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The consequences of trade mark use involving OEMs




Shirley Fu and Yakai Shi of Beijing Sanyou Intellectual Property Agency outline how the courts have interpreted trade mark use in OEM cases

Many foreign firms use original equipment manufacturers (OEMs) in China to make their products, with a view to exporting them. We look at three recent key cases involving OEMs with a view to answering the following questions:

Can trade mark use involving OEMs constitute infringement?

Can trade mark use involving OEMs be deemed as prior use to block trade mark squatting on similar products or services?

Can trade mark use involving OEMs be used to counter non-use cancellation requests?

Can trade mark use involving OEMs constitute infringement?

Foreign firms commonly provide a trade mark for a local Chinese manufacturer (an OEM) to use in making their products, which are then exported. In disputes involving OEMs, the plaintiff is often the owner of a registered trade mark identical or similar to the trade mark used by the OEM.

Case study

Court: The Supreme Court

Parties: Focker Security Products International v Pujiang Yahuan Locks

The facts: The plaintiff was the owner of the registered trade mark "PRETUL and the oval device". The defendant manufactured padlocks with the PRETUL trade mark, then exported the padlocks to the commissioning party who sold them in Mexico.

The ruling: The Supreme Court held that since the product in question was not sold in mainland China, there was no possibility of the public in China confusing their trade mark with the trade mark of the plaintiff's goods. Whilst generally trade mark use involving OEMs don't constitute infringement, it can if a manufacturer doesn't conduct a reasonable examination of a trade mark before using it.

Case study

Court: Jiangsu Province Higher People's Court

Parties: Shanghai Diesel Engine v Jiangsu Changjia Jinfeng Dynamic Machinery

The facts: The plaintiff was the owner of the Chinese trade mark "DONGFENG". The defendant manufactured diesel engines and related components with the DONGFENG trade mark for an Indonesian company, which were then exported to Indonesia.

The ruling: The court found that the defendant had maliciously registered a well-known Chinese mark, and that the Indonesian company knew of the DONGFENG trade mark in China but still accepted the products without careful examination. The court ruled that though trade mark use involving OEMs doesn't usually constitute infringement, domestic manufacturers have a duty to conduct a reasonable examination to determine if the commissioning party owns the trade mark or has obtained a license to use it. Because the manufacturer in this case failed to perform this duty, it was guilty of trade mark infringement.

Can trade mark use involving OEMs be deemed prior use to block trade mark squatting on similar products or services?

Courts have generally held that, if products made by OEMs did not enter the distribution channel in mainland China, the public has not made any connection between the products and the trade mark. Therefore having the products stamped with the trade mark manufactured by the OEMs in China doesn't count as prior trade mark use and cannot block trade mark squatting on similar products or services.

Case study

Court: The Supreme Court

Defendant: Trademark Review and Adjudication Board (TRAB)

Third party: Chao Hanliang

The facts: A foreign company, LF, gave its "GATEHOUSE" trade mark to more than 10 Chinese OEMs to use when making its products. Later, an individual, Chao Hanliang, obtained the trade mark "GATEHOUSE" for his products. LF filed an application to invalidate Chao's trade mark on the grounds of prior use.

The ruling: The court held that the basic function of trade marks is source identification, namely indicating different sources of products or services, hence a trademark can only play its role during circulation. Since LF only circulated the product outside China, no prior use of the trademark could be found.

Can trademark use involving OEMs be used to counter non-use cancellation requests?

In recent years courts have generally held that trademark use involving OEMs can be used to counter non-use cancellation.

Case study

Court: The Beijing IP Court

The facts: The defendant licensed a Chinese OEM to manufacture clothing with its trademark "SODA", which was then exported to Malaysia.

The ruling: Whilst the clothing bearing the "SODA" trademark wasn't circulated in the Chinese market, getting a Chinese OEM to manufacture it still constituted trademark use. Since the alleged trademark use in this case was intended not to create a new trademark right, but to activate an existing one, it was ok for it to count, and to be used to counter a non-use cancellation.

Shirley Fu
  Shirley Fu graduated from Liaoning University with a BA in English Language and Literature, and the University of Sydney with a Master’s in Commerce. She’s been working at Beijing Sanyou Intellectual Property Agency since 2000.

Yakai Shi
  Yakai Shi graduated from the University of Muenster with an LLM. He’s been working at Beijing Sanyou Intellectual Property Agency since 2013, and is a Member of The International Association for the Protection of Intellectual Property.


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