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A Seven-Year Journey —QBPC's Quest to Improving Criminal IP Protection

Create Time:2021-05-07

Hailie SHEN

On February 9, 2021, the Supreme People's Procuratorate (hereinafter referred to as the "SPP") announced at a press conference its decision to further promote the pilot program of IPR holders exercising rights in the proceeding against IP crimes (hereinafter referred to as “pilot program”) across the country, so as to enhance the IP prosecution. Upon hearing the thrilling news, QBPC members were delighted to share it with each other. Jack Chang, one of the founders of QBPC and former QBPC chair for 13 years, is the key facilitator for the reform. He told us the story that dates back seven years ago.

 

Origin and Causes

       In 2013, Jack's employer encountered a large-scale case of industrial software piracy and trademark infringement. The Economic Crime Investigation Department of Ministry of Public Security attached great importance to the case and supervised it as a major case. After three months of painstaking efforts, the case was successfully solved. Based on the unit retail price of the genuine software, the total value of the seized pirated software was 10 times that of the company's software sales revenue in China in the previous year. However, when the police handed the case over to local prosecutors, there was no following. Jack, on behalf of the company, repeatedly sought to meet with the prosecution to follow up but was unexpectedly turned down. According to the procuratorial authority, the provisions related to intellectual property crimes were stipulated in the chapter of crimes against the socialist market order under the Criminal Law, so that they concluded that IP crimes were not regarded as crimes against property. As a result, the public prosecution and trial of intellectual property crimes were for the protection of public interests instead of the private property rights of the parties concerned. Accordingly, they argued that intellectual property right holders had nothing to do with public prosecution and trial. Without any suspense, the case ended up in a dead end.

 

       This case exposed two serious flaws of the system. Firstly, the IPR right holders as victims were unable to assert their rights during the proceedings; Secondly, the right holders were unable to provide relevant technical information and evidence, which made it difficult for prosecutors to grasp sufficient and strong evidence, thus affecting the judge's decision. As an IP veteran, Jack identified the symptom and determined to make a difference.

 

Pioneers - Shanghai and Beijing

Afterwards Jack had a discussion with the Economic Crime Investigation Department of Shanghai Public Security Bureau. In his view, without an open public prosecution and trial process allowing right holders to participate, it would be difficult to enhance the transparency of IP criminal protection and maximize the visibility and effectiveness of the public security authority's efforts. In March 2014, Jack was introduced by the leader of the ECID to Wu Weijun, deputy director of financial & IP Department (FIPD) of Shanghai Municipal People's Procuratorate (SMPP). Subsequently Jack had his first encounter with Director Xiao Kai of FIPD and raised the issue, with an expectation to promote a reform of the system that could allow IP right holders to participate in criminal proceedings as victims.

 

Considering that intellectual property was a property right, Director Xiao believed right holder should have a status of victim in criminal cases of intellectual property infringement. Xiao informed Jack that the FIPDs of seven district-level procuratorates in Shanghai had actually started the practice. Subsequently, the SMPP issued a written instruction to the seven district-level procuratorates on systematically implementing the practice. The SMPP created a standard form of notice (in both Chinese and English) for notifying IP owners of their rights and obligations. Shortly thereafter, another district procuratorate set up its FIPD. In the end, with the support and guidance of the deputy procurator-general in charge and the FIDP of SMPP, all eight district-level procuratorates in Shanghai adopted the same approach.

 

In July 2014, QBPC signed an MOU with the FIPD of SMPP, which mentions that "the Financial & IP Department of the Procuratorate will strengthen guidance, coordinate and supervise major, complex and difficult criminal cases involving infringement of intellectual property rights of QBPC members, and provide feedback on the investigation of the cases. QBPC members will be informed of the victim's rights and obligations in the proceeding. The QBPC members are encouraged to inquire on the case handling process in accordance with the "Regulations on the Case Handling Process Inquiry Platform (for Trial Implementation)" of the SMPP, so as to fully protect the legitimate rights and interests of the QBPC members, such as the right to know, the right to participate, and the right to litigate. In order to better cooperate with the Procuratorate, QBPC promised to assist the Procuratorate in finding the contact information of the right holders.

 

Between 2014 and 2017, eight district-level procuratorates implemented the system of notifying IP owners to exercise and fulfill their rights and obligations under the guidance of FIPD of SMPP. Since 2015, Shanghai procuratorates at both levels have accepted 539 cases involving 981 accused defendants of IP crime, in 62.5% of which the victims have received the notification.

 

In June 2017, QBPC shared the Shanghai best practice with the Economic Crime Prosecution Department (ECPD) of Beijing Municipal People’s Procuratorate, hoping that all procuratorates in Beijing could adopt the same practice. The suggestion was echoed by Jiang Shuzhen, Director of ECPD. Subsequently, the two sides signed an MOU and achieved consensus on "Focusing on the function of IP protection, improving IP owners’ consciousness and ability of safeguarding rights: enhancing communication and further exploring cooperation opportunities in terms of notifying rights and obligations, circulating the case information, hearing opinions and reducing losses’’.

 

In early 2018, QBPC and FIPD of the SMPP met to discuss the feasibility of promoting the rights and obligations notification system across the city. Jack further proposed that many crimes of selling or producing fake and inferior products also involved counterfeit trademarks, and therefore relevant trademark owners should also be allowed to participate in relevant public prosecutions. Director Xiao immediately invited Director Kang Qiang of the Investigation Supervision Department of SMPP to join the meeting, and the subsequent discussion was very smooth and productive.

