Fight against Counterfeit Goods Related to IP Infringement: Criminal Perspective and Judiciary Role in Vietnam45310

By scrutinizing the statutes to prosecute and convict trademark counterfeiters and relying on criminal cases, the author found that: 1 There remains a confusion of actus reus 1 of the of

Fight against Counterfeit Goods Related to IP

Infringement: Criminal Perspective and Judiciary Role in Vietnam

Hoang Van Thang (1)*

(1) LL.M, Prosecutor, Supreme People’s Procuracy of Vietnam

(*) Correspondence: hoangvanthangks@outlook.com

Abstracts: This article provides a legal analysis of the trademark counterfeiting enforcement

framework in the criminal perspective in Vietnam By scrutinizing the statutes to prosecute and convict trademark counterfeiters and relying on criminal cases, the author found that: (1) There

remains a confusion of actus reus 1 of the offense of infringing upon industrial rights to trademark; (2)

The crime of trademark counterfeiting overlaps with the crime of manufacturing and/or trading counterfeit goods while the case law brings a useful illustration of this issue; (3) There has not been

necessary judicial guidance on commercial scale, damages and values of infringing goods as vital

requirements of the crime of trademark counterfeiting; despite that, the cases provide useful interpretation of these standards Based on the findings, to strengthen the criminal regime in the fight against counterfeit goods related to IP infringement, the author would give several innovative recommendations on legislation and policy, which could help Vietnam achieve sustainable

social-economic development in the long run

Keywords: Counterfeiting; IP infringement; crime; criminal code; sustainable social-economic

development

1 Introduction

Counterfeiting has been considered as “the economic crime of 21st century” with global menace to the sustainable social-economic development (McDonough, 2007) Counterfeit products hurt the economy as well as cause harmful, even deadly, effects on the environment and human beings because of their use of ingredients and materials of bad or toxic quality Moreover, counterfeiting often involves the infringement of an intellectual property right (e.g., trademark) that should be a key tool for the innovation and growth of any modern economy, thereby becoming the growing threat hampering businesses’ efforts

in a sustainability perspective Also, it has been suggested that counterfeiting of goods related to IP infringing has not existed in isolation due to organized criminals that have utilized it as an immense source of profits and a golden means of creating networks for other

1 “Actus reus” means “criminal act” In Vietnamese law, “actus reus” is called “objective aspect of a crime”

crimes like the trafficking of human beings, drugs and weapons, the money laundering or even the terrorism (Jeena, 2012)

Curtailing practices of trademark counterfeiting has been a difficult and often frustrating goal (Roediger, 2018) Faced with the global challenges, it is important for each country to endorse effective regulation and enforcement mechanisms to dissuade counterfeiting as well as IP infringements and thus create incentives to invest and engage in legitimate and sustainable businesses that are protecting the natural environment and consumers and boosting the growth (Baldini et al., 2015) Through preliminary assessments

of the current legislation and enforcement situation, this paper found on the one hand that judicial decisions could bring into light the difference of legal status between trademark counterfeiting, trademark infringing and manufacturing and/or trading counterfeit goods

as well as the vagueness of the requirements of the crime involving trademark counterfeit goods, on the other hand that despite the recent revision and amendments, the criminal enforcement regime of Vietnam is not an effective deterrent against counterfeiting of goods related to IP infringement, thereby needing to be revisited in a comprehensive way The author would, on the judicial view, give innovative recommendations in terms of legislation and policy to strengthen the Vietnamese criminal regime in the fight against counterfeit IP goods that could help Vietnam achieve sustainable social-economic development in the long run

2 Methodology

With the complexity of counterfeiting industry, the criminal legal issues that involve trademark counterfeit goods would vary in complex way for the objective of this article The methodology employed in the study is comparative research on the basis of historical and international perspective, from which the author finds remarkable changes in the current Criminal Code compared to the previous one as well as the compliance of Vietnamese criminal mechanism with the international framework to a certain extent However, based

on critical analysis of several academic articles and of the figures on the judicial practice with regard to the crime of trademark counterfeiting, loopholes of criminal law would be drawn with the request of innovative and prompt recommendations for more effective enforcement Finally, case law analysis is applied to show support that the judiciary has been somehow progressive, which should be incorporated into the statutes and the development of new policy

