In recent years, the intersection of intellectual property law and international trade has become increasingly complex, particularly when it involves trademarks. This complexity is evident in cases where trademarks are registered in multiple jurisdictions and where manufacturing and export activities span different regions. One notable example is the legal dispute involving the “Predator” trademark, which highlights the challenges of trademark protection in a globalised economy.
This case underscores the difficulties courts face when balancing the rights of trademark owners against the realities of international trade and manufacturing practices. The following analysis explores the details of the “Predator” trademark case in China and examines several precedent-setting cases that shed light on how Chinese courts approach issues of trademark use and infringement in export contexts.
1. Predator Trademark Dispute
Fuzhou Yama Mechanical and Electrical Co., Ltd. (Yama Company) holds the Chinese trademark No. 10886272 “Predator” for Class 7 goods, including generators. Registered on September 14, 2013, this trademark was filed in May 2012.
In contrast, Harbor Freight Tools (USA) owns the U.S. trademark “Predator” for Class 7 goods (generators), with its first use recorded on February 1, 2012. This trademark was filed on October 12, 2012, and registered on June 18, 2013.
On March 20, 2021, Chongqing Shenchi Import and Export Trading Co., Ltd. (Shenchi Company) exported gasoline generators bearing the “Predator” trademark to the U.S., with Harbor Freight Tools as the consignee. The Shanghai Customs issued a “Notice of Intellectual Property Infringement” to Yama Company on March 22, 2021. Yama Company sought the detention of the suspected infringing goods on March 25, 2021. Customs detained the generators on June 24, 2021, but later found no infringement on August 4, 2021, prompting Yama Company to pursue legal action.
Shenchi Company claimed it had been negotiating with Harbor Freight Tools since late 2020, with the first sample sent for inspection on March 20, 2021. Documents from Harbor Freight Tools revealed that Shenchi Company was authorised to use the “Predator” trademark solely for manufacturing products for Harbor Freight Tools and distribution to them.
Judgment:
First Instance: Pudong New Area People’s Court, Shanghai
The Pudong Court determined that the handling of the foreign trademark was considered “use” under Chinese law. However, it concluded that the sample product was unlikely to affect the Chinese market or confuse consumers about the origin of goods, thus not constituting trademark infringement.
Second Instance: Shanghai Intellectual Property Court
[i] The Shanghai IP Court debated whether the act of using a trademark by a manufacturing entity constitutes “use” under Chinese law. It ruled that determining whether an act constitutes “use” is secondary to assessing whether other elements of trademark infringement are met. If the other elements are not satisfied, the act does not amount to infringement, regardless of whether it constitutes “use.”
[ii] Damage to the exclusive right to use a registered trademark is an essential element of trademark infringement. Even if no consumer confusion occurs, using an identical trademark still infringes on the trademark owner's rights if it disrupts the trademark's function.
[iii] The Court recognised the territorial principle of trademark law, which limits the exclusive right to the territory where the trademark is registered. However, it noted that in global trade, applying this principle rigidly might not align with international practices. The main consideration is whether the trademark's identification function is affected domestically.
[iv] In the global context, all exported goods might potentially return to their country of origin. The Court emphasised balancing interests: excessive protection could hinder manufacturing, while leniency could infringe trademark rights. In this case, the likelihood of the sample returning to China and causing confusion was minimal, thus not constituting infringement.
2. Historical Cases Involving Export Manufacturing
[i] Nike v. Cidesport (2001): Nike won a lawsuit against Cidesport and its Chinese OEM manufacturer for infringing Nike’s trademark in China. The court upheld the territorial nature of trademark rights.
[ii] Jolida Case (2008): Shanghai Customs seized JOLIDA-branded goods for export, which were manufactured under contract for Jolida Inc, the U.S. owner of the JOLIDA trademark. The court ruled that there was no infringement since the goods were exclusively for the U.S. market, and no confusion occurred in China.
[iii] Pretul Case: The Supreme People’s Court ruled that Ya Huan’s use of the “PRETUL” trademark for export manufacturing did not infringe the rights of Focker Security International, as it did not affect the trademark’s function in China or cause confusion.
[iv] Hondakit Case: The Supreme People’s Court held that the use of a trademark must be assessed comprehensively, considering factors beyond mere affixation. Trademark use is only considered infringement if it causes confusion regarding the origin of goods.
[v] Stahlwerk Case: The court found that Laoshidun’s use of the “STAHLWERK” trademark for export did not infringe Weike’s Chinese registration, as the trademarks did not compete in the same market and did not cause consumer confusion. The court deemed Weike’s registration of the trademark in China as acting in bad faith. The "Predator" trademark case and related precedents illustrate the nuanced approach Chinese courts take when resolving intellectual property disputes involving export manufacturing. While the territorial principle of trademark law remains a cornerstone of legal protection, the global nature of trade requires a flexible interpretation to safeguard trademark rights effectively.
The courts recognise that excessive rigidity could stifle international trade and manufacturing activities, while too much leniency might undermine trademark protection. Through these cases, it becomes evident that balancing the protection of trademark rights with the realities of global commerce is crucial. As international trade continues to evolve, so too will the legal frameworks that govern it, striving to adapt and address the complexities of trademark use across borders.
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