Trademark Infringement In Foreign Related Original Equipment Manufacture

There are different understandings and criteria for judicial assessment on whether the conduct of a contractor’s attaching brands on products as required by its foreign client under the circumstance of original equipment manufacture (hereinafter referred to as OEM) constitutes an infringement on the trademark rights of the domestic right holder. The academic community has not formulated a unified theory on this issue. Some take the view that labeling an identical or similar trademark on the same or similar kind of products without authorization of the trademark owner constitutes trademark infringement; some hold that a case-by-case principle should be adopted in this regard, i.e. only using the same trademark on the same type of products constitutes an infringement while using the same or similar trademark on similar type of products does not; some think that OEM only constitutes a pro forma infringement instead of a substantial one, and hence should not be viewed as a trademark infringement. To the author’s opinion, the above-mentioned differences and disputes in both theory and practice derive from the inappropriateness in PRC trademark law specifically in connection with the criteria for judicial assessment on trademark infringement as well as the use of trademark. In terms of the former issue, the existing law stipulates that using an identical or a similar trademark on the same or similar kind of products without authorization of the trademark owner constitutes a trademark infringement no matter if such use causes confusion or misleading of certain customers. Such rule does not take the labeling nature of trademark into account. In fact, the crucial point in assessing whether a conduct constitutes trademark infringement is whether such conduct causes confusion of customers regarding the origin of the products. Under OEM circumstance, the final products will be ultimately exported to overseas markets and no confusion will be caused to domestic customers at all, and accordingly the contractor’s processing activity does not constitute a trademark infringement. As to the latter issue, i.e. use of trademark, this terminology under trademark law should not be deemed as purely labeling certain brands on products, but in stead should be regarded as using a particular symbol to differentiate certain products or services for the purpose of commercialization. Under OEM circumstance, the contractor’s use of trademark and delivery of products is not for the purpose of distribution, and does not constitute the use of trademark under trademark law, and consequently does not constitutes a trademark infringement. From the perspective of benefit balancing principle, deeming OEM as trademark infringement is not conducive to macro-balance between trademark protection and international trade freedom, neither to mid-level balance between trademark protection and OEM industry development, nor to micro-balance between trademark protection and OEM contractors as well as customers. The disputes arising out of the OEM trademark infringement demonstrates the irrationality and immaturity of the legislation in this regard. The future amendments to PRC trademark law should further clarify the criteria regarding trademark infringement assessment and better define the concept of use of trademark. In addition, the PRC Intellectual Property Customs Regulation is also suggested to rescind the IP protection on exported products. Finally, the PRC Supreme Court should formulate and release the relevant judicial interpretations to clarify the concept of OEM as well as it legal features, and to stipulate that the labeling activity under OEM circumstance should not constitute the use of trademark under trademark law, and therefore does not constitute any trademark infringement.