In a recent decision, the Supreme People's Court of China
ruled that the use of a trademarked sign on goods manufactured in
China solely for export purposes does not constitute
"use" of a trademark. Consequently, such use could not be
considered an infringement of a trademark registered in China.
The decision was given in a case involving a trademark which was
used on goods that were produced for export to Mexico. The Supreme
People's Court ruled that the first and second instance courts
erred in their finding of trademark infringement, because both
courts had based their assessment of infringement on the sole fact
that a sign identical or similar to a trademark, and in relation to
identical goods, was used without authorization. However, in the
eyes of the Supreme Court, the first and second instance courts had
ignored an essential prerequisite – namely, that the alleged
infringing act must constitute "trademark use in the sense of
the trademark law."
The Supreme People's Court determined that the use of a
China registered trademark on goods that were manufactured in China
solely for export purposes does not amount to trademark
"use". Consequently, there could be no finding of
trademark infringement. The key element to note in this case was
that the trade marked goods were not intended to enter the Chinese
market. For this reason, the Chinese public could not have possibly
been confused into thinking that the trademarked goods come from
the same source or, at least, think that permission has been given
to use the mark.
The decision resolves years of uncertainty about the position of
Chinese courts, government and customs authorities on the so-called
"OEM" (Original Equipment Manufacturing) principle.
Although court decisions in China are non-binding authorities on
future cases, judgments from the Supreme People's Court are
strongly indicative of possible future trends. Still, whether or
not OEM constitutes trademark infringement remains a somewhat
complicated issue that has to be resolved on a case-by-case
In view of this Supreme People's Court decision, foreign
brand owners that have their marks registered in China will need to
consider a potential defense of non-infringement available to local
OEM manufacturers that deal with counterfeit trademark goods.
Thorough and well-supported investigation can help ascertain
whether the allegedly infringing goods were produced solely for
export sales and whether the OEM manufacturers had knowledge (or
should have had knowledge) of the foreign brand involved.
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This article provides information and comments on legal
issues and developments of interest. The foregoing is not a
comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
discussed herein. Please also read the JSM legal publications
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