With its entry into the WTO, China’s domestic market is opening wider and its international trade volume is growing. As a result, some new phenomena and trends will appear with regard to patent-related crime. The criminal law is the fundamental law for penalising criminals and cracking down on crime.14 To be able to effectively control and prevent patent crime, we should further, in accordance with the WTO Agreement on TRIPS, amend and improve the current criminal statutes and perfect the strategising system for legislations on criminal offences concerning patent-related crimes.
Set up clearly defined criteria for criminal prosecution of a case
To deal with the worsening situation in patent crime, the most urgent thing now is to establish protection of patent rights by criminal statutes. However, criminal law is the last defence of the whole legal protection system and is the strongest force wielded by a state against certain misbehaviours. Compared with other legal sanctions, criminal punishment is the most severe and should not and could not be a commonly used legal means to law and order on the mainland. As Minoru Otani, a Japanese scholar in criminal justice, has pointed out:
14 Zhang Xiaoqin & Zhao Guoling (eds), Crime and Crime Control in Contemporary China, Peking University Press, 2001, p.9 6.
To keep anti-social behaviors from happening, it is necessary to adopt crimination measures. However, as criminal punishment goes hand in hand with cruelty of bodily coercion, only when a full recogni-tion of legal interest it intends to protect is achieved, can criminarecogni-tion be practiced. Only when there is no other optional method to protect this legal interest except for creating criminal laws and resorting to criminal punishment, may crimination be allowed.15
There is no doubt that criminal penalty should be used, but it should be used prudently. To this end, a clearly defined boundary within which criminal law can be applied has become highly necessary. So to amend and improve the criminal legislations against patent-related crimes, we should first of all clearly define the criteria for criminal prosecution of a patent-related offence.
It has been mentioned previously that according to the relevant provisions in the Patent Law, cases involving the counterfeiting of another person’s patent, disclosure of state secrets and neglect of one’s official duties, abuse of power, and self-seeking misconduct will attract criminal investigation only when the circumstances are serious. But neither the legislative branch nor the judicial branch has an adequate yardstick for judging seriousness of circumstances. In patent offences, seriousness of circumstances is judged by the amount of illegal income gained by the counterfeiter, the degree of the subject’s vicious intent, the actual loss suffered by the patentee, how evil the means are through which the offender engaged in the offence, and so on. The circumstances of cases involving patent infringements are judged serious:
• if the amount of illegal income from counterfeiting activities is comparatively large;
• if the counterfeiting is a deliberate subjective initiative and the offender has intentionally, continuously and repeatedly counterfeited the patent of another person, and when caught and proved, has refused to make a confession of his crime;
• if the offender has, from vicious motives, engaged in counterfeiting by very sordid means, thus causing extremely negative social or even political effects;
• if a case has not only caused the patentee or interested parties direct heavy economic losses, but also has hurt them in reputation and psychologically;
• if the patent administrative and law enforcement personnel have knowingly and intentionally engaged in patent counterfeiting; and
• if a case has very serious consequences internationally.
Although jurisprudent interpretations have made up for the deficiencies in legislative and judicial interpretations, the problem of the lack of clearly defined criteria for criminal prosecution of a case has hardly been resolved. First, scholars differ in their interpretations of ‘comparatively large amount of illegal income’. Some hold that if the amount of illegal income gained by an individual offender exceeds RMB 20 000 or that gained by a unit offender exceeds RMB 50 000, the amount should be considered ‘comparatively large’;16 others hold that only illicit gain exceeding RMB 20 000 by an individual or exceeding RMB 100 000 by a unit should be considered ‘comparatively large’.17 Second, on the issue of the target to whom the
‘comparatively large’ amount is directed, most scholars maintain that it refers to the illicit income gained by the criminal who has infringed patent rights. However, there are still some scholars who have argued that the
15 Minoru Otani, Criminal Policy Studies, transl. Li Hong, Law Press China, 2000, p. 86.
16Liu Fang & Shan Min, Crimination and Sentencing of Crimes Involving IP Infringement, The People’s Court Press, 2001, p. 176.
