Supreme People's Court of China, Decision of 29 June 2012, No. 2, Ryohin Keikaku Co., Ltd. v. Trademark Review and Adjudication Board

Does the decision of the Supreme People's Court of China in the "Muji"–case indicate that, for infringement actions, OEM manufacturing purely for export will no longer be deemed as trademark "use" and hence no trademark infringement can be proven?

Ryohin Keikaku Co. Ltd. (Muji), the Japanese retail company, filed the Chinese character trademark 无印良品 ("Muji" in Chinese characters) 1999 in several classes (16, 20, 21, 35, and 41). Muji does not have a registration for "无印良品" in class 24 in China. In 2001, Hainan Nan Hua Co., Ltd. registered the mark "无印良品" in class 24. The mark was later assigned to a Beijing based company. Muji opposed this mark based on its prior use of the mark in China, submitting proof of use of the mark on its OEM (original equipment manufacturer) export goods.

Article 31 of the PRC Trademark Act states that "an application for registration of a trademark shall not be of such a nature as to infringe the existing earlier right of another person. An application shall not be made with intent to register a trademark which is used by another person and enjoys certain reputation."

The China Trademark Office and the Trademark Review and Adjudication Board (TRAB) rejected the opposition. Muji filed an administrative review appeal in 2009, challenging TRAB’s decision. However, Muji also lost before the first and second instance courts in Beijing.

Upon further appeal to the Supreme Court, the court upheld the Beijing Higher Court’s decision allowing the registration. Although the decision was the same, the Supreme Court reached its conclusion slightly differently to the lower courts. Whilst the Supreme Court mentioned OEM manufacturing in its decision, it did not address the question of whether OEM manufacturing for exports constitutes trademark "use" under Article 31. The court held that "Article 31 is aimed at preventing the hijacking of marks but not to protect all unregistered marks. Only a mark that has been previously used and achieved a certain amount of influence in China should be prevented for registration as stipulated under Article 31."

The court stated that only submitting proof of use of a trademark in OEM activities in China for export was not sufficient to show that the mark achieved a certain amount of influence in China through its "use". The required elements of "prior use and a certain amount of influence" were, thus, not fulfilled.

It should be noted that the Supreme Court did not explicitly deny that trademark "use" can be achieved by way of OEM manufacturing. It demonstrates the court's position that it is difficult for brand owners to prove that a mark has achieved a certain amount of influence if only providing limited evidence of trademark "use" in OEM manufacturing of products purely for export. In such cases, where OEM products are not made available to the general public in the domestic market, the court would thus need to consider whether a "certain influence" has been achieved within the supply chain and amongst parties in the same industry.

The decision mainly discusses Article 31 and, as such, does not provide definitive guidance on what constitutes trademark "use" under Articles 44 (non-use cancellation) and 52 (unauthorized use of the same or similar trademark on similar goods) as regards OEM manufacturing in China solely for export.

Therefore, enforcement against infringing OEM manufacturers will continue to be a discussion point.[1]