Chang Xing Long Packaging Co., Ltd.

Case:

Chang Xing Long Packaging violated the Fair Trade Law for sending patent infringement legal attest letters without justification

Key Word(s):

Display paperboard box, warning letter, technical report

Reference:

Fair Trade Commission Decision of August 20, 2014 (the 1189th Commissioners' Meeting); Disposition Kung Ch'u Tzu No.103102

Industry:

Manufacture of Containers of Paper and Paperboard (1520)

Relevant Law(s):

Article 24 of the Fair Trade Law

Summary:

1. Fu Guo International Co., Ltd. (hereinafter referred to as Fu Guo International) started to purchase display paperboard boxes from Chen Yi Container Co., Ltd. (hereinafter referred to as Chen Yi) sometime in Sep. 2013. On the same day, Chang Xing Long Packaging Co., Ltd. (hereinafter referred to as Chang Xing Long Packaging) sent a legal attest letter to Costco Wholesale Corporation (hereinafter referred to as Costco), the main distributor for Fu Guo International, and Chen Yi, claiming that the display paperboard boxes designed by the company had been awarded a utility patent and a technical report from the Intellectual Property Office of the Ministry of Economic Affairs had been obtained. The letter also accused Costco and Chen Yi of infringement of the company’s patent right and demanded them to stop selling related products. As a result, the sales of boxed Fuji apples Fu Guo International supplied to Costco dropped by a large margin. However, since Chang Xing Long Packaging had not provided the technical report for the patent, the letter sent was in violation of the Fair Trade Law.
2. Findings of the FTC after investigation:
   

   Although Chang Xing Long Packaging had been awarded the utility patent on Jul. 1, 2012, it had not yet obtained the technical report for the patent. After Chang Xing Long Packaging and Fu Guo International ended their display box business relationship in early Sep. 2013, Chang Xing Long Packaging discovered Fu Guo International was still using similar display paperboard boxes at Costco’s outlets and therefore determined the boxes were an infringement of its utility patent. Another finding showed that Chang Xing Long Packaging did not send the legal attest letter for the patent infringement to Fu Guo International whose name was indicated on the boxes. Instead, it sent the letter to Costco which was only selling the Fuji apples in those boxes and had not purchased the boxes. Even worse, Chang Xing Long Packaging lied in the letter that it had obtained a technical report for the utility patent from the Intellectual Property Office of the Ministry of Economic Affairs. As a consequence, Costco believed the accusation was true and stopped purchasing Fuji apples from Fu Guo International.

3. Grounds for disposition:
   

   (1)

   Chang Xing Long Packaging stated that it had sent the legal attest letter to the largest distributor of Fu Guo International on Sep. 30, 2013 because of its business dispute with Fu Guo International. However, by lying about having obtained the technical report for its utility patent, it had concealed the fact and misled Costco into stopping purchasing Fuji apples from Fu Guo International. Since Fu Guo International was a major supplier in the domestic boxed apple market and Costco was a principal distributor for the boxed apples from Fu Guo International, the letter-sending was therefore a deceptive practice able to affect trading order in violation of Article 24 of the Fair Trade Law.

   (2)

   After assessing the motive behind the unlawful conduct of Chang Xing Long Packaging, the level of harm to trading order, as well as the business scale and sales of the offender, the FTC cited the first section of Article 41 (1) of the Fair Trade Law, ordered the company to immediately cease the unlawful act and also imposed on it an administrative fine of NT$50,000.

Appendix:
Chang Xing Long Packaging Co., Ltd.'s Uniform Invoice Number: 12749115