Violation of the Fair Trade Law by Umax Data Systems, Inc. for circulating false information
Chinese Taipei
Case:
Violation of the Fair Trade Law by Umax Data Systems, Inc. for circulating false information
Key words:
circulation of false information, warning letters regarding patent, trading order
Reference:
Fair Trade Commission Decision of 7 October 1998 (361st Commission Meeting); Disposition (87) Kung Ch'u Tzu No. 8700215
Industry:
Other Computer Equipment Manufacturing Industry (3149)
Relevant Laws:
Article 24 of the Fair Trade Law
Summary:
According to Hung You Technology Co., Ltd. (complainant), in June 1996 it applied to the Securities Exchange Commission (SEC) of the Ministry of Finance and Taiwan Securities Exchange (Tai-Ex) for public listing of its shares. Later, Umax Systems, Inc. (respondent), which produces image scanners and is one of the complainant's competitors, sent an assessment report alleging that the complainant had infringed the respondent's utility model patent No. 92088 with two models of image scanners. In addition, the respondent complained to the SEC and Tai-Ex with the assessment report so as to block the processing by the competent authorities of the complainant's application for public listing. After the complainant presented an explanation to the Tai-Ex Application Review Committee, the complainant's application was approved in October 1996. The bidding on its publicly listed shares was scheduled from 24 October 1996 through 30 October 1996. On 28 October 1996, several journalists contacted the complainant to inquire about the respondent's filing, without notifying the complainant, of a criminal complaint with the Hsinchu District Court Prosecutors' Office on 24 October 1996, which was the first day of the bidding followed by holidays. On 28 October 1996, the first day after the holidays, the respondent distributed to the press its allegations that the complainant had infringed its patent. According to the press release, "we retained a professional institution to conduct an assessment, the result of which shows that Hung You (complainant) is indeed suspected of infringing our patent." However, the complainant found that the assessment had been conducted by Wan Kuo Patent & Trademark Office (Wan Kuo), which was not among the 65 institutions approved by the competent authority to assess patent infringement. Moreover, the respondent released such important information through the Tai-Ex's "Stock Market Spectator" to achieve a greater defamatory effect. The complainant's goodwill and corporate image were adversely impacted as a result of the various media reports on the respondent's allegations as headline news. On the same day, the complainant's stock price dropped NT$2 to 3 (per share), contrary to its previous continual increase, which caused irreparable loss and damage to the complainant's reputation and the rights and interests of its shareholders.
The respondent circulated defamatory news against the complainant through the distribution of press releases to various journalists, who reported the same in the newspaper. Such act was sufficient to cause a considerable number of (the complainant's) trading counterparts or potential trading counterparts to know of the alleged information, and if not a proper exercise of the respondent's rights, such act may be found to have violated the Fair Trade Law. The Fair Trade Commission (this Commission) found that although the respondent retained Wan Kuo, who presented its report on 3 May 1996 and based on which report the respondent sent an attorney letter to the complainant on 27 June 1996 for negotiations, to assess the alleged infringement, the respondent's act was not a proper exercise of its rights.
(1) Before releasing information, a rights holder must refer the matter to an impartial and objective assessment institution, which should be one of the professional institutions announced by the National Bureau of Standards (NBS) under the provisions of the Patent Law. If such institution cannot, or refuses to, assess the patent at issue, another institution may conduct and report an assessment. The assessment the respondent presented was made by an engineer at Wan Kuo. According to the NBS, Wan Kuo was not one of the institutions announced in accordance with Article 131(4) of the Patent Law. According to the respondent, its patent was not an item that could not be assessed by one of the announced institutions, nor had it been refused by an announced institution when referred to for assessment.
(2) The respondent failed to specify the content and the scope of its patent in its press release. In addition, the use of phrasing such as "patented skill" would mislead the public to the mistaken belief that its utility model patent claim included the scope of an invention patent. Thus, trading counterparts or potential trading counterparts would have been unable to make a reasonable decision based on the content of the news reports. Moreover, the public might have mistakenly thought that any product using single-scan technology was an infringement of the patent.
(3) The course of making the press release is discussed as follows. This Commission found that the respondent sent the assessment report to the complainant in June 1996, alleging that two models of the image scanners produced by the complainant were infringing its patent. However, the respondent chose to file a complaint with the Hsinchu District Court Prosecutors' Office on the first day, 24 October 1996, of the bidding period (from 24 October 1996 through 30 October 1996) for the publicly listed shares of the complainant's stock, and circulated information regarding the complainant's alleged patent infringement through a press release on 28 October 1996, the first working day after the holidays following 24 October 1996, so as to affect the bidding. Although the Commission cannot find a direct causal relationship between the fall of the complainant's stock price and the press release, the respondent's timing is questionable.
In conclusion, this Commission found that the respondent's press release was not based on an assessment by an impartial and objective institution, that the respondent failed to specify its patent claim therein, that the timing was questionable, and therefore that such release was not a proper exercise of its rights. Accordingly, this Commission found the respondent's act to be against commercial ethics and sufficient to adversely affect the trading order in violation of Article 24 of the Fair Trade Law.
Summarized by Chen P'in-ch'iu
Supervised by Pai Yu-chuang
Appendix:
Umax Data Systems, Inc.’s Uniform Invoice No.: 22624873