Taiwan is an innovation-driven economy, ranked 12 out of 141 economies according to the World Economic Forum Global Competitiveness Report 2019. As a member of the World Trade Organisation since 2002, Taiwan’s IP laws are amended from time to time in compliance with the Agreement on Trade-Related Aspects of Intellectual Property Rights to keep up with international legislative trends. The latest Taiwan Trademark Act amendment entered into force in December 2016, in which the law has expanded the liability of preparatory trademark infringement activities such as manufacturing or selling labels, packages or containers bearing counterfeit trademarks.
For trademark owners that record their trademarks with Customs each year, Customs conducts random investigations as an effective means to prevent the import of counterfeit products at the border. To relax the burden of trademark owners renewing their marks with Customs, in 2016 the Regulations Governing Customs Measures in Protecting the Rights and Interests of Trademarks was amended to extend the protective period of the customs monitoring service to the expiry date of a registered trademark.
A specialised IP court was established in 2008. The court is expected to be further enlarged on 1 July 2021 to become the IP Rights and Commercial Court. This specialised court has the professional capability and jurisdiction to adjudicate civil, criminal and administrative actions related to all IP rights.
The relevant legislation in Taiwan is:
- the Trademark Act; and
- the Regulations Governing Customs Measures in Protecting the Rights and Interests of Trademarks.
As an effective measure for preventing counterfeit products from being imported into Taiwan, a trademark owner may file an application for the Customs monitoring service. The trademark owner has the opportunity to explain the difference between the counterfeit and genuine products, as well as the potential source of the counterfeit items so that Customs may learn how to distinguish between counterfeit and genuine goods.
When Customs finds suspicious products, it notifies and requests the trademark owner to go to Customs for an inspection within 24 hours of receipt of the notice. The following measures should be taken by the trademark owner:
- Inspect the suspicious goods – the trademark owner should take photographs and acquire information regarding the suspicious goods at Customs.
- Submit an identification report – if the suspicious goods are identified as counterfeit, the trademark owner must submit evidence (eg, an identification report) within three business days (extendable once for up to three further days with reasonable cause) to prove that the items are counterfeit.
- Provide evidence that the items are genuine – after the suspicious goods are identified as counterfeit, the importer should provide evidence within three business days (extendable once for up to three further days with reasonable cause) to prove that the items are genuine. If the importer fails to provide the evidence in time, Customs may temporarily detain the suspicious goods and transfer the case to the police for investigation. If the prosecutor believes that the importer has infringed the trademark, the prosecutor will indict the importer at the criminal court. If the importer provides the evidence in time, the trademark owner may provide a bond (equal to the duty-paid price of the suspicious goods) and apply for detention of the items. The importer may provide a bond at twice the amount of the bond put up by the trademark owner for release of the suspicious goods.
- File a lawsuit against the importer – the trademark owner must file a criminal or civil complaint against the importer within 12 days of detention of the goods, otherwise the goods may be released by Customs.
The trademark owner may file a complaint with the police or the court. The police may investigate evidence, record the suspect’s statement and transfer the case to the prosecutor who may determine whether to prosecute. If the prosecutor proceeds, the case will enter a criminal proceeding.
In practice, it is common for trademark owners to seek a criminal remedy because a criminal action is cost-effective (the police and prosecutor take charge of the investigation and prosecution) and acts as a deterrent on the infringer. The trademark owner may file an incidental civil action claiming damages if the defendant is found guilty (the owner does not have to pay court fees for an incidental civil action). However, unlike a civil court, a criminal court cannot issue a permanent injunction order.
In a criminal action, the wilfulness of the defendant is the premise of establishing criminal liability, meaning that if the court believes that the defendant is negligent only, then the defendant will be held not guilty. If this is the case, damages cannot be claimed in an incidental civil action.
In view of the lower legal cost and potentially lower damages available, in practice trademark owners tend to choose a criminal action for minor infringement cases or in cases against infringers who are individuals or small business entities.
Preliminary injunction order
The trademark owner may move for a preliminary injunction order with the court before or after filing the trademark infringement lawsuit on the merits. After receiving the motion, the court will subpoena both parties (unless the trademark owner can prove that there is a reasonable cause not to subpoena the defendant) and make a decision.
If the motion for a preliminary injunction order is granted by the court, the court will generally request the trademark owner to put up a bond (generally one-third of the damages amount claimed by the trademark owner). The court may also allow the defendant to put up a bond (generally equal to the damages claimed by the trademark owner) to release the preliminary injunction order. A defendant not putting up a bond may also request the court to set a deadline for the trademark owner to file a trademark infringement lawsuit on the merits. If the trademark owner does not file said lawsuit within the timeframe, the preliminary injunction order will be released.
In practice, it is unusual for a trademark owner to move for a preliminary injunction order unless the amount at stake is significant and there is an imminent threat of infringement. The pending time for a preliminary injunction order (about six months per instance) is close to that of a trademark infringement lawsuit on the merits (about eight to 10 months per instance).
Civil action on the merits
The trademark owner may file a civil action on the merits against a potential infringer. After receiving the complaint, the court will arrange the hearings, investigate the evidence and make a decision. In a civil action, unlike a criminal action, the court will award damages if it believes that the defendant is, at least, negligent and may issue a permanent injunction order.
However, the legal costs are comparably higher than resorting to a criminal action, and the trademark owner must also collect most of the evidence itself, since there is no discovery proceeding in a civil action in Taiwan. There is also a risk that the defendant may transfer property and monetary assets before the issuance of the judgment.
In practice, a trademark owner will seek a civil remedy when the damages at stake are very large and it is important to obtain a permanent injunction order.
Online trademark infringement and the rapid development of online trading and electronic transactions has resulted in some severe counterfeiting issues for businesses. Most online infringers sell counterfeit products anonymously through internet service providers (ISPs) such as online stores and auction websites, which makes them difficult to track and identify.
To balance the interests between IP right holders and ISPs, the chapter regarding limitations on liability for ISPs was incorporated into the Copyright Act in 2009. Accordingly, ISPs are not obliged to investigate whether the products provided by the sellers on their platforms are counterfeit. However, if the online stores receive a takedown notice from a copyright owner, they must take down the asserted infringing goods, otherwise they may bear the liability of contributory infringement.
Although a notice-and-takedown procedure is not expressly provided in the Trademark Act, in practice the court adopts the same standard when reviewing ISPs’ liability for trademark infringement. Therefore, such a procedure is strongly recommended when dealing with online trademark infringement.
It is highly recommended that trademark owners adopt the following preventive measures to protect their brands:
- Engage local counsel who can provide professional advice for protecting brands and who are experienced in cooperating with private investigators and the police.
- Manage the contractual relationship with third parties (eg, clearly state the scope of the right granted to the local manufacturer or distributor in the manufacturing or distribution agreement).
- Periodically monitor the counterfeits in online and physical stores.
- File a notice for the customs monitoring service to prevent counterfeit products from being imported into Taiwan.
- Use criminal actions to deal with trademark infringement where the situation is not severe or the infringers are individuals or small business entities.
- Do not move for a preliminary injunction order unless the monetary damages at stake are high and the need to stop the infringement is urgent.
- Use civil actions to deal with trademark infringement if a trademark owner aims to obtain a higher damages award and permanent injunction order.
- Obtain a notice-and-takedown procedure to deal with online trademark infringement.