China: An Analysis Of The SPC Judgment On PRETUL

Last Updated: 25 January 2017
Article by Cecilia Lou

Since the Supreme People's Court (the "SPC") handed down its retrial judgment (2014) Civil Retrial No. 38 on the "PRETUL Case"  , the question of "whether the use of a trademark on an OEM  product constitutes infringement" has arisen as a topic of heated debate in 2016. Although the SPC gave an answer to this particular case, it did not provide explanations on other subsequent questions, which are now facing people concerned. This article aims to address these questions by analyzing the SPC's judgment on PRETUL and two similar cases handled by the Beijing IP Court.

1. Background of the OEM-related trademark question

In the first-ever OEM trademark infringement case in China - "NIKE International Ltd. v Jiaxing Yinxing Garments Ltd., etc."  in 2001, the Shenzhen Intermediate People's Court held that "despite that the Spanish company (the licensor) had the legitimate right to use the NIKE trademark, the defendant infringed the plaintiff's trademark rights by producing on an OEM basis in China and exporting NIKE branded male ski jackets for commercial purposes without the plaintiff's consent", citing trademark territoriality and Chinese courts' jurisdiction. In short, the court confirmed that OEM products constituted infringement.

Many people disagree to that view, however, deeming it inappropriate to treat OEM products as infringing, for the following reasons: (1) Trademark infringement essentially undermines a trademark's function of identifying the source of the underlying product and causes confusion among consumers. But OEM products for export will not probably cause consumer confusion as to their sources because they are not circulated in China and will not be accessed by the relevant public . (2) OEM will cause no material damage to the trademark holder's domestic market or his trademark rights. (3) OEM in essence represents a contractual relationship under the PRC Contract Law, and the contractor's processing should not be considered "the use of a trademark" in the sense of trademark law .

The controversy was later reflected in judicial practice: courts in different regions held different views on this question. In "JOLIDA case" , the Shanghai Higher People's Court observed that, "the product in dispute manufactured and exported by the defendant (domestic manufacturer) on the commission of the US-based JOLIDA, an outsider, was not distributed in China, and therefore would not cause consumer confusion or misunderstanding. In addition, although the trademark was actually affixed by the manufacturer in China, it was used in reality by the overseas client. The trademark on the disputed product played the role of identifying the product source in the overseas market rather than in China. Therefore, the defendant did not infringe the plaintiff's exclusive right to the trademark."

The Jiangsu High People's Court presented another logic in (2015) Jiangsu High Court IP Final Judgment 00036 , "although the defendant's conduct belonged to OEM for a foreign company, it was aware that the plaintiff's trademark 'DONGFENG' was a well-known mark. It nonetheless engaged in OEM and knowingly used the same trademark with the plaintiff's on the allegedly infringing product. Without exercising its duty of reasonable care and avoidance, the defendant damaged the plaintiff's interests, and infringed its exclusive right to its registered trademark". 

Meanwhile, a number of judicial guiding opinions contain different views. According to Article 13 of "Answers to Several Questions on Trademark Civil Disputes" issued by the Beijing Higher People's Court on February 18, 2004, OEM is based on the express commission by a party who is entitled to use a trademark, and OEM products should not be determined to be infringing as they are not distributed in China and will not probably cause confusion or misunderstanding among the relevant public. However, the same court expressed a different view in its later edition of "Answers to Several Questions on Trademark Civil Disputes" publicized on February 13, 2006. According to Article 21 thereof, an OEM contractor who processes products bearing a trademark is responsible for examining whether the client has the exclusive right to the registered trademark. Otherwise, the contractor will be considered an infringer as the client's accomplice. In its April 21, 2009 "Opinion on How IP Trial Serves the Overall National Strategy in the Current Economic Conditions", the SPC reaffirmed the OEM contractor's indispensable duty of examination and care, but remained silent about whether OEM generally constitutes infringement. 

2. The PRETUL Case

PRETUL is important in that it produced the first clear-cut judgment about whether OEM is considered "trademark use" under trademark law, and whether trademark use in OEM infringes someone else's trademark rights. The case provides a guide to the trial of subsequent cases.