3 Results

3.1 Confusion of actus reus: counterfeiting or infringing?

3.1.1 Counterfeiting and infringing under Law on Intellectual Property 2005

In Vietnam, there is a classification that distinguishes trademark counterfeit goods from trademark infringing goods; of these, the former is part of the latter (Nguyen, 2014)

On the one hand, trademark infringement is defined in Article 129.1 as acts of using signs that are identical with or similar to protected marks without authorization of the mark owners2 On the other hand, there is an additional narrower definition of “trademark counterfeit goods” which covers goods or their packages bearing illegally used trademarks which are identical with or cannot be distinguished from protected marks3 As such, it is considered that trademark counterfeiting is comprised of acts of using marks that are identical with or indistinguishable from protected genuine marks In other words, trademark counterfeiting is the highest level of trademark infringement4 This has resulted

in the fact that not all the acts of infringing upon trademark have the same criminally illegal status

3.1.2 Counterfeiting and infringing under Criminal Code 1999 (amended and supplemented in 2009)5

2 Article 129.1 of Law on Intellectual Property 2005 states: “The following acts if being performed without the

permission of mark owners, shall be regarded as infringements of the rights to marks: (a) Using signs identical with protected marks for goods or services identical with goods or services on the lists registered together with such marks; (b) Using signs identical with protected marks for goods or services similar or related to those goods on services on the lists registered together with such marks, if such use is likely to cause confusion as to the origin of the goods or services; (c) Using signs similar to protected marks for goods or services identical with, similar to or related to goods or services on the lists registered together with such marks, if such use is likely to cause confusion as to the origin of the goods or services; (d) Using signs identical with, or similar to, well-known marks, or signs in the form of translations or transcriptions of well-known marks for any goods or services, including those non-identical with, dissimilar or unrelated to goods or services on the lists of those bearing well-known marks, if such use is likely to cause confusion as to the origin of the goods or services or misleading impression as to the relationship between users of such signs and well-known mark owners”

3 Article 213.2 of Law on Intellectual Property 2005 states: “Counterfeit mark goods are goods or their

packages bearing marks or signs which are identical with or indistinguishable from marks … currently protected for those very goods without permission of mark owners …”

4 Ha, T.N.T Strengthening the Legal Framework on the Offense of Infringing upon Industrial Rights to Trademark in Vietnam In Vietnamese: Hoàn thiện pháp luật về xử lý hành vi xâm phạm quyền sở hữu công nghiệp đối với nhãn hiệu ở Việt Nam Ph.D Dissertation, Ho Chi Minh Institute of National Politics, 2017, p 104

5 Hereinafter referred to as Criminal Code 1999

Under Criminal Code 1999, the offense of infringing upon industrial rights to trademarks charges are provided in Article 1716 As aforementioned in Section 3.1.1, acts of counterfeiting trademark are part of trademark infringement acts; therefore, it could be understood that Article 171 involves both trademark counterfeit goods and “other” trademark infringing goods On the other hand, trademark counterfeit goods are also included in the definition of “counterfeit goods”7 stipulated in Article 3.8.g of Decree

185/2013/ND-CP8 In addition, the offenses of manufacturing and/or trading counterfeit goods charges are regulated in Articles 156, 157 and 158 This has resulted in different opinions on the application of law to prosecute crimes involving trademark counterfeit goods Some commentators argue that those involving trademark counterfeit goods should

be prosecuted and convicted under Articles 156, 157 and 158, and that the offense of infringing upon industrial rights to trademarks charges regulated in Article 171 are to specifically deal with crimes involving trademark infringement that excludes trademark counterfeiting (Tran, 2007) Other commentators assume that Article 171 applies to both those involving trademark counterfeit goods and those committing other acts of infringing trademark rights (Tran, 2008) In practice, there are several cases in which the court’s decisions and reasoning provide a clear illustration of judicial favor of the opinion that acts

of trademark counterfeiting would be judged under Article 171

In Nguyen T T v Pepsi Co, Inc., the forensics conclusion by the Institute of

Intellectual Property Science states that the energy drink products bear signs “STINHP and image” are trademark counterfeit goods under Article 213.2 of Law on Intellectual Property

