How IP is Covered by China’s Criminal Law
Published 14 November 2023
Xia Yu
China’s Criminal Law (“Criminal Law”), adopted by the Second Session of the Fifth National People’s Congress on 1 July 1979, has been amended eleven times. The current version was revised on 26 December 2020, with a total of 452 Articles. Among them, Articles 213 to 220 are provisions on intellectual property (“IP”) crimes involving infringement of trademark rights, patent rights, copyrights and trade secrets. Regarding these provisions, China’s Supreme People’s Court and Supreme People’s Procuratorate jointly issued three judicial interpretations on 2 November 2004, 4 April 2007, and 21 August 2020 respectively. They are Interpretation of Several Issues Concerning the Specific Application of Law in the Handling of Criminal Cases Involving Infringements upon Intellectual Property Rights (“Interpretation I”), Interpretation (II) of Several Issues Concerning the Specific Application of Law in the Handling of Criminal Cases Involving Infringements upon Intellectual Property Rights (“Interpretation II”) and Interpretation (III) of Several Issues Concerning the Specific Application of Law in the Handling of Criminal Cases Involving Infringements upon Intellectual Property Rights (“Interpretation III”). Combining the three Interpretations, this article introduces criminal liability for IP infringement crimes in the Criminal Law.
Articles 213, 214 and 215 of the Criminal Law provide for criminal liability for trademark infringement. Article 213 stipulates that “whoever, without permission of the right holder of a registered trademark, uses a trademark representation which is identical with the registered trademark on the same kind of commodities or services, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than 3 years, and concurrently, a fine, or shall be sentenced to a fine only. If the circumstances are especially serious, the offender shall be sentenced to fixed-term imprisonment of not less than 3 years but not more than 10 years, and concurrently, a fine.”
According to Interpretation I and III, the term “use” refers to using the registered trademark or counterfeit registered trademark on the goods, product packaging or containers, product instructions and transaction documents, or using it for advertising or exhibitions and other commercial activities. The “trademark representation which is identical with the registered trademark” refers to a mark that is the same as the registered trademark, or is visually indistinguishable from the registered trademark enough to mislead the public, such as changing the font, capitalization, or horizontal and vertical arrangement of the registered trademark, or changing the spacing between the words, letters, numbers, etc. of the registered trademark which result in basically no difference between the mark and the registered trademark, changing the color or adding only undistinctive elements to the registered trademark which doesn’t affect the distinctiveness of the registered trademark. The serious circumstances in this Article include the circumstance where the illegal business amount exceeds RMB 50,000 or the amount of illegal gains exceeds RMB 30,000, as well as the circumstance where two or more registered trademarks are counterfeited, and illegal business amount exceeds RMB 30,000 or the amount of illegal gains exceeds RMB 20,000. When the illegal business amount is more than RMB 250,000 or the amount of illegal gains is more than RMB 150,000, or if two or more registered trademarks are counterfeited, and the illegal business amount is more than RMB 150,000 or the amount of illegal gains is more than RMB 100,000, It falls into the scope of the particularly serious circumstances in the Article. The “illegal business amount” refers to the value of manufacturing, storage, transportation, and sales of infringing products during committing IP infringement.
Article 214 stipulates that “Whoever knowingly sells counterfeit commodities bearing another’s registered trademark, if the amount of illegal gains is relatively large or there are other serious circumstances, shall be sentenced to fixed-term imprisonment of not more than 3 years, and concurrently, a fine, or shall be sentenced to a fine only. If the amount of illegal gains is large, or there are other especially serious circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than 3 years but not more than 10 years, and concurrently, a fine.”
According to Interpretation I, “the amount of illegal gains” refers to all illegal income earned and due from the sale of goods with counterfeit registered trademarks. When the amount of illegal gains is more than RMB 50,000, the amount is relatively large. When the amount is more than RMB 250,000, it is large. “Knowingly” includes the following situations:1. Knowing that the registered trademark on the goods you sell has been altered, replaced or covered;2. Having been subject to administrative penalties or civil liability for selling goods with counterfeit registered trademarks, and then selling the same goods with counterfeit registered trademarks;3. Forging or altering the authorization document of the trademark registrant or knowing that the document has been forged or altered; 4. Other situations where you know or should know that the goods being sold are counterfeit registered trademark goods.