In PRETUL, Focker Security Products International Limited ("FOCKER") obtained the exclusive right to use the "PRETUL and oval device" trademark (in Class 6) in China on March 27, 2010 by virtue of a trademark holder's assignment, whereas an outsider, Mexico-based TRUPER HERRAMIENTAS, S.A.DE C.V. ("TRUPER"), was the owner of the registered trademarks "PRETUL" and "PRETUL and oval device" (in Classes 6 and 8). In 2011, TRUPER signed an OEM contract with PUJIANG YAHUAN Locks Co., Ltd. ("YAHUAN") licensing the latter to manufacture padlocks bearing the "PRETUL" mark, which would all be exported to Mexico. FOCKER claimed that YAHUAN infringed its exclusive right to the PRETUL trademark.

The SPC heard the case and confirmed that OEM was not "trademark use" and YAHUAN did not infringe TRUPER's trademark rights. According to the SPC, the trademark used by YAHUAN did not perform a trademark's basic function of identifying the product source. It continued, "YAHUAN's use of the trademark was simply a physical affixation of the mark in China, a necessary technical condition provided for TRUPER to use the trademark in Mexico where it was entitled to use. The mark applied to the product was not to distinguish the product from others, nor had the function of identifying its source. Therefore, the mark on YAHUAN's product did not possess the nature of a trademark, and should not be considered the use of a trademark". In addition, determining whether one's trademark rights are infringed is based on whether a trademark's identification function is undermined. When a trademark does not play the role of identifying the product source and trademark use is involved, it is of no practical meaning to find if the same or a similar trademark is on the same or a similar product and would cause confusion.

The above analysis is consistent with the SPC's judgment in (2012) Administrative Retrial No. 2 . The SPC agreed with the second instance court that the act at issue was not trademark use under trademark law, because "OEM products (of the foreign trademark owner) in China were manufactured by Chinese enterprises exclusively for export, and all relevant advertising and media reports happened outside of China, therefore, it cannot be proved that the 'Muji' trademark was actually used in China and known by the relevant public to a certain extent".

3. New questions

While the SPC judgment on PRETUL put an end to the debate over whether OEM constitutes infringement, it did not answer other extended legal questions, which have become more pronounced than before.

A major question for instance is that if under the logic of PRETUL no trademark use is constituted because the product has not entered the domestic market and therefore will not cause confusion, should the affixation of a trademark in production by an exporter who is not an OEM but aims to export all of its products be excluded from trademark use? Similarly, if the branding of products for export is not considered trademark use, how should an exporter maintain registration of its trademark?

In two cases involving processing products for export heard by the Beijing IP Court, i.e., "SODA case" and "DCLSA case" , the Beijing IP Court asserted that the affixation of trademark on products for export in the manufacturing phase constituted trademark use under trademark law. This looks to be in conflict with the SPC's position in PRETUL. But a detailed comparison between the two cases and PRETUL will reveal that they were different in nature, and thus led to opposite conclusions. 

In PRETUL, TRUPER (the client) had the exclusive right to the PRETUL trademark outside of China, and YAHUAN (the contractor) was the Chinese OEM manufacturing completely in compliant with TRUPER's instructions. All products manufactured were sold to TRUPER for distribution in foreign markets. In DCLSA, Zhenjiang Locks Factory as the trademark holder in China manufactured and exported its own products rather than made products on an OEM basis. Zhenjiang Locks Factory's will was demonstrated throughout the course of manufacturing and export. In SODA, trademark holder Mingji signed two contracts, which licensed China-based Xinhonghou to "non-exclusively use the SODA trademark to produce SODA branded clothes and accessories" and "licensed JF Xinhonghou/GF Shengfu to non-exclusively use the SODA trademark in China to produce relevant branded clothes and products for export to Southeast Asia ..." As the existing evidence shows, Mingji never specifically limited the manufacturing and export by its licensees Xinhonghou and JF Xinhonghou/GF Shengfu, and the export of relevant products were all carried out by Xinhonghou itself (the products were first sold to an import-export company in China, which in turn exported them to foreign countries). Throughout the course of manufacturing and export, the independent will of both Xinhonghou and the import-export company was demonstrated in full as well.

