You Lin Enterprise Co., Ltd.

Case:

Key Words:

lawyer's letter, patent, trading order

Reference:

Fair Trade Commission Decision of April 12, 2011 (the 1014th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100049

Industry:

Other Computer Peripheral Equipment Manufacturing (2719)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. The FTC was informed that You Lin (transliteration) Enterprise Co., Ltd. (hereinafter referred to as You Lin Co.) sent faxes and statements extensively to businesses of the same industry on January 29, 2009 and May 18, 2010, claiming that the informer had been selling products that had infringed the patent of the company and action would be taken to hold the informer legally responsible. Without sending any allegedly patent-infringing sample for appraisal by professional organizations, the company distributed the said documents that carried no appraisal report to the downstream clients of the informer and accused the informer of infringement on it patent. The intention was to make the informer's clients panic so that its goal of unfair competition can be achieved. It was in violation of the Fair Trade Law (FTL).
2. Findings of the FTC after investigation:
   (1) On January 29, 2010 and May 18, 2010, You Lin Co. sent to the informer's as well as its own trading counterparts faxes and statements in which it claimed: "…We have found products made by the informer that have infringed the patent of You Lin Co. (ROC Patent Number M263601) and decided to take action to hold the informer legally responsible!"
   (2) The informer and You Lin Co. provided the letters (or faxes) sent to 13 businesses to the FTC so that the FTC can examine them for the purpose of assessing their impact. The investigation showed most of the said businesses did not return goods, cancel orders, or change their trading counterparts for the products in question after receiving the warning letter. They also expressed that the faxes or statements had no effect on their transaction decisions. However, the informer sent a written statement to the FTC to clarify that, to protect business reputation, it had provided an affidavit to its trading counterparts who had received the said faxes or statements and, therefore, no return of goods or cancellation of orders had happened.
3. Grounds for disposition:
   You Lin Co. sent faxes and statements to the informer's and its own trading counterparts to accuse the informer (its competitor) of infringing its patent. The conduct met the description of sending of warning letters by enterprises in Point 2 of the "Fair Trade Commission Directions (Guidelines) for Disposal of Cases Involving Warning Letters". Before sending the faxes and statements, no court had reached any decision with regard to the alleged infringement and neither had You Lin Co. taken any sample of the alleged infringement to any appraisal organization for assessment of the infringement. Therefore, no appraisal report was attached to the said faxes or statements and these documents did not contain any description of the content and range of the patent or the concrete fact of the infringement to convince the recipients that the products of the informer had indeed infringed the patent of You Lin Co. Hence, the sending of the faxes and statements by You Lin Co. could not be justified as appropriate behavior of exercising its patent right. As to the lawyer's letter sent to the informer's trading counterparts, despite that none of the recipients took the products in question off the shelves or return them to the informer as a result, the informer did have to resort to the means of establishing an affidavit as guarantee to relieve the doubt of its trading counterparts. However, when interviewed, some of them confessed they had indeed thought about switching to You Lin Co. to avoid controversy in the future. Apparently, the action taken by You Lin Co. was strong enough to generate misconceptions in the said trading counterparts and have an effect on trading order. Therefore, the act of You Lin Co. was deemed obviously unfair conduct able to affect trading order in violation of Article 24 of the FTL. The FTC imposed on the company an administrative fine of NT$50,000.

Appendix:
You Lin Enterprise Co., Ltd.'s Uniform Invoice Number: 52416177

Summarized by: Liu, Yuchuan; Supervised by: Wu, Lieh-Ling