 479 cases.
1. An increase in new-type, hard, and complicated cases. New-type, hard and complicated cases handled by the procuratorates in shanghai in terms of the determination of complex and technical facts
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and that of the application of law kept emerging, e.g. the first-ever case of infringement upon the copyright by means of the WeChat plug-in software as well as those of infringement upon the IPR with the help of new technology including the deep linking and the parser tool.
2. Comparatively greater proportion of cases of counterfeiting the registered trademarks. In terms of the case type, trademark-related cases accounted for comparatively greater proportion in the caseload1 of a range of infringement upon the IPR in Shanghai, i.e. 90.13%, including 245 cases of counterfeiting the registered trademarks with 648 perpetrators and 35 cases of illegal manufacture of registered trademark logos and sales thereof with 87 perpetrators. Moreover, there were also 17 cases of infringement upon the business secret with 28 perpetrators, 66 cases of infringement upon the copyright with 192 perpetrators, and eight cases of selling pirated goods with nine perpetrators. There was no case of counterfeiting patents in the whole year.
3. Highlight of the leading pre-examination role and further strengthening of the function of legal supervision. The procuratorates in Shanghai insisted on intervention in advance in hard and complicated IPR criminal cases of significant influence and new
1 The caseload means sum of the number of arrest cases and that of the prosecuted case upon examination.
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type to proactively guide the investigation and effectively fight the crime, e.g. the timely intervention in a “zero-confession” case of infringement upon the business secret, resulting in detailed suggestions on investigation regarding the source of the related technical information, the security measure, the whole course of disclosure, the obligation of confidentiality, and the damage so that a complete evidence system could take form and the guilty company and its persons-in-charge could be correctly and timely prosecuted.
4. Strengthening of the application of the plea agreement and a significant increase in the proportion of the compensated right holders. The proportion of the number of IPR cases where the plea agreement system was applied reached 41.66%, up 31% over the previous year. Thanks to strengthening of the application of the plea agreement system and promotion of the proportion of compensated IPR holders, altogether 87 defendants took the initiative to return nearly RMB 200 million at the stage of examination for arrest, an increase of 32.8 times over the previous year. The compensated holders were not limited to the cases of copyright and business secret in that there was also a significant increase in the number of the compensated cases involving trademarks and the amount of indemnity.
5. A significant rise in the fine and successful measures of non-
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criminal penalty. Both the rate of application of the fine and the amount of the fine rose significantly. All the effective judgments in 2019 were guilty verdicts in which the sentence of minimum three-year (exclusive of three years) fixed-term imprisonment accounted for 8.91% and the rate of application of the fine reached 95.54%. The average amount of the fine was RMB 181,000, up 91.5% in comparison with the previous year. Cases where injunctions were sentenced or occupation prohibition was ordered have emerged. For instance, in the event that a defendant has been operating a number of video websites over a long period of time where he/she has infringed the copyright by means of the parser technology, he/she would be prohibited from operation of the video websites during his/her probation period for five years. In that case, the punishment has been increased for the purpose of relapse prevention.
(II) Features of the cases
1. A continuous increase in professional intellectualization of the modus operandi. In the cases of manufacture and sales of counterfeits, the degree of simulation gradually improved. Furthermore, the tort goods and their logos were separated at the time of shipment, leading to more difficulty in investigation. Moreover, the perpetrators of infringement upon the copyright normally adopted secondary changes, design or iterative development against the
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original works, or registered the copyright of the infringed goods, which was more disguised and confusing. In addition, there was a significant web-based trend in that the perpetrators frequently adopted professional and technical tool and methods including deep linking, video oculographic, transcoding, and crawler.
