Over the last few years, China has offered optimal conditions, in terms of the labour market and low costs, for companies from all over the world to locate their production and manufacturing processes in this country.
In this context, companies that outsource the manufacture of their products in China to sell them in third markets, generally do not see the need to protect their trademarks in China. In fact, the Supreme Court of China has in recent years held that there is no trademark infringement arising from manufacturing activity when the local manufacturer has authorization from the foreign owner, as long as the goods are not sold in China and the trademark is adequately protected in the country of destination of the goods.
However, a recent decision of the above-mentioned court considers that the activities associated with manufacturing and transportation could be understood as use of the trademark and, therefore, be susceptible of infringing third parties trademark rights in China.
In this new scenario, companies operating in China, not only those strictly marketing their products and services in this country, but also those companies that have some phase of their production chain in this country, need an assessment on the risks of infringement of third parties trademark registrations in China, in the specific context of their activity. Likewise, it is also necessary for them to establish an appropriate trademark protection strategy.