Amid heightened global recognition of ESG concerns, the Chinese government is paying increased attention to the recycling and reuse of products. The Environmental Protection Law and Circular Economy Promotion Law do not directly address the exhaustion of IP rights in product recycling or the conditions under which right holders may reassert their rights (see “How Chinese courts approach trademark exhaustion when it comes to product recycling and remanufacturing”).

As this issue becomes increasingly relevant, it is necessary to look at how the Chinese courts have previously approached it for guidance. The first article in this three-part series has introduced the stance of the courts and the administrative authorities on trademark infringement over beer bottle recycling. Now comes the second article which aims to analyse how the Chinese judiciary is gradually clarifying the boundaries of trademark infringement when refurbished goods re-enter the market.

Trademark infringement when refurbishing goods

Refurbished goods are frequently reintroduced into the Chinese marketplace. From a judicial perspective, a key issue is how the refurbisher uses the original trademark when reselling the products.

Removing the original trademark without authorisation

In Fengye (1994), the Beijing First Intermediate People’s Court held that buying products bearing the plaintiff’s trademark and then removing the marks for resale – under the guise of exhaustion of rights – constitutes unfair competition. The court reasoned that the defendant’s conduct exploited the plaintiff’s high-quality products for illicit profit without compensating the plaintiff for the goodwill and labour involved in building its brand.

After the Trademark Law was amended in 2001 to include in Article 57(5) reverse passing off as a form of infringement, courts have consistently found that removing and replacing an original trademark before reintroducing goods into the market impairs the mark’s normal function. For example, in Malata (2016), the Ningbo Intermediate People’s Court held that covering up Malata’s mark with “AOV” deprived Malata of the opportunity to display its trademark to the public, preventing it from leveraging its brand value and goodwill in the market. Consumers would also be misled regarding the product’s origin.

Some courts have similarly found that removing the original trademark (without replacing it with a new mark) can also constitute infringement. In Yinzhi (2003), the Nantong Intermediate People’s Court reasoned that trademark rights are inseparable from the goods themselves. Removing the original trademark disrupts the link between the owner and user, depriving them of information about the true producer and negating the product’s market-expanding attributes – thus infringing the trademark owner’s legitimate interests.

Continuing to use the original mark without authorisation

Whether refurbished goods may still bear the original mark without constituting infringement depends on whether:

  • the product has undergone a substantive transformation; and
  • there is a likelihood of confusion.

The HP case (2019)

In this case, the Tianhe District People’s Court in Guangzhou reasoned that the seller must respect the trademark owner’s rights during the product’s circulation; merely transporting, storing or reselling goods that bore the mark did not cause confusion. However, if the seller substantially alters the product’s core elements, the trademark no longer accurately indicates the product’s origin and quality. Continuing to use the original mark thus tarnishes it and undermines consumer interests.

The Domino case (2018)

The Guangdong High People’s Court recognised a balance between the trademark owner’s rights, the interests of the recycler and public interest. In this case, the defendants only recycled old circuit boards from the plaintiff’s A200 coding machines. The default setting caused Domino’s mark to appear when the screen started up, but the defendants did not actively or prominently use Domino’s mark on the refurbished machines or packaging. Because the new product’s packaging contained no Domino logo, there was no direct risk of confusing the public as to its origin. The reuse of an internal part – without significantly altering the machine’s overall quality or removing the original trademark – fell within the scope of trademark exhaustion.

Selling refurbished products as brand new

Refurbishers that sell old products as new and that are falsely labelled as original may also face criminal charges. In Oppo (2022), the Chengdu Intermediate People’s Court found that replacing certain components (eg, phone back covers and screens) could affect functionality and performance, amounting to a “substantial alteration”. Selling phones as new without disclosing such alterations would confuse consumers about the product’s authenticity and quality, infringing on the trademark’s source-identifying and quality-guarantee functions. Further, such activities constituted counterfeiting of registered trademarks as they harmed the brand’s goodwill.

Zhu Zhigang

Wanhuida Intellectual Property