China's Supreme People's court made a final judgment on an OEM-related trademark infringement case recently. The court held that the act that Zhejiang Yahuan lockset Co.,Ltd (hereafter as to Ya Huan) used logo of "PRETUL" on its OEM padlocks based on its contract with Mexico Chu bo company (hereafter as to Chu bo) didn't constitute the use in trademark law. So the court ruled that Ya Huan didn't infringe exclusive trademark rights of Hongkong-based Focker Security international Co., Ltd (hereafter as to Focker), revoking the verdicts of the first and second instance, rejecting the claims of Focker.
In January 2011, Focker brought Ya Huan at court , asking for 450 thousand yuan of economic losses. The plaintiff argued that Ya Huan manufactured padlock with logo of "PRETUL" without authorization and infringed its registered No.3071808 trademark rights of PRETUL and its oval shape.
Ya Huan defended that the products involved were OEM commissioned by Chu bo which were used to export to Mexico. The products have never been sold in Chinese markets and will not cause confusion among Chinese consumers. Since the two companies signed a contract to process the OEM product, Ya Huan's act didn't constitute trademark infringement.
Both the courts of first and second instance ruled Ya Huan infringed Focker's trademark exclusive rights and ordered Ya Huan to compensate 50 thousand to 80 thousand yuan of economic losses. Disgruntled with the ruling, Ya Huan lodged an appeal to supreme court.
Recently, the supreme court made the final judgment. The court held the OEM packlocks were totally exported to Mexico and have never been distributed and used in Chinese market which has no possibility to cause confusion among Chinese consumers on the source of the OEM products and products of Focker. Ya Huan's use of "PRETUL" did not have the function of distinguishing the source of goods. For above reasons, the court made the final judgment.