Preface
In the ordinary courses of trading, there are two distribution channels through which a consumer may have access to foreign goods in the domestic market: i) a local agent/distributor designated by the overseas trademark owner; and, ii) a third party, who, without acquiring an agreement from the domestic trademark owner, imports and sells foreign goods in the domestic market. The latter is a so-called parallel importer, who engages in parallel importation of genuine (non-counterfeit) goods from another country without the permission of the intellectual property owner. A parallel import is often referred to as grey product as it exists and is mixed with those genuine products -imported by the authorized agents/distributors, but is not cateagorized as typical counterfeit products.
In general, the selling price offered by a parallel importer would be lower than that of an authorized agent/distributor. Therefore, the parallel importation would have a considerable influence upon consumers’ purchase decisions.
An introduction to the legal effects upon parallel imports in Taiwan is given below in view of the Taiwan Trademark Act, Fair Trade Act, Copyright Act and Patent Act.
The Exhaustion Doctrine of the Right (The First Sale Doctrine)
This doctrince is an important concept in the context of parallel imports. It indicates that the distribution right of the intellectual property right owner would be exhausted if that owner receives his/her just reward when he/she first sells his/her products, and thus he/she shall not expect to receive an additional benefit thereafter if the purchaser re-sells the products to a third party. Furthermore, the application of that concept may be effective nationally, regionally or internationally, depending on the actual situation case by case. If the right becomes “exhausted” in one area or jurisdiction, the intellectual property right owner may not be able to enforce his/her right in another area or jurisdiction so as to reach balance and harmony between the intellectual property owners’ rights and the public interests.
The Relevant Law and Practice in Taiwan
I. The Taiwan Trademark Act & Fair Trade Act
Paragraph 2, Article 30 of the Taiwan Trademark Act (Please refer to Note 1. below for the detail of the provisions of that article) reflects the spirit of the Exhaustion Doctrine of the Right (The First Sale Doctrine).
In principle, parallel importation of genuine goods manufactured by the trademark owner would not constitute an infringement of trademark under the Taiwan Trademark Act. In other words, a Taiwanese trademark owner may have no basis to challenge those parallel imports and sales of genuine products in Taiwan.
In Judgment No. (81) Tai San 2444 of the Supreme Court, it is held that parallel importation of genuine products does not constitute a trademark infringement as long as the quality of the imported products is identical to the authorized products, no likelihood of confusion, false believing, or deceit is caused, and no damage is inflicted on the reputation of the trademark owner and the interest of the consumers, since such parallel importation can prevent the trademark owner from forming his/her unfair trade competition or even monopoly status in the market, and may create a benefit of free market and fair trade orders for consumers. Under such situation, consumers may buy foreign goods at a relatively reasonable price.
In addition, according to Item 1, Paragraph 1, Article 30 of the Taiwan Trademark Act (Please refer to Note 2. below), parallel importers are allowed to use descriptions of the products or services in a bona fide and reasonable method, although such use is restricted to the purpose of fair and reasonable description of the products for sale.
However, in light of Judgment No. (82) Tai San 5380 of the Supreme Court, some exceptional cases regarding parallel importation are not legitimate and would be deemed as trademark infringement if the imported products have been altered by the parallel importer, are not identical to the authorized products, and that causes deterioration of the products, or the parallel importer uses descriptions of the products beyond the purpose of reasonable description of the products for sale as mentioned above, resulting in likelihood of confusion, false believing, deceit, and that damage is inflicted on the reputation of the trademark owner and the interest of the consumers.
For instance, if peripheral items to the imported genuine products, such as gifts, accessories, key chains, wrapping papers, packages and shoping bags provided along with the genuine products, are produced and furnished by the parallel importer or any third party who resells the genuine products, or if the parallel importer or the re-seller uses trademarks on his/her advertising materials beyond the purpose of reasonable description of the products for sale, then a legal action may be taken against such unauthorized use of trademarks. Moreover, since normally, the local authorized agent/distributor has invested considerable amounts for advertisement and promotion in order to enhanced the goodwill of the trademarks in Taiwan, the parallel importation in such situation is likely to be deemed as unfair trade practice as in being a “free ride”, and may be relied upon as a basis to initiate a legal action under Article 21 or Article 24 of the Taiwan Fair Trade Act (Please refer to Notes 3. & 4. below).