17Tian Hongjie, Studies on Some Difficult Issues Concerning Law Application in Criminal Trials with Units as Criminals, Jilin People’s Publishing House, 2001, p. 345.
judgment of whether the amount is comparatively large should be based first on the actual amount of loss the victim has suffered, because in some infringement cases, although the offenders may not have gained any profits or even have suffered some loss, they have caused loss for the patentees.18 Referring to relevant provisions of foreign legal systems, we find that the Patent Law of the United States stipulates that the decision of amount of damage is mainly based on the loss incurred by the patentee resulting from the infringement, and the illicit income gained by the offender is used as reference in certain circumstance in calculating the loss incurred by the patentee.19
Considering all these, the authors hold that the Chinese authorities should as soon as possible give uniform legislative and judicial interpretations on the issue. When drawing the specific lines for a ‘comparatively large amount’, differences between China’s economically developed regions and the less developed regions should be considered, and different minimum thresholds for different regions should be worked out. As for the target to whom the ‘comparatively large amount’ is directed, the authors agree that the actual loss incurred by the victim should be the basis for calculation. What is more, in calculating the actual loss, the patentee’s reasonable costs such as for stopping the infringement, for investigation, for collection of evidence and for the lawyer’s fee should all be included, together with the presumed patentee’s loss of profits because of changes in the market.
Under the ‘Provisions on Some Issues Concerning Law Application Arising from Trials of Cases Involving Patent Rights Disputes’ and ‘Interpretation for Some Issues Arising from Trials of Cases Involving Patent Rights Disputes’ issued by the Supreme People’s Court on 22 June 2001 and in 1992 respectively, there are four ways of calculating the amount of loss resulting from patent infringement:
• based on the actual amount of loss incurred by the patentee as a result of the tort against him;
• based on all the interests and benefits gained by the offender from his infringement acts;
• based the category of the patent, the nature and circumstances of the infringement acts, the patent licence fee, the nature, scope and duration of the patent licence, when a fee of between one and three times that of the damages is reasonable;
• where there is no licence fee to refer to or the amount of the licence fee that is referred to is obviously unreasonable, the court may decide the damage in accordance with the circumstances, that is, between RMB 50 000 and RMB 300 000, with a ceiling not exceeding RMB 500 000.
When establishing the specific criteria for criminal prosecution of a patent infringement case, these provisions can be used as reference.
Moderately increase the range of criminal charges or give wider interpretations to existing charges Having clarified the criteria for criminal prosecution of an offender, the next question is, with what charges or counts, within the boundary of criminal protection, should patent infringements be capped? Whether the types or categories of charges are rationally established has a direct bearing on how the functions of criminal punishment are realised. As definitions of the charges for patent crimes are not specific enough in China’s Criminal Law, we may, based on the need for more precise legal practices and drawing on the relevant provisions in the criminal codes of certain countries, increase the types of charges against patent-related
18Li Yang, Invisible Rivalry: Hot Issues & Thorny Issues with IPR, Lujiang Publishing House, 2000, p.202.
19Russell L. Parr, Intellectual Property Infringement Damages, 2nd edn, John Wiley & Sons, Inc., 1999, p. 50.
crimes or give expansive interpretations to the existing charges. However, before doing either of these, a problem about the presumptions involved should be resolved.
Different legislations for inventions, utility models and industrial designs respectively
In China, ‘patent’ covers three things: inventions, utility models, and industrial designs. But according to the relevant provisions of most foreign countries and those of the Agreement on TRIPS, ‘patent’ does not include utility models and industrial designs.20 This fact has brought about some unnecessary blocks to China’s foreign trade and its technical and legal exchanges with others21 and put the country’s patent legislation into an embarrassing situation. The main object of a crackdown on patent-related crimes through legislation is to protect through the most stringent legal means the inventions and creations that are technically most innovative and economically most rewarding. But because the Patent Law grants patents to all applications involving inventions, utility models and industrial designs that meet the requirements of the Patent Law, the Criminal Law treats cases involving the counterfeiting of these three types of patents indiscriminately, using the same charge of patent counterfeiting and the same terms of sentencing. In fact the social damage resulting from infringements of patents on inventions is different from that for patents on utility models or industrial designs. The indiscriminate treatment is not only inequitable but is also not conducive to the effective protection of patent rights through legislation. So if we are to reverse the worsening situation of patent crime, we should increase the types of charges and the types of punishment or increase the maximum terms of sentencing. Yet the present presumption is to have separate legislation for the protection of inventions, utility models and industrial designs, with utility models and industrial designs each having their own statute.
