Amway Taiwan Company Limited

Case:

Key Words:

warning letter, lawyer's letter, fair competition

Reference:

Fair Trade Commission Decision of July 18, 2012 (at the 1080th Commissioners' Meeting), Disposition Kung Ch'u Tzu No. 101088

Industry:

Other Retail Sales in General Merchandise Stores (4719)

Relevant Laws:

Article 24 of the Fair Trade Law

Summary:

1. Carrefour Taiwan (Carrefour) filed with the FTC a compliant that Amway Taiwan Company Limited (Amway) had delegated Chang, Lin & Wu International Law Firm (CLS Law Firm) to send a lawyer's letter accusing Carrefour of selling mugs whose design had infringed the patent right of Amway and demanded Carrefour to take all the products in question off its shelf. As Amway had not taken the required procedure according to the "Fair Trade Commission Disposal Directions (Guidelines) on the Reviewing of Cases Involving Enterprises Issuing Warning Letters for Infringement on Copyright, Trademark, and Patent Rights," it is in violation of Article 24 of the Fair Trade Law was suspected and the FTC therefore conducted an investigation.
2. Findings of the FTC after investigation:
   At the request of the FTC, both parties provided related information in writing and came to the FTC to make their statements as well as present supplementary evidence. The Intellectual Property Office of the Ministry of Economic Affairs also provided related documents on the issue. These materials indicated that the mugs referred to in the lawyer's letter had five different patterns of colorful design and were placed on display carts in Carrefour stores. On the underside of each mug was a tag indicating the place of origin, the supplier, and its contact phone number and address. The lawyer's letter did not specify whether the patent or copyright in question was on the design itself, the product the design was put on, or the way of expression of the design. Neither did it mention the creator or date of the design or explain the relation between the design and Amway. The FTC compared the evidence closely and found that the design on the mugs was a ladybug with open wings while the wings of the ladybug in the design drawings and documents attached to the lawyer's letter were closed.
3. Grounds for disposition:
   1. Amway could have easily found out from the tag on the product who the manufacturer, importer, or agent responsible for the product was and made the contact. However, based on the assumption that the retailer had the obligation to provide the information, Amway sent the lawyer's letter without contacting the supplier of the mugs in question and requesting it to stop the infringement.
   2. Since Amway was unable to provide sufficient information with regard to its copyright or the design involved in the alleged infringement, it was difficult for the recipient of the letter to understand the specific content regarding the infringement and to cooperate with Amway to stop the infringement. The recipient of the letter might just take all related products off its shelf for fear that there was really an infringement as accused.
   3. The recipient of the said lawyer's letter was a major hypermarket operator that provided daily commodities at affordable prices through over 60 outlets across the country. Each outlet had hundreds of thousands of products and more than 10 outlets had business with mug suppliers, with the supplier of the mugs in question being one of the bigger trading counterparts. The FTC's decisions on the illegality of sending right infringement notices in the past had focused on whether the right holder had taken the due procedure to exercise its right. In this case, the lawyer's letter had made the seller take the products off its shelf to avoid trouble. The lawyer's letter had created certain impact on the related market and retail business. It was obviously unfair conduct able to affect trading order.
   4. As a well known multilevel sales business in the country, Amway had never engaged in any conduct in violation of multilevel sales regulations on. However, the infringement warning letter disposal directions of the Fair Trade Commission had been enforced for years. The lawyer's letter did not mention the right in concern, its content and coverage, or the details of the infringement. Sending such a letter was obviously unfair conduct able to affect trading order in violation of Article 24 of the Fair Trade Law. The FTC found it impossible to decide not to apply the infringement warning letter disposal directions just because the company had never violated any multilevel sales regulation. Otherwise, it would be creating loopholes for businesses in the future. Therefore, the FTC imposed an administrative fine of NT$60,000 on Amway.

Summarized by Chen, Ying-Ju; Supervised by Hung, Hsiu-Hsing

Appendix:
Amway Taiwan Company Limited.'s Uniform Invoice Number: 84308897