Shanghai Higher People’s Court Upholds 6-Year Prison Term and 90 Million RMB Fine for Lego Chinese Copyright Infringer

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China IP Law Update———————————

On December 29, 2020, the Shanghai Higher People’s Court  announced the upholding of a criminal conviction for infringing the copyright of Lego toys. The Shanghai Third Intermediate Court had sentenced   9 people to up to 6 years in prison and a 90 million RMB (~$13 million USD) fine.  The group of 9 had sold over 300 million RMB of infringing products under the Lepin (乐拼) brand and had over 30 million RMB of infringing products stored ready for sale.

Lego on left, Lepin on right.

From 2015 to April 2019 the defendants manufactured and sold the infringing products in Shantou, China.  On April 23, 2019, the Shanghai Municipal Public Security Bureau seized injection molds used to replicate Lego toys, spare parts for assembling molds, various packaging boxes and manuals for Lepin toys from a factory rented by the defendant Li. 

The Copyright Appraisal Committee of the China Copyright Protection Center determined that the Lepin toys were basically the same as the Lego toys, an example of which can be seen above.

The Court stated, “Most of the counterfeit toys involved in the case have entered into the market, not only infringing intellectual property rights, but also causing the right holders to lose goodwill. It caused heavy losses and hurt economic interests and it also severely disrupted the order of the socialist market economy. The circumstances of the crime were particularly serious and the effect on society was extremely harmful.”

The Shanghai Intermediate People’s Court held that the 9 defendants manufactured infringing toys for commercial purposes without the permission of the copyright holder.  There was a huge amount of illegal business and is particularly serious constituting the crime of copyright infringement.  At the same time, according to the different roles of the defendants in the joint crime, the court determined that the defendant Li was the principal offender, and was punished in accordance with all the crimes he participated in, organized, and directed; the remaining eight defendants were accomplices and were given lighter punishments.

On appeal, the Shanghai Higher People’s Court ruled that according to the relevant laws and regulations of the Copyright, “art works refer to paintings, calligraphy, sculptures and other artistically significant flat or three-dimensional plastic art works composed of lines, colors or other methods.” In this case, a total of 663 assembled three-dimensional models were infringed. The expressions carried by these three-dimensional models were independently created by Lego. They have originality and unique aesthetic significance. Therefore, the assembled three-dimensional toys are protected by China’s copyright law. 

As for the calculation of the amount of illegal business operations, the Shanghai Higher People’s Court believes that the original judgment, combined with the “Accounting Appraisal Opinion” and related evidence, found that the illegal business amount of Li and others in the amount of more than 330 million RMB was correct and should be confirmed. Although Li and his defenders argued that the original judgment did not consider sales returns and customer rebates, which affected the determination of the amount of illegal business operations, there was no evidence to prove it, so the court rejected it.

As for the issue of sentencing, the Shanghai Higher People’s Court believes that according to the Criminal Law and relevant judicial interpretations, the actions of Li and others constitute copyright infringement, and qualify as “particularly serious circumstances” and should be sentenced to three years to seven years imprisonment and fine. The amount of the fine is generally not less than one time and not more than five times the illegal income, or 50% to 100% of the illegal business revenue. Considering that this case not only caused significant losses to the right holder’s goodwill and economic interests, but also disrupted the order of the market economy, with serious social harm, the crime should be severely punished in accordance with the law. The court of first instance made the original judgment, which was not improper.

Source: China IP Law Update