Managing Intellectual Property Magazine: Criminal Sanctions

Are there criminal sanctions in respect of infringement of IP rights in your jurisdiction? If so, for what categories of IP and for what offences?

Criminal offences exist in relation to copyright; trade marks; publication right; rights in performances. There are no equivalent criminal offences in relation to patents, designs, confidentiality or privacy rights.

Copyright: designated offences relate to making, importation, distribution, possession, or other dealing with “infringing articles”. There is a further offence in relation to the unauthorised communication to the public of a work.

In each case there is a requirement that the defendant knows, or has reason to believe, that the article with which they are dealing is an infringing copy of a copyright work, or what they are doing is infringing copyright in the work.

There are also criminal offences in relation to:

  • the unlicensed public performance of a literary, dramatic or musical work, or the playing or showing in public of a sound recording or film;
  • articles designed for making copies of copyright works.

There are equivalent offences in relation to “illicit recordings”, namely a recording which has been made without the consent of the performer or any person holding the exclusive recording rights.

Trade Marks: offences are committed where, without consent, a mark is applied to goods or packaging or there is any sale, hiring, offering for sale or distribution or possession of goods which have (or the packaging of which) has such a mark. This is subject to the requirement that the person carries out the act with a view to gain for himself or another or with intent to cause loss to another.

There are also offences relating to labelling, packaging or business papers and also for making, or having in their possession, an article “specifically designed or adapted” for making copies of the mark.

There is a defence that the person believed, on reasonable grounds, that the way in which the sign was used was not an infringement. It is also an offence to falsely represent that a mark is registered.

What are maximum penalties? What civil recoveries or other compensation may be obtained following conviction and can costs be recovered?

Penalties: these range between a maximum imprisonment of three months and ten years and an unlimited fine. These depend on the specific offence and whether the person was convicted in the Magistrates court (the lower criminal court) or in the Crown court (the higher criminal court).

Compensation: the criminal courts do have general powers to order ‘appropriate’ compensation of up to £5,000 to victims under s.130 Powers of the Criminal Court (Sentencing) Act 2000. Note, however, that the amount of £5,000 will relate to each offence committed.

The courts do, occasionally, make compensation orders if there is a clear indication of the relevant amount of royalties lost. But, if there is any complexity the courts will say that the rights owner should pursue their remedies for damages in the civil courts.

Other financial orders: Under s.11 Civil Evidence Act 1968, in any civil proceedings the fact that a person has been convicted of an offence is then evidence for relevant purposes in the civil proceedings that he did commit the offence. Accordingly a criminal conviction can effectively permit a claim for summary judgment in a related claim for damages.

A successful criminal prosecution can also trigger other substantial orders against the defendant and his/her associates. Under the Proceeds of Crime Act 2002, where any person is convicted of a “lifestyle offence” (which includes trade mark and copyright offences), there are provisions whereby the court can assume that the defendant’s assets (house, bank account, car and investments etc), together with those of any business associates and his immediate family all derived from criminal conduct. These assets may then be confiscated.

Example: A husband and wife who had been illegally copying DVDs, CDs and computer games were convicted under the Trade Marks Act 1994. They had extensive assets but were unable to show that these had derived from any legitimate form of income. Assets totalling £836,000 were confiscated from them following the conviction.

Are directors and officers liable if a company is convicted?

Directors, managers, secretaries or other similar officers of the body are liable, concurrently, with the company if the unlawful dealing had taken place were with their “consent or connivance”.

What are the advantages and disadvantages of using criminal sanctions in your jurisdiction compared to civil procedures?

Significant deterrence: No person or business welcomes a trial in the criminal courts; Only a small percentage of civil proceedings ever get to trial – and therefore their deterrent effect, in terms of publicity, is much less. Criminal proceedings cannot be “settled” (this is an abuse of process) and they therefore invariably go to trial with either a conviction or a finding of not guilty.

Personal liability: Directors, managers and similar officers are personally liable for criminal offences of the company. This is not the case in civil proceedings, unless the relevant individual can be classified as a “joint tortfeasor”, which is rare. Unlike in civil proceedings, career infringers cannot hide behind the protection of a limited company.

Confiscation orders: A criminal conviction can precipitate substantial confiscation orders under the Proceeds of Crime Act 2002 (see above);

Costs recovery: For the more serious trade mark and copyright offences, a private prosecutor (such as a rights owner) can recover all their costs from the government (‘central funds’) whether the prosecution is successful or not [s.17 Prosecution of Offences Act 1985].

Can rights owners act independently, or must they use specific agencies? (e.g. Crown Prosecution Service/ Trading Standards). What are the advantages/ disadvantages where they have a choice? Do any trade organisations have the power to take action?

English law permits any individual (whether or not the rights owner or, indeed, connected in any way with the crime) to “lay an information” and therefore commence criminal proceedings against another person. This is called a private prosecution. Although the vast majority of criminal proceedings are, naturally, commenced by a police officer (and then prosecuted by the Crown Prosecution Service) or by a Trading Standards officer, they have no special rights to initiate criminal proceedings any more than any private individual. The disclosure regime in relation to criminal proceedings is far more limited than in civil proceedings.

The prosecution, in a criminal trial, has to prove all relevant elements of the offence to the criminal standard (the Jury has to be sure that the offence had been committed). In civil proceedings the burden of proof is the civil standard, namely the “balance of probabilities”. The main advantages of the Crown or Trading Standards officers taking the prosecution is that, of course, they can apply their own resources and be responsible for the costs of the proceedings. All trade organisations have the power to initiate criminal proceedings. Organisations such as Federation Against Copyright Theft and Design and Artists Copyright Society have brought private prosecutions in the past.

If rights owners act independently, are any consents or approvals required from judicial authorities?

No. Note however that the House of Lords declared in July 2006 that it would be an ‘abuse of process’ for a private prosecution to be brought where the defendant had already accepted a caution from the police [Jones v Whalley].

Which companies/industries have made particular use of criminal sanctions in recent cases?

Trading Standards officers regularly bring criminal proceedings. However, in terms of private prosecutions, cases have been brought by Mechanical Copyright Protection Society (MCPS) and fashion retailers such as Monsoon.

It will be seen from the above that private prosecutions can form an important part of a rights-holder’s armoury against professional infringers – often operating through limited companies which simply cease trading if civil proceedings are brought. The rarity of private prosecutions for IP infringement is probably more due to lack of familiarity with criminal procedure by IP owners and advisers rather than the utility and effect of the proceedings.