GreRoyalt

On Whether the Labeling in OEM Business Shall Be Deemed as Trademark Use

On Whether the Labeling in OEM Business Shall Be Deemed as Trademark Use

2019-07-12

0.00
0.00
  

2019-07-12

【Case Summary】

The OEM business refers to a business model in which a domestic manufacturer (also referred to as "consignee") to manufacture products on which a foreign trademark owned by a foreign company (also referred to as "consignor") will be labeled, wholly sold and exported to foreign countries. Such labeling business in which the products are wholly sold in foreign countries and excluded from China's market circulation shall not be deemed as a trademark use, because the trademark hereof does not serve to identify or recognize the sources of the products.

【Basic Facts】

Plaintiff: Company A.

Defendant: Company B.

The plaintiff alleged that: On August 7th 2010, approved by the Trademark Office of the State Administration for Industry & Commerce of the People's Republic of China, the plaintiff registered the trademark of "HPC" under class 12 of "vehicles, vehicle pull rod, vehicle chassis, shock absorbers, land vehicle power plant, steering wheel, land vehicle connecting rod, land vehicle drive shaft, wheel hub, and apparatus for directional signals", and applied for intellectual property rights protection from the General Administration of Customs of the People's Republic of China.

On January 15th 2014, the plaintiff received the "Notice on the Confirmation of Intellectual Property Right Infringement" from Shanghai Customs, and was notified that 12,680 sets of automobile brake pads, totaled up to 36214.2 dollars, claimed by the defendant and exported to Iran, infringed the trademark of "HPC". The plaintiff hereby requested that:

1. The defendant shall stop infringing the trademark of "HPC".

2. The defendant shall pay 250,000 RMB for trademark infringement and 35, 00 RMB for the reasonable expenses (including attorney fees) incurred in the plaintiff's trademark infringement investigation;

3. The defendant shall bear the litigation costs.

The defendant argued that:

1. The automobile brake pads were not the designated products within "HPC" trademark's scope of use, because the 10 products that were registered under the "HPC" trademark did not include the automobile brake pads, and the automobile brake pad is a single class product, not a similar product. Article 56 of the Trademark Law of the People's Republic of China stipulated that the products specified under the registered trademark shall be limited within the scope of use.

2. In the present case, the defendant's labeling was a legal OEM business. The defendant did no use the trademark to identify the sources of the products. Insomuch, such an act did not constitute the usage of the registered trademark, which is owned by the plaintiff, and did not infringe the right of the registered trademark.

3. Whereas the plaintiff was fully aware that the approved use of scope of the registered trademark did not include the automobile brake pads, and of the fact that the labeled products were manufactured for the purpose of export, the plaintiff chose to abuse the right to appeal, which had caused great losses to the defendant hitherto. Therefore, the defendant retains the right to appeal against the plaintiff.

The court found that:

The plaintiff, Company A was established on September 10th 2009 with a registration capital of 500,000 RMB, operating within a scope of business including "manufacturing automobile parts, fasteners, motorcycle parts, and agricultural machinery parts; import and export".

The defendant, Company B was established on 26th October 2006 with a registration capital of 19,200,000 RMB, operating within a scope of business including "developing, manufacturing, and selling automobile friction products and other automobile parts; export and import".

On August 7th 2010, the plaintiff successfully applied for and registered a trademark of "HPC" (Registration No.:7247298), which has a valid period from August 7th 2010 to August 6th 2020. The scope for using the registered trademark includes "vehicles, vehicle pull rod, vehicle chassis, shock absorbers, land vehicle power plant, steering wheel, land vehicle connecting rod, land vehicle drive shaft, wheel hub, and apparatus for directional signals". The plaintiff applied for intellectual property rights protection from the General Administration of Customs of the People's Republic of China.

On January 13th 2014, Shanghai Customs issued the "Notice on the Confirmation of Intellectual Property Right Infringement" to the plaintiff, requesting whether the 12,680 sets of automobile brake pads labeled with the trademark of "HPC" constituted a trademark infringement. Where the infringement was committed, the Notice requested whether the goods shall be detained by Shanghai Customs. In the event that such a request was confirmed, the plaintiff shall submit a payment of 100,000 RMB to Shanghai Customs for guarantee. The plaintiff made the request.

On February 20th 2014, Shanghai Customs issued the "Notice on Detaining Goods Suspected of Trademark Infringement" (No.009 [2014], Shanghai Customs, Intellectual Property). Following the confirmation of the plaintiff, Shanghai Customs detained the goods (12,680 sets of automobile brake pads with a claimed value of 36214.2 dollars) suspected of the exclusive right of trademark owned by the defendant.

The defendant submitted the following notarized and certified materials:

1. The sales contract entered into on September 15th 2013 between the defendant and Company C, agreeing that the defendant shall sell 12,680 sets of automobile brake pads labeled with the trademark of "HPC" to Company C, delivering in CIF to Khorramshahr Port in Iran.

