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04 May 2020
In China, foreign brand owners are becoming increasingly concerned about unauthorised retailers using their trademarks on signboards. The legal issue is complicated by the fact that these unauthorised retailers are selling genuine goods which originate from parallel imports.
There are no explicit provisions addressing parallel imports in the Trademark Law or in the Anti-unfair Competition Law.
The Chinese courts have acknowledged the legality of parallel imports in recent years. The Beijing High Court issued a document entitled "Several Legal Matters to Note in Current Intellectual Property Trials" (7 May 2016) where it addresses "whether parallel imports constitute trademark infringement", by stating that if the suspect goods are sourced from the rights holder or the authorised dealer, the rights holder would have fully realised the commercial value of the trademark from the 'first' sale of such goods, and thus could no longer prevent others from carrying out 'secondary' sales or reasonable commercial marketing of these goods.
This means that selling parallel imports in China does not constitute trademark infringement per se.
However, in practice, the courts sometimes find ways to penalise sales of parallel imported goods. If the goods are even partially altered so as to make them substantially different from the original products, the court may deem the sale an act of trademark infringement or unfair competition.
The courts found trademark infringement or unfair competition in the following cases:
The abovementioned decisions suggest that a retailer without permission to use a trademark may file a valid defence if it is able to prove that:
If the retailer meets none of these conditions, a trademark fair use defence cannot be established.
Where a retailer uses multiple trademarks on a signboard without the rightsholder's permission (see Figure 1), it will be even more difficult for the rights holders to establish unfair use.
The retailer may argue that it is not using any of the trademarks prominently and that, since there are multiple trademarks registered to different brand owners on the signboard, it is unlikely to cause confusion among the relevant public as to the association between the retailer and each brand owner.
However, a retailer's unauthorised use of multiple trademarks does not mean that no action is possible. Arguably, the abovementioned parameters may still serve as a point of reference. Therefore, the following grounds may serve as a basis for claiming unfair trademark use:
For further information on this topic please contact Cindy Shu Qi Zhen at at Wanhuida Intellectual Property's Shanghai office by telephone (+86 21 6448 6066) or email (firstname.lastname@example.org). Alternatively, please contact Jack Su at Wanhuida Intellectual Property's Shanghai office by telephone (+86 21 6448 6066) or email (email@example.com). The Wanhuida Intellectual Property website can be accessed at www.wanhuida.com.
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