Written by:Jiao Hongbin,Liu Yuxin(Intellectual Property)

Recently, China National Intellectual Property Administration (“CNIPA”) issued an official reply letter to Shanghai Intellectual Property Administration regarding whether the unauthorized acts of repackaging others’ products while continuing to label others’ registered trademarks on the repackaged outer packaging and selling them again constitute trademark infringement. CNIPA held that the answer is YES.

The company being complained firstly repackaged the products originally labeled with other’s registered trademarks into gift boxes, then labeled the said registered trademarks on the gift boxes, and finally re-sold the products through such gift boxes. The above acts were all without authorization. CNIPA holds that a trademark not only has the basic function of identifying the source of goods or services, but also has the derivative functions of ensuring the quality of products or services and maintaining the trademark’s reputation. The above functions of a trademark are the very basis for its existence. Where an act infringing upon a registered trademark is as severe as to the extent of damaging its functions, it can be deemed as trademark infringement regardless of whether confusion occurs or not on the market. The products at issue were genuine and the gift boxes/outer packaging were/was labeled with the same trademark(s) as the complainant’s registered trademark(s), which may not cause confusion among consumers regarding the source of the products. However, the alleged infringer’s unauthorized sale of the products in gift boxes after repackaging was likely to cause consumers to mistakenly believe that the products in gift boxes was a special edition of gift-boxed products of the right holder. Such acts grabbed the market share of the right holder’s genuine gift-boxed products. At the same time, the repackaging of the right holder’s bulk products also poses the risk of lowering the quality of the right holder’s products, which would damage the reputation bearing function of the right holder’s registered trademarks. Therefore, the alleged infringer’s unauthorized acts of repackaging the bulk products labeled with other’s registered trademark into gift boxes and continuing to label other’s registered trademarks on the outer packaging and re-selling them again constitute “acts of causing other damages to other’s exclusive right to use the registered trademark” as stipulated in Article 57(7) of the Trademark Law of the People’s Republic of China. The supplier of the counterfeit gift boxes/outer packaging purchased by the alleged infringer shall also be investigated and punished in accordance with relevant laws and regulations.

CNIPA’s above official reply has triggered heated discussion and debate. In fact, there is no unified conclusion in court cases as to the nature of such acts either. A civil Judgement [1] rendered by a court in Hangzhou in 2015 holds that although such acts may not cause confusion and misunderstanding among the relevant public, the outer packaging of the product actually played an important role in beautifying, promoting and enhancing the value of products, in addition to the basic function of protecting and containing product. As the unauthorized outer packaging used by the defendants differed significantly from the plaintiff’s requirements for outer packaging boxes, the accused repackaging would not only fail to beautify the product and enhance the value of it, but lower the relevant public’s impression of the products’ goodwill to which the disputed trademarks indicate, and thereby damaging the reputation bearing function of the trademark involved. However, the Intermediate People’s Court of Huaian City, Jiangsu province presented an opposite reasoning and conclusion in a similar case [2] in 2014. In that case, the court believed that judging from the way the registered trademarks were used on the alleged infringing goods, the use of the registered trademarks by the defendant in the repackaging was consistent with plaintiff’s use on its goods. The repackaging did not change the manufacturer’s information that indicates the source of the goods, nor did it make any changes to the goods themselves. Therefore, product quality and consumption safety are not affected. Secondly, from the perspective of whether the alleged infringement will cause the relevant public to confuse and misunderstand the source of the goods, the use of the alleged infringing trademark is indicative and does not damage the identification function of the trademark. In this regard, it will not cause confusion and misunderstanding by the relevant public. Lastly, when considering whether the alleged infringement caused damage to the plaintiff’s legal rights and interests in its registered trademark, the court held that after the trademark owner puts the goods to which the trademark is legally attached on the market for the first time, the property rights of the goods have been transferred, and his goal of obtaining economic profits through the goods and the attached trademark is already achieved. Trademark owners shall no longer obstruct further circulation of the goods on the grounds that they have exclusive rights to use the trademarks on the goods. Otherwise, it will directly damage the free circulation of goods in the market, which is the basic principle of the market economy, and will be an abuse of trademark rights.

Given the above, although it may still be disputable as to whether the unauthorized acts of repackaging others’ products while continuing to label others’ registered trademarks on the repackaged outer packaging and selling them again constitute trademark infringement in court levels, it is certain that CNIPA’s official reply will become a key guideline for reviewing such cases at least in administrative enforcement [1]cases in the foreseeable future.

[1](2015)Hang Yu Zhi Chu Zi No. 416

[2](2014)Huai Zhong Zhi Min Chu Zi No. 0007