These differences make the three cases receive different qualitative assessments. PRETUL is a typical OEM case, where products were manufactured by the domestic company on the commission of the foreign trademark holder. No independent will of the manufacturer was demonstrated. It was not a process in which products were manufactured and then sold to the client, the manufacturer only offered the labor of processing. As a contractor, the domestic OEM manufacturer completed its work as per the client's instructions, delivered work results and got paid. Although the SPC does not mention this explicitly in its judgment, the wording "physical affixation" implies such a conclusion. 

DCLSA and SODA, however, were of a different type. In DCLSA, manufacturing and export were performed at the sole discretion of Zhenjiang Locks; in SODA, the licensee Xinhonghou also independently manufactured and exported its products. Their relations with the overseas importers were simply contractual purchase and sale ones. In these two cases, they manufactured and branded the products, and the whole processes were independent and controlled by themselves. The independent will of the trademark holders and licensees were demonstrated in full.

In addition, although none of the three cases involved retail in China, they were different in nature as to whether the trademarks performed the function of identifying the sources. It should be noted that so far as the question of whether "trademark use" was constituted is concerned, the "Chinese market" is not confined to the "retail market", but includes the "wholesale" and "export" markets. 

In PRETUL, YAHUAN manufactured products on the commission of TRUPER and delivered them to TRUPER for export to overseas markets. Except for the payment of processing fees, the whole transaction had nothing else to do with China. Because of the nature of OEM and subject to the agreement with TRUPER, YAHUAN was not, is not, and will not be able to have relations with any third party at home and abroad in connection with the products. Therefore, it can be concluded that a trademark applied in OEM cannot fulfil the function of identifying the product source, does not constitute "trademark use" under Trademark Law, and will not cause confusion among domestic consumers.

In DCLSA and SODA, however, the exporters were engaged in foreign trade and their sales to the importers occurred in China. Although a single transaction involved specific parties, this did not preclude the possibility that the trademark holder and the licensee who controlled the manufacturing and exports would choose other third parties in their upcoming deals. Therefore, the selling or exporting of products was essentially for unspecified third parties. In addition, as foreign importers imported products, they relied on the trademarks to distinguish Chinese exporters, and therefore the trademarks had fulfilled the function of identifying product sources. 

The judgment in DCLSA provides detailed explanations. The court said, "So-called 'trademark use' refers to an act that fulfils the essential function of a trademark, which is identification of product sources (i.e. using a trademark or service mark to identify the provider of a product or service). Usually, a trademark will not fulfil its identifying function until the underlying product enters the market." As "exporting means the product enters the market", exporting as a general rule is an act of "trademark use".

In summary, although the Beijing IP Court rendered judgments in DCLSA and SODA that were different from that of the SPC in PRETUL, they were not contradictory with the latter. DCLSA and SODA represented another form of exports involving trademark affixation, i.e. exports at the discretion of the manufacturers themselves. It was appropriate for the Beijing IP Court to determine such acts as "trademark use in the sense of trademark law", and it can be considered a supplement to the SPC judgment.

4. Conclusion

The SPC judgment on PRETUL is important in that lays down the principle that "the use of trademarks on OEM products does not constitute infringement", putting an end to confusing rulings on OEM trademark infringement disputes, and clarifying the relations between "trademark use" and "non-trademark use". However, to explain the term "physical affixation" in the judgment, "Chinese market" should not be understood simply as the "retail market in China", nor should it be rigidly understood in the way that all acts of affixing trademarks in manufacturing products for export are "physical affixation" and therefore constitute no trademark use.

The analysis of the Beijing IP Court judgment in DCLSA and SODA shows that, the acts of export at the discretion of manufacturers are completely different with OEM. Even though all the products are manufactured for export, the acts of affixing trademarks in the course of manufacturing still constitute trademark use in the sense of trademark law. In determining whether the acts of affixing trademarks in the course of manufacturing are "physical affixation", and whether such acts constitute "trademark use in the sense of trademark law", the specific details of a case should be considered, and attention should be given to two questions: 1. whether the acts of manufacturing and marking demonstrate the independent will of the manufacturer in full; and 2. whether the export sales are directed to unspecified third parties?

Editor's note: this article was simultaneously published on

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions