Recently, China's Supreme People's Court (SPC) issued a final decision in a retrial trade mark infringement case, overturning both first and second instance judgments, and affirming that there is no issue of trade mark infringement for original equipment manufacturer (OEM) products.
In Focker Security International v Zhejiang Yahuan Lockset, the plaintiff was the owner of a Chinese registration for the "PRETUL in oval" trade mark. The defendant, based on a contract with its consignee, produced products bearing the "PRETUL" logo for export to Mexico, where the consignee possessed its own registration for the trade mark "PRETUL".
The SPC held that it was not possible for OEM products being consigned to Mexico and never entering the China domestic market, to give rise to confusion among Chinese consumers as to the source of those OEM products and those of the plaintiff. In other words, the Defendant's use of PRETUL trade mark for export only did not distinguish the source of goods.
In recent years, many foreign companies have seen trade mark squatters in China preemptively registering their trade marks. In some cases the local company has also recorded the trade mark with Customs, which has resulted in the foreign company’s OEM products being seized at the border and/or with the overseas company’s Chinese partner being sued for infringement. China is not a common law country and so the SPC judgment in this particular case may not be relied on directly in all other similar legal cases, but it does provide some guidance and direction for courts around the country when deciding on similar cases. The SPC’s decision can of course be used by foreign companies as supportive evidence when arguing for the release by China ports of OEM products destined for overseas markets.
Soon after the SPC made its decision in the Focker Security case, in another OEM case the Jiangsu Provincial High Court ruled against the defendant and held that the OEM producer had committed an act of trade mark infringement. In that case, the plaintiff's trade mark was found to be well-known in China, and the consignee's local registration in the export market was only obtained after a lengthy legal battle with the plaintiff. In the meantime, the defendant (the Chinese OEM producer) had been involved in disputes with the plaintiff in China regarding use of the mark on OEM products and had undertaken not to initiate such use again. Based on these particular facts, the Court took the view that the OEM producer had committed trade mark infringement as it did not fulfill the reasonable attention obligation.
This later-decided High Court case had a different factual basis to the SPC case, so it may not be regarded as relevant to OEM cases beyond these particular facts and may not carry the same degree of general probative value as the SPC Decision on the usual OEM situations encountered by overseas rights holders. However, attention should be paid to the fact that the use and fame of the local trade mark, as well as the obligation of due diligence, may also play a decisive role in the Courts’ deliberations in future cases.