Is there any legal risk in marking a company’s LOGO on the commercially available products as a gift to customers?

While discussing the 20th anniversary celebration event of Company M, the planning department proposed to buy a batch of thermos, mark with M’s logo, and distribute to consumers and other commercial partners as souvenirs. Some staffs questioned about this proposal from the perspective of legal risk prevention and control.

Generally speaking, the marks on a product or its packaging mainly have 4 functions: 1) to distinguish the source of goods by using a trademark or a design patent; 2) to meet the needs of consumers for acquiring product quality liabilities; 3) to regulate fair competition, and protect consumers’ right to know; and 4) to promote products. In view of these 4 functions, the legal risks involved in marking a company’s LOGO or trademark (hereinafter collectively referred to as “LOGO”) on others’ products for distribution or sale would be analyzed from the following dimensions:

First, whether the company has used its LOGO in accordance with laws and regulations? If a company marks its registered trademark on a commercially available product, there are two main legal risks: 1) a registered trademark should be registered under specific goods/service scopes, if commercially available products are not belong to the aforesaid scopes, then the market supervision authority may hold that the enterprise has failed to use its registered trademark properly; and 2) a company should have a specific registered business scope, if the manufacture or sale of acertain commercially available product requires certain qualifications, the company does not have such qualifications, and consumers take the company as the manufacturer or seller, then it might be deemed as conducting business beyond its business scope.

Second, whether the company would be required to undertake relevant products quality liabilities? Paragraph 2, Article 27 of the “Product Quality Law” prescribes that products or the marks on their packaging must be genuine, and shall have the name and the manufacturing factory’s name and address displayed in Chinese. So the marks on the products or their packaging would display the name and address of the manufacturer which shall undertake the products quality liabilities. If a company marks its LOGO on other’s products in an improper way, which might mislead the other parties on the source of the products, then the company might be claimed in the disputes related to products quality liabilities.

Third, whether the company has infringed other parties’ exclusive rights to use registered trademarks, or confused others on the source of the products/service, or led others to believe the company has a relationship with the sourcing party of the products/service? Paragraph 5, Article 57 of the “Trademark Law” prescribes that changing of a registered trademark without the consent of the trademark registrant, and sale of commodities bearing the changed trademark in the market shall be deemed as infringement of exclusive rights to use registered trademarks. For example, if a company purchases a batch of bottled water for anniversary, in order to promote its own LOGO instead of the bottled water, it tears off the packaging of the bottled water, tags with its own LOGO, and distributes to guests, such behaviors might be deemed as infringement of exclusive rights to use registered trademarks. Even if the company has not tired off the packaging, it just tags its own LOGO on the packaging, and the packaging has the company’s LOGO and the manufacturer’s trademark, if the size, content, location of the two are not properly arranged, such behavior might be deemed as other conduct that is confusing enough to lead people to mistake its products for another business operator’s products or to believe certain relations exists between its products and another business operator’s products, as stipulated in paragraph 4 Article 6 of the “Anti- Unfair Competition Law”.

In addition, it should be highlighted that whether the products would be used as a gift would not affect the determination of the relevant risks. There are two main reasons: 1) in the judicial practice, courts tend to hold that the gifts and sale are inseparable, the essence of providing a gift is to promote the sale, such as (2018) Yue 03 Min Chu No. 352; and 2) although the gifts have not been sold directly, it might be flowed into the market, which may cause the misunderstanding of the source of products of the recipient or other parties who have gotten such gifts.

In summary, if a company wants to put its LOGO on commercial available products, it is recommended to pay attention to the following aspects:

(1) To retain the product’s original packaging and identification information.

(2) To mark the LOGO in a proper way, it is recommended to add explanatory content such as “XX Company’s Anniversary”, and the LOGO should not be marked over, or in the same prominent position with, the product’s original LOGO or trademark.

(3) To display the information of the manufacturer and seller of the product.