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final judgment rendered on the case of 330 million "lepin" erfeiting "lego" principal offender was sentenced to six years imprisonmentfined 90 million
[2021-01-15]

    

Recently, Shanghai High People's Court (SHPC) rendered the final judgment on the case of "LEPIN" (乐拼) counterfeiting "LEGO," involving the amount of up to RMB 330 million. The court dismissed the appeal filed by Li and others, and affirmed the original judgment. According to the original judgment, Li was sentenced to six years in prison for the crime of copyright infringement and was fined RMB 90 million. The other eight defendants were respectively sentenced to fixed-term imprisonment ranging from three years to four years and six months, together with fines.


[Case Review]


In June 2011, Li founded Guangdong Meizhi Zhijiao Technology Co., Ltd ("Meizhi"), engaged in toy R&D, production and sales. With his efforts, His business was prospering. It not only developed more than 400 kinds of toys with independent intellectual property rights, but also expanded its business to high-tech fields such as AI robots.

"In 2015, when I found that friends were making money in the building-block toy industry, I began to invest money in building-block toys." Li said. However, for this promising new business, Li didn't take the path of "independent research and development," but instead came up with the idea of copycatting the well-known toy brand "LEGO."

Since 2015, without the permission of LEGO Company, Li, together with Yan and other seven people, set up a toy factory to reproduce LEGO blocks through dismantling new LEGO toys for study, computer modeling, copying drawings and commissioning others to making molds, etc., and then sold the products online and offline under the "LEPIN" brand.  

"Success" didn't last long. On April 23, 2019, Shanghai Municipal Public Security Bureau seized the injection molds for reproducing LEGO toys, spare parts for assembling molds, various packaging boxes, instructions, sales orders, relevant computers, mobile phones and counterfeiting "LEPIN" products in the plant leased by Li.

As identified by Copyright Appraisal Committee, CPCC, LEPIN's "Great Wall of China," "PRIMITIVE TRIBE," "FAIRY TALE" and "TECHNICIAN" products are basically the same as the "Great Wall of China," "THE FLINTSTONES," "DISNEY PRINCESS" and "ALL Terrain Tow Truck" of LEGO Company, forming a reproduction relationship. LEPIN's atlas, NINJAG Thunder Swordsman, is the same as LEGO's atlas, NINJAGO Masters of Spinjitzu, also forming a reproduction relationship.

At the same time, the Accounting Appraisal Opinion shows that from September 11, 2017 to April 23, 2019, Li and others produced and sold more than 4.24 million boxes of infringing products, involving 634 models and a total amount of more than RMB 300 million. On April 23, 2019, more than 600,000 boxes of infringing products were seized in related warehouses, involving 344 models and a total amount of more than RMB 30.5 million.

On September 2,2020, after the trial, Shanghai No.3 Intermediate People's Court held that Li and other eight people's act of reproducing and distributing LEGO's copyrighted works of fine art for profit without the permission of the copyright owner, the circumstances of which were particularly serious, constituted the crime of copyright infringement. In view of the accomplice, voluntary surrender, meritorious behaviors and confession of some defendants, a lighter punishment was given. Li was sentenced to six years in prison and fined RMB 90 million, whereas Yan and other seven people were sentenced to fixed-term imprisonment ranging from three years to four years and six months, together with fines.

After the verdict of the first instance, Li, Yan, Zhang, Wang, Du and LV filed an appeal.

In the second trial, the plaintiff and the defendants debated about whether LEGO's infringing assembly toys belong to art works, whether the amount of illegal business of Li and others in copyright infringement crime is correct, whether this case involves a unit crime and whether the original sentence is appropriate, etc.
"Art works refer to the aesthetic works of painting, calligraphy and painting. LEGO embodies the meaning of assembly. In this case, the definition of assembly toys as art works is groundless in law." Wang's defender said in the trial. Li believed that the amount of crime identified in the first instance didn't take into account the sales return and customer rebate, so he had objection. Yan proposed that the crime in this case should be identified as a unit crime. In addition, six Appellants and their defenders said that the first instance sentence was too heavy and demanded that the original sentence be revoked and the sentence be changed according to law.

 

[Case Study]
Do the infringed LEGO toys belong to art works? After hearing, the SHPC held that according to the relevant provisions of the copyright law, art works refer to the plane or vertical plastic art works of aesthetic significance composed by lines, colors or other means such as painting, calligraphy and sculpture. In this case, a total of 663 pieces of assembled stereoscopic models were infringed. The expressions carried by these stereoscopic models were independently created by LEGO, with originality and unique aesthetic significance. Therefore, the assembled stereoscopic toys belong to the category of art works protected by China's copyright law.

