IPR Enforcement in Finland

2007: 1 907 148 pcs of counterfeit and pirated products

value 25,9 mio Euros 157 cases

121.000 counterfeit medicinal products seized

2008 6 months: 800.000 pcs and value 6 mio Euros

ZERO TOLERANCE: Tackling the “handluggage piracy”

-criminalization of private imports of pirated sound recordings, films, computer games etc.

-Amendments to the Copyright Act (and Penal Code) passed by parliament Oct 2005 and new articles came into force 1 January 2006

Controlled delivery to Spain 2008

CASE STUDY

CASE BIG E

Case BIG E

1. Background

2. Preliminary investigation from May 2005 to Jan 2006

- Coercive measures

- Essential elements evaluated during preliminary investigation

3. Consideration of charges 01/2006

4. Judgment by Helsinki District Court on 5 Oct 2007

Case ISO E: Background

- Investigation request to Economic Crime Investigation of the Enforcement Unit of the Southern Customs District regarding intellectual property offence filed in Nov 2004

- Content of investigation request: A so-called one-euro shop located at the Itäkeskus Shopping Centre, Helsinki, is selling counterfeit goods

STORE

Case BIG E: Background

• Legal persons concerned– Two companies in whose name business was

carried on in a store located at the Itäkeskus shopping centre

– The store is a so-called one-euro shop– The business also involved a limited company in

whose name goods being sold in the store were imported from China to Finland

• Suspected natural persons

- Three persons of Chinese origin

STORAGE FACILITIES

WAREHOUSE

Case BIG E: Preliminary investigation

COERCIVE MEASURES• Searches carried out in May and June 2005

– 6 targets– notable: duration of searches– one agent present as expert

• No coercive measures targeted at natural persons• Seized property

– 87,000 suspected counterfeit products– EUR 10,553 in cash confiscated for security, appr.

EUR 10,000 blocked on bank account– documents, cash receipts, accounting material,

packing lists (in Chinese)

SEIZED PRODUCTS

SEIZED PRODUCTS

SEIZED PRODUCTS

SEIZED PRODUCTS

Case BIG E: Preliminary investigation

• Chapter 49 section 2 of Finnish Penal Code

”A person who in violation of the Trademark Act (7/1964)…and in a manner conducive to causing considerable financial loss to a person holding a right, breaches

1) the right to a trademark;

…

shall be sentenced for an intellectual property offence to a fine or to imprisonment for at most two years.”

Case BIG E: Preliminary investigation

Fulfilment of essential elements:

• Breach of exclusive rights

• Considerable financial loss

• Intent

Case BIG E: Preliminary investigation

Importer’s duty to make inquiries:• It is a generally known fact that there are counterfeit products carrying well-known

trademarks in circulation -> the importer (non-authorized) has the obligation to inquire into the origin of the goods with sufficient care.

• The suspects admitted at the interrogations that at no stage had they received or requested evidence on the authenticity of the products imported and resold by them, or on the existence of the right-holder’s authorization.

• The principal in the first degree stated at the interrogations having believed that no authorization is required since the amounts of each brand imported and resold by him were small.

The authenticity can usually be somehow estimated on the basis of the quality and price of the products: The acquisition price of e.g. a Luis Vuitton bag is in this case abt. 7 to 9 euros and the retail price 15 to 17 euros. It should be noted that original bags of this brand are not even sold in Finland and that their prices elsewhere in the world are manifold.

Also the acquisition and retail prices of the other branded products are remarkably low. The most expensive branded product cost abt. 20 euros in this store. -> In view of the low acquisition price, the defendants should have had a good cause to inquire properly into the origin of the products.

Case BIG E: Preliminary investigation

Ordering process/Mode of acquisition • The products were acquired through a foreign import and export company• At the interrogations, the defendants’ descriptions on the ordering process were

inconsistent (whether the products were ordered on samples, or chosen randomly out of various remaining stocks, in which case the defendants were unaware of what products would be coming in)

• In the packing lists, which were translated into Finnish during the preliminary investigation, the product trademarks were stated clearly: e.g. 300 pcs of Adidas shoes

• The packing lists also revealed that products carrying various trademarks had been imported ever since the beginning of the company’s operation.

Agreement with one complainant in autumn of 2004 that products carrying the trademark of the complainant in questionwould no more be sold by this party without authorization

• Aware of liability to authorization at this time at the latest!

