In a significant ruling, the Shanghai Intellectual Property Court (Shanghai IP Court) has determined that an original equipment manufacturer (OEM) producing goods for export does not infringe on a trademark registered in China. The Court issued its judgment on June 11, 2024. The case, (2023) Hu 73 Min Zhong No. 475, involved Fuzhou Yamma Electromechanical Co., Ltd. (Fuzhou Yamma), which sued Chongqing Senci Import & Export Trade Co., Ltd. (Chongqing Senci) over the production and export to the United States of a gasoline powered generator bearing the PREDATOR trademark, which Fuzhou Yamma had registered in China. The first instance court, the Pudong New Area People’s Court of Shanghai, (2021) Hu 0115 Min Chu No. 77928, found that this was a case of “foreign-related OEM” production, where a domestic manufacturer produces goods exclusively for export using an overseas brand owner’s trademark. The Court determined that such OEM production would not cause consumer confusion in China or damage the registered trademark rights of Fuzhou Yamma. Unsatisfied with the first instance court’s judgment, Fuzhou Yamma appealed to the Shanghai IP Court. After reviewing the case, the appellate court upheld the lower court’s decision. The Shanghai IP Court explained that for foreign-related OEM production, where the goods are entirely exported, the affixed trademarks would not confuse domestic consumers or undermine the trademark’s identification function registered in China. Hence, the Court concluded that such OEM production generally does not infringe on the exclusive rights of a domestically registered trademark. However, the Court also acknowledged that this traditional principle of the territorial nature of trademark rights may need to be reexamined on a case-by-case basis, given the increasing trends of cross-border mobility, e-commerce, and Internet globalization. In this specific case, the appellate court held that the product was merely a sample machine, and there was no evidence of Chongqing Senci selling it in China. The risk of reimportation to China was deemed extremely low, and finding infringement would lead to an imbalance of the interests of the different parties and could have hindered the normal development of the OEM processing industry. Consequently, the Shanghai IP Court dismissed Fuzhou Yamma’s appeal, upholding the original judgment.
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