2. Pe*******on into all sectors in terms of the domain of the cases. In the case of infringement upon trademarks, the domain ranged from the prevailing cigarette, liquor and luxury brands to a variety of household and industrial products including daily chemical products, electronic products, hardware and building materials, auto spare parts, and industrial raw materials. More and more commodities with low prices but high profits and in huge demand were also counterfeited. Furthermore, the object of infringed copyright extended from the traditional books and works of art to film and television works, online books, and collective works, gradually covering a range of copyrights listed in the Copyright Law. There was also a trend in continuous occurrence of tort cases involving pirating video websites, accounting for one third of the copyright infringement cases. In addition, infringement upon the business secret was not limited to technical secret; instead, it extended to the operation information which might bring competitive advantages on the market to the holders.
3. Elaborate and scale criminal organization structure. Whereas
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the traditional street-vendor-type operations were on gradual decrease, perpetrators developed corporation operation in terms of the crime pattern. Division of labor in the links of tort was also elaborate. Moreover, companies took advantage of the operational model for enterprises to perpetrate tort faster and on a larger scale. The spread of the crime turned out to be broader and its consequence graver, which increased the difficulty in supervision and investigation.
4. Significant achievements and results in fighting the upstream crime. Both the police and the procuratorate continuously strengthened control of the source of the IPR crime, putting more efforts to fight the upstream crime. A batch of industrial chains of manufacture and sales of counterfeits as well as those of piracy were demolished. A number of cases where the value reached tens of millions of or even hundreds of millions of yuan emerged. In terms of the trademark-related crime, there were 245 cases of counterfeiting trademarks, the upstream manufacture of counterfeits, in 2019, the proportion of which rose to 24.2%.
II. An analysis of features of various IPR crimes
(I) Crime of infringement upon the trademark
Firstly, the new criminal pattern of “selling goods through online broadcasting” and that of “selling counterfeits in the name of repair” took form. With emergence of new commercial activities
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including the online broadcasting, quick repair of mobile phones, and overseas shopping representatives, sales of counterfeits gradually extended from channels of the traditional small shops and online stores to social and entertainment platforms including the WeChat official accounts, shopping representatives through moments, and live broadcasting. Some perpetrators also sold goods with counterfeit registered trademarks through official channels including exhibitions and promotion events organized by shopping malls which were highly accepted by the public. Secondly, hotel employees trafficked in packing materials. Employees of hotels and clubs trafficked in packing materials without authorization including wine bottles, bottle caps and packing boxes to perpetrators. After such recycling, the latter filled the bottles with low-end liquor to counterfeit high-end brands. Thirdly, tort against “old brands” drew more attention. In recent years, the procuratorates in Shanghai handled cases regarding infringement upon trademarks of “old brands” involving food, drug, daily and industrial supplies, including the well-known indigenous “Yutang” white granulated sugar.
(II) Crime of infringement upon the copyright
Firstly, new-type Internet crimes such as “deep linking” were quite damaging. Such hard cases accounted for nearly one third of the cases of infringement upon the copyright examined for
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prosecution. They became one of the major behavior patterns of infringement upon the copy right on the Internet. It was mainly the piracy websites that set up the deep linking, creating the effect of gathering and scale spread of scattered piracy recourses. Perpetrators usually posted gambling and promotion advertisements on the Internet to compromise copyright protection and network order. Secondly, traditional cases of infringement upon the copyright of books and works of art became more complicated. For instance, perpetrators applied for registration of trademark or design patent of the works of art created by other people and sold the products whose exterior packing contained the said trademark logo during the period of such application. Once they were caught, they defended the foregoing tort on the ground of the registration of trademark or design patent. Thirdly, new types of cases such as infringement upon collective works emerged. The key to protection of the collective works under the Criminal Law lies in whether such works are original. For instance, a procuratorate in Shanghai handled the first ever tort case where the question bank of an online training platform was infringed in China. It accords with the trend of overall and tight criminal protection of the IPR to include the collective works featuring original selection and arrangement.
