A civil judgment concerning a claim by the Chinese Taipei branch of Chieh Shih Overseas Trading Company (Hong Kong) for damages from the Chinese Taipei branch of Hang Ten (Virgin Islands)
Chinese Taipei
Case:
A civil judgment concerning a claim by the Chinese Taipei branch of Chieh Shih Overseas Trading Company (Hong Kong) for damages from the Chinese Taipei branch of Hang Ten (Virgin Islands)
Key Words:
counterfeiting, free ride, taking advantage of another firm's commercial reputation, inducement with profit
Reference:
Taipei District Court Civil Judgment (86) T'ai Shang Tzu No. 809
Industry:
Apparel Retailing
Relevant Law:
Summary:
According to the Chinese Taipei branch of Chieh Shih Overseas Trading Company (Hong Kong) (the plaintiff):
The plaintiff launched its all-cotton wrinkle free slacks in the Chinese Taipei market in July 1996. Nearly NT$10 million had been invested in advertising and promotional expenses to emphasized the "wrinkle free" attribute of the product. Subsequently, in October of the same year, the Chinese Taipei branch of Hang Ten (Virgin Islands) (the defendant) launched "all-cotton wrinkle free casual slacks" of nearly identical design and style. Its product advertising pamphlet was printed on "crepe" paper just like that of the plaintiff, and the wording used in the pamphlet to describe the process and principles employed in producing the wrinkle free slacks was also nearly the same. It took "wrinkle free" as its advertising and promotion theme as well, and its product also bore the word "Authentic" on the right rear pocket, identical to and in the same location as that on the plaintiff's product. The defendant thus has infringed on the design, wording, and photography copyrights of the plaintiff. It also counterfeited and plagiarized the plaintiff's commercial symbols in violation of Article 20 of the Fair Trade Law (FTL). Additionally, the defendant's use of the terms "100 Percent Quality at 50 Percent Price" implied that its goods were half the price of products bearing other brands but of similar design and quality in the market. It could thereby mislead consumers and influence their product selection consideration, and would accordingly induce them to purchase the defendant's product to accomplish the purpose of excluding competition from competitors. It violates Article 19(iii) of the FTL.
Moreover, the defendant's false or misleading advertisement accompanied by concrete numerical evidence asserting that its all-cotton wrinkle free slacks offered "100 Percent Quality at 50 Percent Price" as compared to similar products of other brands harmed the business interests of the plaintiff as well. This kind of free-riding behavior is capable of affecting the trading order and the nature of fair competition, and is deceptive to the consumer. It violates Articles 21 and 24 of the FTL and the plaintiff filed this damage claim against the defendant on these grounds.
The defendant on the other hand claims that its brand Hang Ten is widely known to consumers in the market. It has more sales outlets and greater annual turnover than those of the plaintiff. Therefore, it has no reason to counterfeit or take advantage of the plaintiff's brand of Giordano. Moreover, the defendant was already selling its Hang Ten all-cotton wrinkle free slacks in the market in February 1996, five months before the plaintiff's aforementioned product was launched. It is unlikely that the defendant would counterfeit the plaintiff’ s product. Neither the plaintiff's nor the defendant's wrinkle free slacks differ significantly from ordinary slacks of other brands sold in the market. The term "Wrinkle Free" and "Authentic" used by the plaintiff are neither product appellations nor symbols, but rather merely descriptive wording. The wording "100 Percent Quality at 50 Percent Price" is a creative advertising slogan; there is nothing false about it, so it does not violate the FTL. The all-cotton wrinkle free casual slacks advertising pamphlet was created by the defendant itself, and does not violate any provisions of the Copyright Law.
Regarding Article 20 of the FTL:
The plaintiff asserted that since the launching of its Giordano brand all-cotton wrinkle free slacks in July 1996, its large-scale advertising and promotional campaign and large sales volume have render the design, style, labeling (the "Authentic" inscription) of the all-cotton wrinkle free slacks, and the descriptive pamphlet printed on "crepe" paper and highlighting the "wrinkle free" attribute to become widely known to relevant consumers. However, the style, design, and labeling of the plaintiff's aforementioned Giordano brand of all-cotton wrinkle free slacks appear to be characteristic of casual slacks in general, and lack any significant unique features distinguishing them from other brands sold in the market. The only thing that sets them apart from conventional slacks is the wrinkle free feature; yet the plaintiff's product is not the only brand of wrinkle free slacks in the market. Other brands with the same feature include Lee, Unicorn, and Baleno -- of which the defendant submitted one pair each as evidence. It is therefore evident that the relevant consumers would be unable to identify the plaintiff's product merely on the basis of the product's design, style, and labeling.