The object and scope of China’s Criminal Law is relatively narrow as it concerns the counterfeiting of patents. So also are the provisions in the Patent Law, which dictate that in dealing with the serious disclosure of state secrets, an offender’s criminal liabilities will be investigated. On the other hand, the provisions dealing with offences of neglect of official duties, abuse of power and self-seeking misconduct appear to be too general and oversimplified. In fact, in the process of applying for patents, and in obtaining, assigning and licensing of patent certificates, the harm done to society is grave enough to deserve criminal penalties. There should be different criminal charges available in accordance with their different nature. However, while avoiding setting up too many fine differences in charges, such as is characteristic of Taiwan’s Criminal Law, we should identify some further forms of criminal charges. For example, since in China a lot of offences involving the infringement of inventors’ patent application rights have taken place before the patent is granted (of all the cases the authors have collected, 24.4 per cent were offences concerning the infringement of inventors’ patent application rights before the patent had been granted; see Table 9.1), we may consider setting up a new charge of infringing patent application rights. The criminal statutes of foreign
20According to Articles 25 and 26 of TRIPS, members are to be free to protect the independently created industrial designs through industrial design law or through copyright law as long as the duration of protection available amounts to at least ten years. The reason is that utility models and industrial designs are not fully in conformity with the definition for invention given by the patent law and they bear characteristics of their own. Furthermore, only when patent includes exclusive inventions does the word ‘patent’
truly represent techniques and innovations. Now the availability of protection of utility models and industrial design through different separate laws has been confirmed by most foreign countries and regions as well as by the TRIPS.
21For instance, the revised second version of China’s Patent Law, in conformity with the provision that ‘an opportunity for judicial review of any decision to revoke or forfeit a patent shall be available’ prescribed in Article 32 of the TRIPS, stipulates explicitly that cases of appeal involving re-examination and invalidation of utility models and industrial designs shall be heard at the people’s courts and the courts’ decisions are final. In fact the ‘patent’ referred to in the TRIPS does not cover utility models and industrial designs.
countries have long had provisions available to control the offence of infringing patent application rights.
For instance, in Japan, the charge of fraud penalises acts of obtaining patents through fraud, and in France, the charge of counterfeiting another’s patent or counterfeiting other patent applicants penalises acts of falsely claiming a patent or falsely claiming the ownership of a patent being applied for.
Since maintaining consistency in law is important, we do not expect that a comprehensive improvement and incorporation of new criminal charges against patent crimes can be achieved in a short time. To meet the needs of legal practice, we might consider interpreting the existing charges more broadly to include some infringement acts that have serious consequences. For example, a series of indirect infringing acts such as the illegal practice of misuse of the patents of another person without authorisation and illegal manufacture and sale of the components of patented products (contributory infringement) could be incorporated into the charge of patent counterfeiting. As another example, the acts of intentionally disclosing a person’s patent secret (not state secrets) during the application process by patent administrative personnel and relevant state personnel, which causes great loss to the applicant, should be regarded as a criminal offence of abuse of power or of self-seeking misconduct. The scenarios proposed by the authors might not be very rational as the establishment of criminal charges involves decisions on policy orientation and technical practicality.
But we hold that no matter what criminal charges are to be established, or how specific, the goal should be clearly defined criteria based on the principle of slow but sure justice to ensure the correct charge, penalty and sentencing.
