IP Newsletter Issue 21 (2016-01-24)
Whether does a manufacturer infringe a trademark right by OEM in China?

    Recently China’s Supreme Court made a final judgment on an OEM-related trademark infringement case.
    Zhejiang Yahuan lockset Co., Ltd (hereafter as to Yahuan) used logo of “PRETUL” on its OEM padlocks according to a contract with a Mexican company didn’t constitute the use in Chinese trademark law.  Therefore the Supreme Court ruled that Yahuan didn’t infringe exclusive trademark rights of Hong Kong-based Focker Security international Co., Ltd (hereafter as to Focker), revoking the verdicts of the first and second instance, rejecting the claims of Focker.
    In January 2011, Focker brought Yahuan at court, asking for 450 thousand Yuan (about US$69,230.00) of compensation. The Focker argued that Yahuan manufactured padlocks with logo of “PRETUL” without permission and infringed the registered No.3071808 trademark rights of PRETUL as well as its oval shape.
    Yahuan defended that the products involved were OEM products commissioned by the Mexican company and the products were only used to export to Mexico. The products have never been sold in Chinese markets and will not cause confusion among Chinese consumers. Since the two companies signed a contract to process the OEM product, Yahuan’s action never constitutes any trademark infringement action.
    Both the first and second instance courts ruled Yahuan infringed exclusive rights of Focker’s trademark and ordered Yahuan to compensate 50 thousand to 80 thousand Yuan. Disgruntled with the ruling, Yahuan appealed to Supreme Court.
    Recently, the Supreme Court made the final judgment and held the OEM padlocks with the trademark “PRETUL” were totally exported to Mexico and have never been distributed and used in Chinese market, which has no possibility to cause confusion among Chinese consumers on the source of the OEM Products and products of Focker. Yamuna’s use of “PRETUL” did not have the function of distinguishing the source of goods in China.  For above reasons, the court made the final judgment.