Overview
There have been two notable developments in the Chinese legal landscape, an important market for brand owners.
First, there has recently been uncertainty in the Chinese courts about whether original equipment manufacturers (OEM), which only export branded products without offering or advertising the goods in China, are subject to claims of trademark infringement.
Historically, Chinese courts have taken the position that simply manufacturing branded goods in China, without engaging in the Chinese market, did not qualify as “trademark use.” In 2019, the Chinese Supreme Court held in the “Honda Decision” that OEM production in China alone qualifies as “trademark use.” Honda Motor Co Ltd v Chongqing Hengsheng Group Company & Chongqing Hengsheng Xintai Trading Co Ltd, 2019. Various lower courts since followed suit, including the Ningbo Intermediate Court’s “Juratek Decision” in 2021. Laizhou Baoyi Machinery Co., Ltd. v Suzhou Runjun Trade Co., Ltd., 2022.
Most recently, however, in the Zhongshan Intermediate Court’s 2023 “FTSS Decision,” the court held that such use was not “trademark use” subject to infringement claims because manufacturing products is an inward facing activity, rather a public market facing one, and as the OEM had exercised a certain amount of due diligence before manufacturing the allegedly infringing products. Fila Sports Co., Ltd. v Hunan Jiahui Technology Co., LTD, 2023. That said, it is anticipated that the FTSS Decision will be further appealed, and so this is surely an issue to watch in 2024.
Second, authentication of legal documents for use in China is now possible by apostille. Previously, Americans making trademark related filings in China had to have certain paperwork authenticated by a competent governmental agency. Documents like a Power of Attorney were required to be authenticated via legalization through a Chinese Embassy or Consulate in a process that could cost several hundred dollars per document and was cumbersome. As of November 7, 2023, China has begun accepting authentication of documents via apostille, an international system set up by the 1961 Hague Convention Abolishing the Requirement of Legalization for Foreign Public Documents. Each U.S. state has a designated office which handles apostille requests (usually the “Department of State” or “Department of Treasury” for the given state). The process to obtain an apostille is typically less expensive and quicker than legalization and, as of October 2023, estimated time frames for apostille requests in each of the 50 states and Washington D.C. was between one to four weeks.
Honda Motor Co Ltd v Chongqing Hengsheng Group Company & Chongqing Hengsheng Xintai Trading Co Ltd, 2019.
Laizhou Baoyi Machinery Co., Ltd. v Suzhou Runjun Trade Co., Ltd., 2022.
Fila Sports Co., Ltd. v Hunan Jiahui Technology Co., LTD, 2023.