Increase the categories of criminal punishment to achieve coherence with relevant provisions in the civil and business law
The rationalisation of legislation is represented not only by the availability of adequate pigeonholes for criminal charges but also by the availability of enough categories of penalty. As mentioned earlier, the classification of penalties for patent crime in China’s Criminal Law is somewhat oversimplified. It has listed three kinds of penalty: fixed-term imprisonment, criminal detention, and fine. This has, to a certain extent, led to the disjunction between the patent-related criminal provisions and those prescribed in civil and business laws. Under (2) of Article 57 of China’s Company Law, a person who has been sentenced to criminal punishment for the crime of embezzlement, bribery, seizure of property or misappropriation of property or for undermining the socio-economic order, where not more than five years have elapsed since the expiration of the enforcement period; or a person who was deprived of his political rights for committing a crime, where not more than five years have elapsed since the expiration of the enforcement period, may not hold the position of director, supervisor or manager of a company. Since the crime of patent infringement falls exactly into the category of crime that undermines the socio-economic order, if the head of a unit was sentenced to criminal punishment for the serious circumstances of crime of patent infringement, he should, according to the provisions of the Company Law, be deprived of the qualifications for a senior managerial position. Yet in the provisions for criminal punishment relevant to the crime of patent infringement in China’s Criminal Law, this type of punishment is missing. The disjunction between the criminal law and civil and business laws has not only spoilt the inherent consistency in China’s legal system but has also frustrated the effective crackdown on and control of patent-related crime.
Of all the criminal cases involving patent infringements, cases with legal persons as offenders make up a large proportion. Among the cases to which the authors had access, 86.6 per cent of cases were cases with units as offenders. And of this 86.6 per cent, corporate offenders made up 77.8 per cent, by far the largest proportion (see Tables 9.2 and 9.3). So the main consideration in any discussion about criminal punishment
for patent-related crime is what types of criminal punishment we need to achieve our goal of cracking down on unit offenders of patent-related crimes in a more effective and efficient way.
There are many types of criminal punishments. The main ones include the punishment of deprivation of personal life, deprivation of personal liberty, deprivation of property and deprivation of qualification. Generally, deprivation of property and deprivation of qualification are applied to punish the criminals who are legal persons. The punishment of deprivation of property includes confiscation of property and fines. Under China’s Criminal Law, the punishment of deprivation of property against patent offences mainly takes the form of a fine rather than confiscation of property, to which the authors have no objection, though in some countries confiscation of property is also used to punish criminals who are legal people.22 In China, since most patent offences have been perpetrated by corporate offenders, the punishment of deprivation of property should be limited to a fine, for according to the provisions of China’s Criminal Law, deprivation of property refers to the compulsory confiscation of part or all of the property personally owned by a criminal.23 For a company or an enterprise, a certain amount of property owned by the legal person is a prerequisite for its existence and for its engaging in business operations in the market economy. If part or all of its property has been compulsorily confiscated by the state, the legal person of the company or enterprise will possibly lose his qualifications as a subject for civil as well as economic activities. The market is made up of numerous entities, which are closely connected, crisscrossing and interacting with each other, thus maintaining the stability of the economic order. Under these circumstances, if part or all of the property of a company or enterprise is confiscated, thus deprived of its qualifications as a subject in the market, other
There are many types of criminal punishments. The main ones include the punishment of deprivation of personal life, deprivation of personal liberty, deprivation of property and deprivation of qualification. Generally, deprivation of property and deprivation of qualification are applied to punish the criminals who are legal persons. The punishment of deprivation of property includes confiscation of property and fines. Under China’s Criminal Law, the punishment of deprivation of property against patent offences mainly takes the form of a fine rather than confiscation of property, to which the authors have no objection, though in some countries confiscation of property is also used to punish criminals who are legal people.22 In China, since most patent offences have been perpetrated by corporate offenders, the punishment of deprivation of property should be limited to a fine, for according to the provisions of China’s Criminal Law, deprivation of property refers to the compulsory confiscation of part or all of the property personally owned by a criminal.23 For a company or an enterprise, a certain amount of property owned by the legal person is a prerequisite for its existence and for its engaging in business operations in the market economy. If part or all of its property has been compulsorily confiscated by the state, the legal person of the company or enterprise will possibly lose his qualifications as a subject for civil as well as economic activities. The market is made up of numerous entities, which are closely connected, crisscrossing and interacting with each other, thus maintaining the stability of the economic order. Under these circumstances, if part or all of the property of a company or enterprise is confiscated, thus deprived of its qualifications as a subject in the market, other