2005 vis-à-vis the trademark “STING and image” protected under the Certificates of Registered Trademark of PepsiCo, Inc9 In Tran T K L v Polo R L and Phung Q Q v L I

Vietnam Co Ltd, the forensics agencies did not conclude whether the infringing goods are

trademark counterfeit ones under Article 213.2 of Law on Intellectual Property 2005 Concretely, in the former case, the Department of Science and Technology of Ho Chi Minh

6 Article 171 of Criminal Code 1999 states: “T hose who intentionally infringe upon industrial property rights

to marks … currently under protection in Vietnam on a commercial scale, shall be imposed a fine of between fifty million and five hundred million dong or subject to non-custodial reform for up to two years”

7 Article 3.8.g of Decree 185/2013/ND-CP as follows: "Counterfeit goods include: (g) Goods have been

forged in term of intellectual property rights as provided for by Article 213 of Law on Intellectual Property 2005”

8 Dated November 15th, 2013 providing the penalties on administrative violations in commercial activities, production of, trading in counterfeit or banned goods and protection of consumer rights

9 Regarding the quality of the infringing goods, the forensics conclusion by the Institute of Criminal Science states that their technical parameters reach the quality criteria registered and notified by the H P Beverage Co., Ltd whose one of the two co-founders is Nguyen T T

city concluded that the trademark Polo R L was protected under the International Certificate 1261858, referring to be protected in Vietnam for products of clothes of group 25 under the application dated April 22, 2015; Polo R L asserted that the mark on the seized infringing goods are “identical” with the company’s protected mark, and the seized goods are counterfeit trademark goods; in the latter, the forensics conclusion by the Institute of Intellectual Property Science states that the sign “L, INAX” on the infringing goods are

“identical” with the mark “L, INAX” protected under the Certificate of Registered Trademark 24690 Despite that, it should, in the author’s opinion, be greatly important to take consideration into the characteristics of the trademark infringing goods to decide whether they are trademark counterfeit goods or not, which might give influence on the judicial decision on crime and penalties to the mark infringers The author assumes that the crime in these cases involves trademark counterfeit goods since the marks on the infringing goods are “identical” with the protected trademarks Finally, the court in these three cases held that defendants had committed the crime of infringing upon industrial rights to trademark under Article 171 of Criminal Code 1999 even though the infringing goods were concluded or should have been concluded to be trademark counterfeit products, which means that this Article is applied to prosecute those committing other acts of infringing trademark rights per se, but those involving trademark counterfeit goods

3.1.3 Counterfeiting and infringing under Criminal Code 2015 (amended and supplemented in 2017)10

The Criminal Code of Vietnam was reformed in 2015, then revised and amended

2017 with vital changes Of these, changes pertaining to offense involving trademark counterfeit goods are one the most remarkable highlights of the reform Under Criminal Code of Vietnam, the crime of infringing industrial rights to trademark is echoed in Article

226 as follows: “A person who infringes upon industrial property rights of a brand name …

protected in Vietnam, in which the infringing goods are trademark counterfeit goods, for commercial purpose or to earn an illegal profit of from VND 100,000,000 to under VND 300,000,000 or causes

a loss of from VND 200,000,000 to under VND 500,000,000 to the owner of such brand name … or with the violating goods assessed at from VND 200,000,000 to under VND 500,000,000 shall be liable to a fine of from VND 50,000,000 to VND 500,000,000 or face a penalty of up to 03 years' community sentence” This provision clearly states that only “trademark infringement by means

of counterfeiting is a crime” (Harms, 2018) under Article 226 of Criminal Code 2015 In other

words, Vietnamese law makers excluded “ordinary” trademark infringement from the offense of infringing upon industrial rights to trademarks charges, which is one of the remarquable novelties of Criminal Code 2015 in comparison with the previous one However, the title of the article is “offense of infringing upon industrial rights”, which has

caused confusion in the comprehension of the actus reus of the offense Some commentators

still assume that every act of infringing trademark that meets the other requirements

10 Hereinafter referred to as Criminal Code 2015

stipulated in Article 226.1 would be prosecuted for criminal liability (Le, 2019) Moreover, there remains an issue that Decree 185/2013/ND-CP is still effective till today11 This could lead to the argument that those involving trademark counterfeit goods should be prosecuted and convicted under the offense of manufacturing and/or trading counterfeit goods echoed in Articles 192, 193, 194 and 195 of Criminal Code 2015

