Non-legal factors to be perceived in anticipating the outcome of controversial IP disputes

In addition to what the law says in books, it is necessary to identify the factors beyond the law, especially when a dispute (1) has not yet become a typical case that can follow a fixed rule and (2) is raised in multiple jurisdictions. 

For example, during the year 2012-2016, various Chinese courts made contradictory decisions over an issue of the so-called “OEM Exception”.  It refers to a situation where a manufacturer affixes a third-party trademark purely based on the requirement of its client. For example, a manufacturer may affix a brand logo according to its client’s requirement.  However, such a client may have not secured trademark right in China.  Then the issue is: whether the manufacturer should be found infringing, in China, the trademark rights that are owned by a registrant other than the manufacturer’s client. 

Lawyers may anticipate the outcome of the case through various approaches.  But because this “OEM Exception” issue is very controversial, different courts interpreted the law in different ways.  Some courts ruled that because the OEM products are made purely for the purpose of export, there shouldn't be an infringement of an "exclusive right in China". Some courts ruled to another extreme that "manufacture of the product" per se should be deemed a trademark use and therefore the OEM factories should be found infringing trademark rights. A third way was to carefully review case facts and consider whether there is domestic use of the trademark in dispute.

I have represented clients from both sides before various courts. In addition to the legal analysis, I have identified a non-legal factor that may impact the court's decisions – which is the reference of the overall export environment during a given period and in a specific province. 

Usually, when the local government wishes to boost the export or when the number of export went down, the local courts would unlikely find manufacturers to be liable, citing the reason that the products were made purely for the purpose of exporting overseas. Therefore, affixing the trademark on these exporting products would not cause confusion for consumers residing in China.

On the other hand, when the economy, and in particular the export, numbers looked good and the local government wanted to reduce its reliance on the OEM business model, the correspondent courts would tend to find OEM branding an infringement of trademark rights.

No judgment would explicitly acknowledge the above insights. However, because Chinese judges are officially responsible to "support" the overall development of the economy, whether or not the OEM business is encouraged by the government becomes a factor to be monitored.

The above is just an example of the "non-legal" factors (please note I am not discussing those "illegal factors") that may affect the outcomes of the IP disputes. The key point is: perceptions of these factors will be helpful for enterprise management in making wise decisions on starting, speeding up or suspending, holding a litigation/settlement negotiation.