"Offering for Sale" from a Trade Mark Perspective

Generally, "offering for sale" is a legal term within Patent Law. Patent Law provides that after a patent is granted for an invention, utility model or design, without permission of the patentee, no entity or individual is entitled to offer for sale the patented product, the products directly originated from the patented process or the products incorporating patented design for production or business purposes.

Under Chinese Trade Mark Law, there is no provision particularly relating to "offering for sale". In practice, the term "offering for sale" has never appeared in trade mark infringement cases until recently. In case before the Beijing IP Court on March 10, 2017 it was ruled that a display of the products for the purpose of sale, ie "offering for sale" did not infringe exclusive rights to use the registered mark of the owner.

The Case

Beijing Hangtian Kaisa International Capitals Management Co., Ltd. (hereinafter "Beijing Hangtian Kaisa") is a manufacturer of non-metal pipes including aluminum alloy lining plastic pipes and owns the registered marks such as "曲弹(Qu Tan in Chinese)", "ASAK" and "航天凯撒管(Hangtian Kaisa Pipe in Chinese)". Jilin Changyuan Pipes Co., Ltd.(hereinafter "Jilin Changyuan")  was sued for using the marks "ASAK" and "航天凯撒管(Hangtian Kaisa Pipe in Chinese)" owned by Beijing Hangtian Kaisa in the promotion of its aluminum alloy lining plastic pipes on its official website www.jlscygy.com without authorization. Beijing Hangtian Kaisa claimed that Jilin Changyuan's acts would cause confusion to the relevant public implying that the goods were sourced from Beijing Hangtian Kaisa and constituted trade mark infringement.

The first instance court Beijing Haidian District Court ruled that Jilin Changyuan's acts of using the marks "ASAK" and "航天凯撒管 (Hangtian Kaisa Pipe in Chinese)" owned by Beijing Hangtian Kaisa to advertise the products displayed on its website constituted trade mark infringement of Beijing Hangtian Kaisa's exclusive right to use its registered marks. Jilin Changyuan, dissatisfied with the first instance decision, appealed to the second instance court Beijing IP Court. They subsequently decided that the first instance court was wrong in the application of the law and that Jilin Changyuan's acts as an "offering for sale" did not constitute trade mark infringement.

Different Views of Two Instance Courts

Through its decision, the first instance court indicated that determining trade mark infringement it should first examine whether the accused infringement acts belong to trade mark use, that is, whether the use of symbol is able to identify sources of the goods or services. According to Article 57.1 of the Trade Mark Law, using a trade mark that is identical with a registered trade mark in connection with the same goods without the authorization of the owner of the registered trade mark is trade mark infringement. In this case, Jilin Changyuan's promotion of its products on its website by using the marks "ASAK" and "航天凯撒管(Hangtian Kaisa Pipe in Chinese)" owned by Beijing Hangtian Kaisa constitutes an infringement on the exclusive right owned by Beijing Hangtian Kaisa to use its registered marks.

The second instance court viewed that the first instance court was wrong by applying Article 57.1 of the Trade Mark Law because this article refers to production of infringing products. In this case, Jilin Changyuan persistantly claimed that it was a distributor of pipe products and never engaged in production of pipe products. On the basis that Hangtian Kaisa failed to submit the accused infringing products, the second instance court ruled that Jilin Changyuan's acts did not constitute trade mark infringement.

In addition, the second instance court regarded Jilin Changyuan's use of the marks "ASAK" and "航天凯撒管 (Hangtian Kaisa Pipe in Chinese)" to promote its products on its website is a trade mark use by displaying the products for the purpose of sale, that is, "offering for sale".

In respect of the products to be offered for sale, there are two circumstances: firstly that the products are produced by Beijing Hangtian Kaisa and its authorized companies, which shall not be regarded as infringement on Beijing Hangtian Kaisa's exclusive right to use its registered marks; secondly that the products are produced by a third party by copying Beijing Hangtian Kaisa's registered marks. With respect to the second circumstances, Beijing Hangtian Kaisa needed to provide proof that the goods sold by Jilin Changyuan were those that infringed Beijing Hangtian Kaisa's registered marks.

In this case, however, since Beijing Hangtian Kaisa could not provide any infringing products and Jilin Changyuan confirmed that it had never actually sold the infringing products, the court could determine whether the products which were offered for sale on the website of Jilin Changyuan were infringing products. Therefore, the court ruled that Jilin Changyuan's offering for sale did not constitute trade mark infringement.

Our Comments

Does Beijing IP Court's ruling that "offering for sale" is not a trade mark infringement mean that it is in conflict with Article 48 of the China Trade Mark Law?

Article 48 of the China Trade Mark Law provides that the use of trade marks refers to the affixation of trade marks to commodities, commodity packaging or containers, as well as commodity exchange documents or the use of trade marks in advertisements, exhibitions, and for other commercial activities, in order to identify the source of the goods.