• During a house search in the spring of 2005, i.a. products provided with the trademark of the complainant were seized in the store -> act reprehensible due to its reproduction, and a special obligation to establish the origin of the products.

Case BIG E: Preliminary investigation

A single intellectual property offence or several? • All the counterfeit products were imported by the same persons (two

companies, X and Y)• These counterfeit products were sold in the store managed by these

persons and the X company, and stored in the warehouse rented by them, from 1 June 2004 to 26 May 2005. The counterfeit products covered about 10 to 15 per cent of all the products on sale in the store.

• The operation was continuous and comprehensive.

• In total, 15 customs clearance decisions were issued to the above companies, in the course of 1.5 years.

• Also the translated packing lists prove the import dates of the products carrying the trademarks.

Case BIG E: Preliminary investigation

A single intellectual property offence or several? • The preliminary investigation concluded that the act shall be evaluated

as a single intellectual property offence• -> The importation and resale of counterfeit products was considered to be

closely connected with the company’s operation and to constitute a continuum in time. In this respect, the operation did not get interrupted at any stage.

• Even if the operation should violate the rights of more than one complainant, the object of protection referred to in Chapter 49 Section 2 of the Finnish Penal Code does not preclude its treatment as one single act.

• Alternative solutions: • (a) the series of importations shall be considered to constitue separate

intellectual property offences in respect of each single complainant(b) each importation shall be considered a separate intellectual property offence (connection in time, and its interruption)

Cases: Intellectual property offences

TYPES OF OFFENCES WITHIN PRELIMINARY INVESTIGATION:

1. Serious tax fraud– Imported goods falsely declared/undeclared

2. Intellectual property offence- 32 complainants (10 complainants refrained from filing a request for investigation)

3. - Claims for damages amounted to EUR 1,392,000 when the protocol was submitted to a consideration of charges

4. - Seized property consisted of abt. 87,000 items: clothes, bags, toys, and office supplies

5. Accounting offence- No stock accounting- Actual sales not retraceable through the cash system - Tax audit during May 2006 uncovered considerable sales not recorded in the cash register

6. Regulation offence7. Environmental offence

Cases: Intellectual property offence

PROSECUTOR’S CLAIMS AT DISTRICT COURT- Process at district court took 2 weeks, decision issued

on 5 Oct 2007

1. Severe tax fraud- the prosecutor demands that the married couple actually running the business be convicted for serious tax fraud- the evaded import duties amount to EUR 14,776.28 - besides, the unbooked sales amount to EUR 1,143,941.49, on which the unpaid VAT totals EUR 216,919.13- the total of the evaded taxes thus amounts to EUR 233,866.22

Cases: Intellectual property offence

PROSECUTOR’S CLAIMS AT DISTRICT COURT2. Intellectual property offence

- the prosecutor demands that the married couple actually running the business be convicted for industrial property offence - 18 complainants submitted no claims in this matter- 21 complainants agreed with the prosecutor’s summary penal order- the complainants’ claims for damages at district court amounted to a total of abt. EUR 170,000

3. Serious accounting offence- the prosecutor demands that the married couple actually running the business be convicted for a aggravated accounting offence - investigated at the preliminary investigation as an accounting offence

Case BIG E

Judgment issued by Helsinki District Court on 5 Oct 2007(not valid)

Mr. X is found responsible for following offences:

1. Aggravated tax fraud from 19 Apr 2004 to 13 Apr 20052. Intellectual property offence from 19 Apr 2004 to 26 May 20053. Aggravated accounting offence from 1 Apr 2004 to 31 March 2005

Sentence:

Aggregate imprisonment: 2 years and 4 months of unconditional imprisonment

Case: BIG E

Judgment issued by Helsinki Lower Court on 5 Oct 2007

- Total amount of damages: - The amount of damages is an estimate since the quantity of the products sold by the company and profits thereof has been impossible to ascertain definitely. Furthermore, the losses and expenses incurred by the complainants as well as the unobtained profit remain unascertained. - It is reasonable to base the indemnity calculation on a damages calculation based on the turnover. - The amount of the sales declared by the company and the unbooked sales as estimated by the tax audit are nearly four times as high as those declared by the company. -> The damages caused to each single trademark amount to 4 x 825.10= EURO 3,300.40.

THANK YOU!