Presicarre & Test Rite v. Itoya:
Standard of Care in IP Infringement Cases[1]

Both Presicarre Co., Ltd. (“Presicarre”) and Test Rite Retail Co., Ltd (“Test Rite”) are renowned retailers and have several stores in Taiwan. Both retail stores sold a poster depicting five gods of wealth; the poster is popular with households and companies as part of their Chinese New Year celebrations.

Itoya Publishing Co., Ltd. (“Itoya”) claimed that it is the copyright owner of the work of the five gods of wealth (the copyright at issue). Itoya accused Chi Fu Kae Industrial Co., Ltd. (the manufacturer, hereinafter “Chi Fu Kae”), RT Mart International Co., Ltd. (the retailer, hereinafter “RT Mart”), Presicarre and Test Rite of infringing Itoya’s copyright at issue, for which a judgment was issued on March 19, 2018. Presicarre and Test Rite appealed against the judgment.

Both Presicarre and Test Rite claimed that they had not breached their duty of care as retailers, despite the fact that the IP Court had stated in the first instance judgment that the retailers were held liable for negligence for failure to check the infringing products.

According to Article 184(1) of the Taiwan Civil Code, “[a] person who, intentionally or negligently, has wrongfully damaged the rights of another is bound to compensate him for any injury arising therefrom”; that person shall exercise the due care of a good administrator. Furthermore, according to Article 88 of the Copyright Act, “[a] person who unlawfully infringes on another person's economic rights or plate rights out of intention or negligence shall be liable for damages. Where multiple persons engage in unlawful infringement, they shall bear joint and several liability for damages.”

In cases where retailers have sold products which have infringed the intellectual property rights of others, it is arguable whether the retailers should be jointly and severally liable for the tort of a manufacturer.

In this case, the IP Court stated that the image of the five gods of wealth on the accused product manufactured by Chi Fu Kae is substantially similar to the graphical work at issue whose copyright is owned by Itoya. Thus, the act of using the image to reproduce the accused product constitutes infringement. However, both Presicarre and Test Rite argued that they had exercised the due care of good administrators as retailers by contracting with suppliers in order to avoid any possible infringement. It is unreasonable to request retailers to remove all potential infringements of intellectual property rights among the vast range of commodities displayed in their stores.

With regard to the standard of care in intellectual property infringement cases, the IP Court indicated a way to approach this:

First of all, the level of care depends on the role assumed by the party. Is the party a professional manufacturer or seller? What type of intellectual property right is infringed? Unlike patent and trademark rights, for which the law requires the publication of the complete contents of the right as the manifestation of rights for public access, there is no such similar publication of copyrights available for the public to check the existence of copyrights.

On the other hand, a case of patent infringement analysis involves a comparison of technologies in a particular field, while a case of trademark infringement requires an examination against the standard of likelihood of confusion. Both of these should be conducted on a case-by-case basis by the IP Office or the IP Court. Therefore, before judging whether a person has failed to exercise the duty of care, specific circumstances should be taken into account in an individual case.

Secondly, there should be different levels of care imposed on manufacturers and sellers. A blind imposition of the same level of duty of care on all entities would mean nothing more than to require the strictest “liability without fault”. This not only exceeds the original regulatory purpose of the law but also interferes with the efficiency of economic activities.

Presicarre and Test Rite have both contracted with their suppliers in order to prevent possible IP infringement. Both retailers also declared that they could withdraw the infringing products if any infringement were found. However, neither of the retailers was requested by Itoya to withdraw the accused product before this lawsuit was initiated. As such, there was deemed to be no negligence on the retailers’ side. The IP Court in the second instance stated that the retailers had not failed to exercise the degree of care which they should and could have exercised. The IP Court therefore reversed the first instance judgment, finding an absence of negligence on the part of Presicarre and Test Rite.

Although this appellate judgment concerns copyright, it also provides a guideline regarding the level of care in other intellectual property infringement cases. Since information regarding patents or trademark rights can be obtained through official publications or via search engines, the manufacturers or sellers have a minimum obligation to confirm the risk of infringement by conducting due diligence. The act will be considered to have been committed negligently if the party fails to carry out background checks, or intentionally if the party foresees possible infringement but still exploits the intellectual property rights of others.

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