Recently, Ageless IP Attorneys & Consultants represented a renowned fashion brand in a criminal case concerning the infringement of industrial property rights in Thanh Hoa province, Vietnam. In this case, although the offenders operated only on a small-scale family business model, the quantity of counterfeit branded products was substantial, posing numerous challenges and difficulties in the investigation and enforcement process. Let us delve into the analysis of this case to gain additional perspectives on the protection and enforcement of Industrial Property rights, particularly the protection of trademark rights in Vietnam.
1. Case Summary
In early 2020, TL, a small business owner in Bim Son town, Thanh Hoa province, and her daughter-in-law TTh began selling counterfeit goods such as clothes, shoes, bags, perfumes, cosmetics, watches, household appliances, blankets, pillows etc. via Facebook livestreams. They sourced products from various suppliers in Hanoi and elsewhere, storing them in four warehouses.
From April 27-29, 2022, the Thanh Hoa Market Surveillance Department, in cooperation with other authorities, inspected these warehouses. They seized 143 types of products, totaling 27,825 items. Most of these were identified as counterfeit versions of famous fashion brands. The case was later transferred to the Thanh Hoa Provincial Police Investigation Agency for further investigation.
2. Extended Investigation
The extended investigation revealed that:
- 54 types of products (13,770 items including clothes, shoes, bags, perfumes, cosmetics, watches, etc.) with the total value of 973,996,000 VND were confirmed counterfeit based on the Vietnam Intellectual Property Research Institute (VIPRI)’s expert opinions and trademark owner confirmations.
- Lighting equipment used for livestreams and CCTV equipment were seized
- TL and TTh could not recall how many counterfeit items they had sold previously.
3. Court Decision and Legal Issues:
3.1. Regarding TL and TTh
The court found TL and TTh guilty of “Infringement of Industrial Property Rights” under Article 226, Paragraph 2, Point (đ) of the Penal Code 2015 of Vietnam. The conviction was based on:
- Their admission of knowingly selling counterfeit goods.
- The value of infringing goods (973,996,000 VND).
- The organized nature of their operation.
Sentences:
- TL: 12 months suspended sentence, 24 months probation, 80,000,000 VND fine
- TTh: 9 months suspended sentence, 18 months probation, 60,000,000 VND fine
- Both defendants shall bear the court costs as prescribed by law.
- With respect to the civil aspect: The Court has recognized the settlement agreement regarding the compensation for the infringement of honor and reputation between defendant TL and the authorized representatives of the right holders of the two trademarks who have made a claim for compensation.
The court considered both aggravating factors (organized crime, value over 500,000,000 VND) and mitigating circumstances (first-time offenders, sincere confession, family background).
Commentary:
Article 226 of the Penal Code stipulates that intentional infringement of industrial property rights in Vietnam for counterfeit goods valued between 200 million and 500 million VND is punishable by a fine or up to 3 years of non-custodial reform. Higher penalties apply for organized crime or goods valued over 500 million VND.
Acts of intellectual property rights infringement and trading in counterfeit goods are currently evolving in an increasing trend, especially business activities on the Internet environment. However, most of the cases are handled through administrative measures, the number of cases prosecuted and tried under criminal law is considered to be small compared to the total number of violations. It should be noted that in order to prosecute subjects under criminal law, firstly, the investigating agency needs to prove the intentional fault of the subjects. However, in reality, proving this is relatively difficult and time-consuming in the investigation process; for the requirement to determine the value of goods (from VND 200 million or more), it is somewhat simpler through the seizure, inventory, and valuation process of the authorities.
In this case, TL and TTh were people with full criminal capacity, TL used to be in the footwear and fashion business, so they were fully aware or at least aware of the brands, prestige, popularity, prices… of brands in the fashion and textile industries. Furthermore, along with the information on the task allocation between TL and TTh regarding the purchase of equipment for the sales process, warehouse rental, and hiring drivers and workers, which was collected during the investigation, as well as the admission at the investigation agency, the intent of these two was clearly showed. Therefore, all the elements constituting the crime were satisfied.
Besides, criminal law also considers mitigating circumstances directly related to the case, such as the defendant’s sincere confession, remorse, first-time offender, and less serious case…, or indirectly considers factors such as family, relatives who have made contributions to the revolution, which in this case the court considered when sentencing TL and TTh.
3.2. Regarding Suppliers
During the investigation, some suppliers did not admit to selling counterfeit goods to TTh, only admitting to selling unbranded goods, liquidated goods, domestically produced goods, and selling in bulk. In addition, TL’s record did not have any other documents or material evidence showing the purchase and sale of counterfeit goods from these suppliers, so there were not enough grounds to consider criminal prosecution against these suppliers.
While, another supplier admitted to purchasing blankets, pillows, mattresses, and labels of famous brands, attaching these trademarks to the products, and reselling them to TL. The investigation revealed that both this supplier and TL kept records of the transactions involving these trademarked items. However, according to the VIPRI and the Council for Valuation in Criminal Proceedings of Thanh Hoa Province, only the blankets were found to be counterfeit, with a total value of 76,500,000 VND. Despite this supplier’s admission of intentionally infringing on trademark rights, the total value of the counterfeit goods did not reach 200,000,000 VN, which is the threshold required to constitute the crime of Intellectual Property Rights Infringement under Article 226 of the Penal Code.
These issues highlight the difficulties in gathering evidence and establishing criminal liability in intellectual property infringement cases, especially those involving online transactions.
3.3. Regarding other Related Parties
TTh asked her biological mother to open a Bank account for use in money transfers and receipts related to her business. After opening the account, TTh’s mother gave the account details to TTh and TL to manage, unaware that they were using it for transactions involving counterfeit goods. TL also hired drivers and workers for transportation and packaging, paying them monthly. These drivers and workers were unaware of the origin of the goods, whether they had proper invoices or documentation, and did not know that the goods being traded by TL and TTh were counterfeit and infringed on intellectual property rights.
As analyzed above, one of the important signs of the crime of Intellectual Property Rights Infringement is that there must be intentional fault. However, the case file shows that the above drivers and workers were not aware that their actions were infringing the trademark rights of others and did not foresee the consequences of their actions. Therefore, there were no grounds to consider criminal prosecution against this group of subjects under Article 226 of the Penal Code.
3.4. Regarding Seized Items
The court ordered:
- 13,770 counterfeit items: Confiscated and destroyed;
- Lighting equipment used for livestreams: Confiscated as a direct tool of the crime;
- CCTV equipment: After extracting data for investigation, it was returned to the owner as personal property not directly used in the crime.
These measures aim to remove infringing goods from the market and deprive offenders of the tools used in their illegal activities, serving as both punishment and deterrent.
4. Conclusion
It can be seen that the investigation of criminal cases related to the crime of intellectual property rights infringement often faces many complicated difficulties. First of all, incomplete records, lack of evidence, or evidence destroyed by violators have hindered the determination of the quantity and value of counterfeit goods – the basis for considering the constitution of a crime. On the other hand, the subjects did not admit to selling counterfeit goods, only declaring to sell unbranded goods or liquidated goods…, which also caused difficulties in collecting direct evidence for the prosecution agency.
Finally, tracing the origin of goods and violators through social networks is also a major challenge for the prosecution agency due to the lack of information about the names and addresses of these people. This reflects the challenges in collecting and verifying evidence, as well as determining criminal liability in cases of intellectual property rights infringement in the online environment in Vietnam.
