Legal analysis of China’s first BlackBerry trademark counterfeiting case

By Kevin Nie, China IP,[Trademark]

Case summary
The second instance trial of trademark counterfeiting case of BlackBerry against Liu Bingming et al., highly watched by both domestic and foreign news media, has recently been concluded at the Intermediate People’s Court of Shenzhen City.
 
The court found that defendants, Mr. Liu and others, engaged since March 2009 in purchasing abandoned or used BlackBerry mobile phones or main boards for repair, and also keypads, speakers, flashlights, displays (with the BlackBerry trademark); assembled, without permission from Research in Motion Ltd. (RIM) of Canada, fake BlackBerry phones, applied labels on them; and sold them for profits, the amount of 290,000 yuan.
 
At trial of the first-instance, the court sentenced the four defendants for prison terms of sixteen to forty-two months respectively. Disagreeing with the judgment, the defendants appealed to the Intermediate People’s Court of Shenzhen City. The court on the second instance affirmed.
 
Determination of goods of the same kind
According to Xu Zhen, Prosecutor of Section I, the People’s Procuratorate of Futian District, Shenzhen, the case was primarily centered on the determination whether the allegedly infringed product and the allegedly infringing product were goods of the same kind. Pursuant to Article 213 of the Criminal Law and related judicial interpretations, the crime of registered trademark counterfeiting is not constituted unless the goods that the alleged infringer produces or sells and the goods that are approved for using the registered trademark of the owner are “goods of the same kind.”
 
In the present case, the BlackBerry mark had been registered by RIM in China, which was approved to be used on data processing devices, transmitters (for telecommunication purposes) and computer software. The conviction of the accused was dependent upon whether the BlackBerry counterfeits belonged to any one of the three kinds of goods approved under the registered mark. The defense attorney argued that the counterfeits should be determined as mobile phones, and did not belong to any of the approved kinds. Thus, none of the defendants should be convicted.
 
The public prosecutor started from the functions of the counterfeits, and concluded that they could make phone calls, send and receive emails, synchronize data with a computer and transmit files. They were like PDAs with networking functions. They were handheld electronic data transceivers or data processing devices for the purpose of tracking or processing personal information, other than simple traditional mobile phones for the sole purpose of placing phone calls. They were included in the approved scope of goods under the BlackBerry mark. They could be determined as goods of the same kind as the goods approved under the registered mark.
 
Finally, the Futian District Court adopted the opinions of the prosecutor, holding that the acts of the defendants have infringed upon the trademark rights of the owner, and that the amount of the infringement, which was over 290,000 yuan, which constitutes a serious offence, and that a crime of registered trademark counterfeiting is constituted.
 
Reportedly, the “goods of the same kind” determination became the key and the main difficult point of the case, because despite provisions on the concept and how to determine “goods of the same kind” in relevant laws and judicial interpretations, some details are left to the discretion of courts in practice.
 
Prosecutor Xu Zhen explained it to China IP in detail. In the Opinions Concerning Several Law Application Issues in Handling Criminal Intellectual Property Infringement Cases (“Opinions”) issued jointly by the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on January 10th, 2011, Article 5 explicitly provides that “goods of the same kind” can be goods with identical names or goods with different names referring to the same thing. A “name” means a name used for goods by the Trademark Office of the State Administration for Industry and Commerce in trademark registration, which is usually a name from the International Classification of Goods and Services for the Purposes of the Registration of Marks. “Goods with different names referring to the same thing” means goods that have the same or almost the same function, purpose, main materials, consumers, or distribution or sales channels, and are generally believed by the relevant public as the same thing.
 
Hu Chao, Deputy Presiding Judge of the Criminal Division of the People’s Court of Futian District, Shenzhen, remarked that the “goods of the same kind” rule determines the use of a registered mark and its legal protection, and is the key to the trial of criminal intellectual property infringement cases. Before the Opinions was issued, due to lack of explicit standards, the practical circle adopted a prudent attitude towards the rule. Goods subject to the determination were in a relatively narrow scope, with varied opinions. The issuance of the Opinions provides an explicit rule, that is, goods of the same kind can be goods with identical names or goods with different names referring to the same thing. In the determination, comparison should be done between the goods approved under the registered mark of the owner, and the goods produced and sold by the alleged infringer. Admittedly the rule provides judges with a clear standard and guidance for fighting and properly managing related crimes.
 
