Hi-Five Products Developing Co., Ltd. was complained for improper issuance of patent infringement warning letters in possible violation of the Fair Trade Law

Chinese Taipei



Case:

Hi-Five Products Developing Co., Ltd. was complained for improper issuance of patent infringement warning letters in possible violation of the Fair Trade Law

Key Words:

warning letter, hand tools manufacturing

Reference:

Fair Trade Commission Decision of March 27, 2003 (the 594th Commissioners' Meeting)

Industry:

Steel Casting (2312)

Relevant Law:

Article 22 and 24 of the Fair Trade Law

Summary:

1. This case originated with a letter of complaint from Kabo Tool Company (Kabo) against Hi-Five Products Developing Co., Ltd. (Hi-Five) for improper issuance of warning letters to Kabo's American clients Cooper Co. and Home Depot regarding patent infringements, such letters allegedly being written by Hi-Five with the intent of damaging Kabo's business reputation and causing its trading counterparts to refuse to buy its products, in possible violation of Articles 22 and 24 of the Fair Trade Law.

2. Findings of the Fair Trade Commission (FTC) investigation:
(1) The two parties involved in this case are competing enterprises in the domestic hand tools manufacturing business, with the US as their primary market. The act of issuance of the patent infringement warning letters and the receipt of those letters took place in the US, and the recipients were US enterprises. Furthermore, in regard to the patent rights alleged in the warning letter in question, the respondent was acting to exercise its rights under relevant US patent regulations, and the relevant markets were also overseas, so that the actions in question would not have been sufficient to impact the domestic trading order. In addition, the warning letters were all issued by the respondent to foreign firms, and the texts of the letters had to do with the likely discovery of infringements in the US market of patents held by the US patent holder. Hi-Five had not yet obtained Chinese Taipei patent rights at the time of issuance of the letters, and therefore would have had no way of proceeding in accordance with the FTC’s guidelines for handling of such cases, which require “completion of necessary preliminary procedures.” These acts did not conform with the nature of cases regarding issuance of warning letters customarily handled and decided by the FTC, and therefore the Disposition Principles For the Screening of Cases Involving Enterprises Issuing Warning Letters for Infringement of Copyright, Trademark, and Patent Rights did not apply. With regard to the trading order in the domestic market and overall market conditions of competition, the respondent's issuance of warning letters did not meet the conditions of deception or unfair trading practices sufficient to influence the market trading order that would constitute violation of Article 24 of the Fair Trade Law.
(2) In addition, Hi-Five had obtained a new utility patent model in Chinese Taipei, No. 186160, by 7 May 2002, and obtained a patent assessment report from the Taiwan Provincial Association of Mechanical Technicians on 24 May 2002. Hi-Five thereafter filed a criminal action against Kabo on 17 June 2002, with related proceedings still pending at the District Court of Taichung, being handled in accordance with judicial procedure and without reference to the Fair Trade Law.
(3) With regard to Kabo's allegation that Hi-Five's issuance of warning letters violated Article 22 of the Fair Trade Law, the results of the aforementioned investigation showed that it was only after obtaining a US patent that Hi-Five issued letters to the American importers demanding discontinuation of the patent infringement. Such acts were not unfounded and may not be deemed “false statements sufficient to damage the business reputation of another” and therefore fall short of the constituent elements of a violation required under the aforesaid provision of the Fair Trade Law.

3. In conclusion, it was therefore held that on the basis of current evidence, the aforementioned acts of issuing patent infringement warning letters by the respondent, Hi-Five, did not constitute a violation of the Fair Trade Law.

Summarized by Chiu, Chia-Yun; Supervised by Lin, Gin-Lan