(III) The crime of infringement upon the business secret
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Firstly, case exposure focused in certain sectors. The cases of infringement upon the business secret handled by the procuratorates in Shanghai were mainly in the information technology, machine manufacture, silicon crystal research and development, and the service consultation sectors. The information technology and machine manufacture sectors accounted for more than 80%. The content of the infringed business secret concentrated on the technical information including mechanical drawings and software codes. Secondly, tort was mainly perpetrated by employees. Some of them were directly responsible for research and development, or management of the business secret, and some took advantage of their job by accessing and stealing the business secret. In addition, they illegally disclosed or used the business secret by means of internal and external collusion, or establishment of another company, or resignation.
III. Achievements and results of the IPR protection by procuratorates in Shanghai in 2019
2019 saw firm establishment of the concept of “IPR protection equals innovation protection” by procuratorates in Shanghai by means of organic combination of severe punishment against the IPR crime and strengthening of rights and interests protection to continuously deepen and innovate the procuratorial working mechanism of the IPR protection.
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1. Specifying the standard for IPR law enforcement. The Municipal Procuratorate made an empirical research on the measurement of penalty in the IPR criminal cases in Shanghai in the past five years to summarize together with Shanghai High People’s Court the findings so as to launch the first standard for the measurement of penalty in the IPR criminal cases in the country. Moreover, the application of law and the standard for exhibit specification in copyright cases was strengthened and perfected. Proceeding from the “deep linking” behavior, the guide for handling cases of infringement upon the copy right in this category was formulated.
2. Establishment and perfection of the system of the joint meeting of procurators. The joint meeting of the IPR procurators in Shanghai was established, and its specific procedures were standardized. Hard cases submitted by procuratorates at all levels were discussed and studied at the said joint meetings for the purpose of feasible intellectual support for case handling at the frontline. A professional case handling team consisting of cross-district procurators in Shanghai was set up for the purpose of intervention in advance and participation in hard, complicated and new-type IPR criminal cases by the team members.
3. Exploration of substantive participation in the criminal
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proceedings by the right holders. Based on the pioneer system of notifying the victims (corporate victims) in the IPR criminal cases of their litigation rights and obligations, we further promoted substantive participation in the criminal proceedings by the right holders. On one hand, we provided the right holders with room for full claim for their rights and interests by means of their participation in public hearings on examination for arrest, pre-trial conferences, and the court hearings. On the other hand, we explored the mechanism of reasonable compensation for the right holders by the tort perpetrators during the stage of examination for prosecution. There was success in the said compensation in a number of cases. Pudong New Area People’s Procuratorate, with a view to deepening linking up between the administrative law enforcement and the criminal justice in the IPR area, executed the Agreement on Cooperation in Pre-prosecution Mediation of IPR Infringement Cases with the Intellectual Property Bureau to promote the trial mechanism in this regard to effectively safeguard the rights and interests of the IPR holders in time.
4. Strengthening publicity on the rule of law based on media including the white paper. We promoted the publicity on the IPR in terms of the rule by law by means of releasing the white papers and drafting the guide on legal risks of the IPR to strengthen awareness and capability of technical start-up enterprise regarding prevention
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and solution of the legal risks as well as to create a sound social atmosphere for IPR protection.
5. Provision of proactive and tailor-made service for industrial development. We deepened the application of the unified platform of Shanghai procuratorates’ service for safeguarding construction of the science and technology start-up center so that channels for IPR holders to make complaints, whistleblow, and check the progress of case handling could become unimpeded and the online service featuring convenience without delay, efficiency and high quality could be provided. Furthermore, the procuratorial service channel platform was extended. Judicial service stations and IPR procurator’s teams were established in major science and technology start-up parks such as Pudong New Area Free Trade Zone and High-Tech Zone, Yangpu District Changyang Campus, Fengxian District Dongfang Meigu Bio-Tech Park, and Songjiang District G60 Science and Technology Start-up Corridor to sink the procuratorial strength and provide enterprises therein with face-to-face service.
6. Establishment of the IPR protection research center. The municipal procuratorate set up Shanghai Procuratorial IPR Protection Research Center at the Third Branch of Shanghai People’s Procuratorate. The foregoing center, combining four major functions, i.e. case handling, theoretical research, talent training, and publicity
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and service, is the first-ever IPR comprehensive practice and research base for procuratorates at the provincial level in China.
