Guangzhou Intellectual Property Court OKs Parallel Imports
In a trio of cases dated May 6, 2020, the Guangzhou Intellectual Property Court allowed the parallel import of lightning surge protectors from Singapore into China. Parallel import is the import of a non-counterfeit product from another country without the permission of the intellectual property owner. Specifically, in cases(2019)粤73民终6944号, (2019)粤73民终6975号, and (2019)粤73民终6976号 the Guangzhou Intellectual Property Court held on appeal that parallel importation by Guangdong Shifu Electric Industrial Co., Ltd. (广东施富电气实业有限公司) of the genuine surge protectors did not violate Chinese trademark law or Chinese unfair competition law.
OBO BETTERMANN Holding GmbH & Co. KG is owns a trademark in class 9 for OBO and appointed Opel Electric (Shenzhen) Co., Ltd. (欧宝电气(深圳)有限公司) as an exclusive distributor in China. In April 2018, Opel discovered that Shifu imported OBO brand lightning protectors products from Singapore to China for sale, undercutting Shifu on price. Opel sued Shifu in Nansha court, arguing that Shifu ’s actions infringed the trademark rights of the case and constituted unfair competition, and requested Shifu to stop the infringement and compensate Opel for losses suffered. The Nansha Court held that that there was no TM infringement nor acts of unfair competition. Opel appealed.
The Guangzhou Intellectual Property Court upheld the lower court. The appeals court determined that the product in question was a genuine product legally derived from the trademark owner. Shifu Company did not damage or cover over the trademark and did not change the product quality or packaging, and accordingly did not infringe the trademark rights of OBO. Further, the behavior of Shifu to seek low-cost products to reduce operating costs and pursue commercial profits is non anti-competitive. The course of conduct does not violate the principles of good faith and recognized business ethics, and therefore does not constitute unfair competition.
As noted by Xiaoxia Xu, this is the first parallel import case in Guangdong province and Nansha Free Trade Zone. Guangdong province is reported to have a trade volume of over $1 trillion USD/year and represents about a quarter of the nation’s trade by value. Accordingly, based on the amount of overall trade, the Guangdong ruling may significantly increase parallel imports into China via Guangdong ports if non-counterfeit products can be sourced cheaper outside of China.