Jul 6, 2020 | Japanese Motor Giant Win a Landmark OEM Infringement Case in China

By the end of 2019, China’s Supreme People’s Court made a final judgment on trademark disputes between the Japanese motor giant Honda Motor Company (“Honda”), and 2 Chinese companies, namely Hengsheng Xintai Trading Company and Chongqing Hengxin Group (“the Defendants”), and ordered the Defendants to stop infringing Honda’s trademarks immediately and compensate Honda for 300,000 yuan in damages.

Honda is a Japanese multinational motor giant company specializing in vehicle and motorcycle production. The company has obtained various trademark registrations in China, namely No. 314940 HONDA, No. 1198975 H and its graphics, and No. 503699 HONDA and its graphics “ ”, “ ” and “ ”. In June 2016, Ruili Customs seized a cargo of outbound motorcycle parts bearing the HONDAKIT trademark. The motorcycle was manufactured by Hengxin Group under the authorization of Meihua Company and was applied for export by Hengsheng Xintai Company, a subsidiary of Hengxin Group.

In September 2016, Honda claimed that the two companies infringed its trademark rights and submitted the case to the Intermediate People’s Court of Dehong Hong and Jingpo Autonomous Prefecture in Yunnan Province, demanding an injunction against the Defendants and compensation of 3 million yuan.

The court ruled that the two Defendants used HONDAKIT and its graphics on motorcycle hoods, and nameplates while lengthening the dimensions of Honda portion, which led to infringement of the plaintiff’s trademark.

Subsequently, Hengxin Group and Hang Seng Xintai Company appealed to the Yunnan Higher People’s Court in 2017.

After the hearing, the Court of Appeal held that the two Defendants’ OEM activities did not infringe Honda’s exclusive trademark rights and revoked the decision of the first instance.

Dissatisfied Honda appealed to the Supreme People’s Court.

Ruling:
(1) Suspected infringing activities of Chinese manufacturers should be confirmed as OEM.
(2) The OEM activities of Chinese manufacturers shall in this case be regarded as the use of trademarks in China. The use of trademarks refers to the use of trademarks to identify the origin, which involves the physical addition of trademarks and the market circulation of trademarks. All these factors should be considered when deciding whether an activity should be “use of a trademark.”
(3) Considering that the trademark is similar to the registered trademark of Honda, and its designated products are similar to the trademark of Honda, it is likely to cause confusion among consumers. Therefore, the activities of Chinese manufacturers constitute trademark infringement.

In fact, Supreme People’s Court has consistently held different opinions on the OEM issues in several prior occasions; the new decision has provided extra protection to authentic trademark owners who have been adversely affected repetitively by OEM activities. In other words, OEM is no longer a conclusive defense to trademark infringement.