2. The Trademark Registration Certificate of "HPC" (Registration No.UK0000067184) owned by Company C, which has a valid period from August 8th 1997 to March 30th 2016. Company C operated within the class 12 of business scope: components, parts, and accessories of electric land vehicles; the goods that are exported to Iran.

3. Certificate owned by the defendant which was authorized by Company C on September 15th 2013 to use the trademark of "HPC" on its ordered goods.

On April 3rd 2014, Shanghai Customs issued the "Notice on Affirming the Goods Suspected of Intellectual Property Infringement", which informed the plaintiff that the 12,680 sets of automobile brake pads labeled with the "HPC" trademark shall not be decided as to whether the said goods infringed the plaintiff's exclusive right of "HPC" trademark. In the event that Shanghai Customs had not received the notice of assistance on execution from People's Court within 50 working days from the date of detainment, Shanghai Customs shall release the said goods.

On April 17th 2014, the plaintiff appealed to this court, but did not make the order of procedural preservation. On May 5th 2014, Shanghai Customs issued a notice that released the suspected detained goods.

【Judgment】

This court held that: In accordance with Article 9 of the Interpretation by the Supreme People's Court on Issues Relating to the Jurisdiction over Trademark Cases and Application of the Law after the Entry into Force of the Decision on Amending the Trademark Law (No. 4 [2014], Interpretation, Supreme People's Court), except otherwise provided for in this Interpretation, the provisions of the former Trademark Law apply to civil cases of trademark disputes involving civil acts taking place before the entry into force of the Decision on the Amendment of the Trademark Law and accepted by the People's Court. The present case occurred prior to the implementation of the Decision on Amending the Trademark Law. Hence, the former Trademark Law of the People's Republic of China, amended in 2001, applies to the present case.

1. Whether the infringing acts sued in this case shall be deemed as the OEM business.

This court held that: The labeling business for foreign countries is a model for international processing trade, referring to the act of the consignee of labeling a specific trademark over products, which are wholly exported and sold in foreign countries. In the present case, the defendant manufactured the automobile brake pads as agreed in the sales contract entered between the defendant and Company C, and labeled the trademark of "HPC" registered by Company C in the UK over the automobile brake pads under the approval of Company C. The products manufactured by the defendant were wholly exported to and sold in Iran as requested by Company C. Hence, the defendant's act in the present case shall be deemed as the OEM business.

2. Whether the defendant's act constitutes a trademark infringement

In accordance with Section 1 of Article 52 of the Trademark Law of the People's Republic of China (Amended in 2001), using a trademark that is identical with or similar to a registered trademark in respect of the same or similar goods without the authorization from the trademark registrant shall be deemed as an infringement of the exclusive right to use a registered trademark. In the present case, the "HPC" trademark labeled over the automobile brake pads, manufactured and sold by the defendant under the trust and authorization of Company C, is identical to the "HPC" trademark registered and owned by the plaintiff. The products by the defendant are similar with the plaintiff's products. Hence, whether the defendant's act constitutes a trademark infringement depends on the defendant implementing the act of using trademark.

In accordance with Article 8 of the Trademark Law of the People's Republic of China (Amended in 2001), any visible sign able to distinguish the goods of a natural person, legal person, or other organization from those of others, including any word, device, any letter of the alphabet, any number, three dimensional symbol, and color combination, or any combination thereof, may be applied for registration as a trademark. Therefore, a trademark is a specific sign applied for goods or services, through which customers may recognize or identify the manufacturer or provider of those goods or services. The basic and primary function of a trademark is to recognize or identify the sources of such goods or services. The judgment on whether the trademark is used or not shall take the said function as the basis: the mere usage of the trademark that performs this function shall be deemed as a trademark use, and vice versa.

In the present case,

First, whereas the defendant conducted the labeling business in China, the real user of the trademark is the principal party operating overseas.

Second, the automobile brake pads were detained by Shanghai Customs and did not enter into market circulation to be sold to the consumers.

Third, the automobile brake pads were wholly exported to the foreign countries. The plaintiff had no evidence that those products would be sold in China. Therefore, the allegedly infringed trademark performs the function of product recognition or identification outside of China.

Finally, the territoriality of the trademark right would decide whether the usage of "HPC" trademark suspected of infringement in the present case shall confuse or mislead the consumers in Iran in respect of product sources, which is not regulated by the Trademark Law of PRC. The labeling business conducted by the defendant shall not constitute a trademark used under the Trademark Law of PRC. Hence, the defendant's labeling business shall not be deemed as an infringement of the plaintiff's trademark.

In accordance with Article 8 and Section 1 of Article 52 of the Trademark Law of the People's Republic of China (Amended in 2001), and Article 2 of Some Provisions of the Supreme People's Court on Evidence in Civil Procedures, this court hereby renders the following verdict:

1. dismissed all the claims made by the plaintiff;

2. The plaintiff shall bear the court hearing charges, which are 5,575 RMB.

After this first instance judgment, the plaintiff and the defendant did not appeal.

Case No.: No. 373[2014] of Civil Division III, First Instance, People's Court of Shanghai Pudong New Area

Judge: Sun Li