II.The Taiwan Copyright Act & Patent Act
Compared with the Taiwan Trademark Act, the Taiwan Copyright Act and Patent Act take a harsher stand against parallel imports. Under Item 4, Article 87 of the Taiwan Copyright Act (Please refer to Note 5. below), the importation of the original or any copies of a work without authorization of the copyright owner may create a cause of legal action for infringement of copyright.
In accordance with the Paragraphs 1 and 2, Article 56 of the Taiwan Patent Act, the importation of any patented products or any products manufactured through direct use of patented process may create a cause of legal action for infringement of patent. Because Taiwan has been a member of the World Trade Organization (“WTO”) since 2002, any other WTO members may enforce their copyright and/or patent right against a parallel import involving copyright/patent infringe- ment in Taiwan.
A Summary
In summary, as trademark law and practice in Taiwan are quite lenient to the act of parallel importation, the trademark owner will encounter a relatively heavy burden of proof in establishing its claim of trademark infringement or unfair trade practice on the part of the parallel importer. However, from the viewpoint of copyright/patent law and practice, it will be a different story when it comes to the issue of parallel importation. A parallel import may involve one, two or more fields of intellectual property rights including trademarks, copyrights, and patents, etc., therefore any factual details and patterns can lead to different results in a legal action as the legal basis may vary from different cases regarding an issue of parallel imports.
Notes:
1.Paragraph 2, Article 30 of the Taiwan Trademark Act
Where goods bearing a registered trademark are traded or circulated in the marketplace by the trademark right holder or by an authorized person, or are offered for auction or disposal by a relevant agency, the right holder shall not claim trademark rights on the said goods. However, the aforementioned shall not apply in case of preventing deterioration or damage of goods or any other fair reasons.
2.Item 1, Paragraph 1, Article 30 of the Taiwan Trademark Act
Any of the following conditions shall be free from the capacity of trademark rights of a person:
One who, through means of bona fide and fair use, expresses the same one's name, title, or the name, shape, quality, function, place of origin, or other description with respect to the goods or services provided by the same one for non-trademark purposes.
3.Paragraphs 1 and 2, Article 21 of the Taiwan Fair Trade Act
No enterprise shall make or use false or misleading representations or symbol as to price, quantity, quality, content, production process, production date, valid period, method of use, purpose of use, place of origin, manufacturer, place of manufacturing, processor, or place of processing on goods or in advertisements, or in any other way making known to the public.
No enterprise shall sell, transport, export or import goods bearing false or misleading representations referred to in the preceding paragraph.
4.Article 24 of the Taiwan Fair Trade Act
In addition to what is provided for in this Law, no enterprise shall otherwise have any deceptive or obviously unfair conduct that is able to affect trading order.
5.Item 4, Article 87 of the Taiwan Copyright Act
Any of the following circumstances, except as otherwise provided under this Act, shall be deemed an infringement of copyright or plate rights: Import of the original or any copies of a work without the authorization of the economic rights holder.
6.Paragraphs 1 and 2, Article 56 of the Taiwan Patent Act
Unless otherwise provided for in this Act, the patentee of a patented article shall have the exclusive right to preclude other persons from manufacturing, making an offer for sale, selling, using, or importing for above purposes the patented article without his/her prior consent.
(Author: Nicole M. LIN received her LL.B. Degree at National Taiwan University (NTU) and was admitted to the Taipei Bar in 2000. She specializes in general patent & trademark advisory, patent & trademark litigation, resolution of domain name dispute, drafting and negotiation of commercial agreements & contracts, and joint ventures. She now engages in foreign legal affairs for the Dispute Resolution Group and Corporate/ Commercial Law Group in Tai E , and is the author of some English and Chinese articles on IP subjects in Tai E’s periodicals.)
