Criminal liability for infringement of intellectual property rights is not unified under EU law. Nevertheless, in its most recent judgment, the CJEU commented on such liability and ruled that the threat of imprisonment should not be too high due to the provisions of the EU Charter of Fundamental Rights.

On 19 October 2023, the CJEU ruled in Case C-655/21 on criminal penalties for the infringement of intellectual property rights.

The Bulgarian court had doubts as to whether:

• the sanctions for trade mark infringement – as indicated in the Bulgarian Criminal Code (from five to eight years’ imprisonment and fines from BGN 5,000 to 8,000) – comply with the standards of Directive 2004/48/EC on the enforcement of intellectual property rights and the Charter of Fundamental Rights of the European Union;
• the use of a trade mark in commercial transactions without the consent of the exclusive right’s holder constitutes administrative tort (Article 127(1) of the current wording of the Bulgarian Trademark Law (ZMGO)) or a criminal offence (Article 172b of the Criminal Code).

As a result of an inspection carried out in 2016 at the apparel retailer operating under the business name of G. ST. T. (a sole proprietorship), inspectors found the company dealing with and marketing counterfeited products. The Prosecutor’s Office concluded that the activities carried out by G. ST. T. had caused „damage of significant value”. Namely, the value of the goods involved was estimated at BGN 1,404,590 (approximately EUR 718,000) for „original” goods and at BGN 80,201 (approximately EUR 41,000) for „counterfeit” goods. The Prosecutor’s Office charged the company with the offence of trademark infringement (Article 172b(2) of the Bulgarian Criminal Code).

In its judgment, the CJEU pointed out that:

1. Directive 2004/48 does not regulate the issue of criminal procedures and penalties applicable to infringements of intellectual property rights, while granting Member States the competence to establish rules under national law. The court’s questions concerning the comparison of Bulgarian criminal law with Directive 2004/48/EC were declared inadmissible.
2. The fundamental rights guaranteed by the Charter of Fundamental Rights apply in all situations governed by the EU law, but not outside such situations. Meanwhile, the WTO Agreement, which includes the TRIPS Agreement, was concluded by the European Union and, therefore, it forms an integral part of the EU law from its entry into force. Article 61 of the TRIPS Agreement requires the establishment of criminal procedures that can lead to effective, dissuasive and proportionate sanctions.

With this in mind, in fulfilling the obligation laid down in Article 61 of the TRIPS Agreement,  a Member State applies the EU  law which triggers the obligation to abide by the Charter of Fundamental Rights.

3. the provisions of a criminal law should respect certain requirements of accessibility and foreseeability in terms of both defining the offence and determining the penalty. However, the CJEU has indicated that Member States may decide that the same act will be punishable by an administrative sanction jointly with a criminal sanction.
4. the severity of the sanctions should be commensurate with the seriousness of the infringements that trigger the sanctions, in particular by providing a real deterrent effect, but without going beyond what is necessary to achieve that objective.

According to the CJEU, a sentence of imprisonment from five to eight years and a fine of BGN 5,000 to BGN 8,000 is adequate to achieve the legitimate objectives pursued by Article 61 of the TRIPS Agreement. However, the Court pointed out that the threat of imprisonment for a term of not less than five years for using a trademark without the consent of the exclusive right’s holder – also in a case where the effects on trade are insignificant, even despite deliberate and repeated commission – does not guarantee that the severity of the sanctions imposed is not disproportionate.

With this in mind, the CJEU pointed out that Article 49(3) of the Charter of Fundamental Rights precludes a national provision which, in the case of  a trade mark use in the course of trade without the consent of the exclusive right’s holder, sets a lower limit of imprisonment as that being of not less than 5 years.

Conclusion:

In its judgment, the Tribunal confirmed that the same conduct can be qualified as both an administrative tort and a criminal offence, without indicating the criteria to making a clear-cut distinction between an administrative tort and a criminal offence.

Furthermore, the Tribunal indicated that a minimum sentence of five  years’ imprisonment would be contrary to Article 49(3) of the Charter of Fundamental Rights.

Full text of the ruling: https://curia.europa.eu/juris/document/document.jsf?text
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