For many years, when Chang Tsi Enforcement & Investigation team handling trademark infringement cases for clients in China, there has been significant debate among various local enforcement agencies (such as the AMR - Administration for Market Regulation) regarding the methods for calculating the illegal business turnover of infringing entities. This calculation becomes particularly crucial when dealing with targets producing/manufacturing large quantities of counterfeit goods, potentially reaching the threshold for criminal prosecution.

In late October 2024, to promote strict and standardized enforcement in trademark infringement cases, protect the legitimate rights and interests of intellectual property owners, and create a fair competitive market environment, the China National Intellectual Property Administration (CNIPA) and the State Administration for Market Regulation (SAMR) jointly issued and published the "Measures for Calculating Illegal Business Turnover in Trademark Infringement Cases" on the CNIPA’s official website. This measure provides detailed regulations on the definition of illegal business turnover, general standards for its calculation, standards for calculating illegal business turnover in complex infringement scenarios, and handling methods when the actual illegal business turnover cannot be verified, thus resolving a series of contentious issues, and providing specific operational guidelines for enforcement agencies.

The "Measures for Calculating Illegal Business Turnover in Trademark Infringement Cases" consists of 19 articles. It first clarifies that the calculation of illegal business turnover should adhere to the principles of legality, reasonableness, objectivity, and fairness. Illegal business turnover refers to the total value of infringing goods involved in the trademark infringement act or the business revenue generated from the infringement. The value of sold infringing goods is calculated based on the actual selling price. For unsold infringing goods, the value is calculated based on the actual average selling price of the verified infringing goods; if the actual average selling price cannot be ascertained, the value is calculated based on the marked price of the infringing goods.

Additionally, the measures specify that for goods that have been manufactured but not yet affixed with infringing registered trademark labels, if there is concrete and sufficient evidence proving that these goods will infringe on another's exclusive right to use a registered trademark, their value should be included in the illegal business turnover. This new regulation significantly strengthens the crackdown on infringers.

Furthermore, if free giveaway items infringe on another's exclusive right to use a registered trademark, the illegal business turnover should be calculated based on the actual purchase price or manufacturing cost of the giveaway items. If the actual purchase price or manufacturing cost cannot be determined, or if the giveaway items are non-standard goods, the value should be calculated based on the marked price or the median market price of the infringed goods. For those who intentionally facilitate trademark infringement, the illegal business turnover should be calculated based on the income obtained from aiding the infringement. These specific provisions for calculating illegal gains in special infringement scenarios provide clear guidance for handling such cases.

Overall, the implementation of the "Measures for Calculating Illegal Business Turnover in Trademark Infringement Cases" demonstrates the determination of Chinese enforcement authority to continuously strengthen IP protection, and this is definitely a good news for numerous brand owners. Chang Tsi Enforcement & Investigation team has been in close communication with local enforcement authority regarding the implementation of this new regulation and has received positive feedback. Moving forward, we will continue to intensify market monitoring efforts and assist our clients in combating counterfeiting and purifying the market in China.