How to draw a firm line between refurbishment and infringement in China

Determining whether the sale of refurbished goods should be considered trademark infringement has become an increasingly complex issue. Plenty of enterprises are plagued by this problem, especially industrial companies. The crucial issues in this space arise from the high technical threshold, huge capital investment, long lifecycle and high value of industrial products in the market, all of which have created high consumer demand for refurbishment. 

Refurbished products can circumvent these barriers and generate considerable profits, but the lack of clear, legitimate criteria of what constitutes vintage refurbishment and imperfect market management has created controversy when it comes to the identification of vintage refurbishment in judicial practice. There are often challenges caused by law and judicial authorities’ various understandings of this issue, which sometimes contradict one another and make it difficult for trademark owners to effectively safeguard their rights. 

When it comes to legal provisions and the identification of trademark infringement, there is no difference between vintage and non-vintage refurbishment. The root cause of conflicting understandings is the complexity and changeability of the commercial practice and modes of refurbishment. Therefore, it is necessary to balance the legal interests of trademark holders with those of relevant actors and the public. The circumstances under which a trademark right should be considered exhausted should be judged according to the specific methods and circumstances of recycling and refurbishment – it cannot be generalised. 

Identifying refurbishment

Before discussing the legal issues associated with refurbished products, refurbishment must be identified and contextualised. The difference between goods and labels within the context of trademark infringement is central to this issue. Goods can be defined by whether they have been used, while labels serve to identify whether the trademarks they bear have been authorised or if they infringe the rights of the trademark owner. 

In practice, cases of refurbished used goods are often intertwined with various factors including the refurbishment mode, the subjective malicious intent of the relevant actors, the Circular Economy Promotion Law and the exhaustion of trademark rights. In many cases, goods and labels are mixed together or confused. In some instances – even if the infringer reapplies the original rights holder’s mark – there is still a simple and crude logic that because the product is being used, use of the original mark should not be considered infringement.

Although this inference is absurd, it is still assumed in many cases. According to this logic, the quality of new products is better than that of refurbished products, so the original equipment manufacturers are entitled to produce the proprietor’s goods at will without trademark authorisation, regardless of whether the authorisation is terminated, which is obviously inappropriate. 

Therefore, when discussing the problem with refurbishment and infringement, it is crucial to distinguish this from two more complex types of trademark infringement, namely:

• the illegal upgrade of goods, such as low-end red wine posing as high-end red wine or basic model industrial goods posing as high-end series industrial products; and 
• the repackaging of products, such as in the Buerjia candy sub-packaging case and the Wufangzhai gift box case. 

These two types of cases have their own logic. Therefore, refurbished products have a specific scope, namely used genuine goods, which includes refurbished genuine goods. 

Compliance guidelines

In April 2021, Shenzhen Procuratorate issued the Criminal Compliance Guidelines for Intellectual Property Rights in the Electronic Product Refurbishment Industry. These indicate that: 

"Refurbishment refers to a series of processing processes, such as polishing, maintenance, and replacement of parts and components, to improve or restore the performance and status of second-hand electronic products after being used by consumers." 

This definition explains refurbishment through specific actions. It distinguishes refurbished goods from new products and lists the different forms of refurbishment from a processing perspective. However, in practice, refurbished goods are not limited to electronic products and refurbishment processes are not limited to polishing, maintenance or replacement of parts. 

Given that used goods do not usually bear a substantive economic value when it comes to renewal, in most cases they are automatically destroyed after they naturally exit the market and seldom involve trademark infringement. 

However, assuming that the product itself still has residential value, it could be considered as infringement during its cyclic use after it naturally exits the market. For example, the packaging containers of products can be recycled and used to reproduce and sell products such as beer, perfume or mineral water bottles. 

This situation often constitutes trademark infringement if the packaging bears the original rights holder’s mark. The State Intellectual Property Office’s reply on whether using recycled old beer bottles to fill and sell beer constitutes trademark infringement states that: 

"Although the Measures for the Management of Renewable Resources Recycling advocate and encourage the recycling of glass and other renewable resources from the society, it does not mean that the production enterprises are allowed to infringe the exclusive right to use registered trademarks enjoyed by others in accordance with the law in the process of recycling renewable resources, and the recycling and use of renewable resources should be reasonable on the premise of not infringing their trademark rights."

Even if the infringer attaches their own trademark to the product, because the original rights holder's mark still exists, the likelihood of confusion is still high and would be considered infringement.

The second installment next week will examine how to verify refurbished products and shed light on bad faith within the context of trademarks on refurbished goods.