Original Equipment Manufacturing or OEM is the business
model that is used when a trademark owner is "sourcing", i.e.,
looking for a factory to manufacture its products, using its
trademark. China is one of the most favoured countries by
business operators sourcing OEM products. If you are one of
them and want to ensure the safe exportation of the OEM
products, is there anything you need to do? And if, assuming
you do not own a registration of the trademark in China, you
want to prevent others from registering such trademark, can you
rely on your prior OEM export business?
Due to the lack of specific regulation in China, the nature
of the trademark use in OEM export business is still an
unstable issue. And the opinions of the authorities (CTO/TRAB)
and courts vary according to the type of procedure.
So it is better to understand this issue as the way
suggested by Oliver Wendell Holmes Jr., that is, "The life
of the law has not been logic; it has been experience"
(The Common Law, 1881). Below we analyze a few issues
based on recent precedents:
Can OEM use protect against a cancellation action
If you have already registered your trademark in China, but
you only use it for OEM export, anybody could claim that you
are not using your trademark in China, since you are not
selling anything in the country. Is the use of the trademark in
OEM export business sufficient to defend against a cancellation
action for non-use？
Before 2010, such cancellations actually happened, for the
above reason: no sales in China was considered as no use
This opinion changed after 2010. The Beijing High Court in
the "SCALEXTRIC" case, and, more recently the TRAB in the
"MIRRO" case (2015) accepted that OEM use, if it reflects the
true intention of using the trademark by the registrant, is
sufficient to resist a cancellation action for non use. For the
purpose of showing such true intention, single or occasional
exportations may still be weak. Comprehensive evidence of
long-time and consistent OEM exportations is necessary.
Opposition based on article 32: can OEM use
generate a "certain
Article 32 of the Trademark Law allows the prior user of a
(not registered) trademark, which has acquired a certain
influence, to oppose the registration, or request the
cancellation of a subsequent identical or similar trademark, if
such trademark has been filed by improper means
(commonly called "pre-emptive application").
The article is very often used, but… what if our
prior use is only through OEM business? Does such use count for
the application of article 32?
Well… it does not. In the famous MUJI case (2012),
the Supreme People's Court held that the use in OEM business is
not able to generate "a certain influence" because the OEM
products have not entered the local market at all,.
From then on, although there are few cases affirming that
OEM business can also bring "a certain influence" in special
circumstances, most of the cases followed the principle laid
down by the SPC.
Can OEM use be affirmed as trademark infringement
If another person has obtained the registration of "your"
trademark, and you are using this trademark in OEM practice for
export, can you be sued?
The answer to this question is the most controversial and
least stable of all. The courts have changed their minds
several times; they found that OEM export is an act of
infringement and found the exact opposite.
In November 2015, the SPC handed down a "retrial" judgment
in the famous Focker v. Yahuan case, also called the
PRETUL case, with a reasoning according to which since the
goods were exported from China the trademark Pretul that was
affixed on such goods was not "used" in the sense of the
Trademark law, and therefore, no infringement was committed.
The Court noted, further, that the defendant owned the
trademark in the country of destination.
It is very unlikely that the Supreme People's Court intended
to deliver a message to allow the free exportation of
infringing goods from China. Letting the batch of goods be
exported to Mexico seemed a "fair" decision in the
circumstances. It remains that, if it was systematically
followed, this case would deprive all legitimate trademark
owners of the right to seek the assistance of the Customs when
infringing goods are exported.
Several weeks later, the Court of Jiangsu rendered a
judgment in another OEM case Shanghai Diesel v Jiangsu
Changjia, which did not follow the SPC's reasoning. The
court found that the defendant should have conducted some due
diligence and should have known that there was a conflict
between the Chinese plaintiff trademark owner, and the
Indonesian purchaser of the goods. The OEM factory was,
therefore, declared infringing and the good were not
Still, the Jiangsu court declared that "Generally
speaking, it would be advisable to find the Chinese OEM
manufacturer's act not constituting trademark infringement if
the OEM products are all for exportation and are not intended
for distribution in China."
Given the above, it can be preliminary concluded, for the
time being, that if you have the trademark registration in the
destination country and perform OEM business in good faith,
there will be little risk of being found infringing.
This being said, the above case law is controversial, for a
number of reasons. Affirming that a trademark is not used
because the goods are exported can be easily challenged.
Likewise, making the finding of infringement or
non-infringement contingent on the good or bad faith of the
exporter, or on whether the purchaser owns the trademark in the
destination country, is also very arguable.
Therefore the best advice is of course to use the trademark
in China, and be the first to do so before others try to
register it. But if your trademark has been pre-emptively
registered by another person and if there is nothing you can do
about it, it seems that, for the time being, OEM business is