The Changsha Intermediate People’s Court held two tire dealers liable for trademark infringement for selling Japanese-made Michelin tires without authorization from the mark owner and without mandatory China Compulsory Product Certification (3C) approval. Michelin Group v. Tan Guoqiang and Ou Can, ChangZhongMinSanChuZi, Case No.0073 (2009).

After the Michelin Group engaged an agent to purchase Michelin branded tires from two tire dealers in Changsha, China, it brought a lawsuit against those tire dealers seeking injunctive relief against further sales, destruction of all Michelin branded tires in stock and monetary damages. The defendants engaged in the sales of authentic, Japanese-manufactured, Michelin branded tires in China, but without authorization from Michelin Group. Moreover, the tires had not been approved under China’s 3C system, which is a statutory safety certification system used to safeguard consumers’ rights and interests. The dispute centered on whether sales of genuine imported goods bearing a registered trademark, but unauthorized by the trademark owner for sale in China, infringe the holder’s trademark rights if the products are not certified in accordance with the domestic quality control system.

The first instance court found that the products in question were subject to the inspection and approval required by the 3C system before entering the Chinese market and that, as a consequence of the importers’ failure to obtain such approval, the tires had not been legally imported into China and should not have been sold in the Chinese market. The court also found that the defendants’ sales of the tires were in violation of Chinese law.

The court also noted that because the tires had not been inspected under the 3C standards, certain quality and safety issues may arise, and it is foreseeable that consumers will attribute any such problems to the Michelin Group as the manufacturer. Consequently, the standard of quality denoted by the Michelin trademark and plaintiff’s reputation as a leading tire manufacturer could be substantially damaged. Thus, the court found that even though the products were not counterfeit, the defendants’ sales of the tires without Michelin’s approval and without 3C certification constituted an infringement of the trademark owner’s rights.

Practice Note: The importance of this case was that Michelin received a ruling of infringement for parallel imports into China on the basis that the imports were neither authorized by Michelin nor approved under the required 3C certification. Given that parallel imports of trademarked products is not addressed under Chinese statutory law and there are few judicial cases considering this issue, this unappealed (and now final) decision stands for the proposition that when sales of imported products violate the mandatory quality control regulations and are shown to be detrimental to the trademark owner’s reputation, Chinese courts are likely to find trademark infringement even if the products in issue are not counterfeit. Thus, this decision offers a new offensive tool to rights holders to attack unauthorized sales of products that are manufactured outside China and sold within China, especially if imported without 3C certification.