Many companies manufacture in China without actually intending to sell their goods in the country. The way the authorities view this "export only" activity has changed much over the years, and whether these activities are to be considered trademark infringement has long been in dispute.

    Sometimes, foreign brand owners find themselves manufacturing goods in China without having their trademarks registered in China. This could be for a variety of reasons, but usually it's because (a) they have chosen not to register because they (falsely) believe it not worth their time or money, (b) they want to but have not got around to doing so or have had difficulties in doing so, or (c) a third party has already registered their trademark in bad faith.

    For a long time, each province/city had its own way in dealing with this issue. Customs authorities at one port might provide an exception (often referred to as an "OEM exception") and allow goods to be shipped out without a registration in China provided certain documentation was submitted (such as foreign trademark certificate and authorization letter from the foreign rights holder). Other authorities might opt to detain the goods as infringing. Several years ago, after it was clear that this was a hot-button issue, the Supreme People's Court issued a ruling clarifying that export-only activities did not constitute trademark infringement opining that if the products in question were purely for export and Chinese consumers could not buy the products in China, these activities should not be considered "trademark use". This was very helpful for those companies who found themselves without a registration but being accused of trademark infringement by third parties (often trademark squatters who registered their trademarks in bad faith).

    However, in 2019, the Supreme People's Court issued a new judgment changing their guidance on this issue. The judgement indicated that export-only activities (or "OEM behaviors") should indeed be considered trademark use and thus can be trademark infringement. The court stated that with the increase of e-commerce, consumers in China could buy products online which were manufactured in China for export-only but eventually found their way back to China. The court further found that with many Chinese traveling abroad, Chinese consumers had access to export-only products.  Overall the court determined with the increased possibility for Chinese to obtain products and in order to protect trademark rights in China, export-only activities should be considered trademark use and liable as infringement, specifying that previously accepted authorization letters and registrations from abroad could not offer proper authorization in China.

    This new judgment from the Supreme People's Court is a big shift in this ever-changing saga. Generally speaking, we should expect lower courts and administrative offices such as Customs offices at ports to begin following this new guidance, and brand owners should be prepared for such if they do not hold trademark rights in China. It can take time for different offices to implement changes, and overall this issue is usually not black and white, so discuss this issue with local counsel to see what options may be available. In the meantime, if you are manufacturing in China - register your trademarks as soon as possible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.