[2023] KEHC 24842 (KLR)

Xiangzhong v Republic (Criminal Appeal E183 of 2023) [2023] KEHC 24842 (KLR) (Crim) (7 November 2023) (Judgment)

Neutral citation: [2023] KEHC 24842 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Criminal

Criminal Appeal E183 of 2023

DR Kavedza, J

November 7, 2023

Between

Chen Xiangzhong

Appellant

and

Republic

Respondent

(Being an appeal against the conviction and sentence delivered by Hon. S.M Shitubi (C.M) on 31st May 2023 at Milimani Chief Magistrate’s Court Criminal Case no. 1159 of 2019 Republic vs Chen Xiangzhong)

Judgment

1. The appellant was charged with three counts of the offence of possession in the course of trade counterfeit goods contrary to section 32 (a) as read with section 35 (1) (a) of the Anti-Counterfeit Act No. 13 of 2008. He was also charged with two counts of importing into Kenya counterfeit goods contrary to section 32 (f) as read with section 35 (1) (a) of the same act. He was acquitted on four counts and convicted on one count for the offence of possession of counterfeit goods. He was sentenced to pay a fine of Kshs. 292,222,560 in default serve two years imprisonment.

2. Being aggrieved, he filed an appeal challenging his conviction and sentence. In his petition of appeal, he raised 16 grounds which have been summarised as follows: He contested the totality of the prosecution's evidence against which he was convicted. He argued that the prosecution failed to call a crucial witness to prove their case beyond reasonable doubt. He contested being charged as an accused person and claimed he was not the director of Yang Xinajum. He argued that the trial court failed to consider his defence before conviction. He challenged that the sentence meted out by the trial court as being manifestly harsh maintaining that his mitigation was not considered.

3. As this is the appellant's first appeal, the role of this appellate court of first instance is well settled. It was held in the case of Okeno v Republic [1972] EA 32 and further in the Court of Appeal case of Mark Oruri Mose v Republic [2013] eKLR that this court is duty-bound to revisit the evidence tendered before the trial court afresh, evaluate it, analyse it and come to its independent conclusion on the matter but always bearing in mind that the trial court had the advantage of observing the demeanour of the witnesses and hearing them give evidence and give allowance for that.

4. The prosecution called four (4) witnesses in support of their case. Leon Scho Johns (PW 1) told the court that he is the managing director of JO Global Ventures. He testified that the company was mandated to undertake brand protection for Caterpillar Inc. He produced the power of attorney from Caterpillar Inc. He testified that he was shown goods seized by the Kenya Anti-Counterfeit Authority suspected to be counterfeit Caterpillar shoes. He distinguished the original caterpillar shoes from the pairs seized. He produced a report to that effect.

5. Lorna Khamusa Miima (PW 2) an Inspector at the Anti-Counterfeit Authority told the court that in the course of her duty, she was inspecting go-downs. On May 28, 2018, she came across go-down no. B2 LR No. 209/10633 East Gate Off Msa Road. However, the owner was not present and in the company of her colleagues came the next day. The following day, the appellant gave them access to the premises. It was testimony that the inventory was signed off by Huyhangg who signed off as the owner/agent of the premises. Upon inspection, suspected counterfeit goods were seized. There were 1624 pairs of Caterpillar shoes, 240 pairs of Polo shoes, and 180 pairs of Clarks shoes. An inventory of the goods was recorded and signed.

6. William Olalo Onyango (PW 3) the Director in charge of brand protection research and enforcement at JO Ventures told the court that he is a product expert for Caterpillar Inc and could identify infringement of intellectual property. On May 28, 2018, he received a call from Mr. Abdi Fattah Aden of Anti-Counterfeit Authority who informed him that some suspected counterfeit goods had been seized. He sent him a WhatsApp image and established that the goods did not seem genuine. He filed a complaint and applied to be given samples of the goods for inspection. Upon examination and analysis, he filed a report to the effect that there was an attempt to copy the name Caterpillar by changing the letters CA and replacing it with the letters GH. In addition, Caterpillar’s triangular logo was also used.