However, how should we compare the generic product name on a trademark registration certificate with a specific counterfeit? Wang Jiedong of Rouse & Co., IP counsel for RIM, stated that this could be done first by materializing the generic name, that is, to convert it into specific goods that are produced and sold under the registered mark with the authorization of the owner. Then, the genuine goods so converted can be used to compare with the fake. The steps are as follows. First, deter mine that as a reference, the genuine goods comply with the scope of goods approved under the registered mark. Second, determine that the reference is of the same kind as the counterfeit. Third, conclude that the counterfeit and the goods approved under the registered mark are goods of the same kind.
 
“It should be noted that the center of dispute here is on the difference between the description of the goods approved under the registered mark and the name of such goods in reality. Literally, common people in society can hardly connect the ‘handheld wireless electronic data transceivers for the purpose of tracking or processing personal information’ with such popular names as Smart phone or PDA. It is difficult, even for a judge, to make a correct judgment from his daily experience. Despite the clarification of the Opinions, it is certain that the dramatic difference between professional and popular names had higher influence on the case. From the perspective of the Trademark Law, to solve this practical problem, I am afraid, will be one of the major jobs for future legislation and interpretation,” said Judge Hu Chao.
 
The demonstrative effect of the case
As stated, whether the goods concerned are of the same kind as the goods approved under the registered mark is the key to the outcome of the case. At trial of the first-instance, both the prosecutor and the court began with the multiple functions and attributes of the BlackBerry Smartphone, holding that the alleged infringing goods were included in and of the same kind as the scope of goods approved under the registered mark of the owner. Such a way of thinking, as remarked by Wang Jiedong, is extremely valuable for the handling of similar cases.
 
According to Wang Jiedong, usually the name of goods approved under a registered mark is a name from the Differentiation Table of Similar Goods and Services (“Table”). However, the names in the Table do not correspond with the real names of goods on one-on-one basis, that is, one name in the Table may correspond with more than one kind of named goods in reality, and more than one kind of named goods in reality may correspond with more than one name in the Table.
 
To seek wider protection out of the registration of a mark, the owner often chooses a name with a wider extension, or even the name of a category of goods. Some owners go so far as to use names coined by themselves other than from the Table. Thus, the Table is not the sole standard for the classification of goods. Therefore, in determining whether the goods approved under a registered mark are the same as the goods of an alleged infringer, any rigid adherence to the Table, without viewing the entire picture, will be against the original legislative intention, letting lose the criminals and damaging the legal rights and interests of the owner.
 
Wang Jiedong said that when a name with a wider extension (such as the “date processing device” in the present case) or coined by the owner (such as the “handheld wireless electronic data transceivers for the purpose of tracking or processing personal information” in the present case) is used as the name of goods approved under a registered mark, the goods of an alleged infringer are determined as of the same kind as the goods approved under the registered mark, as long as the attributes of the former are included in the name of the latter. For some interdisciplinary digital products with multiple functions, to cater to market needs, the manufacturers and developers keep on adding new functions to the original types. For quite a number of such additional functions, in reality, the owners seldom, if not never, have their generic names entered into the related trademark registrations. As long as an owner has registered the main function or attribute of his product, it would be overly strict if he is deprived of the trademark protection over any unregistered additional function or attribute.
 
The early wireless handheld devices of RIM did not have the voice call function. It wasn’t until 2002 and after several generations that BlackBerry 5810 came equipped with the function. However, RIM had not registered the function under the relevant trademark before the occurrence of the present case. Whether an alleged counterfeit is of the same kind as the goods approved under a registered mark should be determined by viewing the entire picture, with respects to the functions and intended purposes of the both, on the basis of the descriptions, instructions, origins and special technical materials.
 
