(By Luo Yanjie) For the infringement caused by OEM in China, different courts hold different opinions in China, and in this essay you could see a case describe the infringement determination. The determination of trademark infringement should be subjected to whether or not potential consumers would be confused when making their decision to purchase the product. If the potential consumer is not confused by the product, then it should not be considered as an infringement.
Without prior authorization, using others’ registered trademark to produce similar products constitute as a trademark infringement. However, because trademark is based on the territory, in the case of exports of OEM products, since the product is manufactured in China and sold overseas, it would not confuse the consumers. It is unclear from The Trademark Law of China, whether or not such action constitutes as infringement. The interpretation of the law is different in each jurisdiction. In this article, you will see a case which the court found that there was a trademark infringement.
Lianyi International Trading Co., Ltd in Ningbo Bonded Zone (“Company L”) is the trademark holder of “RBI” numbered 886734, registered in Class 7 of bearing. On June 15th 2005, Yong Sheng Company (“Company Y”) entered into an OEM Export Agreement with R.B.I INTERNATIONAL INC. (“R.B.”) and its domestic agent in China, Wuxi Ai Er Bi An Trading Company (“Company A”). According to the contract, R.B. is the holder of the trademark “RBI” in the US, and entrusts Company Y to manufacture bearings with the trademark “RBI” in China, and then export them directly to the US. Company L believes that such action by Company Y constitutes a violation of its right, therefore, this case was brought to Ningbo Intermediate People’s Court, and later appealed to Zhejiang Higher People’s Court in the second instance. During the hearing, Company Y argued that the product it manufactures will not be sold in China, and therefore it would not lead to confused consumers.
Both the court of the 1st and 2nd instance believed that to determine whether Company Y has infringed upon Company L’s trademark, the decision should be based on China’s Trademark Law and any relevant judicial interpretation by the Supreme People’s Court. Determination of trademark infringement should not be based on the possibility of causing confusion or mistaken identity, but rather whether or not a similar or the same trademark was placed on the same or similar product. Company Y argued that since the export oriented order they receives from R.B. are destined for sales in the U.S., there would be no confusion for domestic consumers in China for its own similar products. This argument was found to lack legal basis, therefore, the Court finds Company Y guilty of infringement, and must pay a compensation for the damages it has caused.
Personally, the author believes that the application of the Trademark Law by the courts in this case appears to be too mechanical, and the ruling is controversial for the following reasons:
I. Whether trademark infringement was committed should be determined by whether or not consumers were confused by the product.
In this case, the court based its decision on whether a similar or identical trademark was used by the similar product. Whether the consumer suffered confusion over the similar product is only used to judge if trademark used was similar to the original trademark. Basically, the opinion of the court is a strict application of Article 52 of the Trademark law, which provides that trademark infringement occurs when one:
“uses a trademark that is identical with or similar to a registered trademark in relation to identical or similar goods without the consent of the owner of the registered trademark;”
Personally, the author believes that this interpretation of the law is too simplified and single faceted. The main function of trademark is to help consumers better recognize the origin of the product, and the main purpose of the Trademark law is to prevent others from misleading the consumer. For this reason, even though it is not specifically stated in the Trademark Law, judging from the trademark function and legal purposes, the possibility of confusion to potential consumer should be used to determine trademark infringement. In fact, back in 2004, in the Solution to Several Issues on the Trial of Trademark Dispute by Beijing High People’s Court, it indicated that “the confusion or misunderstanding of the public is the precondition to trademark infringement”. Compared this with the decision of the court in this case, the opinions of Beijing Court seems much more suitable.
II. OEM products exported abroad should not be considered as an infringment
Under the premise that product confusion should decide trademark infringement, let us take a look at the case again. In the case, although the defendant has produced the goods with the plaintiff’s trademark in China, the sole purpose of it was to export it overseas. This means that the goods manufactured would not confuse the Chinese consumers. Furthermore, due to the regional protection of the trademark, the plaintiff’s trademark could not be extended to overseas. Therefore, when there is no confusion for the consumer, the defendant would not be infringing on the plaintiff’s trademark.
It should be noted that similar cases trialed in Shanghai has been ruled to be non-infringement. We sincerely hope that the Supreme People’s Court will soon issue a more relevant judicial interpretation, streamlining the hearing standards for all regions of China.
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