Hsien Ling Co. Ltd. Taiwan sued Tai Kang Trade Inc. for damageds arising from TaiKang's acts in both intentionally authorizing another enterprise to illegally import certain products and gaining a competitive edge by improper means
Chinese Taipei
Case:
Hsien Ling Co. Ltd. Taiwan sued Tai Kang Trade Inc. for damageds arising from TaiKang's acts in both intentionally authorizing another enterprise to illegally import certain products and gaining a competitive edge by improper means
Key words:
competitive edge, damages
Reference:
Appellate Court Civil Judgment (84) Chung Shang Tzu No 253
Industry:
Import Trade Industry (5601)
Relevant Laws:
Summary:
Hsien Ling Co. Ltd Taiwan (Appellant) in its complaint alleged that itself was the exclusive distributor in Chinese Taipei of NOVA-T, a diaphragm manufactured by Leiras Oy, a corporation based in Finland. Tai Kang Trade Inc. (Appellee) used to be the Appellant's down-line distributor, but the distribution relationship ended in January 1994. Nevertheless, since May 1994, NOVA-T products in blue and white packaging with labeling showing neither the medical equipment permit number nor the name of the importer have come onto the market, whereas the NOVA-T products the Appellant has legally imported and distributed came in pink and white packaging. According to the investigation conducted by the Department of Health, the products in blue and white packaging were imported by Huan Lien Trade Inc. (Huan Lien), which had been authorized by the Appellee to do so, and all sold to Hsing Nan Enterprise (Hsing Nan). As Hsing Nan had long been selling NOVA-T products on behalf of the Appellee, the hospitals and clinics were unable to know that the Appellee and Hsing Nan were no longer the legal distributors of NOVA-T authorized by the original manufacturer (Leiras Oy) from 1994. In addition, the Appellee did not inform these hospitals and clinics that the NOVA-T in blue and white packaging was manufactured by Leiras Oy for sale to Africa. As a result, these hospitals and clinics continued to purchase the products, which put the Appellant at a serious disadvantagous position in the market.
In conclusion, the Appellant alleged that the Appellee gained its competitive edge by employing improper means, such as violating the Pharmaceutical Affairs Law and breaching the distribution agreement. These means constituted non-performance of obligation as referred to in Article 226 of the Civil Law, and violation of Article 184(1) of the same Law and Article 24 of the Fair Trade Law. The applellant alleged therefore, that pursuant to Article 32 of the Fair Trade Law , it may claim for a sum up to the level not greater than triple the damages proven.
However, according to the investigation, the distribution contract between the two parties only stipulated that the Appellee should sell all of its stock before the contract expired on 31 December 1993, and that the Appellant would recall the distribution right from 1994 without compensating the Appellee. The contract did not prohibit the Appellee from importing the same goods for sale from sources other than Germany-based Hsien Ling Company after its expiration. Therefore, no breach of contract occurred when the Appellee, with its legally acquired market license, authorized Huan Lien to import the goods in question.
While its legally acquired market license was still valid, the Appellee authorized Huan Lien to import the goods that were manufactured by the original manufacturers, which contravened no public order or good morals. Moreover, after the contract expired, the Appellant took back the distribution right, and the Appellee could no longer sell the goods imported by the Appellant. However, the Appellee's market license was not recalled, so the fact that the Appellee acquired other sources of supply through other means, authorized Huan Lien to import such goods in a perfectly legal manner, and then sold them to Hsing Nan, was neither in breach of the contract nor relevant laws. As for the violation of the Pharmaceutical Affairs Law by Huan Lien, it was subject to punishment because the packaging should have been pink and white in accordance with the market license, but the goods imported by Huan Lien came in blue and white, and the labeling did not specify the market license number and name of the importer. In other words, Huan Lien was not punished for importing something it should have never imported in the first place. In addition, the NOVA-T Huan Lien imported were authentic goods manufactured by the original manufacturers, rather than counterfeits. Therefore, importing and selling authentic goods was certainly not an unlawful practice.
Article 24 of the Fair Trade Law provides that, "an enterprise also shall not engage in any deceptive or patently unfair acts that can adversely affect trading order." As early as 1987, the Appellee had obtained the medical equipment market license for NOVA-T, which was valid until August 1994, while the distribution contract came into force starting on 16 May 1991. So it is obvious that the Appellee had acquired the market license for the particular product before it made the distribution contract with the Appellant. The Appellee's market license remained in force well after the distribution contract between the two parties expired. Under such circumstances, no deception was involved when the Appellee authorized Huan Lien to legally import and sell the goods, which were authentic NOVA-T manufactured by the original manufacturers. Furthermore, the 20,000 units of NOVA-T imported by Huan Lien were sold by Hsing Nan in the market, where the same products imported by the Appellant were also available. Therefore, no patently unfair acts could be found on the part of the Appellee with a view to putting the Appellant at a disadvantage. In addition, the Appellant did not prove that Hsing Nan had sold the entire 20,000 units of NOVA-T in Chinese Taipei’s market, and thus was unable to prove the losses it claimed to have sustained.
In conclusion, the Appellant's request for damages to be paid by the Appellee pursuant to Article 32 of the Fair Trade Law due to the Appellee's alleged non-performance of obligation and infringing acts was not a legitimate one and shall be rejected.
Summarized by Hsu, Shih-fen
Supervised by Chen, Hui-ping