Swedish supreme court: Trademark infringement is not a crime for which “the nature of the crime” motivates imprisonment

It is rather well-known that a trademark infringement may result in claims for damages. On the other hand, the awareness is probably not as high about the risk for an individual to end up in jail for the very same violation. The extent to which the latter should happen was the question to be decided in the so-called SKF case, a criminal case for which the Swedish Supreme Court recently issued an opinion.

Due to its intrusive nature for a convicted individual, the legislature has emphasized that usage of imprisonment as penalty should generally be avoided in favor for less severe penalties, such as “suspended sentence” and probation. According to the Swedish Penal Code there are three situations that each independently point in the direction of imprisonment:

  1. when the “total penal value” for the crimes committed is found to be one (1) year or higher,
  2. when recidivism is at hand (the accused is re-committing crimes) or
  3. when the “nature of the crime” as such justifies imprisonment.

The first two situations are relatively “hands-on” and easy to evaluate whether applicable or not. The third situation though, the “nature of the crime” (“brottets art” in Swedish), is somewhat ambiguous. Introduced in 1989, along with a general reform of the Swedish penalty system, the concept has been described as a reflection over the fact that certain types of crimes “in themselves” traditionally have been seen as more serious and reprehensible compared to other crimes, rendering imprisonment even in cases when the total penal value falls below one year or when there is no recidivism (the situations 1 and 2 above). Crimes that historically have been included in this group are for example cases of assault, drunk driving and perjury.

In the SKF case, the accused was found guilty of having imported counterfeit bearings from China, reselling them to Swedish customers using the SKF trademark. One customer experienced trouble with the bearings and complained directly to SKF, after which the counterfeit activities were discovered.

Both the District Court and the Court of Appeals found the accused guilty of intentional trademark infringement. However, the courts disagreed on the penalty.

The District Court, siding with the prosecutor, sentenced the accused to one year of imprisonment (after having found that the total penal value for the crime was one year). In this respect, the District Court argued inter alia around the seriousness of the crime, mentioning the severe risks for damages on property and persons that had arisen. Since the total penal value for the crime committed was deemed by the District Court to be one year there was no need to consider recidivism or the “nature of the crime”.

The judgment was appealed by both parties (the prosecutor and the accused) to the Court of Appeals. The Court of Appeals mitigated the penalty, sentencing the accused to a “suspended sentence” in combination with fines. The Court of Appeals stated that the total penal value of the crime was four months, thus remarkably lower compared to what the District Court had ruled. Since the penal value was determined to be less than one year, and the accused had not been sentenced previously, the remaining path for legitimizing imprisonment was to argue for the “nature of the crime” aspect. But this argument was also dismissed by the Court of Appeals. The Court of Appeals stated inter alia that risks for damages on property and persons were outside the scope of the trademark infringement legislation, and could therefore not be taken into account when determining the sentence.

The prosecutor was not satisfied and appealed to the Supreme Court, stating e.g. that counterfeit crime is an increasing problem for society, posing a treat towards economy, public finances and the protection of consumers, why imprisonment for the accused in the case at hand was justified.

The Supreme Court granted the appeal. One of the central questions for the Supreme Court to decide was pretty straightforward: is trademark infringement a crime for which the “nature of the crime” as such motivates imprisonment, even when the total penal value falls under one year and the accused is not a recidivist?

The Supreme Court reply was in-line with the Court of Appeals, namely “no”. The Supreme Court stressed that neither the preparatory works to the Trademark Act nor case law hold that trademark infringement is a crime of such a dignity that there is a reason for any special treatment when it comes to determining the penalty. The Supreme Court continued expressing that the reasons brought forward by the prosecutor in the appeal were not “strong enough”. The Supreme Court estimated the total penal value to eight months, enabling the penalty to come to a halt at “suspended sentence” combined with fines.

The Supreme Court’s verdict is no doubt interesting and can be said to have high precedential value. Firstly, it indicates that trademark infringement indeed is not part of the “nature crime group”. Secondly, concerning the concept of “penal value determination”, it makes it clear that even relatively large-scale trademark infringement hardly motivates significant penal values. One question to be asked though is if the argumentation put forward by the Supreme Court could be used “analogously” in cases concerning other types of IP infringements, such as patents and copyright? Future judicature will have to give the answer.

Anders Sparlund, Associate

Nobel, Nobel …

‘Tis the season when the Nobel Prizes get announced, when science and scientists get their share of media attention. This blog joins in the chorus.

Your inventions don’t need to be Nobel-class to get patent protection, but the Physics and Chemistry laureates do hold patents, dozens of them and really fresh ones too. This year however, Awapatent IP Blog directs the spotlight to someone special, Jean Tirole, who is the Economy laureate¹  – and does research on patents!

In one recent article, Prof. Tirole and coauthor study standard-essential patents, the legal rights that committees like the ETSI, MPEG or IEEE have promoted into industry-wide norms. A patent that makes it into a standard will be a basis for steady royalty income, albeit moderated to be FRAND². In complex technologies where hundreds of patents may be essential, basically everyone pays to use the standard, but the stronger your own portfolio is, the smaller your net payment.

The article is joyful reading for a telecom patent attorney like myself. With a background in mathematical research, I also don’t mind spices like Brouwer’s fixed point theorem and other tools from convex optimization theory that Prof. Tirole uses to explore the effects produced by this workflow:

BLOGG141017

These and other statements are proved:

  • The competitive equilibrium of the licensing game is unique under certain conditions.
  • A patent holder is more eager to avoid price commitments the less essential his patent.
  • If technical functionalities in the candidate IP are ranked by their essentiality, the selection of a standard delivers suboptimal social welfare.
  • So-called structured price commitments would be a better way to negotiate new standards.

Anders Hansson, European Patent Attorney

1) Strictly speaking, he is the awardee of the Nobel Memorial Prize in Economic Sciences.
2) Fair, reasonable and non-discriminatory – a licensing obligation that is often required by standardizing organizations for members that participate in the standard-setting process.

Sweden and China make new Patent Prosecution Highway agreement

Effective 1 July 2014 the PRV (Sweden) and the SIPO (China) started a new PPH-agreement thus offering especially our Swedish clients a new way of speeding up examination of patent applications in China by requesting that the SIPO use the search and examination results of the PRV in treating an analogous patent application. The PPH agreement between the PRV and the SIPO applies to both national and PCT work products.

Meanwhile, the SIPO has been even more active by also signing PPH agreements with the patent offices of the UK and Iceland.

The PPH-network keeps expanding

Furthermore, the PPH-network continuously keeps expanding as new intellectual property offices take interest in making PPH-agreements. The most recent additions count the Intellectual Property Offices of countries such as Indonesia, Poland and Nicaragua as well as the Eurasian patent office (EAPO). In total the PPH network now counts the intellectual property offices of 32 countries and regions.

The complete overview of existing and working PPH agreements at the time of writing can be seen on the graphic below, courtesy of the PPH web-page compiled by the Japanese Patent Office, JPO:

PPHJuly2014

Troels Peter Rørdam, European Patent Attorney & Certified Danish Patent Agent

Link to the PRV-SIPO agreement at the PRV.

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