Based on the above provisions, it is generally accepted that the use of a trade mark in an advertisement or offering for sale shall be accepted as trade mark use to identify sources of the goods, and products bearing the trade mark which is identical or similar to a registered trade mark shall be viewed as trade mark infringement in accordance with Article 57.1 and 57.2 of the China Trade Mark Law.

In practice, in this case the Chinese courts did not specifically distinguish whether the infringer who was offering the products for sale is a producer or distributor but generally viewed that "offering for sale" on brochures, website, exhibition or WeChat is trade mark use and therefore, offering for sale identical or similar products bearing the identical or similar mark will cause the public confusion in relation to the sources of the products offered for sale, and therefore constitute trade mark infringement. That is the reason why the first instance court Beijing Haidian District Court decided that Jilin Changyuan's use of the registered marks owned by Beijing Hangtian Kaisa on its website was trade mark infringement.

However, Beijing IP Court took a very different view. It decided that Article 57.1 of the Trade Mark Law only refers to "production" of infringing goods and Article 57.3 of the Trade Mark Law refers to "sale" or "distribution" of infringing goods, and whether "offering for sale" is trade mark infringement shall be viewed under Article 57.3 of Trade mark Law. Based on Article 57.3 of the Trade Mark Law, whether the infringer's "offering for sale" constitutes trade mark infringement depends on the distributor's subjective intention and whether the products offered for sale are infringing products. Since Beijing Hangtian Kaisa failed to prove that the products offered for sale on the website of Jilin Changyuan were infringing products, it was logical that Beijing IP Court decided that Jilin Changyuan's "offering for sale" did not constitute trade mark infringement.

Will "offering for sale" be deemed as non-infringement in future?

Though Beijing IP Court held that "offering for sale" alone is not trade mark infringement in this case, it is worth mentioning that in this case the infringer Jilin Changyuan is a distributor who is mainly engaged in selling and distributing the products instead of a producer who is able to produce the products. The decision is in accordance with principle of exhaustion of trade mark right. Even though a distributor, without authorization, sells the goods bearing the mark identical or similar to others' registered mark, it is possible that the products sold by the distributor are obtained through legal channels and possibly are genuine ones.

But the question is -- what if the infringer who proceeds with "offering for sale" is a producer?  If a producer offers for sale the products which bears the mark – whether identical or similar to another's registered mark without authorization, even though the trade mark owner never produces these products, it can be deduced that the products "offering for sale" are infringing products. Under this circumstance, "offering for sale" may still be deemed as trade mark infringement.

Alerting to trade mark rights owners

While this is one case, decided by Beijing IP Court and China is not a case law jurisdiction, it is uncertain whether other courts in China and the Supreme People's Court hold the same view.

However, this decision at least delivers a very important message that "offering for sale" alone is hard to be considered as trade mark infringement and therefore, to be on safe side, the trade mark owner needs to conduct purchase notarizations of infringing products if they wish to bring a trade mark infringement lawsuit before the Chinese court.

"Offering for Sale" as part of three years’ non-use cancellation and prior use

For three years’ non-use cancellation cases, courts in the past took the view that the evidence in relation to "offering for sale" of the products/services bearing a registered mark were accepted as valid and sufficient "trade mark use" to maintain a registered mark. However, in practice, it seems that the court adopts a strict requirement and tends to view that the evidence in relation to "offering for sale" alone such as product brochures, advertisements, etc. are not generally sufficient to prove commercial use of the registered trade mark, if there are no other sales contracts or invoices. As "offering for sale" evidence cannot prove that the products bearing the registered mark have been put in commercial circulation. Additionally, a licensing agreement alone is not sufficient to prove use of the registered trade mark for the same reason.

In the decision (2010) Yi Zhong Zhi Xing Chu Zi no. 459, Beijing No.1 Intermediate Court ruled that the licensing agreement between Wuzhou Hotel Group and Pacific Sha Luo Coffee Shop could not prove actually commercial use of the disputed mark. The coupons, sales cards and letters were manufactured by Pacific Sha Luo Coffee Shop. The evidence could not prove actual use of the disputed mark. In addition, the receipts relating to the coupons, reservation cards and advertisement design were not legally effective invoices and could not prove actual use of the disputed mark in the designated period.

Under Article 32 of the Trade Mark Law, "offering for sale" is also deemed as a way of determining trade mark use and the evidence of "offering for sale" shall be accepted to prove prior use of the trade mark. Further, according to this provision, it also needs to confirm whether the prior-used mark has garnered a certain influence in the market. Therefore, in addition to "offering for sale" evidence, it must take into account other substantial evidence to prove reputation of the marks from another perspective. 

In conclusion, based on Beijing IP Court's decision, trade mark use stipulated in Article 48 of the China Trade Mark Law includes "offering for sale". While "offering for sale" itself may not be deemed as trade mark infringement. In practice, the courts consider different case scenarios such as an infringer's situation and subjective faults, etc. to decide whether unauthorized trade mark use constitutes trade mark infringement.

If you have any questions, please contact the authors Sharon Qiao and Meryl Wang both of Lusheng, our associated law firm in China.

This article was first published in China IP Magazine.