Selling Genuine Products Can Still Infringe: By-Health Wins RMB 300,000 in Damages
Product bundling is a common marketing tactic, but when it causes consumer confusion or infringes another party’s trademark rights it can constitute trademark infringement—and even unfair competition. Below is a case in which selling genuine products was judged to be infringing: By-Health was awarded RMB 300,000 in damages.
The Guangzhou Intellectual Property Court has upheld a first-instance judgment in a trademark-infringement and unfair-competition suit brought by the well-known health-products company “By-Health” (汤臣倍健). The court confirmed that the defendants (Guangzhou Qian’en Medical Technology Co., Ltd. and Guangzhou Shangdong Computer Technology Co., Ltd.) infringed By-Health’s rights by bundling their own goods with By-Health products, and ordered the defendants to pay RMB 300,000 in compensation.
By-Health Co., Ltd. is an A-share listed company and the market leader in China’s dietary-supplement sector. It owns the highly recognised and influential “By-Health” series of registered trademarks.
Defendant Qian’en is engaged in medical-technology development and product sales; defendant Shangdong focuses on computer technology. The two companies share the same legal representative and are closely related.
In June 2023 By-Health discovered that Qian’en, operating stores on Pinduoduo and other e-commerce platforms, was committing the following acts while selling genuine By-Health goods:
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Using the “By-Health” trademark in product titles, main images or detail pages.
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Displaying By-Health product images side-by-side with images of its own brand “Qian’enjian”.
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Bundling or commingling “By-Health” and “Qian’enjian” products under the same listing.
By-Health sued, arguing that the defendants had no authorisation, that “Qian’enjian” products were in no way connected with By-Health, and that the defendants were leveraging By-Health’s brand influence to divert traffic and blur product origin, thereby committing trademark infringement and unfair competition.
The defendants contended:
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All By-Health goods sold were genuine; use of the mark was merely nominative and therefore fair use.
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Bundling was not compulsory, their own brand was clearly marked, and no confusion would arise.
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By-Health’s prohibition of unauthorised resale violated the “exhaustion of trademark rights” doctrine.
Court findings
Both the first-instance Huangpu District People’s Court and the second-instance Guangzhou Intellectual Property Court held:
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The defendants exceeded the scope of nominative (indicative) use. By inserting their own products and displaying their own manufacturing information while selling genuine goods, they interfered with the mark’s identifying function and deliberately free-rode on By-Health’s goodwill, infringing the plaintiff’s exclusive trademark rights.
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The commingled sales were apt to mislead consumers into believing the store was an authorised By-Health dealer or that “Qian’enjian” products were affiliated with By-Health, thereby disrupting the competitive order.
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The “exhaustion of trademark rights” principle does not apply: that principle allows only good-faith, reasonable use when reselling genuine goods, whereas the defendants’ side-by-side imaging and bundling impaired the trademark’s function and fell outside fair use.
Judgment
The Guangzhou IP Court’s second-instance ruling orders the two defendants to cease the infringing and unfair-competitive acts and to pay By-Health RMB 300,000 in damages and reasonable costs.
Take-away: even when selling genuine goods, operators must not blur the boundary between those goods and their own by bundling, mixed display or spliced images so as to cause consumer confusion. Where such acts are motivated by an intent to free-ride on another’s goodwill, they may constitute both trademark infringement and unfair competition. When promoting their own brands, companies must keep all branding clear and independent, stay clear of others’ trademark rights, and guard against legal risk. Once the line is crossed, the conduct may be deemed infringement—or unfair competition.
