Alteration of genuine product may constitute trademark infringement

China

Zippo Manufacturing Company (ZMC) is a world-leading lighter manufacturer and its trademark ZIPPO has been recognised several times as a well-known trademark in China.

In 2012 Li Guangsheng of Guangzhou City sourced smuggled blank (ie, non-decorated) lighters bearing the ZIPPO mark, engraved them with various designs – including images from the Transformers franchise and the Chinese Communist Party symbol – and resold them on a large scale.

ZMC filed a civil suit against Li before the Guangzhou Intermediate Court, claiming that Li's acts constituted trademark infringement and unfair competition.

On December 13 2013 the court ruled in favour of ZMC. The court considered that, as the engraved lighters were substantially different from the originals, the altered lighters could not be regarded as the originals placed on the market by ZMC. Furthermore, as the trademark ZIPPO was still used on the altered lighters and the defendant did not indicate that the lighters had been altered with the authorisation of ZMC, this was likely to cause confusion over their origin, which thus constituted trademark infringement. On these grounds, the court ordered Li to cease the infringement and pay damages of Rmb300,000.

The decision was not an obvious one to make. After all, according to the 'first sale' or 'exhaustion' doctrine, trademark rights are exhausted once the product has been placed on the market by the trademark owner or with the trademark owner's consent; the trademark owner cannot prevent further distribution of the product.

The main issue of the case was therefore whether the defendant could invoke this doctrine as a defence. The judge clearly elaborated that the altered lighters resold by the defendant were not the originals launched onto the market by the trademark owner. The defendant's actions severed the specific connection between the trademark ZIPPO and the original products, and were likely to mislead the consumer into believing that the materially changed products were made by the trademark owner – which is detrimental to the trademark's basic function of indicating a product's origin.

From this judgment, it can be concluded that the court was of the opinion that the first sale doctrine is limited to reselling the branded products in the same condition as when they were first sold.

Yongming Fan, Wan Hui Da Law Firm & Intellectual Property Agency, Beijeing 

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