Determination of identical marks
As stated, whether the goods approved under the registered mark “BLACKBERRY” are of the same kind as the alleged infringing goods is the key to the application of laws in the registered mark counterfeiting case. Article 213 of the Criminal Law provides that the crime of counterfeiting a registered mark is constituted where a mark identical with a registered mark is used on goods of the same kind as the goods approved under the registered mark, in a serious offense, without the authorization of the owner of the registered mark. Therefore, the constitution of the crime is centered on whether a mark identical with the registered mark is used on goods of the same kind as the goods approved under the registered mark.
 
Judge Hu Chao noted that the two concepts—“goods of the same kind” and “identical mark”—must be clarified. In criminal justice, the “identical mark” is most often disputed between the prosecutor and the defense attorney. This essential fact had to be examined and ascertained in the present case. First, it was found that the alleged infringing goods, as seized, were labeled with “BlackBerry.” Both “BlackBerry” and “BLACKBERRY” were registered marks of RIM, among which “BlackBerry” was approved to be used on data processing devices, and “BLACKBERRY” on “handheld wireless electronic data transceivers for the purpose of tracking or processing personal information.” The court was of the opinion that they were identical marks. In the Interpretations Concerning Several Law Application Issues in Handling Criminal Intellectual Property Infringement Cases (“Interpretations”) issued jointly by the Supreme People’s Court and the Supreme People’s Procuratorate in 2004, Article 8 provides that an “identical mark” means a mark that is exactly the same as or visually almost non-different from the counterfeited registered mark, and is sufficient to mislead the relevant public.
 
The circumstances are clarified in further judicial interpretations, where an identical mark is a mark that: a. changes the font, case or arrangement of and is imperceptibly different from a registered mark; b. changes the space between the words, letters and/or numerals of a registered mark, without diminishing any distinctive feature of the registered mark; c. changes the color of a registered mark; or d. other marks that are visually non-different from a registered mark and sufficiently misleads the relevant public. Thus, the court concluded that BlackBerry and BLACKBERRY were identical marks. The conclusion was further confirmed in the reply from the Trademark Office of the State Administration for Industry and Commerce concerning BlackBerry and related issues.
 
Second, following the identical-mark determination, the court went on to judge whether the alleged infringing Smart phone devices were included in the kind of goods approved under the registered marks. Article 5 of the Opinions as of 2011 provides for a rule that goods of the same kind can be goods with identical names or goods with different names referring to the same thing.
 
As stated, BlackBerry was approved for use on data processing devices, and BLACKBERRY on “handheld wireless electronic data transceivers for the purpose of tracking or processing personal information,” and the two were identical marks. As found out by the court, the alleged infringing Smartphone devices, namely BlackBerry Curve 8310 and 8320, could make phone calls, send emails, send messages, take photographs, record videos, access web pages, synchronize data with a computer and transmit files. They were designed for personal data services, and suitable for tracking or processing personal information. As wireless transceivers, they were included in the scope of handheld wireless electronic data transceivers or data processing devices for the purpose of tracking or processing personal information. They were basically the same as the “handheld wireless electronic data transceivers for the purpose of tracking or processing personal information” as approved under the registered mark concerned with respects to function, intended purpose and main materials. Therefore, they were of the kind of goods approved under the registered mark. Though different from the language used in trademark registration, the use of the word “Smartphone” could not deny the fact that the Smartphone devices were “handheld wireless electronic data transceivers for the purpose of tracking or processing personal information.” The argument of the defense attorney that the seized products were phones and of a different kind from the goods approved under the BlackBerry mark was rejected.
 
Who determines “goods of the s0ame kind”
Prosecutor Xu Zhen noted that the relevant clause of the Opinions defines the concept and how to determine “goods of the same kind,” offering a strong aid to the procuratorate authority in the proper application of relevant laws. However, some problems have remained in the application of the clause, such as, whether goods of the same kind should be determined by the judicial authority or the administrative authority (that is, the administration for industry and commerce); who are the “relevant public” in the Opinions; and whether Article 8 of the Interpretations Concerning Several Law Application Issues in the Trial of Civil Trademark Dispute Cases issued by the Supreme People’s Court (which provides that for the purpose of the Trademark Law, the “relevant public” means consumers that are related to a class of goods or services identified by a mark, and other business operators in close connection with the marketing of such goods or services) is applicable to criminal cases, and if so, whether the fact that “‘goods of the same kind’ are believed by the relevant public as the same things” should be determined directly by a court or with the help of evidence, and if the latter is the case, how to collect the evidence. These issues are to be clarified in further judicial interpretations.
 
