The Determination on Whether the Original Equipment Manufacturer (OEM) Performed the Duty of Due Care in An Export Trade (I)

— Dispute over Trademark Right Infringement between China Ningbo International Cooperation Co., Ltd. and Pinghu Huayang Tourism Products Co., Ltd.

The Third Party: GRACE CONCEPTS, INC., an American company, founded on April 26, 1996. On February 7, 2000, the company was renamed GCI OUTDOOR, INC. (hereinafter referred to as “GCI”). The Plaintiff, founded in 1988, is mainly engaged in imports and exports of various goods and technologies and processing imported materials. The Defendant, founded in 2001, is mainly engaged in imports and exports of various goods and technologies.

From the second half of 2002 to April 2013, GCI placed orders with the Plaintiff, entrusting the Plaintiff to manufacture outdoor chairs with the mark “GCI OUTDOOR.” In April 2013, due to disputes, the Plaintiff and GCI terminated their cooperation. On April 26, 2013, the Plaintiff applied for registration of the trademark numbered 12496478 on furniture and armchairs classified under Trademark Class 20, which shall remain valid until September 27, 2024.

On June 4, 2015, GCI placed an order with the Defendant, entrusting the Defendant to manufacture outdoor chairs valued USD 95,814, which shall be shipped from August 20 to 27, 2015. GCI also issued a power of attorney to the Defendant which confirmed that the Defendant was authorized to manufacture products for GCI and Integrity (GCI’s joint venture) on an OEM basis from September 14, 2014 to now. All products shall be exported and shall be marked with the trademark “GCI Outdoor” of GCI registered in America.

On August 27, 2015, Shanghai Customs issued the Notice Regarding the Confirmation of Intellectual Property Infringement to the Plaintiff with respect to the 7,400 outdoor chairs with the mark “GCI OUTDOOR” that were valued USD 95,814 and declared by the Defendant for export in a normal trade way. The notice indicated that the chairs were suspected of infringing the intellectual property registered by the Plaintiff with the General Administration of Customs. The Plaintiff was required to confirm whether such chairs infringed its rights and whether to request the Customs to detain the goods. Later, the Plaintiff applied for detainment. On December 30, 2015, Shanghai Customs issued the Notice on Detainment of Goods Suspected of Infringement (HGZZ [2015] No. 103) to the Plaintiff, which indicated that the Customs had detained the Defendant’s goods suspected of infringing the Plaintiff’' exclusive right to use the trademark (7,340 outdoor chairs valued USD 95,036.85), as required by the Plaintiff. On March 18, 2016, Shanghai Customs issued the Notice of the Determination on the Intellectual Property of the Alleged Infringing Good, which indicated that it cannot determine whether the chairs declared by the Defendant for export infringed the Plaintiff’s exclusive right to use the trademark “GCI OUTDOOR.” Upon comparison, it was found that the mark on these bench chairs was identical to the trademark numbered 12496478, except that the mark had a sign “TM” at the bottom right.

On September 14, 2015, GCI applied to the United States Patent and Trademark Office for registration of the trademark “GCI Outdoor.” On May 24, 2016, the United States Patent and Trademark Office issued the registration certificate (No. 4963756) of the trademark “GCI Outdoor” to GCI, which shall be valid within 10 years from May 24, 2016 and were used for the first time on February 1, 2000. During the trial, the Plaintiff confirmed that GCI started to use the word mark “GCI OUTDOOR” in 2000 and used the corresponding triangular figure mark in the orders placed in 2008. Meanwhile, the Plaintiff also confirmed that the trademark registered by itself had not been used in China nor registered in America before or after its registration. In addition, both the Plaintiff and the Defendant confirmed that the GCI branded outdoor chairs had not been sold in China.

On November 13, 2015, GCI submitted a written application to the Trademark Review and Adjudication Board of the State Administration for Industry and Commerce, requesting the Board to invalidate the trademark numbered 12496478. The Board accepted the application on March 2, 2016. On September 29, 2016, the Trademark Review and Adjudication Board of the State Administration for Industry and Commerce ruled that the trademark violated the provisions of Paragraph II, Article 15 of the Trademark Law of the People’s Republic of China and shall be invalidated.

In this case, the Plaintiff submitted the Purchase Contract of China Ningbo International Cooperation Co., Ltd. signed by the Plaintiff with the Third Party to the court to prove that it had already used the mark “GCI OUTDOOR and the related figure mark” in 2000. The contract was signed and sealed on June 6, 2000, with the purchaser being “China Ningbo International Cooperation Co., Ltd.” But the Plaintiff was formerly known as China Ningbo International Cooperation (Group) Co., Ltd. and renamed itself on February 28, 2003. The Plaintiff did not give a reasonable excuse for this. Therefore, the contract was obviously fake.

The Plaintiff China Ningbo International Cooperation (Group) Co., Ltd. claimed that the behavior of the Defendant infringed the Plaintiff’s exclusive right to use the registered trademark and requested the court to order the Defendant to stop infringing the Plaintiff’s exclusive right to use the registered trademark “GCI OUTDOOR” (No. 12496478), namely, to stop manufacturing and selling (exporting) goods with the mark “GCI OUTDOOR” and destroy such goods detained by the Customs, and to order the Defendant to compensate the Plaintiff RMB 250,000 for damages caused to the Plaintiff and RMB 50,000 for the expenses incurred by the Plaintiff in stopping the infringement of the Defendant. 

The Defendant Pinghu Huayang Tourism Products Co., Ltd. claimed that its behavior shall not constitute an infringement upon the Plaintiff’s trademark for the following reasons: 1. the involved trademark was first used by GCI OUTDOOR and GCI OUTDOOR has all legal rights to the trademark. GCI had cooperated with the Plaintiff since 2000 on OEM basis. In 2013, upon termination of the cooperation between the Plaintiff and GCI, the Plaintiff maliciously registered the involved trademark behind GCI’s back and based on this, GCI submitted an application to the State Trademark Bureau for revocation of the Plaintiff’s trademark; 2. as the Defendant cooperated with GCI on an OEM basis and GCI authorized the Defendant to use the involved trademark to manufacture and exports products to America, the behavior of the Defendant shall not be deemed as the use of trademark, so even if the Plaintiff had the trademark rights, the behavior of the Defendant shall not constitute an infringement upon the Plaintiff’s trademark rights; 3. the evidence provided by the Defendant proved that GCI started to use the involved trademark in 2000, earlier than the Plaintiff. According to Chinese laws, the GCI’s cooperation with the Defendant on an OEM basis upon termination of its cooperation with the Plaintiff was within its authority and shall not constitute an infringement upon the Defendant’s trademark rights. Therefore, the Defendant requested the court to reject all the claims proposed by the Plaintiff.