Brand protection under the ODM model

Original design manufacturer (ODM) is normally a company that designs and manufactures a product that is eventually rebranded by another company for sale. As the e-commerce market prospers, the ODM model gradually attracts attention from the public as the so-called “most lucrative sector following e-commerce” in the next one or two years. Many well-known self-operated stores on e-commerce platforms have entered this sector.

In order to attract attention of consumers, e-commerce platforms supporting the ODM model often highlight themselves, in advertisements on their promotion pages, as providers of products directly supplied from factories to consumers without price premium attributable to brands. In their product introductions, they may even hold the products out as, for example, “made by a Coach manufacturer” or “made by an Armani manufacturer”, while profiting from selling them at prices much lower than normal sales prices charged by brand owners for the same models.

To stop these malpractices, it is reported that some brand owners have repeatedly sent attorney’s letters to e-commerce platforms requesting the removal of their brand names from the webpages – only to find that the letters produce very little effect. However, to our knowledge, there have not been any cases of brand owners filing infringement lawsuits against e-commerce platforms as of the date hereof. So, do promotional materials holding products out as being “made by XXX manufacturer” possibly involve infringements?

Trademark infringement vs. reasonable use. According to Article 57 of the Trademark Law, using a trademark that is identical with a registered trademark in respect of the identical goods without the authorization from the trademark registrant and thus causing any other damage to the exclusive right to use the registered trademark shall be an infringement of the exclusive right to use the registered trademark. However, using trademarks in some special circumstances – for example in comparative advertising or for illustrative purpose – is necessary for engaging in fair competition, promoting consumer interests or exercising the right to freedom of expression. That is why reasonable uses of trademarks are not deemed trademark infringement under the Trademark Law. In the light of prevailing judicial practices, reasonable uses of trademarks are allowed for narrative, indicative and illustrative purposes.

Many argue that the above-mentioned promotional activities of e-commerce platforms supporting the ODM model can be considered reasonable use of trademarks for indicative purpose. They cite reasons as follows: (1) the expression “made by a XXX manufacturer” is used to reveal objective facts with the purpose of identifying the source of the goods; (2) the use by e-commerce platforms is limited; and (3) the use will not cause confusion so that consumers misunderstand that the goods available on the e-commerce platforms somehow relate to the registered trademark owners.