Moreover, the compliance of the genuine goods reference with the scope of goods approved under the registered mark is a precondition to the goods-of the- same-kind determination. By whom the precondition should be determined is not clarified in related laws or judicial interpretations. Some say that judges have the authority to make the decision, some say that it should be the state trademark administration, and some say that it should be the supervisory authority of quality and technology as it involves the classification of goods.
 
In the present case, the determination was made by the court. Wang Jiedong said that this is a good example for the handling of similar cases. A court knows a case better than the other authorities.
 
It provides a platform for the parties involved to express their opinions. It is legally authorized to render a final judgment. Therefore, in the existing judicial system, undoubtedly a court is the best reasonable choice to make the determination.
 
Determination of refurbishments
In reality, it is often witnessed that counterfeiters buy scraps and refurbish or repair them, and sell the product refurbished or repaired for a profit. Their usual defense is that the act is to repair a product, which does not infringe upon the rights of a registered mark owner. In the present case, a similar defense was invoked by the attorney of the defendants, but was disaffirmed by both of the courts.
 
Opinions vary regarding the nature of the reworking on a genuine product or its parts. One opinion is that the reworking act and the use of the registered mark by the alleged infringer comply with the descriptions of Article 213 of the Criminal Law, and constitute the crime of registered trademark counterfeiting. The other opinion questions the illegality of these acts using the theory of exhaustion of rights.
 
When asked whether “the refurbishment of secondhand mobile phones constitutes the crime of registered trademark counterfeiting,” Judge Hu Chao remarked, “Article 8 of the Interpretations of the Supreme People’s Court and the Supreme People’s Procurato rate as of 2004 provides that to ‘use’ means to apply the registered mark or the counterfeit registered mark on goods or their packages or containers, or product descriptions, or transaction documents, or in advertisements, displays or exhibitions, or in other business activities. To buy a large number of main boards and various parts and accessories (including displays with the BlackBerry mark), to recruit a number of assemblers to assemble products, and to label the products with marks (containing the BlackBerry letters, the model number and the IMEI code) without authorization is obviously to “apply the registered mark or the counterfeit registered mark on goods” rather than to simply repair mobile phones. It accords with the law to criminalize and punish such refurbishing acts as a crime of registered trademark counterfeiting.”
 
Wang Jiedong remarked that in trademark practice, the doctrine of “trademark exhaustion” means that it is not infringement if goods that are first sold lawfully are resold or redistributed, without any change or working on the original trademark or parts (or, a reverse passing-off will be resulted if the trademark is replaced by another). Therefore, apparently it is a misunderstanding when the refurbishing or reworking of genuine goods is deemed as exhausting the original trademark rights. Whether the repair or refurbishment of genuine goods constitutes trademark counterfeiting should be judged by unifying subjective and objective factors. In concrete terms, the following factors may be taken into consideration:
 
1. The purpose. By refurbishing or repairing, does the doer intend to receive a payment for the refurbishment or repair, or to sell the goods refurbished or repaired and gain a price difference? If he intends for the latter, the act may constitute a crime of counterfeiting the registered mark concerned.
 
2. The object. Does the doer work on individual and specific goods or wholesale and unspecific goods? In the case of the latter, the act may constitute a crime of counterfeiting the registered mark concerned.
 
3. The act. Does the person’s actions constitute a material productive act? If the doer sets up a production line and a workshop, buys a large number of parts, recruits assemblers, and labels a trademark on the products so assembled, the acts materially differ from the operational mode of the repairing industry. They should be determined as material productive acts, and constitute a crime of counterfeiting the registered mark concerned.
 