7. On cross-examination, he denied knowing whether GHT was a registered trademark. He maintained that Caterpillar Inc. was not contesting the registration of the GHT trademark if it existed.

8. Abdi Fatah Aden (PW 4) an Inspector at ACA told the court that on May 28, 2018, in the company of a multi-agency team visited the appellant's go-down off Mombasa Road. Upon inspection, 812 boxes of caterpillar shoes, 10 boxes of polo shoes, and 10 boxes of Clark shoes which were suspected to be counterfeit were seized. He informed JO Global Ventures, the local representative of Caterpillar Inc about the seizure and directed them to file a complaint. Once a complaint was lodged, JO Global Ventures applied for a sample of the seized goods for analysis. Their application was approved and analysed which confirmed that the goods in question were counterfeit.

9. After the close of the prosecution’s case, the appellant was found to have a case to answer and was put on his defence. In his defence, he gave unsworn testimony and called three witnesses. In his defence, he told the court that he is an employee of Yuhang Investment Limited. He maintained that he is not a director as alleged. On the material date, when the multi-agency team came to the premises to inspect the goods, he informed them that he was only an employee and not the owner of the goods but they were adamant and arrested him. He told the court that the company director is Yuhang Hu Yuhang who signed the inventory.

10. William Onyango (DW 2) the Director of JO Global Ventures was recalled as a defence witness told the court that the goods seized at the appellant’s go-down had a triangular logo design. In addition, the first three letters looked like CAT from a distance.

11. Eunice Njuguna (DW 3) the registrar of trademarks at Kenya Industrial Property Institute (KIPI) explained the process of registration of a trademark in Kenya. She testified that GHT had made an application for a trademark and followed all requisite procedures before the trademark was registered. She told the court that the trademark was registered in respect of clothing, footwear, headgear, and goods bearing the mark GHT are therefore genuine.

12. The trial court found the appellant guilty and after mitigation, convicted him accordingly.

Analysis And Determination. 13. In his appeal, the appellant, challenged the totality of the prosecution’s evidence against which he was convicted. He argued that another trademark GHT otherwise in full GHTE PILLAR had been duly registered with the Kenya Industrial Property Institute and therefore not counterfeit.

14. It is trite that the burden of proof in criminal cases is always on the prosecution to prove the elements of an offence which an accused is charged with. The standard of proof is always that of beyond reasonable doubt. This is provided under section 107 of the Evidence Act cap 80 Laws of Kenya.

15. In this case, the appellant was convicted for the offence of being in possession of counterfeit goods contrary to Section 32 (a) as read with section 35 (1) (a) of the Anti-Counterfeit Act No. 13 of 2008. The purpose of the Anti-Counterfeit Act No.13 of 2008 is to prohibit trade in counterfeit goods. Section 32(a) provides for the offence the appellant had been charged with. It provides that;“It shall be an offence for any person to-(a)have in his possession or control in the course of trade any counterfeit goods.”

16. To sustain a conviction, the prosecution needed to prove, beyond reasonable doubt, three elements: -a.That the appellant was in possession;b.of counterfeit goods;c.in the course of trade.

17. The question which then needs to be answered is whether the prosecution tendered sufficient evidence to prove all the above elements. As to whether the appellant was in possession, from the appellant’s evidence, it is not disputed that he was at the premises when the goods were seized by officers from ACA. In addition, he told the court that he was an employee of Yuhan Investment Limited. The goods were seized from the premises of Yuhan Investment premises. As such, it is not in dispute that he was in possession and control of the same.

18. As to whether it was in the course of trade; trade is defined under section 2 to include business and profession. It was the prosecution’s evidence in particular PW 2 and PW 4 that the appellant was arrested in the premises of Yuhan Investment Limited. The appellant admitted to the trial court that he was working there. As such, the appellant was in possession of the goods while in the course of trade.

