IP Information & News

Manufacturing goods in China for export? Beware trade mark infringement

Ian Byworth

By Ian Byworth

Partner

A recent decision means that you may be in danger of trade mark infringement if you produce goods in China for export — here’s what you need to know…

The manufacture of goods by Chinese companies on behalf of overseas companies for export purposes has been a boon to the Chinese economy. Until recently, the manufacturing of goods for export by a Chinese original equipment manufacturer (OEM) under trade marks registered in China hasn’t amounted to trade mark infringement. However, the Honda decision of the Supreme People’s Court of China (issued 14 October 2019) has changed this position.

How it used to work

In the Pretul decision of 2015, the Court established three conditions for non-infringement of a Chinese registered trade mark when goods are manufactured under that trade mark by a Chinese OEM:

1. The OEM is authorised to manufacture the goods by a foreign company.

2. The goods are manufactured for the sole purpose of export outside of China.

3. The foreign company authorising the OEM owns a valid registered trade mark in the goods’ destination country.

This position was confirmed by the Dong Feng decision of 2017, which added another requirement — that the OEM must obtain copies of the relevant foreign trade mark certificates.

How it now works

However, the Supreme People’s Court has now overturned the reasoning given in Pretul and Dong Feng. Honda Motors, the owner of several Chinese trade mark registrations for its HONDA marks, sued a Chinese company for manufacturing 220 sets of motorcycle parts under the mark HONDAKIT. These goods were manufactured under a valid OEM contract for export to a company in Myanmar which holds a valid Myanmar trade mark registration for HONDAKIT.

The conditions of Pretul and Dong Feng for non-infringement were therefore met, but the Supreme People’s Court has held that, even when there is a valid OEM relationship, there can still be trade mark use in China during manufacture — and attaching the trade mark to goods in China could cause confusion among the ‘relevant public’. It has been held that the ‘relevant public’ can include operators of businesses involved in the OEM arrangement (for example, those involved in the logistics chain for export). Furthermore, since Chinese nationals are increasingly travelling overseas and purchasing goods on overseas websites, they’re being more widely exposed to foreign trade marks in China.

High risk for OEMs

Chinese OEMs now face a significantly increased risk of trade mark infringement, even if they are manufacturing goods solely for export. If you’re currently or considering manufacturing in China, you should consider obtaining a trade mark registration in China for the mark under which the goods are to be sold.

china-infringement-risk.png#asset:3088

In the absence of obtaining a Chinese trade mark registration to support OEM manufacture, there’s still some scope for a defence in view of the Honda case, since the Chinese rights holder must prove that there’s a likelihood of confusion. If the definition of the ‘relevant public’ can be limited, or it can be shown that those involved in the export chain are unlikely to be confused, it may still be possible to avoid infringement.

Get in touch with me at ijb@udl.co.uk to discuss your options.

Also, read about the five key things you need to consider when protecting IP in China.

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