Sentencing and more
An opinion says that compared with many trademark infringement cases in China in recent years, the monetary amount of the case at hand does not seem to be very high, but the two principal offenders were each sentenced to over three years in prison and fined 150,000 yuan. It seems that the punishment is overly heavy. For the sentence, Prosecutor Xu Zhen explained, “In the Interpretations Concerning Several Law Application Issues in Handling Criminal Intellectual Property Infringement Cases issued jointly by the Supreme People’s Court and the Supreme People’s Procuratorate on December 8th, 2004, Article 1 provides that if the amount involved in an illegal business operation is 250,000 yuan or above, it constitutes a serious offense for the purpose of Article 213 of the Criminal Law, and the offender shall be sentenced to seven years or less in prison, together with a pecuniary penalty, in accordance with the crime of counterfeiting a registered mark. In the existing case, the amount involved in the illegal operation of the four defendants was over 290,000 yuan, which meets the criteria for a serious offence. Also, the two principal offenders did not have any legal mitigating circumstances. It is fully compliant with the Criminal Law and the Interpretations to sentence them to over three years in prison, together with a pecuniary penalty. The sentence is proper and suitable.”
 
Our journalist noticed that the owner of the intellectual property was also involved in this case of public prosecution. For this, Prosecutor Xu Zhen remarked, “First, the crime of counterfeiting a registered mark protects the trademark management system of the state and the exclusive trademark rights of the owner. According to relevant provisions of the Civil Procedure Law of China, the owner of the mark, as the victim, shall have the rights to participate in the criminal proceedings and enjoy the related procedural rights. Second, the participation of the owner is very important to help the court to find out facts and apply relevant laws. Third, the participation of the owner is advantageous to the protection of his intellectual property by the judiciary.”
 
“As the representative of the victim, we organized a dedicated Criminal Prosecution Management (“CPM”) group, to monitor the progress and engage in the proceedings. We prepared a detailed CPM solution, to formulate strategies and programs for each stage of the proceedings and for each law that may be applicable to the case. In particular, when it entered the examination and prosecution stage and the adjudication stage, we fully exercised the rights granted to an attorney by the Civil Procedure Law, actively communicated with the prosecutor and the judges, and expressed our opinions in law on behalf of the victim at many times regarding related issues. For some major issues in judicial determination, we prepared numerous jurisprudential analysis materials and provided an effective theoretical support. Regarding the technical issues, aided by the owner, we searched numerous related technical materials and provided professional opinions on the functions and technology of the products concerned,” Wang Jiedong said. “To view it from the process and the final outcome, the CPM related work has played a very positive role and reached our ideal result. Once again, the experience proves the significance of the participation of the victim in a criminal intellectual property infringement case.”
 
The successful treatment of the case not only protects the trademark rights and interests of RIM in China, but also demonstrates the unshaken determination of the Chinese government and judiciary to protect intellectual property.
 
A different view
As the case being concluded by the court, the four defendants involved were all sentenced of criminal penalties. However, You Yunting, Partner of DeBund Law Offices has a different view on the case.
 
I.                    The refurbishing should not be deemed as trademark counterfeiting
A refurbished device, though identical with the commodity under the registered trademark “BlackBerry,” cannot be deemed as mere counterfeit. Its core part—the main board—was from the BlackBerry phones that the BlackBerry trademark owner had manufactured. Except the main board, the case and the trademark logo were both counterfeited. The above set the refurbished devices apart from the usual trademark counterfeit.
 
(1). Legal nature analysis of the refurbishing act
The refurbished device was described as follows: the case, including the trademark logo, was fake, as the defendant replaced the case and the “BlackBerry” logo (and used instead the “BLACKBERRY”); and the core part was genuine, as he kept the original main board of RIM.
 
The refurbished device is essentially different from a sham in the traditional sense in that only part of the device is fake. According to the fact finding section of the written judgment of the BlackBerry case, the defendant purchased secondhand BlackBerry phone sets, refurbished them by replacing the cases, keyboards, speakers, flashlights and displays (as part of the case, which had the “BlackBerry” mark), and resold the refurbished devices. Common sense tells us that most secondhand phones still have functioning parts, such as keyboards, speakers and flashlights. Due to profit considerations, obviously the refurbisher will not change any working part. He will replace only some of them.
 