19. As to whether the said goods were counterfeit, Section 2 of the Act defines “Counterfeit goods” as;“goods that are the result of counterfeiting any item that bears an intellectual property right, and includes any means used for purposes of counterfeiting.”“Counterfeiting” is defined as;“taking the following actions without the authority of the owner of intellectual property right subsisting in Kenya or outside Kenya in respect of protected goods—a.the manufacture, production, packaging, re-packaging, labelling, or making, whether in Kenya, of any goods whereby those protected goods are imitated in such manner and to such a degree that those other goods are identical or substantially similar copies of the protected goods..”

20. As such, the prosecution had a burden to prove that the goods (shoes in question) were a result of counterfeiting of any item that bears an intellectual property right. To do so, the prosecution was required to tender sufficient evidence that the shoes were manufactured, produced, packaged, re-packaged, labelled, or made in imitation of protected goods in such a manner and to such a degree that those other goods are identical or substantially similar copies of the protected goods. The prosecution further had a duty to tender evidence to the effect that all that was done without the authority of the owner of intellectual property rights subsisting in Kenya or outside Kenya in respect of protected goods.

21. PW 1, a product expert from JO Ventures, inspected the shoes that were suspected to be counterfeit. He had a power of attorney from Caterpillar Inc. that authorized him to examine goods and determine if they were authentic or counterfeit Caterpillar products. He found that the shoes that were suspected to be fake had the mark GHterpillar, not CATerpillar. They also lacked a bag, unlike the authentic shoes. The triangular logo on the authentic caterpillar shoes was similar to the one on the counterfeit shoes, but the colour and font style was different. He concluded that the shoes in question were counterfeit because they tried to imitate the genuine caterpillar shoes. He demonstrated in court the differences between the authentic and the counterfeit shoes.

22. PW 3 admitted that he did not initially examine the goods seized being GHterpillar branded shoes but was sent digital photos which he analysed. He later applied for samples and upon examination and analysis confirmed that they were indeed counterfeit. He corroborated the testimony of PW 1 and further testified that the shoes in issue bearing the GHterpillar brand were infringing on Caterpillar's intellectual property. He made this conclusion after comparing the features of the authentic and the counterfeit caterpillar shoes.

23. In his defence, the appellant did not sufficiently challenge the prosecution's evidence on the counterfeit. The appellant's argument revolved around the existence of a registered GHT trademark and the authenticity of the seized shoes as genuine GHT products that did not violate the complainant's intellectual property rights. However, it was discovered that the shoes in question did not bear the GHT mark but instead featured the GHterpillar mark.

24. The testimony of PW 1 and PW 3 strongly suggested an attempt to imitate Caterpillar's trademark on the confiscated shoes. Consequently, the inference was that the seized shoes were not authentic Caterpillar products. This led to the determination that the seized GHterpillar shoes had indeed infringed on Caterpillar's trademark with the registration number 101xxx. The result is that the prosecution proved beyond reasonable doubt that the goods in question were fake. The appellant was therefore rightly convicted.

25. On sentence, the appellant was sentenced to Kshs. 292,222,560 in default serve two years imprisonment. In his submissions, he argued that the sentence was manifestly excessive and not in consideration of the Judiciary Sentencing Policy Guidelines. He cited the case of Kimani Gacheru v. Republic [2002] eKLR in support of this position.

26. Section 35 (1) (a) of the Anti-Counterfeit Act No. 13 of 2008 provides the sentence for the offence the appellant is convicted of as follows:(1)A person convicted of an offence under section 32, shall be liable—(a)in the case of a first conviction, to imprisonment for a term not exceeding five years, or to a fine, in respect of each article or item involved in the particular act of dealing in counterfeit goods to which the offence relates, not less than three times the value of the prevailing retail price of the goods, or both;

27. During the sentencing proceedings, the trial court noted that the appellant was a first offender. The court also pointed out that the law provides a sentence of 3 times the value of the counterfeit goods in the form of a fine or a prison sentence. The court noted that the goods in this case were worth Kshs. 146,111,280. The court then proceeded to sentence the accused to payment of a fine twice that amount.

