No disposition was made in the case of Apex International Financial Engineering Res. & Tech. Co., Ltd. was complained to violate the Fair Trade Law by plagiarizing the financial data software of another enterprise

Case:

Key Words:

counterfeit, exploiting the fruits of others' labors [free-rider]

Reference:

Fair Trade Commission Decision of February 5, 2004 (the 639th Commissioners' Meeting)

Industry:

Software Design Services (7201)

Relevant Laws:

Article 20 and 24 of the Fair Trade Law

Summary:

The complainant in this case, Systex Corporation (hereinafter called "Systex"), is a firm engaged in securities and financial data software and services. It has been promoting real-time securities information systems since 1978, such as its "Century Winner" real-time securities information system. That software provides real-time stock market trading orders and technical analysis and has a large market share with buyers such as securities houses, securities investment trusts and consulting firms, other companies, as well as individual investors. The respondent, Apex International Financial Engineering Res. & Tech. Co., Ltd. (originally Ru Shuo Co., Ltd.), is also a provider of securities and finance data software and services; the two companies are competitors in that field, which have always maintained their own firm customer bases. In early 2003, the respondent introduced its "Fu Hao Shi Chuang" ["Window on Wealth"] software, with commands, hot-key setups, display interfaces, and overall design similar to that of the "Century Winner" software. The complainant therefore lodged a complaint with the Fair Trade Commission (FTC), believing that in terms of trade dress, the "Fu Hao Shi Chuang" software was a counterfeit of the "Century Winner" product's trade dress and that a high degree of plagiarism and other unfair trade practices were involved.
Grounds for disposition:
1. Violation of Article 20 of the Fair Trade Law (FTL) involves the use by the violator of "any symbol [or trade dress] that represents another person's goods, commonly known to relevant enterprises or consumers, so as to cause confusion with such person's goods." For the following reasons, this case does not constitute a violation of the Article 20 of the FTL.
  1. While the possibility cannot be eliminated that the layout of a product, including the use of color and placement of visual elements and its overall styling, will constitute trade dress symbolic of a product, this does not imply that under Article 20 of the FTL, such styling or design must be exclusive to a specific product or a specific enterprise. If another enterprise adds suitable indications to such trade dress sufficient to distinguish it and avoid the possibility of confusion, such use will not necessarily be subject to regulation by Article 20. The user interface of the respondent's "Fu Hao Shi Chuang" software displays the product name and the company's trademark, and in a comparison of the two product's main interfaces, there will be no confusion of symbols or trade dress.
  2. In addition, the marketing of securities and financial software is primarily through salespersons' direct contact with securities firms and other trading counterparts, and is thus different from customers' shopping of shelf-displayed products. Therefore, the contacts made prior to the sale and the installation of the product itself are sufficient to ensure that those making a purchasing decision will have clearly distinguished the source of the product and that no confusion will be created in this respect.
2. When an enterprise has engaged in a high degree of plagiarism or direct reproduction of the labeling or external appearance of a product created through the labors of another, enabling it to save costs in research and development or marketing and thereby to adopt a low-price marketing strategy, such conduct is an obviously unfair or deceptive practice sufficient to influence the market order, and will constitute a violation of Article 24 of the FTL.
  1. One characteristic of this industry is that lock-in effects are easily produced due to the difficulty of changing users' habits, the "lock-in effect" here referring to the dependency on a particular brand and its specifications created in a user due to the costs of switching. The software market often exhibits a "winner-takes-all" phenomenon or a tendency toward uniformity in specifications. Therefore, in respect of the interface arrangement that users are familiar with, or the structure, processes, or organization of a product, it is inappropriate to restrict, in addition to the protection of intellectual property rights, the potential provider of the product from adopting such arrangement. Otherwise, the lock-in effect will be intensified due to users' switching costs, or disadvantages will be created in terms of market competitiveness or overall national economic interests due to raising the switching costs between two products with similar overall functionality.
  2. With respect to the complainant's allegation that the respondent was taking advantage of its commercial reputation, aside from the specific rights protected within the scope of intellectual property laws, the structure, processes, and organization of the software in question belong to the scope of know-how available for free use by the public. Even if its use by the respondent was similar or identical to that of the complainant, it is difficult to maintain that it involved taking advantage of the complainant's commercial reputation. In addition, given the principal channels for sale of the product as noted above, since the respondent itself made no claim of having any connection with the complainant either in terms of enterprise organization or in business practices, and given that the respondent had clearly indicated its own trademark and the product name on each interface window of the software, it is difficult to maintain that there was any intent of causing confusion among its trading counterparts or misleading them into thinking that the product was in fact the complainant's. Its conduct was also not sufficient to mislead its trading counterparts into thinking that the respondent's and the complainant's companies were one and the same, or that they were affiliates or had business connections, and it cannot be concluded that the respondent therefore intended to exploit the fruits of the complainant's labors by these means.
3. In conclusion, the respondent in this case was not found to have engaged in obviously unfair trading practices sufficient to affect trading order, and its conduct did not fundamentally impair efficient market competition, and it was therefore not found to have violated Article 24 of the FTL.

Appendix:
Apex International Financial Engineering Res. & Tech. Co., Ltd.'s Uniform Invoice Number: 23131763
Systex Corporation's Uniform Invoice Number: 04272685

Summarized by Chou, Yi-Ting; Supervised by Horng, Der-Chang

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