Hogan Lovells Publications | 03 February 2016

China's SPC finally takes a stand: pure OEM use in principle does not infringe upon Chinese trademarks

Summary

After years of controversy surrounding the legal status of original equipment manufacturing ("OEM")¹, China's Supreme People's Court has finally handed down what may become a landmark judgment in the Focker v Ya Huan² case.

Introduction

The controversy regarding the status of OEM infringement initially arose because the Trademark Law does not give any clear-cut answers on the issue, and the judicial and administrative practice on the issue have been - somewhat deliberately - inconsistent. Political, macro-economic, social and public interest factors have so far heavily influenced the jurisprudence, as have the specific factual circumstances of each case. 

In short, in this case, the SPC ruled that a trademark, affixed on OEM products exclusively designated for exportation, where the person who ordered the goods has a valid trademark, does not function as a badge of origin of those products in China. In the Court's opinion, the mark is therefore not used as a trademark in China, and, consequently, cannot infringe upon a Chinese trademark. Whilst the decision is intended to be fact specific, the concern is it will become widely applied.

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^[1] OEM (short for 'Original Equipment Manufacturing') is a process whereby a manufacturer produces another company's product under that latter company's own name and branding.

^[2] Focker Security Products International Limited (莱斯防盗产品国际有限公司, "Focker") v Pujiang Ya Huan Locks Co., Ltd.(浦江亚环锁业有限公司, "Ya Huan")

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