 

The FIPD of SMPP issued a notice to Investigation Supervision, Public Prosecution, Juvenile Crime Prosecution, IP and Financial Dept. of all procuratorates in Shanghai to implement the System recognizing IP owners as victims of IP related crimes and demanding implementation of the System in May of 2018. It required that IP owners be identified and notified whenever an IP crime or a crime of selling or producing fake and inferior products involving counterfeit trademarks was prosecuted. In 2019, Beijing Municipal People's Procuratorate formulated the "Guidelines for the Work of Beijing Municipal Procuratorate to Safeguard the Criminal Litigation Rights of Intellectual Property Right Owners in accordance with the Law", which required that IP owners be served with a Notice of Rights and Obligations at the stage of examination and prosecution, be heard in accordance with the law, and be guaranteed the right to know and the right to participate in litigation.   

 

The Pilot Program - Shanghai, Beijing, Jiangsu, Zhejiang, Fujian and Guangdong

In February 2019, QBPC reported the new practice of Shanghai and Beijing procuratorates to the 4th Department of SPP and suggested that the pilot program be expanded to Jiangsu, Zhejiang, Guangdong and Fujian Province. In April, QBPC sent SPP a letter to reiterate the above suggestion. In November, after seeking inputs from various procuratorates and other relevant agencies, the SPP issued a written instruction to the procuratorates of Beijing, Shanghai, Jiangsu, Zhejiang, Guangdong and Fujian on conducting a one-year pilot program.

 

The plan stated that the cases covered by the pilot program included those involved or were suspected of involving criminal intellectual property right infringement coded in Section 7, Chapter III of the Specific Provisions of the Criminal Law; or those involved or were suspected of involving both criminal intellectual property right infringement and the crime of manufacturing and selling fake or inferior product but were prosecuted only in the latter crime.” During the investigation and prosecution of a said criminal case, the right holder enjoy the following rights: the right to request accommodations for providing testimonies and to keep testimonies confidential; the right to provide self-gathered evidence; the right to provide relevant leads to the case; the right to be informed about the examination opinion that will be used as evidence; the right to be informed about the supporting documents, examine transcripts and handwritten statements; the right to be informed about the progression of the case, and changes in the compulsory detention measures; the right to appoint a legal representative, and to express opinions about the litigation (with the consent of the procuratorate, the legal representative of the right holder may apply to have access to, take excerpts from, or copy the case files); the right to request a recusal; the right to be protected; the right to lodge a complaint against the officials etc.

 

The SPP attached great importance to the pilot program and has included it in 2020 work report to the Two Sessions, which caught attention from all walks of life and was well recognized. In December, the Shanghai Changning District Procuratorate invited representatives of five companies (including Chivas Regal and Jiang Xiaobai) and IPR agencies to the court to inform them of their rights and obligations in litigation of a counterfeit wine case. The prosecutor served the above right holders with the "Notice of Litigation Obligations of Right Holders in Criminal Cases of Infringement of Intellectual Property Rights", introduced the background of the system, and explained the litigation rights and obligations that right holders should assume during the examination and prosecution stage. Take Shanghai as an example, with the leadership of SMPP and the continued promotion of the 4th Department of SPP (established after the institutional reform), the number of notified cases issued by the procuratorates increased from 410 in 2018 to 922 in 2019. As far as we know, the above-mentioned six provinces and two cities issued notification to more than 7,000 right holders during the pilot period, among which 1,169 right holders were notified by Shanghai procuratorate alone.

 

On November 5, 2020, the 4th Department of Supreme People’s Procuratorate (Procuratorial Department of Economic Crimes) replied to the QBPC letter, giving the credit to QBPC for promoting the practice of having IP owners to participate in public prosecution and trial of IP crimes. 

 

The SPP announcement on February 9, 2021 marks a milestone in China’s criminal judicial IP protection history! Furthermore, the SPP and some provinces and municipalities (including Beijing, Shanghai, Tianjin, Chongqing, Jiangsu, Zhejiang, Fujian and Sichuan) have even established the Procuratorial Office of Intellectual Property. Recently Deputy Director Song Jianli of the Procuratorial Office of Intellectual Property of SPP had an online meeting with Michael Ding and other QBPC colleagues, during which both sides exchanged views on strengthening cooperation and further improving the criminal judicial protection of IPR and shared the latest international IPR protection news. After seven years of unremitting efforts, QBPC has finally driven this significant progress. The experience has convinced us that we can jointly make positive changes together with the relevant authorities. Chinese government leaders do listen to the voices of foreign IP owners and do accept constructive recommendations in order to find realistic solutions to IP infringement. Jack believed that the new practice will not only enhance the transparency and efficiency of relevant public prosecution but also minimize the room for manipulating the trial due to corruption or local protection. The SPP, Beijing, Shanghai, and other Procuratorates participating in the pilot program as well as right holders make history together. They are the specific participants and contributors in response to President Xi's call for "telling a good story of China's IP rights"!

 

Looking Forward – Focus on details and cooperate with implementation

Recently, regarding the implementation of new practice, the SPP reflected that the feedback rate of IPR right holders had been low It is expected that IPR holders could respond promptly and render strong support. On the other hand, QBPC has collected information on significant technical problems and difficulties encountered by members. For example, it is occasionally difficult for IP owners to contact the prosecutor's office and vice versa. In response, Jack would suggest SPP refer to the sample produced by the SMPP and develop a unified format notification letter with the name and phone number of the contact prosecutor. We believe that with the implementation and improvement of new system, suspects will be duly punished, and the rights and interests of right holders will be secured.