Anyone working against counterfeiters will surely have faced the dilemma of whether to react to a trademark infringement, when there is limited hope of accomplishing any real results. On the one hand, the cost-efficiency requirement usually does not support a rightholder taking action against small quantities of goods and single infringers. On the other hand, infringements involving large quantities occur only occasionally. The infringers seem to benefit from this situation, since the sanctions are mild and small, the risk of being caught is low, and the profits available are high. However, it could prove to be beneficial for the rightholders to join forces and look beyond the actual amount of goods infringing their own mark, as was shown in a recent court case in Finland.
The National Board of Customs (NBC) in Finland has over the years shown great interest in barring the import and transit of pirated and counterfeit goods. The NBC has even set up special units to pinpoint suspicious shipments and to undertake continuous risk analysis to assist its work. Lately, they have also developed their own internal procedures for investigating infringement cases and created strategies for bringing infringers more frequently to court. However, this process still requires initiative from the rightholders. Fortunately, co-operation between the NBC and the rightholders works extremely well.
In November 2004, the NBC received a complaint from a rightholder who suspected that a 'one euro' shop infringed their rights to a trademark. The shop, which was located in a large shopping mall in Helsinki, sold a variety of household goods, toys, clothing items and such.
The NBC had been observing this shop for a while, and decided to investigate this case further. A team of specialist investigators was assigned to work with the rightholders' representatives.
Initially, investigations of documents revealed that two companies were involved in conducting business in the shop under the 'ISO €' shield, and a third company was involved in importing the goods from China. It appeared that all the three suspects involved were of Chinese origin, but with Finnish nationality.
A house search was conducted in May 2005, which closed down the shop for days. The NBC carefully compiled an inventory of all the goods on the shelves and in the warehouse. The apartment of the main suspect was also searched. The NBC confiscated 87,000 pieces of infringing goods, each of which was carefully photographed, listed and packed away until required.
During the search, the investigators also found documents both in Chinese and Finnish. The Chinese documents were translated and proved to be the shipping documents for 15 shipments. They contained information that it was possible to compare with the Customs declarations of the importing company. This comparison later provided the basis for estimations of the actual scale of infringement—it was impossible to know the actual value of the infringing goods sold since the companies' documentation was incorrect.
Representatives of the rightholders were invited to identify the infringing goods. In all, 59 different, and mostly well-known, trademarks were found on the goods. Later, 32 of the rightholders filed complaints and joined the process. In addition, the taxation agency and Customs department filed complaints against the suspects, who had also avoided taxes and made false declarations in their import documentation.
The Public Prosecutor took on the case and decided to press charges on all possible fronts. Incomplete bookkeeping and missing data on the actual value of sold items brought the suspects a charge of bookkeeping crime and tax fraud. False declarations concerning imported goods resulted in a charge of tax fraud as well. There was a rationing offence—the clothing items were not declared at all but described as 'household items', in a clear attempt to avoid taxes and levies. Finally, there were the industrialproperty rights infringements. The total damages demanded were close to 1.4 million euros.
One major issue in the strategy of both the investigators and the Public Prosecutor was to establish that there was one major violation—industrial property right crime, as stipulated in the Penal Code of Finland—instead of 59 minor violations or infringements of the trademark rights. The respective article in the Penal Code stipulates that when the offence is likely to cause substantial damage for the rightholder, the infringer has committed an industrial property right crime and faces fines or a jail sentence of up to two years. It is likely that the court would dismiss at least some of the minor offences due to the small value of infringing goods, if the cases were to be treated separately.
The preparatory hearing took place on April 2007 in the Helsinki Court of First Instance. The defendants pleaded not guilty and contested the grounds and amounts of the claims. However, in the main hearing, they admitted to the counterfeit nature of the goods sold, but protested that they were not aware of committing a crime when running their business. All the regular defences were heard, i.e. they didn't know, nobody complained, all customers were satisfied, no harm was done, and so forth. The representatives of the rightholders on the other hand argued that the suspects had an obligation to be aware of the legislation, and that lack of complaint and customer satisfaction are not relevant to the issue of an infringement of rights. The Court agreed.
The claims for damages was the most debated aspect of the court case. In Finland, only actual damages can be claimed. How, therefore, is it possible to show the exact amount of loss when there is no accurate data available on the sales figures of the infringing goods? In this case, a formula based on the amount of infringing goods compared to goods imported and goods sold was drafted, and the Court accepted the estimation. In the future, infringers will not be able to avoid damages simply by not admitting the amounts of their sale value.
During the process, it became evident that the main suspect was to blame, while the two others had little if anything to do with his actions—he had even falsified his wife's name in several documents. Consequently, two of the suspects were found to be not guilty, and the charges were dismissed.
If the trademark infringements only had been under consideration, the end result would have been different; however, the Public Prosecutor's decision to combine all the offences and to seek a combined sentence paid off. The Court agreed that the infringement as a whole was a going on for a long time, and that the main suspect had used many different companies to perform the crimes. The economic scale and the number of single illegalities were considerable. All this resulted in a jail sentence of two years and four months, which might be considered very harsh in a case like this. However, it demonstrates that the fight against counterfeiters is taken seriously here in the North.
An appeal was filed by the infringer, and a decision is currently awaited. Meanwhile, the NBC, which was encouraged by the result of its work, continues in its efforts to become even better skilled at investigating such complex crimes. No doubt, the Public Prosecutor also sees this case as proof that thorough and careful preparation is needed when infringers are prosecuted.
What can be concluded from this case? Perhaps the main issue is that rightholders can benefit from participating in such actions, even if there only a small amount of goods illegally carry their trademarks. Those small amounts combined form a larger whole, and an investigation is more likely to find related violations alongside the trademark infringement. The Public Prosecutor is then more likely to take the case to the Court and, ultimately, the Court is more likely to issue sentences that really count. With an approach like this, it will soon become evident to infringers that this type of crime doesn't pay any more.
Original source of publication: World Intellectual Property Review 2008 (WIPR 2008)
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