Swedes consider the "penal value" of a trade mark infringement

"Supreme Court sets high threshold for imposing imprisonment in infringement cases", a note by Tom Kronhöffer and Miriam Röstberg Omari (von lode advokat ab, Stockholm) and posted on World Trademark Review earlier this month, raises important matters of principle that are rarely discussed on this weblog in regard to the criminal law dimensions of IP infringement. In particular, when if at all should trade mark infringers be sent to prison and, if they should, how should the duration of their sentences be calculated?

Conditions in Swedish jails
are reputed to be good. Here
Sven tests out the sleeping
arrangements ...

The case in question is Prosecutor General v CS (Case B-5484-13) and it runs like this. TransmissionsTeamet i Stockholm AB (TT) imported, marketed and sold counterfeit ball bearings which bore the Community trade mark SKF. The infringement was discovered when a consumer whose machinery was damaged by a fake ball bearing sought compensation from SKF. The police were called in. When they searched TT's premises, they seized over 6,000 counterfeit ball bearings made in China. A follow-up search-and seize-visit a few months later revealed the presence of further counterfeit goods. While both the Stockholm District Court and the Svea Court of Appeal found TT's owner guilty of trade mark infringement, they disagreed as to the appropriate sentence: the District Court sentenced the owner of the company to one year in prison, but the Court of Appeal reduced this. Intending to bring clarity to the issue of fixing a "penal value" [ie for how much time is it worth imprisoning an offender?] in trade mark infringement cases, the Attorney General appealed to the Supreme Court.

The Supreme Court initially stated that, while the primary objective is to protect the rights of trade mark proprietors, when it comes to assessing a "penal value", third-party interests should also be considered, because trade mark infringement may both mislead and harm consumers. This statement is a positive step in the protection of brands and consumers, since it was previously unclear whether third-party interests had any impact on penal value. The Court added that

• the infringement was of considerable magnitude, 
• the defendant had criminal intent, 
• the defendant was aware of the risk to third parties, and 
• the defendant's objective was clearly to benefit financially from the infringement. 

Notwithstanding this, the Supreme Court set the penal value at eight months' imprisonment. This is in effect a suspended sentence since the Swedish Criminal Code operates a presumption against imprisonment when the penal value of the sentence is less than 12 months. However, this did not mean that the defendant escaped scot-free, This sentence was combined with a day-fine of Skr 14,000, plus Skr 550,000 in damages, Skr 400,000 in litigation costs, a ban on business activity for three years, a corporate fine of Skr 50,000 and the destruction of the counterfeit products [there are around Skr 9 to the euro at the time of posting. The latest rate can be checked here].

The ultimate penal value: having
to listen to a looped tape of ABBA
singing Fernando ...

Finally, the Supreme Court assessed whether the very nature of trade mark infringement would serve to rebut the presumption against imprisonment. The prosecutor general argued that counterfeiting and piracy represented an increasing cross-border problem that posed a threat to the economy as a whole, as well as to public finances. Easy to carry out and hard to detect, it can also put the lives of consumers at risk: these circumstances, it was argued, were sufficient to rebut the presumption against imprisonment.  The Supreme Court thought otherwise: neither statute nor case law supported the proposition that trade mark infringement should be treated any differently from other criminal activities.  Did the Swedish Supreme Court get it right? Or should it have exercised its power to differentiate trade mark infringement and remove the presumption against prison?

The IPKat would like to believe that, while the presumption against imprisonment should be respected, the courts will be prepared to rebut that presumption whenever the facts of an individual case merit it, for example when the consequence of the infringement is the death or serious injury of one or more consumer.

Merpel disagrees vigorously. In her view criminal law must punish the act, not its consequence: the sale of fake ball bearings is the same act regardless of whether it causes no damage at all, damages a machine or kills a person.

What do readers think?

Why Sweden is closing its prisons here
Why Scandinavian prisons are superior here
10 of the world's most luxurious prisons here