On September 9, 2025, the IP Court of the Supreme People’s Court (“SPC”) handed down its second-instance judgment in (2024) Zui Gao Fa Zhi Min Zhong No. 1193, an appeal in a patent infringement dispute. The Court held that where a business lawfully purchases a genuine patented product from the patentee, replaces the original trademark with its own, and resells it - even while publicly claiming the product to be self-developed and self-manufactured - this does not amount to “manufacture” under Article 11 of the Patent Law, so long as the technical solution of the product is not substantively re-implemented or reproduced. The doctrine of patent exhaustion applies, and no infringement is established. The SPC reversed the first-instance finding of liability in its entirety and dismissed the patentee’s claims for over CNY 30 million (approx. USD 4.3 million) in damages. The ruling draws a clear boundary around patent exhaustion and, as a practical matter, narrows the relief available under patent law against “relabel-and-resell” conduct. At the same time, the SPC’s judgment expressly leaves other enforcement channels open to brand owners and patentees. This article reviews the case from a rights holder’s perspective and sets out practical avenues for precisely targeting the “buy genuine goods, relabel, and resell” business model.

Case Summary

The patent at issue is titled “Anti-SARS-CoV-2 Antibody, Detection Reagent and Kit” (Patent No. 20201118****.X), filed on October 29, 2020 and granted on January 7, 2022. The patentee, Dongguan Peng- ** Technology Co., Ltd., granted an exclusive license to Fei-** Co., Ltd. (hereinafter referred to as “F Company’), including the right to bring enforcement actions in its own name.

Filing: On August 28, 2023, F Company filed suit before the Hangzhou Intermediate People’s Court (Zhejiang), alleging that Hangzhou Hua-** Co., Ltd. (hereinafter referred to as “H Company”) had, without authorization, manufactured, used, sold and offered for sale the accused product - an “M9062” antibody - seeking CNY 30 million (approx. USD 4.3 million) in damages plus reasonable expenses.

First instance: On September 19, 2024, the Hangzhou Intermediate Court issued the first instance judgment (2023) Zhe 01 Zhi Min Chu No. 393, found that H Company had affixed its own trademark to products purchased from F Company and had publicly claimed on its website to be the self-developing, self-manufacturing source of the products. On that basis, the court held that H Company had engaged in “manufacture” within the meaning of the Patent Law, to which exhaustion did not apply. H Company was ordered to cease infringement and pay CNY 60,000 (approx. USD 8,571) in damages plus CNY 140,000 (approx. USD 20,000) in reasonable expenses; the remainder of the claims was dismissed.

Second instance: H Company appealed. The SPC docketed the case on November 25, 2024, held an open hearing on March 25, 2025, and issued its final judgment on September 9, 2025, reversing the first-instance judgment in full and dismissing all of F Company’s claims.

The SPC's Rule and Reasoning

Rather than resolving the case simply on the basis that the product had been “relabeled” or marketed as self-developed, the SPC worked through the underlying elements of patent exhaustion, layer by layer. The key factors it weighed were as follows:

1. Relabeling or simple repackaging does not, by itself, amount to “manufacture”

Once a patentee or its licensee sells a patented product, the buyer’s subsequent use, sale, offer for sale, or importation of that product does not constitute infringement. Even where the reseller directly, or after simple repackaging, reapplies its own label before reselling, this alone - nor a public claim of self-development - is sufficient to establish “manufacture” under Article 11 of the Patent Law.

2. Legitimate sourcing, adequate consideration, and the patentee's prior compensation

H Company obtained the accused products through third parties via lawful channels and paid reasonable consideration; F Company had already received adequate compensation through the first sale of the product - this is precisely the economic rationale underlying the exhaustion doctrine.

3. Resale quantity did not exceed purchased quantity

The evidence showed that the quantity H Company purchased through third parties exceeded the quantity it resold, corroborating that its conduct was resale rather than separate manufacture undertaken to expand supply; F Company, for its part, failed to prove that H Company’s sales volume was anomalously large.

4. No re-implementation or reproduction of the patented technical solution

The patented technical solution was already embodied in the product at the moment H Company acquired it; its relabeling and resale did not re-implement or reproduce that technical solution. This is the substantive dividing line between “manufacture” and “resale,” and the analytical core of the judgment.

5. The implied-license doctrine, applied to assembly into a finished kit

Notably, the SPC treated H Company’s further conduct - assembling the purchased reagent into a finished diagnostic kit for resale - differently. The Court found that this assembly did fall within Claim 15 (directed to the kit) and did constitute “manufacture” under Article 11. However, because the patent specification showed that the reagent’s only reasonable commercial use was to be assembled into such a kit, the Court held that F Company’s sale of the reagent itself carried an implied license for the buyer to assemble it into a kit - so this act of “manufacture” likewise escaped infringement liability.

These five factors mark the outer boundary within which an accused infringer may successfully invoke exhaustion - and, read the other way round, they are precisely the evidentiary battlegrounds a rights holder should target in order to defeat an exhaustion defense against relabel-and-resell conduct, as discussed below.

