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4.5 Year Prison Sentence and 5.5 Million RMB Fine in China Disney Criminal Trademark Case

According to information released January 9, 2024 by the Shanghai Pudong Procuratorate (浦东检察 ), three criminal defendants were sentenced to up to 4.5 years in prison with a 5.5 million RMB fine for selling 830,000 pieces of counterfeit Disney clothing with a sales amount was more than 17 million RMB. This follows a previous criminal case in Shanghai for selling counterfeit Disney plush tolls and multiple Customs cases featuring counterfeit Disney products. The Shanghai Disneyland Resort is 57% owned by the Shanghai government via the Shanghai Shendi Group.

Per the Procuratorate, in February 2023, the police received a report that a Ms. Yu, who lives in Pudong New Area, purchased a Disney children’s thermal underwear set at a price of 88 RMB  on a well-known online shopping platform. The store’s product page described the clothing sold as “Disney IP model” and had the Disney registered trademark. However, after receiving the goods, Ms. Yu found that the quality of the clothes was relatively poor and there was no Disney anti-counterfeiting code and seemed to be fake.

After investigating the online shopping store, the public security organs destroyed the den where criminals manufactured and sold counterfeit goods, and arrested three criminal suspects, Che, Zhu and Feng. The gang’s warehouse was located in Henan has three floors, stacked with a large number of clothing with the “DISNEY” trademark, wash labels, tags, packaging , etc. More than 200,000 pieces of clothing involved in the case were seized on site alone with a value of approximately RMB 1.8 million.

On May 31, 2023, the case was transferred to the Pudong New Area Procuratorate for review and prosecution.

The criminal suspects Zhu and Che are a husband and wife couple. They registered a clothing trading company in Shanghai and have been engaged in the clothing industry for many years. In 2021, seeing that Disney brand children’s clothing is very popular, the two of them combined decided that if they produce and sell children’s clothing with Disney’s registered trademark, it will definitely sell well.

In August 2021, Che and Zhu signed an authorization agreement through a third-party company and obtained a so-called “authorization letter” issued by The Walt Disney Company. However, Che and Zhu did not verify the ownership status of this third-party company, nor did they ask for any valid authorization materials. The contract was only between the third-party company operated by two people and Che’s company without Disney’s authorization. The purchase of the copyright license was only 40,000 RMB. Che and Zhu, who have been in the clothing industry for many years, knew that such a price could not obtain a Disney brand license.

Having the “authorization letter,” Che and Zhu registered a new clothing trading company falsely claiming to have Disney brand authorization, retained factories to produce fabrics, printing, labels with the “DISNEY” trademark, etc., and then collected the semi-finished products to the warehouse for clothing production, assembly, tagging, packaging, etc., and finally shipping. In October 2022, Che and his wife invited their friend Feng to join them. Che was responsible for the company’s material procurement, clothing design, clothing production and customer service management. Zhu was responsible for the company’s finance and overall management, and Feng was responsible for online store operation and sales.

After auditing, from September 7, 2021 to February 27, 2023, the total actual sales volume of the criminal suspects Che and Zhu exceeded 830,000 pieces, and the actual sales amount was more than 17 million RMB. From March 1 to February 27, 2023, the criminal suspect Feng participated in the actual sales of more than 160,000 pieces, and the actual sales amount was more than 5.6 million RMB.

After being prosecuted by the Pudong New District Procuratorate, the court recently made a judgment on the case: for committing the crime of counterfeiting registered trademarks, the defendant Che was sentenced to four years and six months in prison and fined RMB 5.5 million; the defendant Zhu was sentenced to three years in prison and fined RMB 3 million; the defendant Feng was sentenced to two years and six months in prison, suspended for three years, and fined RMB 200,000.

The full original release is available here (Chinese only).

Principal, and Director of the China Intellectual Property Practice

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