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OEM production risk in the international trade

Original equipment manufacturer (OEM) is a trade processing mode, also known as “OEM processing” and “OEM production”. In the international trade environment, it usually refers to the production and operation mode in which an overseas client entrusts a domestic manufacturer to paste the trademark logo provided by the client on the products produced and processed by the manufacturer in a specific three-way business (incoming materials, sample processing or assembly), and then returns all products to the client for sale. This production method is very common, which reflects the economic value of the trademark, so that the entrusting party can expand production capacity and improve market share without setting up new factories and purchasing equipment.


Foreign license processing must involve the export of processed products. Article 3 of the regulations on Customs Protection of intellectual property rights stipulates that “the State prohibits the import and export of goods infringing intellectual property rights…” accordingly, if the trademark on the licensed products has trademark infringement problems, such products will face customs investigation and treatment when they leave the country.


Customs investigation is mainly divided into two types: according to application and according to authority. If the trademark owner finds that the goods suspected of infringement are about to be imported or exported, he may take the initiative to apply to the Customs at the place where the goods enter or leave the country for detaining the goods. If the customs detains the goods suspected of infringement, it may suspend the investigation until the trademark owner first brings a lawsuit to the people’s Court on the infringement dispute, and then dispose of the relevant goods according to the specific circumstances of the court.


If the domestic trademark owner has filed with the General Administration of customs, the customs may also take the initiative to identify the goods suspected of infringement and notify the trademark owner. It should be noted that although the customs can take action, the trademark owner still needs to apply for detaining the goods and providing guarantees immediately after receiving the notice from the customs before the customs can further detain the goods suspected of infringing and initiate investigation.


The customs investigation results may be:

1) In case of infringement, the customs will confiscate the goods and impose administrative penalties;

2) If it is determined that there is no infringement, the customs will release the goods;

3) If it is impossible to determine whether it is an infringement, the customs will notify the trademark owner, who shall file a lawsuit to the people’s court in time to claim corresponding rights. If the trademark owner delays in filing a lawsuit, the customs will release the goods after the expiration of the legal time limit.


Under the foreign-related license processing mode, domestic manufacturers often attach trademarks of overseas enterprises to their products. However, the trademark right is regional, that is, the exclusive right of trademark is only protected in the registered area, and the non registered country has no obligation to protect the non registered trademark. Under the foreign-related fixed license processing mode, it is possible that the overseas entrusting party has only registered the trademark abroad and has not registered the OEM trademark in China.


If the OEM trademark is not registered in China, and the trademark is the same or similar to the registered trademark in China, and the processed product is the same or similar to the goods approved for use with the registered trademark, does the production of OEM goods by domestic OEM enterprises constitute trademark infringement?


The answer is that OEM manufacturers may face such risks. Item 2 of Article 57 of the trademark law stipulates that: “Any of the following acts is an infringement of the exclusive right to use a registered trademark:(2) Without the permission of the trademark registrant, using a trademark similar to its registered trademark on the same kind of goods, or using a trademark identical to or similar to its registered trademark on similar goods, which is likely to cause confusion; ”


From the above provisions, first of all, it is necessary to “use” a trademark to constitute trademark infringement, and “use of a trademark” has special meaning under the Trademark Law: Article 48 of the trademark law stipulates that: “The use of trademarks as mentioned in this Law refers to the use of trademarks on commodities, commodity packages or containers and commodity trading documents, or the use of trademarks in advertising, exhibitions and other commercial activities to identify the origin of commodities.”




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