Source:(2019) zuigaofaminzai No. 138|Author:pmoed5141|Publish time: 2019-12-10|30 Views
Case Background:
Honda Motor Co., LTD（hereinafter referred to as “Honda”）owns proprietary rights over the trademark “HONDA” registered in Class 12 over vehicles and vehicle parts. Chongqing HengSheng XinTai Trading Co., Ltd, and Chongqing HengSheng XinTai Group Corporation (hereinafter referred to as “Hengsheng”) manufactured, under the engagement of a Burmese company named “Meihua”, vehicle parts for motorcycles and attached the trademark “HONDAKIT” to the products, which mark was owned by Meihua and registered in Burma. However, Hengsheng used the mark “HONDAKIT” on the vehicle parts in a way slightly different from the Burma trademark though. They displayed the word “HONDA” distinctively, but the word “KIT” in very small letters. Hengsheng then exported all the products to Burma. On June 30, 2016, Kunming Customs in Yunnan province informed Honda that they seized a set of motorcycle parts exported under the name of Hengsheng. Honda then brought a trademark infringement litigation against Hengsheng.
The first-instance Court found that Hengsheng infringed Honda’s trademark rights, on the grounds that: 1) the evidence that Hengsheng submitted is not sufficient to prove its act constitutes OEM; and 2) the trademark “HONGDAKIT” used on the products is substantially similar to the trademark at issue. The first-instance court granted a monetary award of RMB 300, 000 to Hongda.
Unsatisfied with the first-instance judgement, the defendants appealed the case to YunNan Province Higher People’s Court. The higher Court vacated the aforesaid judgement.
Firstly, the higher court affirmed Hengsheng’s act constitutes OEM, but found that Hengsheng attaching the trademark to the products does not constitute the use of trademark in the sense of Trademark Law. According to Article 48 of the Trademark Law, the use of a trademark, as referred to in this Law means the use of trademark on goods, packages or containers of the goods or in trading documents, or the use of the trademark in advertising, exhibition or any other business activities so as to distinguish the origin of goods. Specifically, the higher court reasoned that if the use of a mark is not intended to distinguish the source of goods or services, it does not meet the requirements with respect to the use of a trademark in the sense of the Trademark Law. The total 220 sets of motor parts manufactured by Hengsheng, which were completely exported to Burmese, are not involved in any commercial activities in the Chinese market, and have no way be accessed by related public in China. Therefore, Hengsheng’s use of the mark at issue does not intend to distinguish the source of the goods in China, and consequently shall not be considered as use of a trademark in the sense of the Trademark Law of China.
Secondly, the higher court found that Hengsheng does not infringe Honda’s trademark rights. According to Article 57 of the Trademark Law, a trademark indicates the source of a good or service, so that the relevant public can distinguish the goods or services provided by different operators, so that it is not “easy to lead to confusion”. This is the core function of the trademark, also the most basic value of a trademark. The fundamental purpose of trademark protection in trademark law is to ensure trademark recognition. The key to judging trademark infringement is to examine whether the use of trademarks is likely to cause the relevant public to confuse the source the goods or services. In this case, 220 sets of motorcycle parts were all exported to Burmese, and did not enter the Chinese market, such that the relevant public in China would have no chance to access the product and is not likely to confuse the origin of the goods. Therefore, Hengsheng did not inflict any harm on Honda’s actual right, which is a pre-requisite for establishing trademark infringement.
Gist of SPC’s judgement
Regarding whether OEM constitutes trademark use, the Supreme Court set forth the following opinions:
Firstly, according to Article 48 of the Trademark Law, the use of a trademark, as referred to in this Law means the use of trademark on goods, packages or containers of the goods or in trading documents, or the use of the trademark in advertising, exhibition or any other business activities so as to distinguish the origin of goods. “[T]o distinguish the origin of goods” in this Article refers to the trademark user’s intention to use it to distinguish the origin of goods, including the case in which the trademark used may function to distinguish the origin, and the case in which the trademark used actually distinguishes the origin of the goods.
