Chang Yao-chou's violation of the Fair Trade Law

Chinese Taipei

Case:

Chang Yao-chou's violation of the Fair Trade Law

Key Words:

counterfeit, commonly known to the relevant public, corporate identification system

Reference:

Hight Court Judgment Ref. (86) Shang Yi Tzu No. 4742

Industry:

Other Mechanical Instrument Retail Sales Industry (5459)

Relevant Laws:

Articles 20(1)(i) and 35 of the Fair Trade Law

Summary:

  1. Defendant Chang Yao-chou (Chang) was the responsible person of Lu Jung Trading Co., Ltd. (Lu Jung). Hsu Chen-chi was the responsible person of Fu Shih Sifter Mfg. Co., Ltd. Both knew that the (subject) orange and white packaging case design belonged to the Japanese company, Hitachi Construction Machinery Corp. (Hitachi), and that it was commonly known to the relevant public as a symbol representing the Hitachi’s products. However, in early 1994, with general criminal intent, Chang and Hsu jointly counterfeited the subject package, with the depiction of "For Use with Hitachi Construction Machinery," and marking the model number "4207841" exclusively used by Hitachi, as well as placing the Japanese-language indication "Genuine Parts" on the counterfeit packaging cases (counterfeits). Objectively, there were sufficient to cause a mistaken belief (on the part of the consumer) that the counterfeits were (genuine) Hitachi products.

  2. Based on the samples that Chang provided to Fu Shih for production , the counterfeits were similar to the subject package in terms of color scheme, font, model number, and description, especially its boring of Hitachi's company name, model number, and the Japanese-language presentation "Genuine Parts." Objectively, there were sufficient to cause the public to mistake the counterfeits for the genuine ones produced by the complainant (i.e., Hitachi). It can also be found that counterfeits' producer subjectively had the intent to use them to confuse its products with Hitachi's. Otherwise, how could the two packaging cases have been so similar to each other? Furthermore, the representations depicted on the counterfeit were sufficiently misleading. The defendants argued that the orange-and-white color scheme was commonly used in the trade. However, an investigation showed that this color scheme had been customarily used by Hitachi. Hitachi's excavator Model Tai No. 5 marketed in May 1949, and oil-pressing excavator Model UH03 marketed in July 1965, both had used the orange color. Orange thus had become the color specially representing Hitachi-produced excavators. In addition, Hitachi had packaged many of its excavator parts in the subject package with labels printed in black and white. The subject package was clearly a corporate identification system (CIS) of Hitachi that was commonly known to the relevant public. The attorney for the defense presented several samples of the same color scheme as used by an insignificant number of companies alleging that the subject package was commonly used in the trade. Such allegations were clearly reckless generalizations and not admissible.

In addition, Hitachi's product under the model number "4207841" was exclusively for use on its excavator product. In representing this model number on the counterfeits, the defendants sufficiently caused the consuming public to mistake the counterfeits for the complainant's products. In addition, Hitachi Electrical Corp. produced air conditioners, elevators, and engineering machines and had a worldwide reputation for decades. Thus "Hitachi" was a world famous mark. Excavators and parts produced by "Hitachi Construction Machinery" with its reputable service accounted for a large market share. Its name was also well known in the trade. The addition of "For Use with" to the "Hitachi Construction Machinery" on the counterfeits was clearly intended to cause confusion. The defendants had printed on the counterfeit packaging a Japanese-language indication meaning "Genuine Parts" ("original manufacturer genuine parts"). It was further proven that the defendants had intended to confuse and mislead the public to believe that the sifters they sold were produced by Hitachi. According to the assessment of the Fair Trade Commission (FTC), the sifters produced by Hitachi were fairly well known in Chinese Taipei’s market, and it would have been difficult to consider them as being not commonly known in the trade.

According to the FTC, the defendants' act included the elements (necessary to constitute) a violation of Article 20(1)(i) of the Fair Trade Law (FTL), and this was confirmed by the testimony of an FTC officer. The defendants' allegations that the color scheme designed by defendant Hsu did not constitute a representation symbol and was not package commonly known to the relevant public were obviously contrary to the facts and therefore not admissible. Despite the defense's attack on the market share and sales figures (presented by Hitachi), the Hitachi excavators in question, the relevant parts and service accounted for a large market share and were well known in the trade. Even though the FTC officer testified that there were discrepancies in the statistics, the FTC did not find the statistics to be inadmissible. Where an enterprise uses for its own product a package similar to another person's that is commonly known to the relevant public, FTL Article 20(1)(i) shall apply. Consumer confusion is not required in applying the said provision. Accordingly, all the arguments made by the defendants as follows to except the District Court’s decision were of no basis: (1) that because Fu Shih's products bore its company name, its trademark, model number "FH-175", as well as "For Use" without the "Made in Japan" representation and were sold at NT$110 each compared to Hitachi's price of NT$400, the consumer would have been able to distinguish the two companies' products; (2) that buyers of the products in question must have substantial professional knowledge as such products were for use with excavators, rather than daily goods, and therefore consumers would not be confused merely by the package; in addition (3) that there were various sifters marketed under various trademarks on the market; and the consumer could distinguish the (defendant's) trademark and would not make purchase simply because of package identification, therefore, the counterfeits were not sufficient to cause a mistaken identification by the customer.

  1. In conclusion, defendant Chang's (defense) argument was insufficient (to sustain an appeal). His violation was clearly found by the facts and evidence. The District Court, taking into account his previously clean record, motive, purpose and post-offense attitude, sentenced him to three months in prison, which was commutable to payment of a fine at the rate of NT$900 per day of imprisonment. Such judgment was considered proper in terms of the facts finding and application of relevant laws. The defendant's appeal was therefore dismissed.

　

Summarized by Chen Hwei-pin

Appendix:
Lu Jung Trading Co., Ltd.’s Uniform Invoice No.: 04473640
Fu Shih Sifter Mfg. Co., Ltd.’s Uniform Invoice No.: 04468111

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