In recent years, Vietnam has become one of the hottest spots for investment. Thanks to the trade war, many factories and even supply chains shifted from China to Vietnam. While it remains to be seen if Vietnam could be the next world factory, a very acute consequential issue arises.
Let’s consider this scenario. Dicken manufactures sports shoes branded DTF in Vietnam exclusively for foreign sales in North America (and none in Vietnam). Does he need to obtain trademark registration in Vietnam? What’s your say?
You may argue that it is not necessary as there will not be any confusion among the Vietnamese market! Smart answer! Indeed one major function of the trademark laws is to try to eradicate confusion among the market. If there is no sale in Vietnam, the customers in Vietnam will not be confused anyway.
Let’s twist the scenario. If Dicken manufactures sports shoes branded Nikie in Vietnam, again exclusively for foreign sales in North America, should Dicken be allowed to walk away without any liabilities towards Nike in Vietnam? What’s your thought this time?
As you could imagine, it is more effective to take down trademark infringement at the manufacturing level, for obvious reasons. The counterfeits seized would be typically larger in volume and that it is far easier to arrange raid actions (before spreading out). It will be a huge blow for the brand owners if they are not allowed to rely on their local trademark registrations to take enforcement steps against the manufacturing origin, simply because the counterfeits will not be sold locally.
It is natural that people conclude in a contradictory manner as above, but the business community always prefers certainty when we talk about rules. In fact, the Chinese experience in the past years has not been entirely satisfactory, as the court decisions may not be very consistent, with difficulties to reconcile. It is indeed painful for not being empowered to take down infringing activities (i.e. a clear rule that products manufactured locally but exclusively for foreign sales will not be afforded local trademark protection), but it would be truly a nightmare if the rules are unclear, because the brand owners simply do not know whether they should spend tremendous efforts and resources to conduct raid actions and could only try their luck.
Vietnam, as the next world factory contender, sees this tricky issue. A draft decree has recently been published for consultation on the sanctioning of the export of counterfeit goods. That may lead to the understanding that even if goods are manufactured in Vietnam for pure export, they will be considered an infringement if affixed with a mark confusingly similar to another person’s registered mark without permission. The decree may take effect as early 2022.
Please do not take this lightly and there are at least three important implications for you.
1. If you are brand owners, please always consider securing trademark registrations in Vietnam, especially since it may be more and more preferable to manufacture products in Vietnam after the relocation of the supply chain. Trademark registration will give you a solid weapon against possible infringes. However, please also bear in mind that registration is vulnerable to non-use cancellation in the future if you do not use it in Vietnam.
2. Further, if you do not own your factory but engage a Vietnamese OEM, it is all but possible that production could be unfortunately interrupted, as it does not serve you exclusively and may well be sued for infringement for the goods produced for its other clients. Please, therefore, conduct background searches (perhaps with a trap inquiry), find an OEM who has a history to respect IP, and also insert appropriate clauses to safeguard your interests.
3. If you are manufacturers, please always try to fight for an indemnification clause in the manufacturing agreement to protect yourselves. In case the products manufactured infringe the trademark of the third-party brand owner, the innocent you will be relieved of legal liabilities, and sufficiently compensated by the one who engages you.
Suffice to say, it will also take some time to observe how and if the decree will be implemented well. Like it or not, however, it is better you understand more about the laws, and adjust your strategies accordingly.
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