Vietnam IPR Enforcement Update: Quality of Counterfeit Goods Reaches 105.9% Compared to Genuine Ones but Still Held Criminally Liable – a Rarely Occurred Criminal Case
Attorney Le Quang Vinh – Bross & Partners
Email: vinh@bross.vn
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In 2018, the police of Bac Ninh province prosecuted a criminal case on the crime of "manufacturing, trading in fake goods" that occurred at two companies headquartered in Que Vo district, Bac Ninh province. The investigation agency discovered more than 4.5 tons of A-pens with fake AIHAO brand name, fake Kewen rulers, barcode stamps and 2 pen cap printing molds, 2 pen body printing molds, 3 ruler printing molds, 4,150 pen cups containing the word AIHAO
Assessment conclusion[1] no. 3163A/C54 (P4) of June 20, 2018 delivered by the Institute of Criminal Sciences - Ministry of Public Security (“C09”) concluded that all the samples obtained by the accused and the outsourced subjects are all counterfeit marks of registered trademarks “A, Aihao & device” and “Kewen & device” in the name of the right holder (Tan Hai Lang Son Co., Ltd.). In its additional assessment conclusion no. 4689/C09-P4 of September 4, 2018, C09 further confirmed that 363,366 pens containing the trademark "A, Aihao & device", 556 kg of pen cartridges with the brand "A, Aihao & device” sent for assessment have different quality criteria and parameters than the company’s specification TCCS 01:2018/TH provided by the right holder; 58,509 pieces of "Kewen & device" branded ruler 20cm long and 56,028 pieces brand "Kewen & device shape" ruler 30cm long type sent for assessment have different quality criteria and parameters than the company’s specification TCCS 02:2018/TH provided by the right holder.
In reply to the investigating agency’s request, the Intellecutual Property Office of Vietnam (“VNIPO”) in its official letter no. 6210/SHTT-TTKN dated June 22, 2018 determined that Tan Hai Lang Son Co., Ltd. is the owner and has the exclusive right to use all kinds of pens bearing trademark “A, Aihao & device” and rulers branded “Kewen & device”. The VNIPO further stated that the act of processing and possessing for sale writing pens (with the letter A), rulers bearing the trademarks "A, Aihao & device" and "Kewen & device" carried out by the accused without the trademark owner’s permission is the infringement of registered trademarks “A, Aihao & device” and “Kewen & device” which have been protected under the provisions of Clause 1, Article 129 of the IP Law. The goods being "pencils (with letter A), rulers bearing the trademarks "A, Aihao & device" and "Kewen & device” are considered counterfeit goods according to the provisions of Clause 2, Article 213 of the IP Law.
The Property Valuation Council in Criminal Procedure under the Bac Ninh Provincial People's Committee at its property valuation conclusion no. 966 of August 13, 2018 concluded that the total value of spurious goods is VND 2,203,468,000 (roughly $100,000), of which 363,366 A-label pens brand name “A, Aihao & device” worth VND 1,090,098,000; 104,411 rulers branded "Kewen & device" 30cm type worth 522,055,000 VND; 197,105 pieces of "Kewen & device" branded ruler 20cm type worth 591,315,000 VND.
Because the quantity of counterfeit goods in the case is equivalent to the quantity of authentic goods worth over 500 million VND (actually more than 2.2 billion VND), the People's Procuracy of Bac Ninh province issued Indictment no. 140/ CTr-VKS-P3 on November 30, 2018 prosecuting the defendant for the offence of "manufacturing, trading in fake goods" under Point a, Clause 3, Article 192 of the 2015 Penal Code with a penalty of 7 to 15 years in prison.
However, in impeaching at the first-instance trial, the representative of the Procuracy changed the crime from "manufacturing, trading in fake goods" according to Clause 3, Article 192 with a penalty frame of 7-15 years in prison to a crime of "infringement of industrial property rights" under Clause 2, Article 226 with a monetary fine of between VND 500 million and VND 1 billion or imprisonment from 6 months to 3 years because the Procuracy contends that the C09’s assessment conclusion no. 306 showed that the accused's counterfeit goods were found to have the lowest quality of 72.5% and highest of 100% compared to the company’s standards of pens and rulers declared by the right holder. That is, if this indicator is higher than the minimum level of 70% or less to be considered fake according to the amended Decree 185/2013/ND-CP.
At the first-instance trial, the court again invoked C09’s assessment conclusion no. 306/C09-P4 dated March 4, 2019 providing further explanation about the assessment conclusion no. 4689/C09-P4 in which concluded that the percentage of quality indicators compared to the company’s standards applicable for the A-line ink gel pens branded “A, Aihao & device” is 72.5% at lowest and the highest is 100%, for the K-line branded “Kewen & device” 20cm type, the lowest is 95.5%, the highest is 105.9%, for the K-line branded "Kewen & device" 30cm type, the lowest is 98.3% and the highest is 103.5%. In this case, the entire amount of goods in the case is not considered counterfeit according to Point b, Clause 8, Article 3 of Decree 185/2013/ND-CP as amended and supplemented according to Decree 124/2015/ND-CP since the quality of the goods in question all reached above the 70% threshold.[2]
Agreeing with the Procuracy's impeachment view, the court considered that the defendant's behavior had enough elements to constitute an offence of industrial property right infringement, specifically the defendant's hiring of a manufacturer of pens and rulers to fake labels in violation with another person's registered trademark with the total value of infringing goods over VND 2 billion is a dangerous act for society, infringing upon the rights to a protected mark, and tarnishing the image of the business environment in Vietnam. Therefore, she must be strictly punished according to Point dd, Clause 2, Article 226 of the 2015 Penal Code. Accordingly, the first-instance trial panel of the People's Court of Bac Ninh province in the judgment 09/2019/HS-ST of March 14, 2019 decided to sentence to the defendant 30 months of imprisonment (but a suspended sentence is granted) with a probationary period of 60 months from the date of the first-instance judgment (March 14, 2019) and an additional fine of 20 million VND to be added to the State budget.
Bross & Partners, an intellectual property company ranked First (Tier 1) by Legal 500 Asia Pacific, has experience in resolving complicated IP disputes including trademarks, copyrights, patents, plant varieties
Please contact: Vinh@bross.vn; mobile: 0903 287 057; Zalo: +84903287057; Skype: vinh.bross; Wechat: Vinhbross2603.
[1] Assessment conclusion basically has the same meaning as expert opinion or expert testimony found in the US Federal Rules of Evidence, Rule 702. The term “assessment conclusion” can be deemed equivalent to those of “judicial technical appraisal”, “neutral technical expert” in Germany, or “judicial technical appraisal”, “advice from experts”, “judicial technical appraisers” in China. See: The Improvement of Intellectual Property Arbitration, Mediation, and Court Procedures in the Shanghai Pilot Free Trade Zone, Office for Harmonization in the Internal Market, page 21. For more information about expert opinion in Vietnam, see “Is expert opinion or appraisal conclusion admissible in the disputes or infringement claims of intellectual property rights in Vietnam?”: http://www.bross.vn/en/ip-practices/Is-Expert-Opinion-or-Appraisal-Conclusion-Admissible-in-the-Disputes-or-Infringement-Claims-of-Intellectual-Property-Rights-in-Vietnam
[2] Decree 85/2013/ND-CP as amended by Decree 124/2015/ND-CP
Article 3. Interpretation of terms
8. “Fake goods” include:
b) Commodities have at least one of the quality criteria or basic technical characteristics generating their use value, utility only reache 70% or less in comparison with the quality standards or technical specification as declared, registered or written on the label, packaging of goods