Buyers: ‘Register your trademark in China’

South African buyers of original equipment manufacturing (OEM) products from China need to register their trademarks in China or risk infringing similar trademarks registered by third parties in China, warns John Foster, a partner at Spoor & Fisher who specialises in domestic and foreign trademark prosecution and trademark, copyright and unlawful competition litigation.

“Until recently most local buyers of OEM products have felt comfortable only registering their trademarks in SA as that is where their products are advertised and sold to end consumers. However, following recent decisions by Chinese courts, local buyers need to be aware of problems that can arise when trademarks applied to OEM products made in China are registered by a different company in China.”

He reports several conflicting decisions by courts in China regarding OEM products and whether the trademarks applied to these products are “used” in China despite the fact they are actually destined for the South African market.

“The legal view for many years was that OEM manufacturing might constitute ‘use’ of a trademark but as long as the use did not lead to a likelihood of confusion, there was no trademark infringement. This changed in 2019 in a case involving the Honda Motor Corporation where the court moved away from previous precedents and made no special exemption for OEM for export activities,” he explains.

One of the most significant findings of this court was that, based on the territoriality of trademarks, buyers cannot rely on their trademarks in a foreign country such as SA to grant an OEM authorisation to use a trademark in China. As a result, affixing a trademark registered in SA to a product manufactured in China can amount to an infringement of an identical or similar trademark registered in China by a third party.

Of particular concern to OEM buyers is that China Customs is taking action. OEM products that are suspected of having infringed Chinese trademarks are being detained and seized at the border even in circumstances where evidence proves that the goods are for export only.

“The best way to avoid issues with OEM products is to register your trademarks in China,” advises Foster. “Conduct a search to establish if any similar trademarks are already registered, apply to register your trademark if it’s available and ensure the trademark filed is consistent with the trademark that is licensed to and used by the OEM manufacturer without alterations.”

He warns that the OEM manufacturer should not be granted any rights to make other non-normative use of the trademark in China.

The good news is that registering a trademark in China and only using it in OEM means the trademark will not be vulnerable to cancellation based on use, says Foster.