Kawa Food Technology Inc.

Case:

Key Words:

trademark right, warning letter

Reference:

Fair Trade Commission Decision of September 14, 2011 (the 1036th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 100170

Industry:

Wholesale of Meat and Meat Products (4542)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. Bioking Technology Co. (hereinafter referred to as Bioking), the informer of this case, complained that Kawa Food Technology Inc. (hereinafter referred to as Kawa Food) sent to Bioking as well as its downstream retail businesses Wellcome Supermarket, Matsusei Supermarket, Breeze Center Co., Ltd., Banqiao City Farmers' Association, Le Huo Cun (transliteration) Co., Ltd. and RT-Mart a warning letter on July 28, 2010. It was stated in the warning letter that Bioking has used Kawa Food's registered trademark "Black Diamond" for its "Black Diamond Pork" on billboards at various retail outlets and this constituted a trademark infringement in violation of Subparagraph 2, Article 81 of the Trademark Act, the use of the trademark had to be stopped, and the downstream retail businesses could not sell any Black Diamond Pork products before the trademark right dispute was settled.
2. Findings of the FTC after investigation:
   Bioking and Kawa Food were both meat businesses marketing their products through hypermarkets and supermarkets respectively under the trademarks of "Herbal Pork" and "Black Diamond Chicken". They were competitors on the horizontal level of the market. The investigation also indicated that before sending the said trademark infringement warning letter through its lawyer on July 28, 2010, Kawa Food had not filed any lawsuit against Bioking over the said trademark infringement. The trademark Kawa Food had registered included the name of Black Diamond Chicken and the corresponding image. In the letter accusing Bioking of infringement of its "Black Diamond" trademark, Kawa Food did not attach any trademark registration number and corresponding trademark image to support its accusation.
3. Grounds for disposition:
   (1) Bioking and Kawa Food were both meat businesses marketing their products through hypermarkets and supermarkets respectively under the trademarks of "Herbal Pork" and "Black Diamond Chicken". They were competitors on the horizontal level of the market. In the warning letter sent to Bioking and its trading counterparts or potential trading counterparts, Kawa Food accused Bioking of infringing its trademark right and demanded the letter recipients "not to sell any "Black Diamond" herbal pork products before the trademark right dispute was settled or Kawa Food would file a compensation claim according to law." Judging from the recipients the letter was sent to and the content of the letter, the conduct met the description of the "act of issuing a warning letter by an enterprise" stated in the Fair Trade Commission Disposal Directions (Guidelines) on the Reviewing of Cases Involving Enterprises Issuing Warning Letters for Infringement of Copyright, Trademark, and Patent Rights.
   (2) It requires professional capacity to judge whether an act has infringed another's copyright, trademark right or patent right. Besides the downstream trading counterparts of the same industry, other businesses will find it difficult to assess if the products they sell have infringed another's right. Kawa Food should have taken the civil and criminal procedures to resolve the dispute regarding whether Bioking had infringed the "Black Diamond Chicken" trademark by selling meat products under the name of "Black Diamond Herbal Pork". To send the warning letter, Kawa Food also could have followed the steps set forth in the aforesaid disposal directions on issuance of warning letters. In this way, the violation of the Fair Trade Law as described earlier would not have happened.
   When Kawa Food sent the warning letter, the court of first instance had not determined whether the alleged infringement had indeed taken place. This was indicated in the company's letter that "Kawa Food is not engaged in any lawsuit with Bioking." Furthermore, the said letter also stated that "'as Black Diamond' is the trademark that Kawa Food has registered with the Intellectual Property Office of the Ministry of Economic Affairs for meat products, Bioking's application of the term 'Black Diamond' herbal pork in large prints on signs at the meat sections of various retail outlets is a serious infringement of Kawa Food's trademark right in violation of Subparagraph 2, Article 81 of the Trademark Act… To protect the company's trademark right, Kawa Food hereby requests you to be our lawyer and send a letter to Bioking and all businesses that sell "Black Diamond" herbal pork products to stop selling any meat product under the name of 'Black Diamond' herbal pork before Kawa Food and Bioking settle the trademark right dispute…" Kawa Food did not provide any details of the alleged trademark right in the letter or enclose any information with regard to the trademark registration number and the trademark image to convince the recipients that the trademark infringement did exist. This could be confirmed from the reply of Banqiao City Farmers' Association to Kawa Food that "the Bioking products we sell are herbal pork and do not carry the term of "Black Diamond". Please provide the image of the trademark you have registered with the Intellectual Property Office for us to conduct further investigation."
   (3) The recipients of the warning letter were retail businesses, not trading counterparts with the capacity to conduct any investigation. They were unable to judge whether their business conduct had constituted trademark infringement. Consequently, it was natural that they were intimidated by the warning letter and had to request Bioking to resolve the dispute so they would not have to go through the trouble of investigation and litigation. Under these circumstances, Bioking had no choice but to change the advertising signs and product labeling from "Black Diamond Herbal Pork" to "Top Quality Herbal Pork" and aborted its plan to market products under the labels of "black pig" and "white pig." Although the warning letter Kawa Food sent out did not cause the retail businesses to take Bioking's products off their shelves, it was likely to bring harm to effective market competition with a focus on the competition of performance and therefore culpable in terms of the ethics of market competition. The conduct could not be regarded justifiable exercise of rights according to the Trademark Act and was considered obviously unfair conduct able to affect trading order.
   (4) After assessing the motive, extent of damage and circumstances of the illegal conduct as well as Kawa Food's business scale and attitude after the illegal conduct, the Commission ordered Kawa Food to immediately cease the unlawful act and at the same time imposed on the company an administrative fine of NT$50,000 according to the first section of Article 41 of the Fair Trade Law.

Appendix:
Kawa Food Technology Inc.'s Uniform Invoice Number: 28632077

Summarized by Hsu, Cho-Yuan; Supervised by Chiou, Shwu-Fen