Docket No.: 90, second instance (终), civil case (民), (2020) Shanghai Intellectual Property Court (沪73)

Lower Court Docket No.: 6040, first instance (初), civil case (民), (2019) Yangpu District People’s Court of Shanghai (沪0110)

SUMMARY OF THE ARGUMENT

Regarding the question whether there is civil liability, an infringer cannot be excluded from bearing civil liability for the part for which no criminal liability has not been identified or attempted to be identified. Regarding the sizing of civil liability, if a principal offender and an accessory offender are identified, it does not mean that there is civil liability difference between the principal offender and the accessory offender. Regarding the amount of civil compensation, the amount of civil compensation cannot be simply based on the amount of crime.

STATEMENT OF THE CASE AND FACTS

SAIC VOLKSWAGEN AUTOMOTIVE CO., LTD.,

Plaintiff-Appellant

v.

SHEN XX,

XU XX,

Defendants-Appellees

On April 24, 2018, Cixi People’s Court of Zhejiang Province issued the Criminal Judgment (2017) Z. 0282 X.C. No. 666 against Shen XX and Xu XX over the crime of counterfeiting registered trademarks. It affirmed that, in April 2014, Shen XX rent the first floor warehouse of Boyuntong in which Xu XX was Deputy General Manager and assembled automobile airbags with Trademarks No. 205770 and No. G1110655 and others, with no license from the registered trademarks owners. Xu XX, with the knowledge that the airbags assembled by Shen XX was suspected of trademark infringement and with the aim to make profits from selling the airbags, still provided the warehouse and labors to help Shen XX assemble the airbags. The seized goods included 439 auxiliary airbags with “YFKSS” Trademark No. 205770 (their value was RMB 230,475 based on manufacturer’s price), 361 main airbags (without generator) with Trademark No. 205770, 590 main airbags (without generator) with Trademark No. G1110655 and a lot of auxiliary airbags with other brands or without brand. According to the Price Determination Report C.R.Z. (2018) No. 102 issued by Cixi Price Appraisal Center, for the finished goods of auxiliary airbags with “YFKSS” Trademark No. 205770, the manufacturer’s price of the infringed goods on the base date of price determination was RMB 525 per airbag. Cixi People's Court of Zhejiang Province held that Shen XX and Xu XX, without the license from registered trademarks owners, used the trademarks identical to the owners' registered ones on the same goods, counterfeited more than two registered trademarks, and received business revenue more than RMB 620,000; with particularly serious circumstances, their behavior had already constituted the crime of counterfeiting registered trademarks; and the crime proposed by the public prosecution organ was established. In the joint crime, Shen XX played a major role and was the principal offender; and Xu XX played a secondary role and was an accessory offender. Therefore, the court ruled that Shen XX committed the crime of counterfeiting registered trademarks and was sentenced to three years imprisonment with five years’ probation and fined RMB 320,000; Xu XX committed the crime of counterfeiting registered trademarks and was sentenced to six months imprisonment with one year probation and fined RMB 60,000.

Additionally, according to the Price Determination Report C.R.Z. [2016] No. 488 issued by Cixi Price Appraisal Center, for the counterfeit Volkswagen PAB airbags, the price of the infringed goods on the base date of price determination was RMB 2,750 per airbag. According to the Price Determination Report C.R.Z. [2016] No. 1086 issued by Cixi Price Appraisal Center, the price of the counterfeit Passat auxiliary airbag was RMB 2,750 per airbag. The selling price of a party not involved in this case, Yanfeng Key (Shanghai) Automotive Safety Systems Co., Ltd., indicated that the market price of both Volkswagen DAB airbags (without generator) and Skoda DAB airbags (without generator) was RMB 520.

After the aforesaid criminal judgment took effect, SAIC Volkswagen Automotive Co., Ltd. (“SAIC Volkswagen”) filed a civil lawsuit, requesting to order Shen XX and Xu XX to jointly compensate for its economic losses and the reasonable expenses incurred in protecting the rights in total of RMB 500,000. The two Defendants defended that: (I) they admitted that the seized auxiliary airbags constituted trademark infringement, but the seized main airbags were not finished goods as they did not have generator, so the latter did not constitute trademark infringement; (II) as the unit price of Volkswagen airbags determined in the criminal judgment was RMB 525, the two Defendants had been criminally punished and paid the fine before the infringing products were sold, and the amount of damages claimed by the Plaintiff was too large.

Yangpu District People’s Court of Shanghai held in the first instance that the two Defendants admitted that the seized auxiliary airbags constituted trademark infringement, and the court confirmed it.  Regarding the main airbags, the Defendants engaged in producing and selling the infringing products; the trademarks in dispute labeled on the airbags were prepared for selling; this also constituted use of the marks identical to the registered ones on the identical goods and further constituted trademark infringement. Therefore, the court decided in the first instance that the two Defendants shall jointly compensate for the Plaintiff's economic losses in the amount of RMB 45,000 and reasonable expenses in the amount of RMB 200,000.

ANALYSIS

In criminal-civil IP cases, there have been many controversies about how to impose civil liability after criminal punishment has been imposed for IP infringement, as there is no unified understanding on the liability mode, the determination standard or the compensation amount.

Regarding the question whether there is civil liability, an infringer cannot be excluded from bearing civil liability for the part for which no criminal liability has not been identified or attempted to be identified. The reasons are discussed below. First, there is essential difference in judging standards between a crime and civil infringement. The part for which no criminal liability has not been identified or attempted to be identified is the judgment made by the court according to the required crime elements and the evidence standards for conviction and sentencing. It only shows that the involved act does not have all the crime elements stipulated by law, but it does not mean that the act does not constitute infringement, nor does it mean that the offenders do not need to bear civil liability. Second, although the evidence rules in civil cases are clear that the basic facts confirmed by a legally effective judgment of people's court are the facts exempted from certification, the trademark infringement judgment does not constitute a fact determination, but a legal judgment. Even if the legal decision on the same legal fact in the prior criminal judgment may be very correct based on the strict standard of true and sufficient evidence in criminal cases, this cannot replace the legal decision in the follow-up civil judgment.

Regarding the sizing of civil liability, the principal offender and the accessory offender in the criminal case are distinguished according to the different roles of the Defendants in the joint crime. However, the criminal liability sizing cannot be directly transplanted into the civil case. In other words, it does not mean that there is civil liability size difference between the principal offender and the accessory offender.

Regarding the amount of civil compensation, the amount of civil compensation cannot be simply based on the amount of crime. The reasons are discussed below. First, “illegal operating amount” and “illegal income amount” each only consider the factors on the side of the Defendant/infringer, and the evidence mainly includes the sales amount shown on the account book, and the value of the goods seized for this case. In addition to the infringer’ profit, the amount of civil liability can also include the loss of the infringed party or the license fee paid to others, and the factors such as awareness and market share can be considered comprehensively. Second, criminal evidence is very different from civil evidence. The amount of crime is determined strictly according to the crime. The truthfulness and sufficiency standards should be met, and reasonable doubts should be eliminated. The civil compensation liability should be evidenced by the parties to the “highly probability” standard. Thus, in juridical practice, the actual operating amount of the Defendant is always higher than the amount of crime determined in the criminal judgment. But in civil cases, it is normal that the amount is re-determined and increased.