This decision was rendered in the presence of a large number of officials, invited to attend the hearing, as the court intended to widely publicize its decision.

Indeed, the decision, which accepted a civil claim filed by the victim of acts of infringement, was ground-breaking.

Actually, whether this was really ground-breaking is arguable. Indeed, such a procedural move is expressly provided in article 101 of the Criminal Procedure Code of China (revised in 2018) "A victim who suffers from property losses due to the defendant's criminal offenses shall be entitled to bring an incidental civil action during criminal proceedings".

So, why make such a publicity?

The reason is that, until now, the courts had made a very restrictive interpretation of the terms “suffers from property losses".

On 13 December 2000, the Supreme People's Court issued a judicial interpretation (2000 No. 47) defining the scope of civil proceedings incidental to criminal matters as including "material damage" suffered as a result of a "criminal violation of personal rights" or the "destruction of his property". The interpretation excluded the "moral damage" from the scope of possible incidental action. As for the material damage, it was further defined as the "actual damage" or the "damage necessarily suffered" by the victim. This judicial interpretation was annulled in 2015.

On 20 December 2012, the Supreme People's Court issued a new Interpretation on the Application of the Criminal Procedure Law (adopted at the 1559th session of the Judicial Committee of the SPC - Fa Shi [2012] No. 21). Chapter 6 concerns incidental civil actions and Article 138 provides: "A victim who suffers material damage as a result of the violation of his personal rights or the destruction of his property by criminals shall have the right to institute incidental civil proceedings in the course of criminal proceeding … the People's Court shall not accept any civil action for moral damage…".

The restrictive interpretation of the words "property losses", therefore, remained unchanged.

As a result, the practice of most courts was to refuse incidental civil claims in cases concerning intellectual property, viewed as intangible assets that could not be destroyed. The victim had to file a separate civil lawsuit during or after the criminal prosecution.

In the past years some IP owners, especially trademark registrants, tried to file civil lawsuits incidental to criminal prosecution, but the practice varied from province to province. In Zhejiang Province the courts would not accept such civil lawsuits.

However, the debate never stopped. Recently the judges and public prosecutors of Zhejiang Province discussed this issue again, and preliminarily agreed to have a try on a civil lawsuit incidental to a criminal prosecution in an intellectual property infringement case.

The conflict between Andreas Stihl, the manufacturer of the famous orange and black chain saws and the Lu family, operating under several legal entities, among which Hua Sen, Jia Ji, and Sen Bao, was ancient. They had been raided several times since 2014 and had never stopped infringing the Stihl trademark. The quantities seized were more than sufficient to justify a criminal prosecution. It was, therefore, decided, after full consultation with the Public Prosecutor, to file a civil claim for the full amount of the statutory damages, then provided in the Trademark law (1 million RMB).

On 29 March 2021 the Court of Yuyao adopted all the recommendations made by the Public Prosecutor and pronounced sentences of prison from two to three years, accompanied by probation periods to take account of the attitude of the defendants. Stihl obtained an amount of 500,000 RMB as damages.

It is hoped that this case will be followed by many others, and that the interpretation of the property losses in the Criminal Procedure Code will be interpreted, as they should, as including losses caused to the owners of intellectual property rights.

Then, it will be possible to implement other provisions of the above mentioned Supreme People's Court interpretation of 2012, which contain many practical aspects, such as: the possibility for the Public Security, or the Public Prosecutor, or the court to mediate with the victim and the defendant an agreement on the compensation (Articles 148 and 153), the possibility for the court to seal, seize or freeze the assets of the defendant (Article 152), the taking into account, by the court, of the compensation paid by the defendant (Article 155).

The practice, for the defendants, to seek leniency in the criminal prosecution based on the compensation offered and paid to the victim/plaintiff is already existing. The new judgment in the Stihl case might make it more systematic, which is welcome.

Authors:

Founding Partner, Management Committee Chair
Wanhuida Intellectual Property
Beijing, China

Bai Gang is the Founding Partner & Management Committee Chair at Wanhuida Intellectual Property.

Mr. Bai is a prominent figure in China’s intellectual property field. He is a veteran intellectual property counsel who has been representing the clients’ prosecuting, enforcement and litigating interests in China since 1990s. He has been leading the firm’s practice groups in obtaining landmark decisions, delivering astute, reliable and effectual legal solutions for clients’ high-profile cases, contributing to the nation’s IPR legislative progress and helping to mold industry standards.

Since 2014, he has been included eight years in a row in Managing IP’s List of IP STARS in China. He has been rated as Leading IP Lawyer by “Legal 500” (2012 - 2021), “Chambers & Partners” (2011 - 2021) and “Asialaw Profiles” (2016 - 2021). In 2020, he is inducted into the Legal 500 Asia Pacific Hall of Fame.

Mr. Bai is a member of the Board of Directors of the International Trademark Association (INTA).

Partner
Wanhuida Intellectual Property
Beijing, China

Paul RANJARD is a partner at Wanhuida Intellectual Property.

Paul, member of the Paris Bar since 1972, moved to Beijing in 1997 where he represented the French association Unifab (for the protection of intellectual property). Since 2000, he has been actively involved in the drafting of the IP Position Papers submitted by the European Chamber of Commerce.

Paul is an active speaker at academic seminars and international conferences. He is the co-author of “The China trademark cases you need to know about” (World Trademark Review, The Long Read, 2021), “Revocations and damages: the 2020 China decisions shaping trademark practice” (World Trademark Review, The Long Read, 2021), “Which trademark cases were selected by the Chinese SPC in 2019?” (Managing IP, China IP Focus, 2020), “Matters to be addressed in the future revision of China’s trade mark law” (Asialaw Leading Lawyers 2020) and “Tackling OEM infringement in China” (INTA Daily News 2016).

Paul is a member of INTA’s Global Advisory Council – China and the Geographical Indications team of MARQUES.