China IPMT Alert: The discussion continues with Muji: OEM manufacturing, trademark use and infringement

The Japanese company, Ryohin Keikaku Co., Ltd., is the holding company that operates the exclusive Muji stores seen internationally. Recently, the Supreme People’s Court ("SPC") upheld a Beijing Higher Court’s decision in an administrative litigation case and essentially rejected Muji's plea to recover its hijacked mark by adducing evidence of use of its mark in the context of OEM manufacturing products for export. The SPC held that evidence of such OEM use is not sufficient for the purposes of showing that a mark has been "used and achieved a certain amount of influence in China" as stipulated in Article 31 of the PRC Trademark Law. Article 31 states that "An application for registration of a trademark shall not be of such a nature as to infringe the existing earlier right of another person. An application shall not be made with intent to register a trademark which is used by another person and enjoys certain reputation". Muji was seeking to recover its hijacked mark on this basis.
There has been some discussion whether this decision indicates that, for infringement actions, OEM manufacturing purely for export will likewise no longer be deemed as trademark "use", and hence no trademark infringement can be proven. In our view, a more reasonable interpretation would be to consider this as an interpretation only for the combined phrase: "has been used and achieved a certain amount of influence in China", and not for the interpretation of what constitutes trade mark use generally. The decision does not directly refer to the use of a mark in OEM manufacturing per se and does not comment on the other articles in the PRC Trademark Law that pertain to use. Also noteworthy is that the Muji case is a decision regarding an administrative review. It is not an infringement action per se and also is not a formal judicial interpretation, which influences its level of importance.

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