Sung Enterprise Inc. (an American firm) violated the Fair Trade Law for wrongfully sending out warning letters through an attorney to the complainant's customers
Case:
Sung Enterprise Inc. (an American firm) violated the Fair Trade Law for wrongfully sending out warning letters through an attorney to the complainant's customers
Key Words:
warning letter, copyright, novels by Ku Lung
Reference:
Fair Trade Commission Decision of October 11, 2001 (the 518th Commissioners' Meeting); Disposition (90) Kung Ch'u Tzu No. 171
Industry:
Book Publishers (8430)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
1. Storm & Stress Publishing Co., Ltd. (Storm & Stress) filed a complaint with the Fair Trade Commission (FTC) claiming that Sung Te-ling and the US firm Sung Enterprise Inc. (Sung Enterprise) improperly sent out warning letters through an attorney to the complainant's customers in violation of the Fair Trade Law.2. Article 3 of the publishing contract at issue granted non-exclusive publishing rights to Storm & Stress for the publication of a series of novels by Ku Lung. Accordingly, Sung Enterprise retains the right to publish novels by Ku Lung, or grant publishing rights to a third party. Sung Enterprise and Storm & Stress are thus competitors operating at the same level of the distribution chain. In its formal review, the, FTC found that the actor in this case was Sung Enterprise, not Sung Te-ling. The main reasons for this part of the ruling are as follows:(1) The attorney who issued the letters of warning did so on behalf of Sung Enterprise:In determining whether the dispatch of warning letters by enterprises constitutes a violation of the Fair Trade Law, the most important criteria are the following two questions: Can the dispatch of the letters be imputed to the enterprise in question? Does the dispatch of the letters conform with the provisions of the Fair Trade Law? In this case, the warning letters dispatched on 4 August 2000 and 28 September 2000 were dispatched by Luo Sheng-chien, of Luo Sheng-chien Law Office, at the request of Sung Enterprise. Therefore, Sung Enterprise should in formality be regarded as the entity that dispatched the warning letters, and should be reprehensible for such a conduct. (2) The attorney explained that he was asked by Sung Enterprise to send the letters:The attorney who signed and dispatched the letters, Luo Sheng-chien, stated that he did so at the oral request of Sung Enterprise. In light of both the content and form of the letters, the FTC concluded that Sung Enterprise is the party that requested their dispatch.(3) The copyright royalties were paid to Sung Enterprise:The publishing contract at issue contains the name "Sung Enterprise" in the contract header and bottom signature line, and the royalty payment tax withholding statement dated 14 October 1997 names Sung Enterprise as the funds recipient, thus the facts in this case indicate objectively that Sung Enterprise is the party that instructed the attorney to issue the warning letters.3. The commissioners made decision that Sung Enterprise violated Article 24 of the Fair Trade Law, basing their ruling on the following facts and evidence:(1) The Taipei District Court issued a decision on 29 June 2000 confirming the contention of the plaintiff, Stress & Storm, that a relationship existed under the relevant publishing laws between itself and the defendant, Sung Enterprise. The content of the warning letters that Sung Enterprise instructed attorney Luo Sheng-ch'ien to dispatch on 4 August 2000 and 28 September 2000 indicated strongly that Sung Enterprise was already familiar with the content of the Taipei District Court's decision. However, Sung Enterprise made no particular effort to seek from the Taipei District Court any confirmation of the import of its decision; on the contrary, Sung Enterprise claimed that it never received the decision, and refused to recognize the jurisdiction of the Taipei District Court on the grounds that Sung Enterprise is a US company and its responsible person is a US citizen. On the basis of these claims, Sung Enterprise denied that Storm & Stress had any legal right to publish the books in question.(2) Sung Enterprise has repeatedly insisted on "exercising its rights," and twice instructed attorney Luo Sheng-ch'ien to dispatch letters of warning. These letters accused Storm & Stress by name of infringing Sung Enterprise's copyright, and demanded that Hess Bookstore, Kingstone Book Co., and Eslite Bookstore immediately stop selling the books in question, promising to take necessary legal measures should they refuse to do so (including confiscating reproductions not authorized by Sung Enterprise, and filing civil and criminal copyright infringement suits against the companies in question). The respondent's first two warning letters were sent out to nine different book sellers. The third warning letter was sent to only three book sellers. In the end, among these three remaining book sellers, Eslite Bookstore, in order to avoid a lawsuit, on 11 October 2000 removed from its shelves and ceased sales of all six volumes of martial arts novels published by Storm & Stress. Eslite returned all of its remaining volumes in stock to Storm & Stress, and has not since ordered any more products from Storm & Stress. By sending out the warning letters, Sung Enterprise prompted a third party to terminate purchasing of all publications from Storm & Stress, thereby achieving its objective of undermining the position of Storm & Stress in the publishing market.4. Sung Enterprise wrongfully dispatched letters via an attorney to its competitor's bookstore clients, claiming that the competitor's publication of Chu Liu Hsiang Chuan Chi (The Legend of Chu Liu Hsiang) and five other novels by Ku Lung constituted an infringement of Sung Enterprise's copyright. The objective facts of the case are sufficient to support the conclusion that the letters brought improper pressure to bear upon its competitor's trading counterparts, and impinged upon the ability of the trading counterparts to freely decide whether to trade, and upon what terms and conditions. This behavior violates the principle of effective competition, is ethically reprehensible, and clearly unfair. For these reasons, the FTC ruled that Sung Enterprise violated Article 24 of the Fair Trade Law.Summarized by Hou, Vh-Hsien; Supervised by Wu, Teh-sheng