TIPS^®  Taiwan Intellectual Property Special

Issuing Warning Letters of Patent Infringement under the Fair Trade Law

In the "Principles Governing the Warning Letter Issued by the Proprietary Owner of Intellectual Property Rights" (the "Principles"), the Fair Trade Commission ("FTC") declared that the warning letter sent by an IPR owner to his competitor's trading partners shall encompass the specific rights/claims and the objective facts of the alleged IPR infringement. In the case of non-compliance, the FTC will probably find the proprietary owner in violation of the Fair Trade Law ("FTL").

Recently, the FTC in 88-Kong-Tsu-Ze-023 Ruling held that issuing a warning letter to the competitor's trading partners urging them not to deal with the competitor, without first alerting the competitor to correct and/or cease the allegedly illegal behaviors, in violation of Article 24 of the FTL (a general provision regulating unfair competition).

In this case, Princeton Biomedical Technology, Inc. ("PBT"), the patent owner of a pregnancy test kit, sent warning letters to many franchised drugstores requesting those stores not to sell its competitor's products since those products were found guilty in the infringement of its patent pursuant to a verification report. Although PBT specified the particulars of its patent and detailed the alleged infringement of its competitor in the aforesaid warning letter. The FTC held that if the patent owner found his right 'being infringed, he should exercise his exclusive right by filing a lawsuit pursuant to the Patent Law, rather than coercing or harassing the competitor's trading partner not to trade with said competitor by a warning letter. The FTC further concluded that PBT should have demanded the competitor to cease the illegal behavior prior to the issuance of the warning letter. Without first requesting the competitor to cease the illegal behavior, PBT's warning letter caused its competitor losing trading opportunities. Accordingly, the FTC ruled that PBT's conduct was an "obviously unfair act against the competitor's trading partners," which prevented the above trading partners from freely and independently deciding whether to engage in transactions.