The Supreme Court of China recently held that manufacturers with trademark registrations in China may ask China Customs to prevent counterfeit or infringing products from being exported from China to overseas markets, even if the manufacturer has not sold or advertised the products in China. The Supreme Court's decision demonstrates that it is critical to record trademark registrations with China Customs. Otherwise, a rights owner may be unable to prevent counterfeit or infringing products from leaving China.
Honda Motor Co., Ltd. recorded its HONDA word mark with China Customs in 1988 for automobiles and parts—and has used the mark in China since it was recorded. In June 2016, China Customs found 220 motorcycle parts that were being exported from China to Myanmar under the mark HONDAKIT. Honda asked China Customs to detain these parts, and it brought a court action against the manufacturer of the parts, Chongqing Hensim Group Limited ("Hensim") for counterfeiting and trademark infringement. In its defense, Hensim alleged that the exporting company, Mei Hua Company Limited of Myanmar ("MH") had registered the HONDAKIT mark for automobile parts in Myanmar. Hensim then argued that its contract with MH gave it the right to rely on MH's Myanmar registration to defend itself against Honda's claims in Chinese courts.
Rejecting Hensim's arguments, Taizhou City Intermediate Court (Taizhou City was the port from which the products were to be exported) ruled in favor of Honda, issued a permanent injunction against Hensim, and awarded Honda damages of US$50,000. Hensim then appealed to Yunnan Province High Court. The High Court overturned the Intermediate Court's decision, finding that mere manufacturing activities for the sole purpose of exporting the products to overseas markets did not constitute "trademark use" in China. Thus, in the High Court's view, Hensim had not violated Chinese law even if its products bore counterfeit marks.
Honda subsequently requested review by the Supreme Court of China. The Supreme Court vacated the High Court's decision ruling that because "trademark rights . . . are limited to geographic regions . . . . Trademark owners will not be afforded rights without registration in China, even if [the trademark owner] had registration rights overseas. Similarly, a licensee [i.e., Hensim] claiming to have rights to use a mark based on the licensor's [i.e., MH] foreign registrations cannot be protected against the rightful owner of the registered mark in China." The Supreme Court also affirmed the US$50,000 damage award to Honda.
In light of this decision, even trademark owners who only manufacture their goods in China should record their rights with China Customs.
This case is Honda Motor Co., Ltd. v. Chongqing Hensim Group Limited, et al., case number (2019)最高法民再138号.
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