In September of 2019, the Supreme People’s Court of the People’s Republic of China (the SPC) issued an “attitude changing” decision on OEM trademark infringement dispute, brought by Honda Giken Kogyo Kabushiki Kaisha (“Honda”) against Chongqing Heng Sheng Xin Tai Trading Co. Ltd and Chongqing Heng Sheng Group Co. Ltd. (“Heng Sheng”). The SPC held that two defendant’s activities – manufacturing and exporting 220 motorcycle bearing trademark “HONDAKIT” (distinctively displaying “HONDA” alone) to Myanmar company – constituted OEM manufacturing and infringed Honda’s Chinese trademark right. After the "PRETUL" and "Dongfeng" cases, this is another or the latest decision made by the SPC on OEM issue, a different voice from before. Main Arguments in Honda Case 1 . W h e t h e r t h e a c t s o f d e f e n d a n t s co n s t i t u t e O E M manufacturing T h e S P C u p h e l d t h e j u d ge m e n t o n co n s t i t u t i n g O E M manufacturing in 2nd instance. Even if the contracts signed as the name of “Sales Contract”, the nature of the conditions and details referred to the OEM manufacturing contract. Undoubtfully, the behavior - authorized by Myanmar company, pasting specific trademark on the package, exporting to Myanmar alone - performed by defendants is indeed OEM manufacturing. 2. Whether the acts of defendants constitute trademark use The SPC held that even if the infringement products exported to Myanmar, with the development of Chinese economic, not only the related operators involved, but also the overseas Chinese tourists or consumers all had access to the infringement products, thus aroused confusions. Furthermore, it is possible that the infringement products flowed back to China as well. Therefore, the said OEM manufacturing constitute trademark use. 3. Whether the acts of defendants constitute trademark infringement In this case, Heng Sheng used trademark “HONDAKIT” and related device on infringement motorcycles by distinctively displaying “HONDA” alone, coloring “H” and wing shape into red, which constituted similar trademarks with Honda’s. Such “trademark use” would arouse confusions among the related public, thus it constitutes trademark infringement. In addition to the case analysis, the SPC also provide meaningful judicial guidance on some hitting issues through Honda decision. Hereby we highlighted and would like to draw your attention. Trademark Use Trademark use is a kind of objective acts, usually involving many aspects, such as physical attachment, market circulation, etc. The judgment on “trademark use” shall be based on the comprehensive consideration, not focused on or separated into partial aspects. The use of a trademark on a manufactured or processed product by means of labeling or others should be determined as "trademark use", as long as it has the possibility of distinguishing the source of the commodity. Related Public According to judicial interpretation, the related public refers to the consumers and operators who have the close relations with goods or services of the trademarks. With the increasing development of Chinese trade and economic, many Chinese consumers traveling and consuming abroad, also have access to the OEM products. That is to say, the range of related public would not confine in traditional definition, it could enlarge to some extent. Continue reading GossIP | Page 3 Trademark Infringement Liability The judgment of trademark infringement is based on principles of no-fault liability, i.e. causing actual damage is not the essential element of tort liability. The term “easy to arouse confusion” in the Trademark Law refers to the situation that if the related public has access to the goods, it has the possibilities on arousing confusions, that is to say, it is not required that the related public touch the infringement products in actual or the confused facts is determined to occur. In conclusion, as reinforced by the SPC in Honda decision, with the transformation of Chinese economic development, it is impossible to simply definite a certain trade method (OEM) into an exception of trademark infringement. The Court shall take both the domestic and international situation into consideration, conducting specific analysis on trademark infringement disputes which occurred in specific period, in specific market or through specific transaction form. Although the SPC’s attitude on OEM is irresolute in the past, now we can see the SPC try to get back to the general principle on judging trademark infringement. If the OEM manufacturing would arouse confusions among the related public on goods source, it shall constitute trademark infringement. We have to say this is a good signal for the right holders to seek protection on their products from illegal infringement, while it is also a good guidance for the lower courts to follow when judging the similar cases to a large extent. At the same time, we also hope that the SPC could give more precise judicial interpretation on OEM issue in the future. Ariel Huang HFG Law&Intellectual Property GossIP | Page 