OEM (Original Equipment Manufacture) originally referred to a production model where the purchaser provides the technology and brand, the manufacturer provides labor and facilities. While in this article, the OEM production model specifically refers to foreign OEM, where the foreign purchaser provides the brand and authorization, the domestic manufacturer is responsible for production. Furthermore, the products are entirely exported abroad after being branded.

In the foreign OEM business model, both the foreign purchaser and the domestic manufacturer often overlook trademark rights issues, leading to potential trademark infringements. This article, based on current judicial practice in OEM trademark infringement, provides suggestions on OEM trademark infringement risks and countermeasures.

I. Judicial Practice in China Regarding OEM Trademark Infringement

In 2015, the Supreme People's Court, in the "PRETUL case", held that the labels affixed to the OEM products did not perform a trademark identification function within China, and thus did not constitute trademark use. Consequently, the relevant public would not be confused or misled about the source of the goods. Therefore, it did not constitute trademark infringement. In 2017, the Supreme People's Court adopted the same viewpoint in the "Dongfeng case", holding that the use of commercial signs in foreign OEM does not constitute trademark use, thus does not constitute trademark infringement as well.

While in 2019, the Supreme People's Court's perspective changed in the "HONDAKIT case". The court discussed and concluded that OEM labeling constitutes trademark use, considering the possibility of contact by operators in the transportation of the alleged infringing goods, as well as the issue of goods re-entering the domestic market.

In 2024, the Shanghai Intellectual Property Court, in the "PREDATOR case", held that foreign OEM activities generally do not harm the exclusive rights of domestically registered trademarks. Whether the issue of goods re-entering the domestic market affects the determination of infringement should depend on the balance, which contains the rights protection of domestic trademark owners and the promotion of international trade. It is also required to make case-by-case determinations based on different types of goods re-entering the market.

II. Trademark Infringement Risks and Countermeasures in Foreign OEM Business

Since the 2019 "HONDAKIT case", judicial practice has leaned towards case-by-case determinations on whether the foreign OEM model constitutes trademark infringement, which introduces a degree of uncertainty. Therefore, under the foreign OEM business model, both the foreign purchaser and the domestic manufacturer should be well-prepared to avoid trademark infringement risks. The following countermeasures are recommended:

1. Conducting Pre-Assessment of Trademark Use Risks

Before engaging in OEM activities, conduct an intellectual property use risk assessment to ensure that labeling does not infringe on others' intellectual property rights in China.

2. Early Trademark Registration

Regardless of whether the principal's products are sold within China, early application for trademark registration is highly recommended.

3. Timely Customs Recordation of Trademarks

Customs recordation can provide active protection by customs authorities, effectively intercepting infringing products during import and export. Besides, it may ensure the smooth export of authorized products.

4. Active Response to Detention

In case the OEM products are detained by customs, it is strongly recommended to actively collect evidence regarding trademark rights, authorization documents, and OEM contracts. In addition, evidence regarding the target market and transporting destination of the OEM products is also helpful to prove the good faith of both the principal and the manufacturer, which is helpful to avoid being deemed as trademark infringement.

If it is difficult to overcoming the risks of trademark infringement, it is advisable to negotiate with the trademark owner (recorded with customs) to reach a licensing or settlement agreement for quick release.

5. Proactively Combat Malicious Trademark Grabbing

For the registered trademarks which are identical or similar to OEM labels and maliciously squatted by others, regardless of whether the trademark is recorded with customs or whether the trademark owner has taken enforcement actions, the foreign principal should actively pursue invalidation or cancellation actions to eliminate risks or at least adding to the bargain chips of settlement negotiation.