Parrying the risks of trademark infringements from OEM business

Original equipment manufacturing (OEM) is a form of trade in which an enterprise in China accepts a commission from an offshore trademark rights holder to process a product and affixes a specific trademark to it for the commissioning party, then delivers the products to the offshore commissioning party and receives a processing fee. There has been a long history of OEM in China, and in conjunction with this, trademark-related legal risks arising in connection with this trade have become an unavoidable practical problem.

If the foreign commissioning party has not secured the trademark rights in China to the trademark that it is affixing, and that trademark is identical or similar to a trademark registered on identical or similar goods by a PRC trademark rights holder, there is a strong possibility that the Administration for Industry and Commerce (AIC) or customs will render a finding of infringement in respect of the OEM, pursuant to a filing by the PRC trademark rights holder or ex officio, and impose such penalties as ordering a halt to the infringement, confiscation of infringing products, a fine, etc. There is also a possibility that the OEM will face an infringement charge by the domestic trademark rights holder. Numerous such cases have arisen in recent years.

Laws, such as the Trademark Law, are silent on whether the “act of affixing a brand” in OEM constitutes infringement of China’s trademark rights, and different perspectives on this issue exist in PRC administrative and judicial practice.

Wang Yadong is the executive partner and Hu Cuiqin is a lawyer at Run Ming Law Office