As to the calculation of the amount of illegal business, the SHPC held that the original judgment, combined with the Accounting Appraisal Opinion and relevant evidence, found that the amount of illegal business of Li and others in copyright infringement crime was more than RMB 330 million, which was correct and should be confirmed. Although Li and his defenders argued that the original judgment didn't consider the sales return and customer rebate, which affected the determination of the amount of illegal business, there was no evidence to prove it, so the court didn't accept it.

Meanwhile, according to the provisions of the Criminal Law, unit crime refers to the crime in which the proceeds of crime committed in the name of a unit are mainly attributed to the unit. In this case, reproducing LEGO toys was decided by the principal offender Li and done by other accessories. Seen from the production and sales links, counterfeiting LEPIN toys were produced and sold by Lihao Toy Factory that has been deregistered. Details of bank accounts show that all income and expenditure relating to the production and sale of LEPIN toys flow into/out of personal accounts not involved in this case. The illegal income wasn't attributed to relevant unit and the wages of defendants were paid in cash. Therefore, the crime was a gang crime rather than unit crime. 

As for sentencing, the SHPC held that according to the provisions of the Criminal Law and relevant judicial interpretations, the acts of Li and others constitute the crime of copyright infringement, and belong to "other especially serious circumstances." They should be sentenced to fixed-term imprisonment of not less than three years but not more than seven years, and should also be fined, the amount of which is generally more than one time but not more than five times of the illegal income, or not less than 50% and not more than 100% the amount of illegal business revenue. Considering that the infringement not only caused great losses to the goodwill and economic interests of the obligee, but also destroyed the order of market economy, which has serious social harm, the offenders should be severely punished according to law. It is proper for the court of first instance to make the original judgment in combination with the circumstances of accomplice, voluntary surrender, meritorious behaviors and confession of some defendants.


[Relevant Laws]

I. Criminal Law of the People's Republic of China

Article 217 Whoever, for the purpose of making profits, commits any of the following acts of infringement on copyright shall, if the amount of illegal gains is relatively large, or if there are other serious circumstances, be sentenced to fixed-term imprisonment of not more than three years or criminal detention and shall also, or shall only, be fined; if the amount of illegal gains is huge or if there are other especially serious circumstances, he shall be sentenced to fixed-term imprisonment of not less than three years but not more than seven years and shall also be fined:

(1) reproducing and distributing a written work, musical work, motion picture, television programme or other visual works, computer software or other works without permission of the copyright owner;

...

Article 52 The amount of any fine imposed shall be determined according to the circumstances of the crime.
...

Article 64 All money and property illegally obtained by a criminal shall be recovered, or compensation shall be ordered; the lawful property of the victim shall be returned without delay; and contrabands and possessions of the criminal that are used in the commission of the crime shall be confiscated. All the confiscated money and property and fines shall be turned over to the State treasury, and no one may misappropriate or privately dispose of them.

II. Interpretation of the Supreme People's Court and the Supreme People's Procuratorate Concerning Some Issues on the Specific Application of Law for Handling Criminal Cases of Infringement upon Intellectual Property Rights

Article 5...

Where any person, for the purpose of reaping profits, has committed one of the copyright infringements as prescribed in Article 217 of the Criminal Law, with a total illegal income of over RMB 150,000, he or she shall be deemed as "having gained a huge amount of illegal income;" any of the following cases shall be deemed as "other very serious circumstances," and the offender shall be sentenced to imprisonment for a definite term from no less than three years up to seven years, and concurrently to a fine upon conviction of Crime of Copyright Infringement:

1.having an amount of illegal business value of over 250,000;

...

III. Interpretation II of the Supreme People's Court and the Supreme People's Procuratorate of the Issues concerning the Specific Application of Law in Handling Criminal Cases of Infringement of Intellectual Property Rights

Article 4 In the case of infringement of intellectual property right, the amount of criminal proceeds, the amount of illegal business, the damage caused to the right holder, the harm to society and other circumstances shall be taken into account when imposing a fine in accordance with the law. The amount of the fine is generally determined at a level not less than one and not more than five times the amount of the illegal gain, or not less than fifty percent and not more than one hundred percent the amount of illegal business revenue.

IV. Criminal Procedure Law of the People's Republic of China

Article 236 After hearing a case of appeal or protest against a judgment of first instance, the people's court of second instance shall handle it according to the conditions set forth below:

(1) If the original judgment was correct in the determination of facts and the application of law and appropriate in the meting out of punishment, the people's court shall order rejection of the appeal or protest and affirm the original judgment.

...

 

(Author: Guo Yan, Shanghai High People's Court)

 

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