1. Introduction

Since parallel imports are allowed in Taiwan and do not violate the Trademark Act, many authorized agents or distributors are deeply affected by parallel importers and it is difficult to demand parallel importers to cease-and-desist from their actions by invoking IP laws. Even if distributors reflect the aforementioned situation to the original manufacturers, the response is usually slow and any measures often only have limited effect. However, if parallel importers engage in acts deemed to constitute unfair competition in the course of distributing products and cause damage to authorized distributors, these distributors may claim damages according to the Fair Trade Act. The following is a successful case raised by a local distributor against a parallel importer (2017 Ming Gong Su Zi No. 6 by the Intellectual Property Court; 2018 Ming Gong Shang Zi No. 4 by the Intellectual Property Court and 2020 Tai Shang Zi No. 2158 by the Supreme Court).

2. Facts

The plaintiff acquired the general distribution authorization of a Canadian clothing brand in Taiwan and was authorized to use their trademark. Therefore, the plaintiff invested considerable resources in the marketing and operation of such brand. However, the defendant, a parallel importer, not only utilized the product pictures and trademarks of such Canadian brand without authorization, but labeled the name, address and telephone number of the plaintiff on its price tags before distributing the products to consumers. Therefore, since the defendant did not indicate the correct importer information, they violated Article 9 of the Commodity Labeling Act. Consumers also mistakenly believed that the defendant had a cooperative relationship with the plaintiff, and additional manpower was required to deal with defective products sold by the defendant. Therefore, the plaintiff requested the defendant to compensate its loss according to the Fair Trade Act.

3. Issues

(1) Did the defendant violate the Fair Trade Act?

(2) If so, what is the amount of damages?

(3) Is the plaintiff entitled to seek an injunction?

4. Summary of the judgments

(1) The defendant shall pay the plaintiff NTD 1,000,000 plus interest, and the defendant shall not use information related to the plaintiff on clothing of the Canadian brand which was not purchased from the plaintiff.

(2) According to Article 21 of the Fair Trade Act, no enterprise shall make or use false or misleading representations or symbols on the matter that is “relevant to goods and is sufficient to affect trading decisions” on goods or in advertisements. Since the court considered importer information is a representation “relevant to goods and is sufficient to affect trading decisions,” and the court further found the defendant was reported for false labeling while distributing their clothes and the authority even imposed a fine of NTD 30,000 during the second inspection after reviewing the data provided by the Economic Development Bureau, the court considered that the defendant violated Article 21 of the Fair Trade Act.

(3) The calculation of the amount of damages should be based on the interests suffered by the defendant's infringement. The plaintiff filed a petition to the court, requesting the defendant to submit all the purchase orders, sales invoices, source of purchases and the destination of sales of the Canadian brand’s clothing since the plaintiff was authorized as the general distributor, as well as relevant import declaration documents for inspecting the false sales in accordance with Article 342 of the Code of Civil Procedure. The court recognized that the plaintiff’s claim was justified, but the defendant refused to disclose the aforementioned evidence on the grounds that they did not violate the Fair Trade Act. Therefore, the court considered the plaintiff’s request for NTD 1,000,000 was reasonable under Article 345 of the Code of Civil Procedure.

(4) The defendant filed an appeal against the first-instance judgment and argued that they did not violate the Fair Trade Act. The evidence submitted by the defendant in the second-instance was ultimately rejected by the court and the court still found the defendant violated Article 21 of the Fair Trade Act. As for the amount of damages, the court determined that the evidence presented by the appellant (the defendant of the first instance) could prove that they benefited from the reduction of manpower expenditure due to their failure to label according to the law, and the benefit even exceeded the amount requested by the appellee (the plaintiff of the first instance). In addition, the appellee should also bear the disadvantage of being sanctioned for refusing to reveal evidence without reason. Therefore, the court upheld the first instance judgment and dismissed the defendant’s appeal. Afterwards, the appellant filed an appeal with the Supreme Court but the Supreme Court also dismissed the appeal and this lawsuit has become final and binding. 

Reference: Anthology for the 70th Anniversary of Tai E's Law Practice