IV. Countermeasures and suggestions
(I) Strengthen the right relief and perfect the working mechanism of strict protection of the criminal right
Firstly, perfect the mechanism of reasonable compensation for the right holders. We shall proactively explore pre-prosecution mediation to guide and promote reasonable compensation for the right holders by the tort perpetrators by application of the plea agreement system. The strength shall be put on loss recovery and the “restitutio in integrum” of the right. In addition, proactive compensation for the right holder will be the comprehensive factor in measurement of penalty to display the judicial concept of restitution and to enhance pacification and restoration of the social relations. Secondly, promote the “three-in-one”, i.e. civil, administrative, and criminal case handling. The Third Branch of Shanghai People’s Procuratorate will, as the first procuratorate establishing the said case handling mechanism at the branch level in China, further give play to its professionalism and draw on some basic theories and concepts of the civil law so that they can be put to use in handling the criminal cases.
(II) Strengthen “linking up between the administrative law enforcement and the criminal justice” to build the collaboration
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pattern of the grand IPR protection
Firstly, perfect the collaboration mechanism of case investigation and handling. We shall continuously strengthen communication between the administrative authorities for law enforcement and the police, the procuratorate, and the court to perfect the mechanism of briefing about the case information so that the law enforcement and judicial authorities can have access to the case information and intervene in advance to ensure timeliness and completeness of evidence fixing. The case transfer procedure, that of inspection and evaluation, and that of procuratorial supervision shall be specified by means of countersignature of normative documents. Secondly, jointly implement special administration in related areas. We shall implement the special criminal protection of the business secret, identity the mechanism of multi-department transfer of the special tort clues, and jointly carry out publicity on the rule of law. Furthermore, the criteria for the evidence in business secret crime shall be unified for the purpose of joint promotion of the special administration to fight such crime. In addition, the special IPR program on the “old brands” in Shanghai shall be implemented to perfect the system of case briefing. Procutatorial service of higher quality shall be given to the indigenous brand enterprises. Thirdly, jointly promote study and judgment of tort as well as talent training. Various authorities
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shall, based on the information platform for law enforcement and case handling, strengthen data circulation as well as analysis, study, and judgment, and establish the expert database for consultation to jointly study and solve issues and difficulties in terms of evidence collection, inspection, evaluation, and application of law in IPR cases. Moreover, we shall jointly formulate the training plan for communication between the administrative and criminal authorities in terms of the IPR, share the training resources, and build the echelon of professional IPR law enforcement and judicial talents.
(III) Strengthen joint administration and share to create the social atmosphere of diversified supervision and protection
Firstly, explore establishment of the system of the “black list” of torn perpetrators. We shall, on the basis of the disclosure system of procuratorial work, strengthen collaboration with the administrative and judicial authorities including the IP Bureau, the police, the court, and the Justice Bureau to explore establishment of the system of disclosure of the IPR law breaking and criminal information and to reinforce the diversified supervision against the tort perpetrators with criminal records. Meanwhile, we shall collect the foregoing information and make a “black list” of perpetrators on a regular basis so that we can disclose it to the related sector and industry associations in time. Secondly, strengthen publicity on crime prevention. A
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number of departments shall jointly release the guide on tort prevention and typical IPR cases to guide the right holders to enhance self-protection awareness and take preventive measures. In addition, we shall follow the trend of the times by innovating and exploring more popular methods like online broadcasting to interpret the law based on specific cases and to achieve the result of “educating the public at the completion of a case”. Thirdly, reinforce self-regulation by industry associations. Industrial development shall be further standardized to prevent and restrain IPR law breaking and crime, e.g. IPR-related sectors including the server lease and management, the advertising alliance, hotels and clubs. Moreover, the mechanism for information communication about IPR protection shall be explored to promote and strengthen self-discipline and self-regulation by industry and chambers of commerce.