Implications and Enforcement Strategy for Brand Owners and Rights Holders

This case shows that where a defendant can prove legitimate sourcing, that its resale volume did not exceed its purchase volume, and that it made no substantive change to the technical solution, a rights holder enforcing solely on a patent infringement claim against “relabel-and-resell” conduct will often fall short of full relief. That does not mean rights holders are without recourse - quite the opposite: this case points to more precise, multi-layered enforcement paths. The SPC expressly noted that whether H Company’s trademark substitution infringed any “other civil rights” of F Company fell outside the scope of this patent case, and that F Company “may assert such rights through other channels” - expressly preserving room for trademark claims, competition-law claims, and other intellectual-property enforcement channels.

(1) Trademark Enforcement: Targeting Relabeling Precisely Through “Reverse Passing Off”

Article 57(5) of the current PRC Trademark Law expressly provides that “replacing a registered trademark without the trademark owner’s consent and putting the relabeled goods back on the market” constitutes infringement of the exclusive right to use a registered trademark - a practice known doctrinally as “reverse passing off.” This provision offers rights holders a more direct route against “buy genuine goods, relabel, and resell” conduct than patent law, with a materially lower evidentiary bar: there is no need to prove re-implementation of any technical solution - only that the goods are genuine and that the trademark was substituted without authorization. Brand owners are well advised to:

1.  Lead with reverse passing off as the primary cause of action rather than relying on patent litigation alone. Against distributors, agents, or unidentified channel resellers who purchase genuine goods and relabel them, rights holders should plead Article 57(5) of the Trademark Law as a primary or parallel claim, so that a successful exhaustion defense on the patent side does not leave the case empty-handed;
2.  Layer in unfair-competition and false-advertising claims. Where the infringer also publicly claims the goods to be “self-developed” or “self-manufactured,” rights holders can additionally invoke China’s Anti-Unfair Competition Law provisions on false advertising and confusion, combining trademark law and competition law for fuller coverage;

3.  Strengthen evidence preservation and product-identity comparison. Following the approach F Company took in this case, rights holders should use notarized test purchases to fix evidence of the accused product’s source and distribution chain, and commission third-party testing to compare the accused product against the genuine article by sequence or composition analysis - establishing product identity as solid technical support for a reverse passing off claim;

4.  Combine civil litigation with administrative and customs channels. Reverse passing off is an infringement type expressly enumerated in the Trademark Law, so rights holders can, in addition to civil law suit, file complaints with market regulation authorities (Administration for Market Regulation) and record their trademarks with Customs to intercept relabeled goods at the import/export stage - building a layered enforcement network of civil litigation, administrative action, and customs protection.

(2) Patent Enforcement: Focusing the Evidentiary Effort to Defeat an Exhaustion Defense

Where there is genuine evidence that an infringer’s conduct exceeds the scope of lawful resale, patent law remains an important tool. Rights holders should build their evidentiary strategy, claim drafting, and contractual arrangements around the very factors the SPC weighed in this case:

1.  Make volume reconciliation the central battleground. In this case, it was only by obtaining the defendant’s procurement contracts, bank records, and tax invoices, and reconciling purchase against resale volumes, that the court was able to confirm there was no material discrepancy. Rights holders should proactively apply to the court to subpoena the accused infringer’s sales invoices and inventory records from tax authorities and invoicing systems; if resale volume can be shown to exceed verifiable purchase volume - i.e., there has been “padding” of supply - the excess portion may be argued to constitute “manufacture” under Article 11, defeating the exhaustion defense;

2.  Focus on detecting substantive alteration of structure or appearance. Through professional testing, sequence comparison, or reverse engineering, examine whether the accused product deviates from the rights holder’s originally sold product in technical solution, structure, or design. Proof of a substantive modification - beyond simple repackaging or relabeling - supports a finding of “manufacture”;

3.  Draft and prosecute claims that reach downstream processing, assembly, and finished forms. In this case, it was only because the patentee had included the finished “kit” form in an independent claim (Claim 15) that the court had any basis to find that the defendant’s kit-assembly conduct objectively fell within the patent’s scope and constituted “manufacture” - even though it was ultimately excused under the implied-license doctrine. This is a reminder for rights holders to draft claims, at the application and portfolio-building stage, that separately cover raw materials, intermediates, and common downstream processing, assembly, and packaging forms, broadening coverage and remedial flexibility across the full value chain;

4.  Use contractual terms to expressly exclude the implied-license doctrine. An implied license arises only where the rights holder has not imposed restrictions on downstream use of the product. Rights holders can include express provisions in procurement agreements, sales contracts, or product terms with distributors and agents prohibiting unauthorized relabeling, private-labeling, further processing, assembly, or resale, while reserving the right to separately license and charge for downstream processing or assembly - foreclosing, at the source, any defendant’s ability to invoke an implied license;

5.  Treat “self-claimed manufacturer” marketing evidence as corroborating, not standalone, proof. This case confirms that marketing language alone cannot establish manufacture. Rights holders should combine such evidence with the volume-reconciliation and technical-comparison evidence discussed above to build a complete evidentiary chain, rather than relying on marketing statements in isolation.

In sum, the rule established in this case narrows the practical scope of patent-law relief against simple “buy genuine, relabel, and resell” conduct - but it also charts a realistic path for brand owners combining trademark law, unfair-competition law, and carefully engineered patent claims and contractual arrangements. Rights holders are advised to tailor evidence-preservation mechanisms, contract terms, and patent claim strategy to their specific products and channel-management needs in advance, so as to precisely target and comprehensively regulate relabeling infringement across the full supply chain.