Patent

Warning Letter Without Support of Secure Patent Right Is Fined For Violation of Fair Trade Law

The Fair Trade Commission of Executive Yuan (FTC) made a resolution for a complaint of unfair competition on June 6th, opining that the conduct with which a company dispatched a warning letter to third parties to assert its right before a patent right was granted, is in violation of Article 24 of the Fair Trade Act. Such conduct has been deemed as obviously unfair and having a negative effect on trading order.

In this case, the company at issue dispatched a warning letter to various third parties on September 14, 2009, in which it asserted its rights from design patent application number 098302309 and design patent number D129820, and requested the recipients of the letter, including the Complainant, to remove the accused infringing products from their marketplace and to cease all sale of the relevant goods.

Based on the FTC investigation, design patent number 098302309, filed on May 20th, 2009, was still pending with the TIPO for preliminary examination even to the date of January 19, 2010; while design patent number D129820 was not licensed to the company at issue until January 5, 2010; although, the company at issue never filed the licensing recordation with the competent authority. As such, at the time when the warning letter was dispatched, namely, September 14, 2009, the company at issue held no secure patent right to support its assertions of patent infringement.

Article 24 of the Fair Trade Act is a general provision regarding unfair competition. The term “unfair competition” refers to activities that are unacceptable according to business competition ethics, including activities that impair fair competition in quality, price and service. “Trading order” is referred to in Article 24 of the Fair Trade Act as trading orders that are in line with social ethics, in which trading counterparts do not resort to deception or improper suppression. In other words, preventing trading counterparts from freely and independently deciding whether to engage in commercial transactions is regarded as an “obviously unfair act” referenced in Article 24. A common type of an obviously unfair act is to impede fair competition with the purpose of harming competitors, examples of which include improper comparative advertising and making representations to trading counterparts of a competitor alleging that competitor's infringement of intellectual property rights.

According to the FTC, the company at issue knowingly dispatched the warning letter with no legitimate right, intended to influence relevant parties’ mind to doubt about patent infringement, so as to stop the sale of the competitor’s products in the marketplace. This action has constituted unfair competitive conduct contrary to business competition ethics, being obviously unfair and affecting the trading order in a hostile manner. The company was ordered to cease its illegal conduct and fined NT$50,000.