28. I have perused the entire record of the trial court and note that no valuation certificate was produced to confirm the market value of the seized shoes. It was speculative for the trial court to maintain the value of Kshs. 146,111,280 indicated in the charge sheet without a valuation certificate.

29. In accordance with established legal principles, several key issues have arisen. Firstly, there was a need to understand the method the investigating officer used to determine the value of the shoes as Kshs. 146,111,280. Additionally, there is a requirement for further clarification on how the trial court arrived at the definitive conclusion that the counterfeit goods were valued at the same figure of Ksh. 146,111,280. These issues arise from the absence of information regarding the prevailing market prices for caterpillar shoes in the Kenyan open market encompassing both retail and wholesale sectors. In this context, it was crucial that the owner of the patent presents evidence regarding the market value of these shoes in the public domain, which, unfortunately, remains lacking.

30. Therefore, a thorough review of the sentencing decision is essential to determine whether it aligns with retail or wholesale valuations. It's important to note that, unlike narcotics, these goods typically go through retail distribution, eliminating the need for hidden valuations. Due to the non-disclosure of this critical information, it can be concluded that the trial court's determination on the value is subject to scrutiny for the inaccuracies outlined.

31. The question then is what happens where there is no certificate produced to prove the market value of the Caterpillar shoes. The Court of Appeal has had to deal with a similar provision of law in section section 86 of the Narcotic Drugs & Psychotropic Substances (Control) Act in the case of Kibibi Kalume Katsui v Republic (2015) eKLR where it expressed itself as follows;“The valuation certificate whose importance cannot be gainsaid as it conquers the awkward position the court is put in to second-guessing the value, was not produced. However all is not lost, we take note that Pw4 and Pw2 were part of the Anti-narcotic Police Unit that recovered the drugs. It can be safely presumed that as they frequently interacted with drug-users or even dealers they brushed on the minute idea of the retail value of the drugs as at that time. We shall take the value to be as stated but with caution, we are not giving the police a free-hand by doing this, no! They must pull-up their socks.”

32. Using the same principle, I take judicial precedent that section 35 of Anti-Counterfeit Act No. 13 of 2008 is not a mandatory provision on sentencing but for evidential aid, for the benefit of the Court, in the valuation of goods for penalty. Sentencing is still discretionary. However, a court sitting on appellant jurisdiction cannot automatically interfere with the exercise of discretion by the trial court. An intervention on discretion is only justified when it is wrongly exercised such as when the court takes in irrelevant facts or leaves out relevant ones and it is automatic when the wrong sentence is imposed which is legally erroneous. (See Wanjema v Republic [1971] EA 493 and Diego v Republic [1985] KLR 621. )

33. The value of the shoes as given in the charge sheet, is by itself, no evidence as to the value. The sentence of payment of a fine of Kshs. 292,222,560 in default serve two (2) years imprisonment was therefore invalid. The trial court was required to exercise its discretion while bearing in mind the quantity of the goods, the value of the goods, and the mitigation of the accused person. In his mitigation, the appellant stated that he was a remorseful first offender, he prayed for a non-custodial sentence. The value of the goods was never determined. Taking all this into consideration, I find the sentence imposed by the trial court to have been harsh and excessive.

34. I therefore uphold the conviction but set aside the sentence of payment of a fine of Kshs. 292,222,560 in default serve two (2) years imprisonment and substitute it with a fine of Kshs. 10,000,000 in default to serve 12 months imprisonment.

35. Orders accordingly.

JUDGEMENT DATED AND DELIVERED VIRTUALLY THIS 7TH DAY OF NOVEMBER 2023________________D. KAVEDZAJUDGEIn the presence of:Akunja for the StateSonoiya for the AppellantJoy - Court Assistant