The "Authentic" inscription on the all-cotton wrinkle free slacks is intended in meaning as "genuine, dependable," i.e. as a description assuring consumers of the product's quality and material, and the location in which the inscription is embroidered is typical of the average pair of casual slacks. The defendant also submitted evidence that other brands had similar words stitched on the pockets of their slacks. This descriptive feature can therefore hardly be deemed a symbol of the product. Moreover, the plaintiff's use of the words "Wrinkle Free" on a "crepe" paper background in its advertising pamphlet is an ordinary advertising technique intended to highlight the product's non-wrinkle, no-ironing-required property. It is a simple expression of a product attribute, and can hardly be considered a symbol of the product.
Also, in the ordinary casual slacks market, purchase choices by consumers are made on the consideration of factors such as trademark, manufacturer, and material. By merely paying average attention, consumers could easily distinguish the product they intended to purchase from the others; it was quite unlikely that they would be confused or misled. In sum, neither the design, style, "Authentic" label nor the pamphlet wording of the all-cotton wrinkle free slacks, be they those produced by the plaintiff or the defendant, constitute product "symbols" known to the public. Nor would consumers or purchasers be so confused or misled by the alleged similarity in the product' s appearance or the advertising pamphlet as to mistake the defendant’ s product for the plaintiff's product. Thus, the defendant can hardly be deemed to have violated Article 20 of the FTL. Such an opinion was also adopted by the FTC in its responding letter dated December 30 1997, Ref. (86) Kung Ts'an Tzu No. 8610991-001 on the issue of whether the defendant's sales behavior had violated the FTL.
Regarding Article 19(iii) of the FTL:
The defendant's use of the slogan "100 Percent Quality at 50 Percent Price" is an advertising and marketing technique intended to attract consumers?patronage by emphasizing the high-quality and low-price features of the product at issue, which has been clearly and correctly explained by the defendant. Furthermore, the defendant did not specifically cite any manufacturer or enterprise by name for the purpose of product comparison. Its behavior did not reach the degree that would be considered as coercive, inducing with profit, or malevolent either. In addition, no evidence had found to indicate that the defendant's promotional behavior was undertaken by employing unreasonably low price. The defendant motive is beyond criticism and its behavior does not breach normal trading order. In light of the previous discussion, the defendant's assertion that its advertising by means of the aforementioned marketing technique does not constitute a violation of Article 19(iii) of the FTL concerning "inducement with profit," "improper means," or "obstructing fair competition" should also be deemed reasonable. Thus, the defendant's behavior in this respect did not violate Article 19(iii) of the FTL.
Regarding Article 24 of the FTL:
The products of the defendant and plaintiff are highly similar in nature. This fact has been respectively and correctly stated by both parties. It is inevitable then that there should be similarities in the advertising of the two. Therefore, Article 24 of the FTL will not be applicable unless one of the enterprises engages in deceptive or obviously unfair acts such as aggressively and blatantly plagiarizing the other, or deliberately misleading people to believe that the products it sells bear a certain relationship to the products of the other, of whose commercial reputation it is trying to take advantage. Products bearing the "Hang Ten" and double-footprint trademarks and brand of the defendant have been in the market for many years, and the consumers are familiar with the brand. The Hang Ten trademark is clearly present on the label and on the inner waistband of the defendant's all-cotton wrinkle free slacks at issue, providing the main reference by which the general public identifies the source of product. The defendant's pamphlet also bears the "Hang Ten" and double footprint trademarks, as well as the company's name and telephone number. In addition to the term of "wrinkle free", it also bears a round icon with the shape of an "iron" and similar to a "no smoking" sign. Consumers could readily identify the defendant product by paying just a modicum of attention. As a result, it is unlikely that a misled connection of the defendant slack with that of the plaintiff would occur. In sum, the plaintiff in this case fails to provide evidence to prove that the defendant aggressively took advantage of the plaintiff's commercial reputation or fraudulently appropriated the fruits of the plaintiff's efforts. The defendant's assertion that it did not engage in unfair acts in violation of Article 24 of the FTL is therefore credible.
Summarized by Ch'iu Shu-fen
Supervised by Ch'en Hui-p'ing
Chieh Shih Overseas Trading Company (Hong Kong)
Uniform Invoice No.: 22822613
Hang Ten's (Virgin Islands) Uniform Invoice No.: 89390754