(2). Refurbishment and the crime of trademark counterfeiting
According to Article 213 of the Criminal Law, it can be inferred that the crime of counterfeiting a registered trademark comprises the following elements: the perpetrator of the crime may be a natural person or an organization; the object of the crime is the business administrative system and the exclusive trademark rights of another person; the subjective aspect of the crime is represented by the criminal intent; and the objective aspect of the crime is represented by the actor’s employing a mark identical with the registered trademark without due authorization, and that the circumstances are serious.
 
In the present case, the first and second instance judgments both contain many argumentations that the refurbishing act was consistent with the objective aspect of the crime of trademark counterfeit under Article 213, on the account that the actor “without permission from the owner of a registered trademark, uses a trademark which is identical with the registered trademark on the same kind of commodities.” Essentially, they try to prove that the “BLACKBERRY” mark on the refurbished device was identical with the registered trademark “BlackBerry.” But, as Mr. You has discovered, they fail to note the inherent difference between the current case and the usual crime of passing off a registered trademark, with respect to the source of “the same kind of commodities.”
 
Usually, in the context of the crime of trademark counterfeiting, both the product and the trademark are fake, and neither of them is manufactured or sold by or with the authorization of the genuine trademark owner. In the present case, the refurbished device, which was identical with the product identified by the registered trademark “BlackBerry,” cannot be deemed as counterfeit totally. Its core part—the main board—was from the BlackBerry phones that the BlackBerry trademark owner had manufactured. Except the main board, the case and the trademark logo were both counterfeited. This is how the behavior of the defendant was different from the usual trademark counterfeit. Thus, in objective aspects, the refurbishment of the secondhand BlackBerry phones in order to pass them off as genuine is different from the crime of trademark counterfeit under Article 213.
 
You Yunting holds that the most fundamental attribute of trademark is to distinguish between the sources of goods and services. Therefore, the crime of trademark counterfeit is obviously constituted if one manufactures products that are of the same kind with those identified by a registered trademark, and adds to such products the logo of the registered trademark, and sells the same to gain a certain amount stipulated in law. In the present case, although the refurbisher’s income from the refurbishment reached the amount specified in law, he had kept the core part of the secondhand phones sold by or for the registered trademark owner, but replaced their case and added a new trademark logo, before he sold the refurbished devices for a profit. The core part, that is, the main board, was manufactured by or for the registered trademark owner, and the case and the trademark logo came from other manufacturers. Thus, whether the act of the refurbisher constitutes the crime of trademark counterfeiting is open to discussion.
 
According to You Yunting, since the core part of the refurbished devices was produced by RIM, the refurbishing act was, in and of itself, to counterfeit the secondhand or inferior as the genuine.
 
Its objective aspect was inconsistent with Article 213 of the Criminal Law that fights against the unauthorized employment of a registered trademark on the same kind of commodities.
 
(3). Two other possible charges
However, although the refurbishment does not constitute the crime of trademark counterfeiting, in the Criminal Law, it still can be broken down upon from the perspective of the legal relationship it damages. For instance, to view the legal relationship concerned, since except for the main board, the original case and other parts were replaced with related parts manufactured by others than the original manufacturer, the buyer of the refurbished device is not guaranteed of the quality of the genuine BlackBerry phone. Thus, the refurbishment may be suspected of constituting the crime of manufacturing and selling inferior commodities under Article 140 of the Criminal Law.
 
More over, since the refurbisher employed and sold, together with the refurbished devices, registered trademark logos that were not manufactured by the registered trademark owner, he is suspected of committing the crime of illegally manufacturing registered trademark logos and selling registered trademark logos that are illegally manufactured.
 
II. Criminal penalty should be used with caution
Last but not least, although it is wrong obviously to manufacture and sell refurbished BlackBerry phones, whether the act should be cracked down upon by criminal law should be determined pursuant to the doctrine of a legally prescribed punishment for a specified crime. The application of law should be calculated in the conviction and the demarcation between crimes. If the refurbishing act constitutes a crime, the refurbisher should be punished according to law. If the refurbishing act is not engaged in criminal activity to a crime, it should be prevented using administrative or civil law tools.
 
(Translated by Ren Qingtao)
 
 

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