Lin, Po-hsien sent warning letters (attested letters registered with the post office) in violation of Article 24 of the Fair Trade Law
Chinese Taipei
Case:
Lin, Po-hsien sent warning letters (attested letters registered with the post office) in violation of Article 24 of the Fair Trade Law
Key Words:
warning letters; trademark
Reference:
Fair Trade Commission Decision of June 23, 1999 (the 398th Commission Meeting); Disposition (88) Kung Chu Tzu No. 073
Industry:
Wholesale Industry (4010)
Relevant Law:
Article 24 of the Fair Trade Law
Summary:
Investigation showed that the disposed party, Mr. Lin, the owner of the right to the exclusive use of the “Hsin Pao” trademark, had been manager of Kuan Ch'un Co. since the company's establishment in July 1992 and was in charge of the company's daily and business operations. Although Kuan Ch'un Co. was a family business owned by the disposed party, the disposed party used his name to apply for the registration of the trademark in question and allowed Kuan Ch'un Co. to use the trademark in the sales of its products. It was obvious that the sales volume of the company's product would affect the interest of the disposed party. By providing the exclusive use to the trademark, the disposed party may be regarded as an “enterprise” as stipulated in Article 2 of the Fair Trade Law (any person that engages in trade through the provision of goods). The Fair Trade Law (FTL) was thus applicable on Mr. Lin's acts in this case.
Both the Trademark Law and Patent Law provide
remedies to trademark holders or patent holders when their rights are infringed upon. The
holder may file criminal charges or private prosecution, or in civil cases, the holder may
file for compensation for damages and provisional attachments. The rules for remedies are
comprehensive, and the holder may seek the aforementioned legal measures to safeguard his
rights and interests.
For the case in question, the trademark holder (disposed party) chose to sent out
attorney's letter of warning. In this case, the FTL may not be applicable if the action
was a proper conduct in connection with the exercise of rights. Article 45 of the FTL
states that “the provisions of this Law shall not apply to proper conduct in connection
with the exercise of rights pursuant to the provisions of the Copyright Law, Trademark
Law, or Patent Law.”
The phrase “proper conduct in connection with the exercise of rights” refers to, in
this case, where prior to sending out warning letters, the trademark holder obtains a
favorable judgment of trademark infringement by a court of first instance; or where the
warning letter clearly states the coverage of the trademark right, its scope, and the
facts relating to trademark infringement, thus enabling the recipient of the letter to
make proper judgment on whether a trademark infringement did occur, and the trademark
holder has already notified the manufacturer, importer, or agent, requesting that such
trademark infringement be terminated. The aforementioned actions are considered “proper
conduct in connection with the exercise of rights.”
If an enterprise arbitrarily sends warning letters to the trading counterparts of its
competitor or to potential trading counterparts, causing the trading counterparts to
become apprehensive or to refuse to engage in trade with the competitor and thus resulting
in unfair competition, such action is not considered “proper conduct in connection with
the exercise of rights” as safeguarded by the FTL. The act violates Article 24 the FTL
and constitutes a deceptive or obviously unfair act capable of affecting trading order.
Investigation also showed that the disposed party
allowed Kuan Ch'un Co., a distributor of alcoholic drinks (hereafter referred to as Kuan
Ch'un), to use the “Hsin Pao” trademark, which was for exclusive use on wines,
champagnes, and brandy among others. Hsing Pao Enterprise Corp. (hereinafter referred to
as Hsing Pao), whose products included “Hsing Pao Red Wine” and “Hsing Pao White
Wine,” had the same series of products as that of Kuan Ch'un. The two companies were
market competitors, and their wine products were mutually replaceable. Although at the
time the warning letter was sent, Kuan Ch'un – the company in respect of which the
disposed asserted the right of use of the Hsin Pao trademark – had not sold products at
the Cooperative Enterprise of Chinese Taipei (currently known as Ch'uan Lien Enterprise
Corp., hereafter referred to as Ch'uan Lien), Ch'uan Lien remained a potential trading
counterpart of Kuan Ch'un, considering that in a competitive market, an enterprise often
had to increase its market share in order to survive and continue its development. In
other words, as far as Hsing Pao was concerned, Ch'uan Lien was a potential trading
counterpart of its competitor.
In addition, the trading counterparts or potential trading counterparts of a competitor,
after receipt of warning letters, will often discontinue selling the product in order to
avoid litigation, regardless of whether the contents of the letter are correct. For the
case in question, the disposed party entrusted a lawyer to sent a letter to Ch'uan Lien on
June 3, 1998. On June 9, Ch'uan Lien started to limit the purchase of the products in
question and also started to return the products. These natural reactions showed that the
lawyer's letter did serve to obstruct possible trade between the potential trading
counterpart and the competitor. The action disrupted the sales channels of Hsing Pao and
led to unfair competition between enterprises.
Moreover, if Hsing Pao did in fact infringe upon the “Hsin Pao” trademark of the
disposed party, the disposed party may resort to the Trademark Law in exercising its
claims; the disposed party should not directly send warning letters to the trading
counterparts of Hsing-pao without first sending letters to the manufacturer, importer, or
agent to request that the infringement be terminated. Although the disposed party alleged
that the act of sending warning letters was an exercise of trademark right and was not
exercised for competition purposes, it nevertheless involved use of threat to adversely
affect trading opportunities of the competition. As a result, Ch'uan Lien returned more
than NT$590,000 worth of goods to Hsing Pao without even allowing Hsing Pao an opportunity
to explain its side of the story. The act by the disposed party of engaging a lawyer to
send warning letters went beyond “proper conduct in connection with the exercise of
rights” and was obviously an unfair act capable of affecting trading order.
Summarized by Yin, Shih-hsi
Supervised by Wu, Ting-hung