4 New stage for Geographical Indications protection in China HIGHLIGHT On November 6th 2019 the EU and China concluded the negotiations on a bilateral agreement to protect 100 European Geographical Indications (GI) in China and 100 Chinese GI in the EU against imitations and usurpation. This landmark agreement is expected to result in reciprocal trade benefits and demand for highquality products on both sides. Delivering on the commitment made at the last EU-China Summit in April 2019, this agreement is, in words of the European Commission “a concrete example of cooperation between the European Union and the People's Republic of China, reflecting the openness and adherence of both sides to international rules as a basis for trade relations”. This new agreement is framed within the 5 years plan launched by the European Commission in 2016 to enhance the promotion, growth and investment into China. Equally, it is part of the agreements previously signed pursuing the recognition and adequate protection of Geographical Indications (GI) in the countries of origin. The publication of the definitive list includes diverse GIs from different European countries such as Italy, Spain, France and United Kingdom, which joins the ulterior GIs already recognized. For instance, some of the Spanish GIs included in the list and therefore that will be protectable in China as soon as the new agreement is in force are: Name as registered in the EU Transcription In Chinese characters Type of product Rioja 里奥哈 Wines Cava 卡瓦 Wines Cataluña 加泰罗尼亚 Wines La Mancha 拉曼恰 Wines Valdepeñas 瓦尔德佩涅斯 Wines Brandy de Jerez 雪莉白兰地 Spirit Queso Manchego 蒙切哥乳酪 Cheese Jerez / Xérès /Sherry 赫雷斯- 雪莉 / 雪莉 Wines Navarra 纳瓦拉 Wines Valencia 瓦伦西亚 Wines Sierra Mágina 马吉那山脉 Oils and fats Priego de Córdoba 布列高科尔多瓦 Oils and fats In macroeconomic terms, China is the main importer of agricultural products worldwide. Moreover, according to the World Trade Organization it has also become the world leader importer of food & beverages products with a total estimated value of importations of 480 billion RMB (around 64 bln EUR). In this context, the European Union Commission expects that new protection of products under the GI will help to extend its recognition and enhance its defense and legal protection against counterfeit products and squatters. On the other hand, China also holds a rich tradition on GIs which may be at the same time object of specific proceedings for its legal protection. To this extent, article 16 of Chinese Trademark Law defines Geographical Indications as “the origin of the goods, the special qualities, credibility or other characteristics of the goods and it is primarily determined by the natural factors or other humanistic factors of the place indicated”. Regarding the specific proceedings and tools available in China to protect and register the GIs, the different applicable regulations lead to two main procedures to be followed by the interested parties: Protection by means of Intellectual Property rights. In this case, GIs will be recognized and protected as collective or certified trademarks before the Chinese Trademark Office. This recognition grants the right to exclusively use the corresponding GI and the faculty to prohibit or act against any other third party illegitimately using such mark. Protection of the GI by means of the rights granted by the China General Administration for Quality, Supervision, Inspection and Quarantine (AQSIQ). Continue reading GossIP | Page 5 In the first case, as mentioned above, the GI may be object of a collective or certified trademark application. On one hand, the collective trademark can only be applied before the Chinese Trademark Office by the Official Association in charge of managing the GI in the country of origin and must also have such GI registered in the country of origin. Additionally, we should bear in mind that the GI at stake cannot be applied for those products whose origin is not the indicated region. On the other hand, the certified trademark is a sign managed by a specific organization who grants the right to use such sign whose aim is to certify some special attributes of the product, such as the origin, manufacturing method, quality or any other specific and distinctive feature of the good. Secondly, as mentioned before, it is possible as well to obtain the recognition, registration and protection of the GIs included in this new agreement by means of the procedure carried out before the AQSIQ. This entity enacted a set of specific measures whose goal is to protect foreign products under GIs. These regulations include the description of the proceeding for the official registration of the GI in China, as well any actions available for GIs owners to act against any third party infringing their rights and interest. As a matter of fact, both protection systems described are complementary. Thus, any interested party may request the protection of a GI by both channels at a time in order to reinforce his strategy to protect and defend the GI in China and so his products.