Modern day business managers use a variety of marketing techniques to promote consumer recognition of their company’s trademark or consumption of goods and services. Offering giveaways that bear a registered trademark is a common marketing technique. However, a giveaway item itself might not belong to the same class of goods or services as those indicated by the giver’s registered trademark. For example, a department store might give out balloons bearing a trademark to promote the store’s retail services to consumers.

So, does the use of a trademark on giveaways satisfy the requirement of “for marketing purposes” necessary to constitute “use” of a trademark as defined in Taiwan’s Trademark Act? And if so, does it count as use with the type of goods of the giveaway itself (e.g., balloon goods) or as use with the main type of goods or services that the user sells or operates (e.g., department store services)? Further, does the giving of counterfeit goods as giveaways to promote other goods or services constitute trademark infringement?

This is a two-part article that looks at court judgments and Taiwan Intellectual Property Office (TIPO) decisions relating to the use of trademarks on giveaways. We give our observations on the prevailing views adopted in practice in Taiwan and further attempt to identify and comment on core principles for determinations in cases involving trademarks on giveaways. (We use the terms “giveaways” and “gifts” interchangeably in this article.)

This Part 1 focuses on cases of infringing use of trademarks on giveaways. Part 2 looks at cases of bona fide use of trademarks on giveaways and presents an overall comparison of the criteria at play in infringing use and bona fide use cases.

1. Elements of “trademark use,” and bona fide use versus infringing use

Taiwan’s Trademark Act (hereinafter the “Trademark Act”) in Article 5 defines the “use of a trademark” as using a trademark (whether in connection with goods, packaging, containers, in related advertisements, or in other ways enumerated in Article 5) “for marketing purposes and furthermore in a manner sufficient to enable relevant consumers to recognize it as a trademark.” This definition can be broken down into three key elements: (i) the actor subjectively has marketing purposes; (ii) the actor uses the trademark in one of the ways enumerated in Article 5 of the Trademark Act; (iii) and consumers objectively recognize the mark as a trademark.

Trademark use that meets the above elements can further be divided into the two categories of bona fide use and infringing use. Bona fide use refers to a trademark holder using their registered trademark on their registered goods or services to maintain and protect their legally registered rights in the trademark. Infringing use, on the other hand, refers to someone who is not the trademark holder using another person’s legally registered trademark on goods or services, thereby infringing the rights of the trademark holder and causing a likelihood of consumer confusion.

The differences between infringing use and bona fide use lie in the different subjects using the mark (non-holders of trademark rights versus holders of registered trademark rights) and the different regulatory purposes with respect thereto (preventing infringement of the rights of trademark holders and consumers versus maintaining the validity of registrations). However, will the determination of whether a specific behavior constitutes trademark use under Article 5 of the Trademark Act differ depending on whether the behavior is “infringing” or “bona fide”? There appear to be different views on this issue in practice in Taiwan.

The legislative comments on the 2011 amendment to the Trademark Act expressly state regarding Article 5 that:

Trademark use can be divided into two types: use by the trademark holder to maintain its rights [bona fide use] and use by others infringing the trademark rights [infringing use]. Although the regulatory purposes with respect to these two types of trademark use are different, both types of use should, in substance, be determined based on whether the use of the trademark in the course of trade is sufficient to enable consumers to recognize the trademark. This recognition element is therefore expressly set out in the General Provisions to provide for its application.

The Article-by-Article Interpretation of the Trademark Act issued by the TIPO states:

Although the two types of trademark use differ in the subjects regulated and the respective regulatory purposes, both types of use can cause trademarks to become recognizable to consumers in the course of trade under the various circumstances of use enumerated in Article 5 of the Trademark Act… so, there is no difference in the substantive content used to determine whether either of these two types of use constitutes trademark use.[1]

This suggests that in the TIPO’s view, whether an action is infringing use or bona fide use has no bearing on the determination of whether it is trademark use.

Additionally, the Intellectual Property and Commercial Court (IPC Court) has issued a judgment holding as follows:

The concept of “trademark use” under Article 6 [the pre-amendment article number] applies to the entire Trademark Act. This is clear from the inclusion of the express definition of “use of a trademark” in Article 6 of “Chapter I General Provisions” of the Act. … So, from the perspective of systematic interpretation, whether in civil, criminal, or administrative litigation and whether discussing “bona fide use” or “infringing use,” the same central concept of “trademark use,” as defined in Article 6, should always be adopted. The emphasis should be on whether the use of the mark on the goods or services is sufficient for consumers to recognize it as a trademark and thereby distinguish the goods and services from those of others.”[2]

Clearly, the legislative comments on the Trademark Act, the TIPO’s Line-by-Line Interpretation, and the IPC Court all take the view that both bona fide use and infringing use by nature fall under the umbrella of “trademark use” as defined in Article 5 of the Trademark Act, and the same criteria for determination of use should apply.

