Resolving differences of opinion on OEM trademark infringement

OEM refers to original equipment manufacturing, namely the conduct whereby a foreign trademark rights holder, directly or indirectly, commissions a domestic manufacturer in China to make a product and affix the designated trademark to it, and then export all of the products back into a foreign market for sale. As China is the “world’s factory”, the OEM business model is widespread in China.

When a foreign trademark rights holder has not registered the trademark attached to products in China (product trademark), and an unrelated third party has registered a trademark identical or similar to the product trademark (domestic trademark) in China – “identical or similar trademark” is determined with reference to the Nice International Classification – a question arises: does domestic OEM constitute a trademark infringement? The answer to this question is crucial. Uncertainty in the determination of infringement by OEM will have immense negative impacts on foreign trademark rights holders and domestic OEM manufacturers’ business activities.

The current mess

In practice, customs authorities generally do not directly render findings on whether OEM constitutes infringement. The problem will, instead, be deferred to the courts, and different courts render different findings on whether OEM constitutes infringement, with a whole host of explanations, giving people the impression that China’s judiciary lacks consistency.