Warning Letters of IP Infringement May Trigger Unfair Competition

Article 88 of Patent Law provides that, in the event of patent infringement, the patentee may demand the removal of the infringement and the prevention of any threat of infringement. The Fair Trade Law also provides that any proper conduct in connection with the exercise of patent rights shall preclude the application of Fair Trade Law. These provisions do guarantee legal monopoly of the patentees. However, patentees may issue IP infringement warning letters to consumers of their competitors, casting doubts in the minds of the consumers and preventing them from dealing with competitors of the patentees. Even if non-infringement is proved later on, the competitor is unable to recover the loss of consumers caused by the warning letters. This kind of behavior produces anti-competitive effects and creates unfair competition, even constitutes the obstacles to the development of intellectual property.

The Administrative Court indicated in 89-Pan-791 judgement that, patent law is applicable to interpret the scope of the claimed invention. However, if the patentee abuses the patent right and produces unfair competition, it will fall into the jurisdiction of Fair Trade Law. The Fair Trade Commission(FTC) announced a “Principle of Handling the IP Infringement Warning Letters Issued by Enterprises” in 1996. It is determined to be proper exercise of IP right if the patentee confirms the infringement of IP rights and notice the alleged infringers for their preparation for defense before issuing a warning letter. If the letter is not accompanied by a judicial judgement or an infringement verification report, a statement containing accurate analysis of the claims and its fact of infringement is sufficient.

The Administrative Court reaffirmed the authority of the FTC in regulating enterprises’ issuance of IP infringement warning letters.