Article 215 stipulates that “Whoever forges, or makes without authorization of the right holder, representations of a registered trademark, or sells such representations, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than 3 years, and concurrently, a fine, or shall be sentenced to a fine only. If the circumstances are especially serious, the offender shall be sentenced to fixed-term imprisonment of not less than 3 years but not more than 10 years, and concurrently, a fine.”
According to Interpretation I, the circumstances are serious when the number of illegal representations exceeds 20,000, and the illegal business amount exceeds RMB 50, 000 or the amount of illegal gains exceeds RMB 30,000; or when the illegal representations involve two or more registered trademarks and exceed 10,000 pieces, the illegal business amount exceeds RMB 30, 000 or the amount of illegal gains exceeds RMB 20,000. If the numbers of the first serious circumstance are increased to 100,000, RMB 250,000 and RMB 150,000 respectively, or the numbers of the second serious circumstance are increased to 50,000, RMB 150,000 and RMB 100,000 respectively, the circumstances become especially serious.
Article 216 of the Criminal Law is about the crime of patent infringement. It stipulates that “Whoever uses the patent of another without authorization, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than 3 years or short-term custody, and concurrently, a fine, or shall be sentenced to a fine only.”
According to Interpretation I, the serious circumstances include situations where the illegal business amount is over RMB 200,000 or the amount of illegal gains is over RMB 100,000; causing direct economic losses of more than RMB 500,000 to the patentee; or two or more patents of others are counterfeited, and the illegal business amount is more than RMB 100,000 or the amount of the illegal gains is more than RMB 50,000. The following behaviors shall be determined as the “use of the patent of another without authorization”:1. Marking the patent number of another on the products or product packages manufactured or sold by oneself without permission;2. Using the patent number of another in advertisements or other promotional materials without permission, causing confusion between the technology involved and the patented technology of another;3. Using the patent number of another in a contract without permission, causing others to mistake the technology involved in the contract as someone else’s patented technology;4. Forging or altering other’s patent certificates, patent documents or patent application documents.
Articles 217 and 218 of the Criminal Law are provisions on crimes of copyright infringement. Article 217 stipulates that “Whoever, for the purpose of making profits, commits any of the following acts infringing on copyrights or copyright-related rights, if the amount of illegal gains is relatively large or there are other serious circumstances, shall be sentenced to fixed-term imprisonment of not more than 3 years, and concurrently, a fine, or shall be sentenced to a fine only. If the amount of illegal gains is large or there are other especially serious circumstances, the offender shall be sentenced to fixed-term imprisonment of not less than 3 years but not more than 10 years, and concurrently, a fine: (1) reproducing, distributing, or disseminating to the public through information network the written works, music, works of fine arts, audiovisual works, computer software, or other works prescribed by laws or administrative regulations, without permission of the copyright owner; (2) publishing a book of which the exclusive right of publication is enjoyed by another; (3) reproducing, distributing, or disseminating to the public through information network a sound or video recording, without permission of the producer; (4) reproducing or distributing sound or video recordings of a performance or making the performance available to the public through information network, without permission of the performer; (5) producing or selling a work of fine art with a forged signature of a painter; or (6) intentionally circumventing or destroying the technological measures which are adopted by a copyright owner or copyright-related right holder to protect the copyright or copyright-related rights on a work or on a sound or video recording, etc., without permission of the copyright owner or copyright-related right holder.”
According to Interpretation I and II, collecting fees directly or indirectly by publishing paid advertisements is with “the purpose of making profits”. The amount of illegal gains exceeding RMB 30,000 is classified as the relatively large amount, and the amount of illegal gains exceeding RMB 150,000 is classified as the amount of large. “Other serious circumstances” include situations where the illegal business amount exceeds RMB 50,000, or the total number of illegal copies of other’s works exceeds 500. The circumstances become especially serious when the illegal business amount exceeds RMB 250,000 or the total number of illegal copies exceeds 2,500.
Article 218 of the Criminal Law stipulates that “Whoever, for the purpose of making profits, knowingly sells works reproduced which infringe on the copyright or copyright-related rights as mentioned in Article 217 of this Law, if the amount of illegal gains is large or there are other serious circumstances, shall be sentenced to fixed-term imprisonment of not more than 5 years, and concurrently, a fine, or shall be sentenced to a fine only.” According to Interpretation I, “the amount of illegal gains is large” means that the amount is more than RMB 100,000.
