On Jan. 4, 2022, Zhejiang High People's Court issued a new judgment, of which ruled that the plaintiff, Shenzhen Times Weike Soldering Technology Co., Ltd. ("Plaintiff"), exercised its trademark rights in this case in an improper way and contrary to the principle of good faith, thus the defendant, Zhejiang Laston Technology Co., Ltd. ("Defendant"), did not infringe the exclusive right to use the disputed trademark by its OEM behavior. [Case No. (2021) Zhe Min Sheng No.4890].

In this case, Plaintiff was the Chinese trademark owner of No. 10121635 "STAHLWERK". It started a litigation against the Defendant, claiming its use of "STAHLWERK" logo in OEM behavior constituted trademark infringement. On the other side, Defendant claimed that the Plaintiff is a trademark squatter, therefore its trademark right shall not be protected. Facially speaking this case sided with the OEM party, which seemed in contrary to jurisprudence made in HONDA and DONG FENG of which the court ruled that OEM still constitute use of trademark and therefore held the OEM party constitute trademark infringement.

Highlights to the Dispute

In 2021, Plaintiff applied to Zhejiang High People's Court for retrial for the dispute with Defendant over trademark infringement, not being satisfied with the civil judgment issued by Ningbo Intermediate People's Court. [Case No. (2020) Zhe 02 Min Zhong No.4306]

The issue was whether the act of Defendant was infringing the exclusive right of the disputed trademark and, if so, the corresponding civil liability of the company. The Court deem that: 

Firstly, the alleged act of Defendant was an act of OEM within the scope of legal authorization.

The court found that STAHLWERK Schweissgeräte GmbH (hereinafter referred to as "STAHLWERK Company") was established in 1998 and has been dealing with electric welding machines and other goods since then. The owner of the STAHLWERK Company, Okan Balaban, is the trademark owner of "STAHLWERK" (No. 302009021017, class 7 & 35) in German since 2009.

  1. A letter of authorization from Okan Balaban confirmed that on 25 October 2017, STAHLWERK Company authorized Defendant to use the trademark "STAHLWERK" on the products of the welding machine and on the outer case of the products.
  2. The alleged infringing goods were manufactured by Defendant under the entrustment of STAHLWERK Company. In the OEM process, the trademark "STAHLWERK" has been used by Defendant in a standard way.
  3. The alleged infringing goods were all eventually exported to and sold in Germany

The way Plaintiff exercised its trademark rights in this case violated the principle of good faith

  1. The records of email correspondence on file show that Yiwu Bailian Import & Export Co., Ltd ("Bailian"), a company solely owned by Chen Dongping (also the legal representative of the Plaintiff) had business relationships with STAHLWERK Company in around 2010, designing and processing products for the "STAHLWERK" welding machines.
  2. When questioned by the Court of first instance, Plaintiff also stated that Bailian had cooperated with STAHLWERK Company as a trading agent since its establishment in 2008 until 2011.
  3. While knowing that STAHLWERK company and German trademark "STAHLWERK" existed, and its affiliated company had been commissioned by STAHLWERK company to design and process the branded products in China, Plaintiff still applied for registration of the same trademark "STAHLWERK" in China for the same goods in October 2011.
  4. Furthermore, Plaintiff used its trademark as the basis filing a lawsuit for infringement against Defendant which was legally authorized by STAHLWERK Company for OEM conduct.

In view of the above, the judgment of the second instance did not err in finding that the alleged act of Defendant did not infringe the exclusive right to use the trademark at issue.


Tendency to examine the OEM cases

Zhejiang High People's Court clarified in the retrial ruling that OEM trade is an important mode of Chinese foreign trades. With the continuous changes and deepening, this kind of trade cannot be simply solidified as an exception for trademark infringement, nor can it be considered that the use of trademarks under this kind of trade constitutes infringement.

Therefore, this case does not break through, let alone violate, the judicial principles established in HONDA case, but rather provides further clarification and useful additions, especially to the judicial spirit established in HONDA case that "a certain trade method cannot be simply solidified as an exception to non-infringement of trademark rights".

If one party in a case clearly acts with malice (such as HONDA case, above STAHLWERK case), namely against the principle of good faith, this will cause the Judge to lean more towards the other party. From a jurisprudential point of view, the introduction of the principle of good faith is more helpful in balancing the interests of all parties.

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