3.2 Overlap of crime: counterfeiting or manufacturing and/or trading counterfeit goods

As mentioned in Sub-section 3.1.3, the offense of infringing upon industrial rights charges are to specifically to those involving trademark infringement by means of counterfeiting As such, it seems that they have drawn a remarkable distinction between the legal rules applied to prosecute criminal liability of the counterfeiters of goods who infringe upon industrial rights to trademarks and those applied to counterfeiters manufacturing and/or trading inferior quality goods In this sense, it would be understood that offenses of manufacturing and/or trading counterfeit goods charges regulated in Articles 192, 193, 194 and 195 of Criminal Code 2015 are used to crimes involving fake and shoddy goods of poor quality that cause health concerns and pose potential safety risks; offense of infringing upon industrial rights to trademarks charges stipulated in Article 226 of the current Criminal Code are to deal with crimes involving trademark counterfeit goods

On the other hand, according to Article 3.8 of Decree 185/2013/ND-CP, counterfeit goods include both trademark counterfeit goods and inferior quality goods that pose physical harm or health threats In many cases, the infringing goods are not only trademark counterfeit goods but also counterfeit goods of poor quality; for example, in the cases where counterfeiter(s) place counterfeit spirits into recycled bottles on which both counterfeit labels and caps (or original recycled caps and genuine labels) are used (Harms, 2018; Matthias & Jiang, 2011) In such cases, trademark counterfeit goods are correlated with both acts of trademark counterfeiting under Article 226 and those of manufacturing and/or trading counterfeit goods of poor quality under Articles 192, 193, 194 In other words, the crime of trademark counterfeiting overlaps with the crime of manufacturing and/or trading fake and shoddy goods In this situation, law enforcement agencies have exhibited an inclination to charge counterfeiters with the latter crime bearing the more severe punishment than the former one12

11 September 15th, 2019

12 Comparing the punishments for the two offenses, the maximum punishment for trademark counterfeiting is three years’ imprisonment plus a maximum fine of up to VND 200.000.000 while those who manufacture and/or trade inferior quality goods with the sales amount equal or exceed VND 150.000.000 could be punished by at least five years’ imprisonment

In Bui T D v T Co Ltd, the forensics conclusions issued by the Intellectual Property

Office of Vietnam states that T Co Ltd is the owner of the “mark A” and the “mark K” for products of pen and those of rule respectively; pens of “mark A” and rules of “mark K” manufactured and traded by Bui T D are trademark counterfeit goods under Article 213.2

of Law on Intellectual Property 2005 Also, the forensics conclusion issued by the Institute

of Criminal Science states that the quality parameters of the counterfeit goods are under the registered ranges of pen and rule products provided by T Co Ltd Based on these conclusions, both crimes was in theory committed; however, the defendant was initially charged and prosecuted with the crime of manufacturing and trading counterfeit (fake and shoddy) goods As such, the court ruled in favor of the opinion that the crime of manufacturing and trading counterfeit goods is related not per se to the poor quality of counterfeit goods (fake and shoddy goods), but to the counterfeit mark when the crime is also correlated with acts of trademark counterfeiting In this sense, the case provides a useful illustration of the issue of overlapping between the crime of manufacturing and/or trading counterfeit goods and the crime of trademark counterfeiting and paves a clear way for the judicial agencies prosecuting and adjudicating counterfeiters in such situation

Then, the Institute of Criminal Science added a further forensics conclusion that the quality parameters of pen and rule products manufactured and traded by Bui T D reached

a minimum level of 72% and a maximum level of 100% in comparison with the quality criteria registered by the trademarks’ owner, and that the reached quality of the infringing goods is higher than the standard level of 70% for counterfeit goods provided in Decree 185/2013/ND-CP13 After the second forensics conclusion, the procuracy’s agency altered the prosecution from the crime of manufacturing and/or trading counterfeit goods under Article 192 to the crime of trademark counterfeiting under Article 226 Finally, the court held that Bui T D committed the latter crime in lieu of the former one The judgment represents

a clear distinction of law applied to counterfeiters who infringe upon industrial rights to trademarks and those who manufacture and/or trade counterfeit goods of inferior quality

