Does Using “Counterfeit Goods” Constitute Trademark Infringement?

1Abstract: generally, consumers’ acts of purchasing infringing goods are not considered to constitute trademark infringement. However, some limits shall be given by laws and regulations to those that intend to manufacture and sell infringing goods to damage a trademark holder’s legitimate rights and interests. Based on such analysis, we don’t fully agree with the Chinese court’s decision in today’s post.

(By You Yunting) Pursuant to the Trademark Law, infringement refers to “manufacturing and selling” goods or services of a registered trademark without authorization, but does not include consumers’ acts of purchasing and using infringing goods or services. If laws entirely indulge consumers’ infringements, it is not entirely effective in protecting a trademark holder’s legitimate rights and interests. In today’s post, we will discuss a typical case evidencing such legal limitations. Here is our analysis:

Guangzhou-based WeiZheng Timber Co., Ltd (the “WeiZheng Company”) is the holder of “伟业牌 Weiye Pai” trademark under Class 19, covering goods such as timber and wooden boards. The “伟业牌 Weiye Pai” trademark was regarded as a Guangzhou well-known trademark in 2008.

Shenzhen-based JinDu Industrial Co., Ltd (the “JinDu Enterprise”) used counterfeit wooden boards utilizing the “伟业牌 Weiye Pai” mark in decorating the Royal Palace hotel. With regard to such facts, WeiZheng Company demanded the defendant dismantle all work performed using its counterfeit wooden boards with “伟业牌 Weiye Pai” branding, to extend a formal apology to it, and indemnity in the amount of RMB 1.5 million for all losses incurred as a result, alleging that JinDu Enterprise infringed its exclusive right to the “伟业牌 Weiye Pai” registered trademark.

After hearing the case, the Shenzhen Baoan District People’s Court held that: pursuant to Article 52 of the Trademark Law, an infringement upon the right to exclusive use of a registered trademark doesn’t include the act of utilizing counterfeit trademarked goods by consumers. Therefore, the court did not support plaintiff’s claims, and dismissed WeiZheng Company’s claims. Afterwards, the second instance court affirmed the original judgment handed down in the first instance.

 

Lawyers’ Comments:

As expected, the court concluded the defendant’s actions did not constitute trademark infringement in this case. Among the determining reasons, this provides a window into some of the imperfections in current Trademark Law.

 

I. Generally, a consumers’ act of purchasing infringing goods does not constitute trademark infringement.

A trademark is a mark used to identify and distinguish the source of the same or similar goods or service of one party from those of others, primarily through functions of objective recognition. However, a major objection to the Trademark Law is that using a trademark identical with a registered trademark on the same kind of goods as the registered trademark without authorization is prohibited, because such acts would confuse consumers, decrease the recognition gained by the mark, and thereby lower the brand value of the registered trademark. In general, as for infringing goods, after consumers purchase them, the confusion caused by the infringing goods to consumers is gone. The reason behind such a general rule is that, except in limited circumstances, infringing goods purchased by a customer cannot expand the scope of such infringing goods to other customers. Taking into account the considerations above, the Trademark Law and judicial practice show that purchasing and using infringing goods by consumers is harmless; indeed, both parties and the courts seldom cease such infringing acts as the one in this case.

 

II. Should the relevant laws and regulations limit the interpretation of “infringing goods” to typical business behavior?

Although the court’s decision conforms to general adjudication rules in judicial practice, and the application of the provision under the Trademark Law must be beyond approach, in the author’s opinion, if the court upholds the goal of improving fairness, thereby protecting a trademark holder’s legitimate rights and interests and safeguarding market order, would a different decision turn out in the same kind of case? With regard to a difference between the “operator” using the counterfeit wooden boards in this case, with the “customer” being the primary consideration in a general trademark infringement case, the defendant as a subject of undertaking business using counterfeit goods that infringe a registered trademark in a public place are not found guilty of trademark infringement because such an act in this case does not confuse consumers. On the grounds of the idea that the wooden boards in this case have, with certain specificity, never been displayed to the general public, if laws do not protect those goods that need to be displayed with their trademarks revealed to any who care to look, it seems inherently unfair, and may confuse consumers as in any other typical trademark infringement case.

However, under the current Trademark Law, it is surely harder to find corresponding theory foundation for the above reasoning. Therefore, in such cases like the one in this case, we suggest that the trademark holder apply for relevant provisions of the Anti-unfair Competition Law, such as Article 2, claiming that JinDu Enterprise used counterfeit wooden boards that infringed “伟业牌 Weiye Pai” trademarks in violation of acknowledged business morality and decency, and that JinDu Enterprise should disclose the distributor of the infringing goods.

 

Lawyer Contacts

You Yunting:86-21-52134918  youyunting@debund.com/yytbest@gmail.com

Disclaimer of Bridge IP Law Commentary

 


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