The Supreme Administrative Court, however, has issued a judgment holding as follows:

The subjects and regulatory purposes with respect to bona fide use and infringing use are clearly different, and it is not reasonable to interpret a trademark holder’s bona fide use and an infringer’s infringing use as having the same significance simply because both are referred to as “use” in the respective provisions of the law.[3]

We can thus see that in practice, even if the provisions of Article 5 are applicable to both infringing use and bona fide use, some latitude still appears to exist for differing interpretations with respect to these two types of use.

This article will therefore look at a number of court judgments and TIPO decisions to observe whether different standards are adopted for determining infringing use and bona fide use of trademarks on giveaways. We will further propose what we believe to be the appropriate standards for such determination.

2. Case examples of infringing use of trademarks on giveaways

Below we look at several cases in which an infringer has used goods that infringe trademarks of others as giveaways to consumers.

(1) Post office “Piao I” teapot giveaway case

The case background is that the defendant, Chunghwa Post Office in Taichung (hereinafter, the “Taichung Post Office”), purchased from a third party a batch of teapots bearing the registered trademarks “飄逸” and “PIAO I” (hereinafter “Piao I Teapots”) owned by the plaintiff, Piao I Enterprise Co., Ltd. (hereinafter “Piao I Enterprise”), as giveaways for consumers who purchase insurance from Taichung Post Office. Piao I Enterprise discovered that the Piao I Teapots were counterfeit goods infringing its trademark rights and brought a civil trademark infringement lawsuit against Taichung Post Office.

In this case, both the trial court and the appellate court dismissed Piao I Enterprise’s claim on the grounds that the Taichung Post Office’s use of the counterfeit Piao I Teapots as giveaways did not constitute trademark use. In the first instance trial, the IPC Court found that the infringing Piao I Teapots were gifts given by the Taichung Post Office to consumers after they purchased life insurance, and the Taichung Post Office “did not use Piao I Enterprise’s trademark for the purpose of marketing its insurance business” and “did not use the counterfeit Piao I Teapots for commercial purposes such as sales.” Therefore, the Taichung Post Office did not use Piao I Enterprise’s trademark to indicate the origin of its own goods or services, nor did it use the trademark for the purpose of marketing its own goods or services. The use therefore was not in line with the definition of trademark use under the law.[4]

In the appeal trial, the IPC Court further found that “the subject of the Taichung Post Office’s marketing in the course of trade was life insurance services, not counterfeit Piao I Teapots,” and “consumers’ willingness to purchase insurance services was not influenced by the source or quality of the goods indicated by Piao I Enterprise’s trademark.”[5] The Court therefore held that, subjectively, the Taichung Post Office did not have the purpose of marketing counterfeit Piao I Teapots or using counterfeit Piao I Teapots to market its insurance services and, objectively, consumers did not rely on Piao I Enterprise’s trademark to identify the source of the Taichung Post Office’s goods or services. Hence, the Taichung Post Office’s act of offering counterfeit Piao I Teapots as giveaways was not a trademark use and did not infringe the trademark rights of Piao I Enterprise.

(2) C’Est Toi Farm tumbler giveaway case

This case is similar in background to the above case. The defendant, C’Est Toi Farm, which provides farm services, offered counterfeit tumblers bearing the registered trademark “Travel Buddy” as gifts to visitors. Piao-I Enterprise consequently filed a trademark infringement lawsuit against C’Est Toi Farm.

However, the trial court and appellate court both dismissed Piao I Enterprise’s claims. The IPC Court in the first-instance trial found that C’Est Toi Farm’s act of giving away the counterfeit tumblers was not trademark use. The Court held that “whether presenting a trademark on a giveaway constitutes trademark use depends on an overall determination of whether, subjectively, the user has the purpose of marketing the goods bearing the trademark and furthermore whether, objectively, it has the result of enabling relevant consumers to distinguish the goods the user wishes to market from the goods of others.” The Court found that the tumblers were merely a gift given to consumers after they entered the farm and were not offered for sale, and the indication of source on the tumblers and the quality of the tumblers would not have influenced consumers’ decision of whether to visit C’Est Toi Farm and spend money there. Therefore, C’Est Toi Farm, subjectively, had no intention of marketing the tumblers and did not achieve any purpose of marketing C’Est Toi Farm through the tumblers. Objectively, it did not enable relevant consumers, by means of the trademark on the tumblers, to identify the source of the goods or services of C’Est Toi Farm. Its giving away of the tumblers was therefore not considered trademark use as defined in the Trademark Act.[6]

In the appeal trial, the IPC Court did not explicitly hold that that C’est Toi Farm’s actions were not trademark use, but rather held that C’Est Toi Farm did not commit infringement intentionally or negligently. However, the reasoning in the appeal judgment does discuss findings relating to the elements of trademark use, such as “consumers did not visit the farm in order to redeem the tumblers” and “no link could be established between the tumbler and C’Est Toi Farm,” etc.,[7] and so appears to likewise deny that the act of giving the free tumblers satisfies the trademark use functions of having marketing purposes and enabling consumers to identify the mark as a trademark.