3.3 Ambiguity of offense of infringing upon industrial rights to trademark

3.3.1 Interpretation of “commercial scale”

“Commercial scale” in international treaties

13 Article 3.8.b of Decree 185/2013/ND-CP states: “Counterfeit goods include: … (b) Goods having determined

contents of main substances or in nutrients or other basic technical characteristics which have only reached a level of 70% and lower in comparison with the quality criteria or technical standards have been registered or notified to apply or to print on labels or packing of goods”

“Commercial scale” has been stipulated in many international treaties such as TRIPS (The Agreement on Trade-Related Aspects of Intellectual Property Rights), ACTA (Anti-Counterfeiting Trade Agreement) and CPTPP (The Comprehensive and Progressive Agreement for Trans-Pacific Partnership); of these, TRIPS and CPTPP are extremely important to the fight against counterfeit goods related to trademark infringement of Vietnam

According to Article 61 of TRIPS, members including Vietnam are required to

“provide for criminal procedures and penalties to be applied at least in cases of willful trademark counterfeiting … on a commercial scale” 14 Under this provision, “commercial scale” requirement is the decisive factor so that the crime of trademark counterfeiting is constituted for giving criminal penalties (Huang, 2017) However, there is not neither further definition

nor clear interpretation on “commercial scale”, thereby “leaving enough room for flexible

interpretations” (Geiger, 2016) in member states This has resulted in the case where the

United States brought against China to WTO Panel for failing to comply with Article 61 of

TRIPS by “not providing in its national legislation for criminal penalties against IP infringements

on a commercial scale” (Geiger, 2016) In this case, WTO Panel provided a situation-specific

interpretation (Ruse-Khan, 2010) by “explaining that ‘commercial scale’ referred to counterfeiting

… carried on at the magnitude or extent of typical or usual commercial activity with respect to a given product in a given market” (WTO Panel, 2009; Ruse-Khan, 2010; Geiger, 2016)

Under Article 23 of ACTA, acts carried out on a “commercial scale” are defined as

“commercial activities for direct or indirect economic or commercial advantage” 15 Thus, there are two requirements within the concept “commercial scale” that are commercial nature of the acts and the purpose of gaining direct or indirect economic or commercial advantage In other words, the definition given in Article 23 of ACTA not only broadens the concept of

“commercial scale” in a considerable way but also leaves far less room for flexible interpretations than the market and product based interpretation held by WTO Panel

In CPTPP, “commercial scale” is also stipulated as the vital requirement of the crime

of trademark counterfeiting and copyright or related rights piracy16 However, the Convention provides interpretation for “commercial scale” applied only to copyright and

related rights piracy as follows: “In respect of willful copyright or related rights piracy, ‘on a

commercial scale’ includes at least: (a) acts carried out for commercial advantage or financial gain; and (b) significant acts, not carried out for commercial advantage or financial gain, that have a substantial prejudicial impact on the interests of the copyright or related rights holder in relation to

14 Article 61 of TRIPS

15 Article 23 of ACTA

16 Article 18.77.1 states: “Each Party shall provide for criminal procedures and penalties to be applied at least

in cases of willful trademark counterfeiting or copyright or related rights piracy on a commercial scale …”

the marketplace” This provision brings a broader and higher standard to criminal

enforcement of copyright than the ones stated other international treaties, which could be a good reference for the trademark enforcement

“Commercial scale” in Vietnamese law

“Commercial scale” was incorporated as the only criteria to prosecute the criminal liability of trademark infringers when the Criminal Code 1999 was revised and amended in

200917 after Vietnam had become member state of WTO Then, this has been echoed as one

of the standards to prosecute criminal liability of the trademark infringers in Criminal Code

201518 Under Article 226 of Criminal Code 2015, the court would view “commercial scale” requirement as a completely independent requirement that is different from the other three alternatives19 However, the concept “commercial scale” has not been so far interpreted in any normative legal document as guidance for judicial offices in the application of law and the resolution of the relevant criminal cases This has resulted in the reluctance of polices to charge and of prosecutors to prosecute trademark infringers as well as of judges to adjudicate crimes under offense of infringing upon the industrial rights to trademark (Le, Mai, & Le, 2019) From 2010 to 6/2019, there have been totally 16 cases adjudicated under Article 171 of Criminal Code 1999 and Article 226 of Criminal Code 201520, which means that the notion “commercial scale” has been to some extent interpreted in different ways in successful cases adjudicated by court

