The Shanghai Intellectual Property Court ("Shanghai IP Court") recently issued a judgment finding that an OEM manufacturer infringed upon domestic trademark registrations when manufacturing identical products for a foreign trademark owner for pure exporting purposes. The foreign trademark owner was also found to be infringing with joint liability.

The domestic trademark registrations are " " (Reg. No. 676992) and (Reg. No. 5087689) in Class 25 covering "shoes, clothing etc." currently in the name of Fu Jian Quan Zhou Peak Sport Products Co., Ltd. (hereinafter referred to as "PEAK Sports")

The foreign trademark owner, ISAAC MORRIS LTD., has a valid trademark registration for "PEAK SEASON" (US Reg. No. 3869976, plain wordmark) in the US covering clothing, etc.; and

The trademark used by the OEM manufacturer, Wuxi City Zhenyu International Trade Co., Ltd. (hereinafter referred to as "Wuxi Zhenyu"), is " ", per the order of ISAAC MORRIS LTD.

PEAK Sports brought a trademark infringement case against ISAAC MORRIS LTD. and Wuxi Zhenyu after their goods were seized by Shanghai Customs.

The 1st instance court found no infringement mainly based on the reasoning that the products are for exportation purposes so domestic consumers have no access to the products; therefore, the use of the " " logo is not considered trademark use in China and does not infringe upon the trademark rights of PEAK Sports.

The Shanghai IP Court nonetheless overturned the 1st instance judgement and found that there is infringement for the following reasons:

1) The " " logo actually used on the OEM products incorporates "PEAK" in a prominent way, which makes the logo distinguishable from the foreign trademark owner's but similar to the domestic trademark owner's;

2) There is a possibility for the relevant Chinese public to buy the exported products from the internet. Since ISAAC MORRIS LTD. confirmed that they are distributing their products via Amazon, the relevant domestic consumers will be able to access the exported products, which will cause confusion.

3) PEAK Sports started promoting its trademark "PEAK" trademark in the US and other markets since 2005 and has enjoyed a certain degree of recognition there. ISAAC MORRIS LTD. is unlikely to have had no awareness of the existence of PEAK Sports' "PEAK" brand when they entrusted Wuxi Zhenyu to use the " " logo to manufacture clothing. It is hard to exclude the bad faith of ISAAC MORRIS LTD.

4) The domestic registrations for "PEAK" also enjoy a very high reputation in China. Therefore, the OEM manufacturer should have noticed the similarity and avoided to use the similar logo " ".

Apparently, the Shanghai IP Court has considered the bad faith of the ISAAC MORRIS LTD. and Wuxi Zhenyu given the high reputation of the PEAK brand both in China and overseas.

However, is it reasonable to find that the consumer can still be misled by the exported products because the consumer can purchase them on the internet, even though those products are not physically sold in China? We believe Shanghai IP Court's finding will fundamentally shift the "OEM exemption" previously established by the Supreme People Court, which basically confirmed that when goods are purely for exporting purposes and are not distributed to the local market, the relevant domestic consumers will have no access to the goods and the logo on the goods do not function as a trademark; therefore there is no infringement on the domestic trademark owner. Now with the increasing availability and popularity of the internet among most China consumers, will Shanghai IP Court's finding be a new trend when filing an OEM manufacturer infringement case? We will continue to keep an eye on this issue.