The Trademark laws of China have undergone revision three times, the most recent one being in 2013. In addition to this, China is not a common law country therefore; the Doctrine of stare decisis (precedents) is not followed by the Courts leaving room for uncertainty on the legal position on various issues. One such issue is whether the use of a mark for Original Equipment Manufacturer (OEM), exclusively for export, should be construed as 'use' in China. The Supreme People's Court of China has provided some clarity on this issue in its recent decision.
In the case of Focker v Ya Huan, Focker Security International Ltd (hereinafter, Focker) a Hong-Kong based company filed a suit against Zhejiang Ya Huan Lockset Co Ltd (hereinafter, Ya Huan) for infringing its registered trademark 'PRETUL' and its oval shape. Ya Huan claimed that the mark 'PRETUL' was being used by them for the OEM pack locks that were processed for the Mexico based company – Chu Bo and were also meant to be exclusively exported to Mexico. The Courts of first and second instance ruled that Ya Huan was infringing Focker's trademarks and was liable to pay 50,000-80,000 Yuan as compensation to Focker for economic losses. The Supreme Court however, was of a different opinion; it held that since the product manufactured by Ya Huan had never been and was not even intended to be sold in China there could be no likelihood of confusion between the OEM products and products of Focker. In light of these observations it was held that there was no trademark infringement committed by Ya Huan.
China is a manufacturing hub for a large number of companies in the world and therefore, this decision (though not binding) is in the interest of such companies that give their orders for manufacturing to Chinese companies. Therefore, for the companies that do not intend to enter the Chinese market but only use it as a center for manufacturing, this decision allows them to continue their activities without allegations of trademark infringement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.