LI Xiaolian August 31 2015 Trademark use within OEM context constitutes genuine use under Trademark Law Wanhuida Intellectual Property | Intellectual Property - China LI Xiaolian Intellectual Property BackgroundFactsDecisionCommentThe Trademark Review and Adjudication Board (TRAB) has recognised that trademark use within the original equipment manufacturer (OEM) context constitutes effective use within the meaning of the Trademark Law. The trademark MIRRO, owned by French company SEB SA, was the object of an application for cancellation based on alleged non-use for three consecutive years. SEB successfully resisted the application, even though the trademark had been used only within the context of OEM manufacturing.BackgroundArticle 44 of the 2001 version of the Trademark Law stipulates that:"Where any person who uses a registered trademark has committed any of the following, the Trademark Office shall order them to rectify the situation within a specified period or even cancel the registered trademark...(4) where the registered trademark has ceased to be used for three consecutive years."FactsOn October 11 2012 Seven·Seven Co Ltd filed with the China Trademark Office (CTMO) an application for the cancellation of the trademark MIRRO (No 684783), registered by SEB for "cooking apparatus and instruments, roasting apparatus, cutlery (except knives, forks and spoons), oven utensils, beverage utensils and utensils used to serve dishes, all the above not made of precious metal" in Class 21, based on alleged non-use for three consecutive years. The period covered was October 11 2009 to October 10 2012.SEB submitted evidence of use of the mark via OEM activities in China during the relevant period.On December 10 2013 the Trademark Office ruled that the adduced evidence was insufficient and cancelled the mark.On January 10 2014 SEB appealed to the TRAB for review on the grounds that use of a trademark in OEM activities complies with the definition of 'use' set forth in the Trademark Law and should be recognised as valid use to defend against an application for cancellation based on non-use. To prove that point, SEB submitted complete sets of documents produced during the OEM procedure, from orders placed to goods received, and actively participated in the evidence disclosure procedure.DecisionThe TRAB overturned the Trademark Office's decision.The TRAB specified that 'use of a trademark' refers to commercial use of such trademark, including affixing the trademark to commodities, commodity packages or containers, as well as using it on commodity trading documents and in advertising, exhibitions and other commercial activities. The TRAB further held that the legislative intent behind the 2001 version of the Trademark Law (under which a registered trademark may be cancelled if it has not been used for three consecutive years) was to encourage registrants to put registered trademarks to genuine and active use so as to ensure that they fulfil their function. (Article 57.3 of the Trademark Review and Adjudication Rules (2014 version) stipulates: "For cases heard by the Trademark Review and Adjudication Board after May 1 2014, in which the party concerned raises a dispute over a registered trademark and revokes the re-emanation application before May 1 2014, the revised Trademark Law shall apply to the relevant procedural matters, while the Trademark Law - before revision - shall apply to the substantial issues".) Even if OEM products do not enter the market in mainland China, if use of a trademark in the OEM process were not recognised as trademark use under the Trademark Law, this would limit the development of the OEM industry and go against the policy of expanding foreign trade.Based on the above reasoning, the TRAB decided to maintain the registration of the MIRRO mark.CommentIn China, whether the use of a trademark in OEM activities shall be regarded as 'use' under the Trademark Law has been the object of intense controversy.Some argue that since OEM products are exclusively for export and do not enter the Chinese market, the trademarks cannot fulfil their function as identifiers of the source of the goods and such use thus cannot be regarded as 'use' within the meaning of the Trademark Law. Others maintain that trademark use in OEM activities corresponds to the circumstance described in Article 3 of the old Implementing Regulation of the Trademark Law (2002 version) (Article 2 of the regulation was later adopted by the new Trademark Law), which provides that: "The use of trademarks refers to affixing trademarks to commodities, commodity packages or containers, as well as using trademarks on commodity exchange documents, and in advertisements, exhibitions and other commercial activities." Therefore, they consider that operators involved in the production and transportation of OEM products in China constitute the relevant public for such goods, and that the OEM products have entered the market in China.In this case the TRAB explicitly endorsed the latter opinion, which conforms with the court judgments in cancellation proceedings involving Hornby Hobbies Limited's SCALEXTRIC trademarks and Daozhi Li Yu's KA SI TE (in Chinese) trademarks.In addition to submitting a complete set of documents produced during the OEM procedure and affidavits provided by SUPOR (an affiliated company) to prove genuine use of the MIRRO mark, SEB based its arguments on the legislative intent behind the Trademark Law with regard to non-use cancellations, the actual loss of business interests of the registrant and, finally, the prejudice that OEM enterprises would suffer if the mark were to be cancelled. These arguments were supported by the TRAB.This case confirms that trademark use in OEM activities is not excluded from 'trademark use' within the meaning of the Trademark Law. As long as the evidence of use forms a complete evidence chain, OEM activities can maintain a registered trademark.For further information on this topic please contact Xiaolian Li or Xue Qiao at Wan Hui Da Law Firm & Intellectual Property Agency by telephone (+86 10 6892 1000) or email ([email protected] or [email protected]). The Wan Hui Da Law Firm & Intellectual Property Agency website can be accessed at www.wanhuida.com.