Chien Shou-Fu violates the Fair Trade Law by improper issuing warning letters of trademark infringement

Case:

Chien Shou-Fu violates the Fair Trade Law by improper issuing warning letters of trademark infringement

Key Words:

warning letters, cosmetics manufacturing

Reference:

Fair Trade Commission Decision of January 15, 2004 (the 636th Commissioners' Meeting)

Industry:

Cosmetics Manufacturing (1840)

Relevant Laws:

Article 19(i), 22 and 24 of the Fair Trade Law

1. This case originated with a complaint letter filed by Taiwan-based Pao Li Co., Ltd. (hereinafter called "Pao Li") alleging that, in trademark infringement warning letters issued to twenty two of Pao Li's distributing and retailing trading counterparts on January 28, 2003, including the Cosmed chain drugstore, Chien Shou-Fu (the respondent) had accused those enterprises of promoting and merchandizing counterfeit products bearing the Chinese-language wording Ying Ts'ai, thereby confusing consumers and misleading them as to the source of the products, and accordingly requested them to cease the marketing of such products upon receipt of the warning letter. The respondent was alleged to have violated Articles 19(i), 22 and 24 of the Fair Trade Law (FTL) through conduct intended to damage the good will of Pao Li and to cause its trading counterpart to refuse to trade with it.
2. Findings of the Fair Trade Commission (FTC) after investigation:
   1. As provided under Points 1 and 2 of the FTC Guidelines on the Reviewing of Cases Involving Enterprises Issuing Warning Letters for Infringement on Copyright, Trademark, and Patent Rights, the Guidelines are promulgated to handle abuse of intellectual property rights by enterprises improperly issuing warning letters accusing competitors of infringement and thus leading to unfair competition. For the purposes of the Guidelines, the term "issuance of warning letters by an enterprise" means dissemination of information by the enterprise to its trading counterpart(s) or to those of another enterprise that such other enterprise infringes upon its intellectual property rights. On January 28, 2003, the respondent issued the warning letters at issue to Cosmed chain drugstore and 21 other enterprises, accusing them of "promoting and merchandizing the counterfeit products bearing the Chinese-language words Ying Ts'ai and thereby obviously creating the likelihood of confusing consumers and causing misidentification of the source of the products, an act that infringes upon the right to exclusive use of the Ying Ts'ai trademark, and you are requested, upon receipt of this letter, to cease all use of Ying Ts'ai for the purpose of indicating or advertising your product." A review of such letters revealed that they were addressed only to retailer distributors selling similar unauthorized products, claiming that their sale of the products involved with infringement of the Respondent's right to exclusive use of its Ying Ts'ai trademark, and demanding removal of the infringement. The letters did not directly accuse Pao Li or other relevant suppliers of specific acts of infringement. Therefore, the issuance of letters in this case was beyond the scope of the Directions.
   2. Article 19(i) of the FTL provides that "An enterprise shall not engage in causing another enterprise to refuse to supply, purchase from, or otherwise trade with a particular enterprise for the purpose of injuring such particular enterprise where there is a likelihood of restraining competition or obstructing fair competition." A boycott has the following constituent elements: that the boycott was initiated, from a subjective perspective, "for the purpose of injuring such particular enterprise"; that the boycott involved the participation of a third party; that the initiator of the boycott was capable of exercising an influence on the decisions of participants; and that the boycott involved obviously unfair practices. In addition, it is provided respectively under Articles 22 and 24 that "An enterprise shall not, for the purpose of competition, state or disseminate any untrue statement capable of damaging the business reputation of another person," and that "In addition to what is otherwise provided for in this Law, an enterprise shall not engage in other deceptive or obviously unfair acts that are capable of affecting trading order." The respondent had the right to exclusive use of the Ying Ts'ai trademark. Based upon the belief that the Cosmed chain drugstore and the other 21 retailers were involved with marketing products that counterfeited that trademark, the respondent issued letters to assert its right to exclusive use of its trademark and to request removal of the infringement. It is difficult to maintain that the respondent intended to boycott Pao Li by issuing the abovementioned letters, to make or disseminate any untrue statement capable of damaging the business reputation of Pao Li, or to otherwise to engage in any other deceptive or obviously unfair acts capable of affecting the trading order.
3. In summary, based upon the available evidence, it cannot be found that the respondent violated the FTL through its issuance of the abovementioned letters.

Summarized by Lin, Chia-Ti; Supervised by Lin, Gin-Lan