Protecting trademark rights is a fundamental concern for brand owners. When trademark infringements occur, rights holders can seek recourse either through administrative authorities or the courts. Administrative action is often preferred due to its speed and lower cost.
Upon confirming an infringement, administrative bodies may halt the illegal activity, seize and destroy counterfeit goods and tools, and impose fines. Penalties can reach up to five times the illegal business revenue if this exceeds RMB 50,000. If there is no illegal revenue or it is below RMB 50,000, fines can be as high as RMB 25,000. Repeat offenders and those involved in serious violations face harsher punishments.
Accurately assessing the illegal business revenue is critical for enforcing these penalties. Recent measures issued by the China National Intellectual Property Administration (CNIPA) and the State Administration for Market Regulation (SAMR) aim to standardise the calculation process.
Key Points from the New Measures:
Definition of Illegal Business Revenue: This refers to the total value of infringing goods or the revenue generated from their sale.
Valuation of Infringing Goods:
Sold infringing goods: Assessed based on the actual sales price.
Unsold infringing goods: Calculated using the average sales price of sold infringing goods. If this cannot be established, the marketed price is used. If neither can be verified, the mid-market price of the legitimate goods during the infringement period is applied.
Goods manufactured without infringing trademarks but intended to bear such marks are included if evidence supports their intended use for infringement.
Mid-Market Price Determination:
Based on the rights holder's retail price.
If unavailable, calculated using average prices from multiple businesses or a single seller.
If no comparable goods are available, it is based on past sales or goods with similar specifications.
When difficult to determine, a price evaluation agency may be consulted.
Special Cases:
Subcontracting: Revenue is based on the sales price, proportional value in the subcontract, or mid-market price.
Complimentary Goods: Valued at purchase price, manufacturing cost, marketed price, or mid-market price.
Refurbished Goods: Entire value if the product infringes; value of components if only parts infringe.
Counterfeit Marks: Based on sales price of the unauthorised trademark symbols.
Contributory Infringement: Revenue from assisting infringement or treated as no illegal revenue if no gain.
Rental Goods: Assessed by rental income.
Advertising Campaigns: Treated as no illegal revenue if infringing goods cannot be identified.
Joint Infringement (Licensor and Licensee): Assessed as per general valuation methods or based on royalties if the licensor aids the licensee.
Unverifiable Revenue: Treated as no illegal revenue.
Partial Revenue Verification: Based on the verified portion.
False Sales: False sales figures are excluded from revenue.
Transfers Between Criminal and Administrative Authorities: When criminal and administrative assessments differ, the administrative investigation's findings prevail.
The updated guidelines aim to enhance consistency and fairness in calculating illegal business revenue, ensuring robust enforcement of trademark rights in China.
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