South African buyers of original equipment manufacturing (OEM) from China need to register their trade marks in China or risk infringing similar trade marks registered by third parties in China, warns John Foster, a partner at Spoor & Fisher who specialises in domestic and foreign trade mark prosecution and trade mark, copyright and unlawful competition litigation.
“Until recently most local buyers of OEM products have felt comfortable only registering their trade marks in SA as that is where their products are advertised and sold to end consumers. However, following recent decisions by Chinese courts, local buyers need to be aware of problems that can arise when trade marks applied to OEM products made in China are registered by a different company in China.”
Conflicting decisions by courts in China regarding OEM products
He reports several conflicting decisions by courts in China regarding OEM products and whether the trade marks applied to these products are ‘used’ in China despite the fact that they are actually destined for the South African market.
“The legal view for many years was that OEM manufacturing might constitute ‘use’ of a trade mark but as long as the use did not lead to a likelihood of confusion, there was no trade mark infringement. This changed in 2019 in a case involving the Honda Motor Corporation where the court moved away from previous precedents and made no special exemption for OEM for export activities,” he explains.
One of the most significant findings of this court was that, based on the territoriality of trade marks, buyers cannot rely on their trade marks in a foreign country like SA to grant an OEM authorisation to use a trade mark in China. As a result, affixing a trade mark registered in SA to a product manufactured in China can amount to an infringement of an identical or similar trade mark registered in China by a third party.
Of particular concern to OEM, buyers are that China Customs is taking action. OEM products that are suspected of having infringed Chinese trade marks are being detained and seized at the border even in circumstances where evidence proves that the goods are for export only.
Register your trade marks in China
“The best way to avoid issues with OEM products is to register your trade marks in China,” advises Foster. “Conduct a search to establish if any similar trade marks are already registered, apply to register your trade mark if it’s available and ensure that the trade mark that is filed is consistent with the trade mark that is licensed to and used by the OEM manufacturer without alterations.”
He warns that the OEM manufacturer should not be granted any rights to make other non-normative use of the trade mark in China.
The good news is that registering a trade mark in China and only using it in OEM means the trade mark will not be vulnerable to cancellation based on use, concludes Foster.