The changing nature of OEM product exports from China

Published on 15 Dec 2021 | 5 minute read

In the past few years, it’s becoming increasingly important for IP owners to ensure that their position with China Customs and the courts in regard to OEM exports, is as strong as possible. In this piece we will explore the important considerations at both levels.

 

China Customs

Currently the following criteria is taken into consideration by China Customs in determining OEM or not:

  • The overseas buyer owns the registration of the mark being used at the destination. A notarised and legalised copy of the trade mark certificate is required.
  • The mark being used, and the buyer’s trade mark are deemed same mark on same goods.
  • Both the production and the exportation are authorised by the overseas trade mark owner. The authorisation documents, purchase orders /contracts are in line with shipping documents.
  • None of the goods should be distributed in the China market.
  • The production/exportation are conducted in good faith with reasonable diligence, no harm to the lawful interests of the trade mark owner in China.

Recently China Customs has begun strengthening the examination into OEM documents. There have been cases where Customs has rejected OEM claims due to the overseas trade mark owner being neither the party placing the order, nor the shipment consignee, with no supplemented documents proving the relationship between the trade mark owner and the other parties in the exportation.

 

Local Courts

The following factors affecting the local court’s judgment in ruling an infringement is likely:

  • The mark - The mark on the OEM products is identical to the overseas registration or is it similar to the China registration.
  • The goods - The OEM goods fall within the protection scope of overseas registration according to the China subclass system
  • The documents - Whether the authorisation documents are in good order
  • The risk of consumer confusion - Whether consumer is able to purchase the OEM product in China online or offline.
  • Good faith – Information on when the overseas trade mark was filed, the status of trade mark use and promotion at the destination.
  • When the China trade mark was filed, the status of trade mark use and its promotion in China.

There are important ways in which IP owners are able to strengthen their position. This depends on trade mark ownership in China and other jurisdictions.

 

Strengthening your position, where you own a trade mark in China while others own the same mark in other jurisdictions.

  • File a recordal with China customs. China Customs is quite effective in taking ex officio inspection into branded goods
  • Ensure you strictly manage your authorised licensors list on the Customs IPR system
  • Actively engage Customs and actively respond to Customs interception notices.
  • Accumulate evidence of your trade mark use and promotion both in China and in all jurisdictions where you own the mark.

 

Strengthening your position where you are sourcing from China while others own the same mark in China

  • Attempt to remove the China trade mark by non-use cancellation/ invalidation/ assignment where possible
  • Prepare your OEM license documents to ensure they are in good order
  • Accumulate evidence of your trade mark use and promotion in the destination jurisdictions where you own the mark
  • Accumulate prior use evidence if you use the mark in China prior to the filing date of the China trade mark
  • If your OEM products are distributed online, ensure mainland China is NOT a “deliverable area”.
  • In the case of a Customs seizure, it’s recommended you actively dispute any “OEM non infringement” litigation together with an invalidation prosecution against the China mark, where possible.

Once an “Non-infringement” judgment is rendered and bonded, as is Customs practice, the same OEM goods would no longer be stopped if they are exported by the same exporter. Technically speaking the “Non-infringement” judgment has no bonding effect if the OEM goods are exported by other licensors. However, based on our experience, the chances the recorded China IP holder applies for detention after receiving a “Non-infringement” judgment are significantly reduced. Consequently, the shipment will be released after short period of interception.

This is becoming increasingly important for OEM exporters and has the potential to become even more so. If you have any further questions, please free to contact our team.

 

Written by: Zoe Liu

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Rouse Editor
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Rouse Editor
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+44 20 7536 4100