In Bui P D & Tran T T v Gas Sai Gon & VinaGas & TotalGaz & Shell Gas & other

Gas companies, the court held that the defendants had infringed upon the rights of Gas

trademarks for purpose of gaining commercial advantage and that the amount of illegal

17 Article 171.1 of Penal Code 1999 (revised and amended in 2009) states: “Those who intentionally infringe

upon industrial property rights to marks … currently under protection in Vietnam on a commercial scale, shall

be imposed a fine of between fifty million and five hundred million dong or subject to non-custodial reform for

up to two years”

18 Article 226.1 of Penal Code 2015 states: “A person who infringes upon industrial property rights of a brand

name … protected in Vietnam, in which the infringing goods are trademark counterfeit goods, for commercial purpose or to earn an illegal profit of from VND 100,000,000 to under VND 300,000,000 or causes a loss of from VND 200,000,000 to under VND 500,000,000 to the owner of such brand name … or with the violating goods assessed at from VND 200,000,000 to under VND 500,000,000 shall be liable to a fine of from VND 50,000,000 to VND 500,000,000 or face a penalty of up to 03 years' community sentence”

19 The other alternative requirements of the trademark infringement crime are illegal profit, damages and value

of infringing goods

20 The author has counted the cases based on the statistics of Supreme People’s Procuracy of Vietnam and cases given by inferior procuracies and courts

profit was of VND 92.136.000, thereby committing trademark infringement crime In this case, the amount of illegal profit that the defendants have gained is lower than the one regulated in Article 226.1 of Criminal Code 201521 Also, the Criminal Code 2015 did not

come into force22 at the time when the defendants performed the infringing trademark acts,

it should be considered that the gained commercial advantage in the court’s interpretation

of the concept “commercial scale” is totally independent from the illegally gained profit stated as one of the thresholds to prosecute criminal liability of trademark infringers in Article 226.1 of Criminal Code 2015 As such, the court defined acts carried out on a

“commercial scale” as “commercial activities for commercial advantage” that is the approach adopted in ACTA

In Dinh T K C & Tran Q D v Lacoste - Crocodile & Louis Vuitton & Valentino &

Levi’s & Gucci & Polo & Hermes, Nguyen T T P v Levi Strauss & Co., Tran T K L v Polo

R L, Phung Q Q v L I Vietnam Co Ltd and Nguyen T T v PepsiCo, Inc., the court held

the same way that the total values of the trademark infringing goods were of VND 1.300.540.000, VND 32.770.566.000, VND 651.000.000, VND 159.565.000 and VND 155.000.000 respectively; thereby concluding that the defendants’ acts had been carried out

on a “commercial scale” for commercial advantage and committed trademark infringement crime under Article 171 of Criminal Code 1999 On the one hand, the value of trademark infringing goods was included into the notion “commercial scale” in these four cases On the other hand, the value of trademark infringing goods was incorporated as one of the elements of the crime of trademark infringement under Article 226.1 of Criminal Code 2015 Concretely, those who infringe upon the rights of a trademark protected in Vietnam with the infringing goods assessed at from VND 200,000,000 to under VND 500,000,000 shall be responsible for criminal liability In the two final cases, the values of trademark infringing goods reached VND 159.565.000 and VND 155.000.000 that are lower than the minimum standard amount stipulated in Article 226.1 Also, the Criminal Code 2015 had not come into force at the time when the defendants performed the acts of infringing industrial rights

to the protected trademark, it can be therefore clearly understood that the value of trademark infringing goods in the court’s interpretation of “commercial scale” is totally independent from that provided as one of the requirements to prosecute criminal liability

of trademark counterfeiters in Article 226.1 This interpretation with the focus on “the value

of trademark infringing goods” is in compliance with the threshold of “commercial scale”

on the basis of commercial activity as well as products and markets regulated in TRIPS

3.3.2 Calculation of “damages”

21 Article 226.1 stipulates that a person who infringes upon industrial property rights of a brand name … to earn

an illegal profit of from VND 100,000,000 to under VND 300,000,000 … shall be liable to criminal liability

22 Criminal Code 2015 came into force on January 1st, 2018