Use of a trademark involves a number of behaviors, ranging from physical attachment of the trademark to market circulation of the same mark. All of them shall be considered as a whole when deciding whether an activity shall be considered “use of a trademark”. The use of a trademark is broad enough to cover rather complicated instances, for example, a trademark may be used in a way to meet the common wishes of both the supplier and the trademark owner, or in a way to meet wishes of neither of them; a trademark may be used in an ideal way that the relevant public properly identifies the origin of the goods, or used to confuse the origin, or only allow some people to identify its origin. Therefore, when it comes to affix a trademark onto a manufactured or processed product, as long as it has the possibility of distinguishing the source of the goods, it meets the requirements of “the use of the trademark” in the sense of trademark law.
Besides, there may be a plurality of parties involved in the use of the trademark, and they may have different intentions. It is inappropriate to make a decision simply based on the intention of a single party.
Secondly, As is set forth in Article 8 of Interpretation of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Trademark Civil Disputes, the relevant public in the sense of the trademark law of China, refers to not only consumers related to a certain kind of goods or service, but also operators in close relationship with the distribution of the goods or service. Therefore, apart from consumers, the relevant public in this case additionally refers to operators in the process of transporting the products, who also have the possibility of accessing the alleged infringing products. In addition, with the development of e-commerce, exported products may also find its way back to China, and Chinese consumers are likely to get in touch with such products and become confused. As such, the second-instance court is wrong in reasoning that the alleged infringing products were not sold in China and therefore the mark cannot be accessed by the relevant public in China, such that the relevant public is not likely to get confused. Therefore, the SPC found that Hengsheng’s use of the mark shall be deemed as “use of a trademark” as contemplated by the PRC Trademark Law.
Regarding whether OEM constituted trademark infringement, the SPC set forth the following opinions:
First of all, the basic function of a trademark is to distinguish the source of goods or services, while infringement of trademark rights essentially destroys this function to cause the general consumers to confuse and misunderstand the source of goods. The term “easy to cause confusion” as stipulated in the trademark law of China means that when the relevant public is exposed to the alleged infringing goods, there is a possibility of confusion, and the relevant public is not required to actually come into contact with the alleged infringing goods, and the confusion does not have to actually happen.
Secondly, the Supreme Court pointed out that with the development of the electronic economy, even if the OEM products are all sold abroad, there is a possibility of returning to the domestic market. Chinese consumers also have the possibility of contact and confusion with the OEM products when they are traveling abroad. Therefore, there is a possibility that the OEM products will cause confusion and misunderstanding among the relevant public in China.
China’s economy has shifted from a high-speed growth stage to a high-quality development stage, facing the deepening of globalization of economic development. Since the reform and opening up, OEM has become an important way for China’s foreign trade. With the transformation of China’s economic development mode, people’s understanding and dispute resolution on trademark infringement issues arising from OEM are also constantly changing and deepening. When the people’s court hears OEM-related cases involving trademark infringement disputes, it shall fully consider the overall situation of domestic and international economic development. It is not possible to simply exclude a certain trade form (such as the OEM in this case) from infringement of the trademark right, otherwise it will violate the trademark law.
Finally, Hengsheng argued that it is authorized to use the trademark of Meihua’s trademark, and therefore it does not infringe trademark rights. The SPC pointed out that trademark rights as one of the intellectual property rights, are subject to territorial limitation. For a trademark that is not registered in China, even if it is registered in a foreign country, it does not enjoy the exclusive right in China. Likewise, despite the authorization by Meihua over the Burmese trademark, it does not constitute a defense against infringement of trademark rights registered in China.
The SPC finally ruled to vacate the judgement of the higher people’s court, found the defendants infringed the trademark rights at issue and granted a monetary award of 300,000 to Honda.