Articles 219 and 219A of the Criminal Law are provisions on the crime of infringing business secrets. Article 219 stipulates that “Whoever commits any of the following acts infringing on business secrets, if the circumstances are serious, shall be sentenced to fixed-term imprisonment of not more than 3 years, and concurrently, a fine, or shall be sentenced to a fine only. If the circumstances are especially serious, the offender shall be sentenced to fixed-term imprisonment of not less than 3 years but not more than 10 years, and concurrently, a fine: (1) obtaining a right holder’s business secrets by theft, bribing, fraud, coercion, electronic intrusion, or by any other unjustifiable means; (2) disclosing, using, or allowing another to use the business secrets obtained from the right holder by the means as mentioned in the preceding paragraph; or (3) disclosing, using, or allowing another to use the business secrets one has learned, by breaching his confidentiality obligation or by going against the right holder’s demand for keeping said business secrets confidential.Whoever, knowing that the business secrets fall under the circumstances specified in the preceding paragraph, obtains, discloses, uses, or allows another to use such business secrets, shall be deemed an offender who infringes on business secrets.Right holders as mentioned in this Article refer to the owner of business secrets and the authorized users of the business secrets.”
According to Interpretation I and III, the serious circumstances refer to the situations such as the amount of losses caused to the right holder of the trade secret (“amount of losses”) or the amount of illegal gains from infringement of the trade secret (“amount of illegal gains”) is more than RMB 300,000, and directly causing the owner of the trade secret to go bankrupt or close down due to major business difficulties. The circumstances become especially serious when the amount of losses or the amount of illegal gains is more than RMB 2.5 million. The amount of losses or the amount of illegal gains can be determined as follows:1. When the illegally obtained trade secret has not been disclosed, used or allowed to be used by others, the amount of loss can be determined based on the reasonable license fee for the trade secret;2. When the illegally obtained trade secret has been disclosed, used or allowed to be used by others, the amount of losses can be determined based on the right holder’s loss of sales profits due to infringement, but if the amount is lower than the reasonable licensing fee for the trade secret, it shall be determined based on the reasonable licensing fee;3. If a trade secret is disclosed, used or allowed to be used by others in violation of the agreement, the amount of losses can be determined based on the loss of sales profits caused by the infringement;4. If a trade secret is obtained, used or disclosed despite knowing that it was obtained through improper means or in violation of an agreement, the amount of losses can be determined based on the loss of sales profits caused by the infringement;5. If the infringement of trade secrets results in the trade secret becoming known to the public or being lost, the amount of losses can be determined based on the commercial value of the trade secret which can be calculated comprehensively based on the research and development costs of the trade secret and the benefits of implementing the trade secret.6. Property or other property interests obtained from disclosing or allowing others to use trade secrets shall be deemed illegal gains.
Article 219A stipulates that “Whoever acquires through theft or spying, or illegally purchases or provides business secrets for an overseas institution, organization or individual shall be sentenced to fixed-term imprisonment of not more than 5 years, and concurrently, a fine, or shall be sentenced to a fine only. If the circumstances are serious, the offender shall be sentenced to fixed-term imprisonment of not less than 5 years, and concurrently, a fine.” None of the three Interpretations involves any judicial interpretation of this Article.
Article 220 of the Criminal Law is about the IP crimes committed by an entity. It stipulates that “An entity committing a crime as prescribed in Articles 213 to 219a of this Section shall be fined, and the directly responsible persons in charge and other directly responsible persons shall be punished in accordance with the provisions in the corresponding article of this Section.” According to Interpretations I, for the IP crime committed by an entity, the conviction and sentencing shall be three times the conviction and sentencing standard for the corresponding individual crime.
In conclusion, the crimes of IP infringement stipulated in the Criminal Law include the crime of counterfeiting registered trademarks, the crime of selling goods with counterfeit registered trademarks, the crime of illegally manufacturing and selling illegally manufactured registered trademarks, the crime of counterfeiting patents, the crime of copyright infringement, the crime of selling infringing copies, the crime of infringement of trade secrets and the crime of IP infringement committed by an entity. The maximum penalty for trademark and copyright infringement is fixed-term imprisonment of not less than three years and not more than ten years and a fine; the maximum penalty for the crime of patent counterfeiting is fixed-term imprisonment of not more than three years and a fine.