Chushen Company violated the Fair Trade Law by issuing warning letters to the users claiming that its trading counterpart infringed its patent rights

Chinese Taipei

Case:

Chushen Company violated the Fair Trade Law by issuing warning letters to the users claiming that its trading counterpart infringed its patent rights

Key Words:

Chushen Company; warning letters for infringement of patent rights; chop impression checking system

Reference:

Fair Trade Commission Decision of January 3, 1996 (the 221st Commission Meeting); Disposition (85) Kung Ch'u Tzu No. 008

Industry:

Information software industry (7501)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. A complainant complained to the Commission in writing, alleging that: Chushen Company improperly exercised its rights in respect of No. 28815 Patent by retaining lawyers in 1992 and 1993 to send warning letters to users who planned to procure a seal chop checking machine. These warning letters state: "Present available chop impression checking systems may involve infringement of the respondent's patent rights. To avoid breaking relevant laws, one should check the respondent's patent rights before making such purchase." These letters also cited provisions of the Patent Law, which stated that persons who buy products infringing on others' patent rights bear criminal liability. The users of the checking system in question were thus terrified, which resulted in unfair competition, constituting a violation of the Fair Trade Law. According to the investigation conducted by the Commission, the respondent had retained lawyers to send to a bank a warning letter on December 5, 1995 concerning infringement of patent rights. The letter stated, "--to prevent the bank from infringing the patent rights of Chushen Company by purchasing a chop impression checking machine, this letter has been specially written to inform the bank about the scope of Chunshen Company's patent rights." Attached with the letter was a copy of a letter dated November 4, 1992 written by Chunshen Company stating the scope of its patent rights and the then effective provisions concerning criminal liability of Article 90 of the Patent Law.

2. The investigation showed that in September 1990 Yinghsiang Company acquired Utility Model No. 54664 for the structure of a machine which can key in, search, check and print computer images. Another competitor of the respondent, Tungch'i Auto Technology Co. Ltd., in 1990 also acquired the copyright of "chop impression checking system program." Chushen Company in September 1992 complained to the competent authority that Yinghsiang Company's utility model was invalid. The respondent in 1992 and 1993 retained lawyers to issue warning letters to the distributors and agents of a chop impression checking system produced by other manufacturers, informing them about the content of its Patent No. 28815. Such acts are highly disputable as the respondent issued such letters while being aware of the fact that there were competitors in the market and no favorable court judgment available, and the letters implied that other manufacturers' chop impression checking systems might be infringing on the respondent's patent rights by referring to its Patent No. 28815 as "widely used in a variety of image processing systems" and bluntly pointed out that "the present chop impression checking systems are all at the risk of infringing on Chushen Company's patent rights." Moreover, the investigation showed that the warning letter issued by Chushen Company to banks which used the chop impression checking systems cited the then effective provisions related to criminal liability of Article 90 of the Patent Law to warn the recipient banks against infringing on its patent rights. However, pursuant to the then effective provisions of Articles 89, 90, and 91 of the Patent Law, criminal sanction was imposed only on those who forged, counterfeited, sold, displayed with the attempt to sell, and imported from abroad the patented goods(which remained unchanged under the 1994 revised Patent Law), while the consumers or users would not be held criminally liable. Therefore, Chunshen Company's act of issuing warning letters which cited provisions related to criminal liability was improper, and does not fit the description of proper exercise of rights conferred under Patent Law as set forth in Article 45 of the Fair Trade Law, and shall not be excluded from the application of the Fair Trade Law.

3. Article 24 of the Fair Trade Law provides:

In addition to what has been provided for in this Law, an enterprise shall not conduct other deceptive or obviously unfair acts that are sufficient to affect trading order.

According to the aforesaid investigation, the respondent issued warning letters based on the reason that the users and distributors of seal impression checking systems developed by other manufacturers infringed its patent rights. Without a clear description of the circumstances of the alleged infringement, either the letters implicitly or bluntly stated that all present chop impression checking systems were at the risk of infringing on its patent rights. The respondent in these letters also improperly cited the provisions related to criminal liability to the legitimate users and distributors of the systems in question, thus causing those users and distributors and the trading order to be adversely affected. Such acts had practically exceeded the scope of protection for patent rights as previously set forth under the Patent Law. Furthermore, its act of abusing the exclusive rights conferred by its patent had obviously obstructed the efforts to build a reasonable environment for fair competition and adversely affected the distribution activities of other enterprises in view of the actual trading conditions. Therefore, the respondent's aforesaid acts are found to be obviously unfair to its competitors and are sufficient to affect trading order, thus violated Article 24 of the Fair Trade Law.

Summarized by Yang, Chia-chun

Appendix:
Chushen Company's Uniform Invoice Number: 21239654

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