(3) Case of LG Corp.’s use of the LV trademark

The background facts of this case are that the defendant, LG Household & Health Care (Taiwan), Ltd. (hereinafter “LG”), which operates the cosmetics brand The Face Shop, cooperated with its Korean parent company to launch in Taiwan a cushion compact product and packaging bearing a trademark similar to a registered trademark of Louis Vuitton Malletier (hereinafter “LV”). The product was packaged with a canvas bag outer package and a giveaway hand mirror, and all bore graphics similar to LV’s trademark. As a result, LV initiated a civil trademark infringement lawsuit against LG.

The discussion in this case focused on issues of determining trademark parody. But the IPC Court judgment held that LG had committed infringement, and states that LG’s use of LV’s registered mark on the cushion compact, packaging, and hand mirror gift covered a large surface area, and “gave consumers the impression that it indicated the source.” Therefore, for the purpose of marketing, LG used LV’s trademark on the product and packaging (including the gifted hand mirror), and such use was “sufficient to cause relevant consumers to take it as a symbol of the product’s source,” constituting trademark use as defined in Article 5 of the Trademark Act.[8] In addition, when calculating the amount of damages in this case, the Court included the value of the gifted hand mirror. In this case, the Court clearly recognized LG’s infringing use of the trademark on the gifts as meeting the definition of trademark use in Article 5 of the Trademark Act.

3. The authors’ observations on infringing trademark use on giveaways

(1) Observations on the subjective elements of trademark use

From the cases discussed above, it appears that the courts’ determination of whether the use of trademarks on giveaways constitutes infringement, in terms of the subjective elements, is based on whether the use is marketing the giveaway itself (selling the Piao I Teapots, tumblers, or hand mirrors) or marketing other goods or services (the post office’s insurance and C’Est Toi Farm’s farm services). However, in the cases in which infringement was not established, it seems that the courts additionally considered the “attractiveness of the giveaway to consumers (the marketing effect generated)” and concluded that the Piao I Teapots did not affect whether consumers purchased postal insurance, and that the tumblers were not a factor in attracting consumers to the Farm, so the giveaways in those cases were not found to be a link in the marketing chain.

However, this article argues that the courts’ determinations on the element of “marketing purposes” seem overly strict. Given that the Trademark Act requires only subjective “marketing purposes,” it should not be necessary to consider whether a gift actually has a successful marketing effect. It should be sufficient to consider whether the user’s act of giving away the item is part of the “course of trade” between the user and the consumer, that is, whether it is an act of a commercial nature. As the legislative comments on Article 5 of the Trademark Act state, “The term ‘marketing purposes’ in Taiwan’s Trademark Act denotes a concept similar to the term ‘in the course of trade’ in Article 16.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement).” Taking the post office tumbler giveaway case as an example, if the post office did not, in the course of trade, have the marketing purposes of promoting consumers’ willingness to purchase insurance through the tumblers, it would not have spent money to purchase the tumblers as giveaways, nor would it have had its employees inform consumers of the offer of tumblers for purchases reaching a certain amount. In the course of trade between the post office and the consumer (the purchase and sale of insurance products), giving away the tumblers with purchases of a certain amount was an intrinsic part of the process and clearly had a commercial nature and purpose. It strains reason to infer that the post office had no marketing purpose for the giveaway.

In addition, in the cases in which the courts found no infringement, they held that the user had no marketing purpose if it neither marketed the gift itself (such as by selling Piao I Teapots or tumblers) nor used the gift to market other goods or services (such as marketing post office insurance or farm services). These holdings seem to distinguish between “marketing the giveaway itself” and “marketing other goods or services.” However, most giveaways are used for the purpose of marketing other goods, and it is rare to market a giveaway alone. Furthermore, if a certain level of consumer attraction is generated during the giveaway transaction, the user can be said, to some degree, to be “marketing the giveaway” (using it to attract consumers to purchase the business’s main products). In the context of infringing use, this article takes the view that it is not beneficial to distinguish between “marketing the giveaway itself” or “marketing other goods or services.” To insist on such a distinction could lead to the inappropriate conclusion that an infringer who uses counterfeit products as giveaways to attract consumers into transacting does not commit infringement because the infringer does not market the counterfeit product itself.

In the same interpretive vein called into question by the present authors, the Article-by-Article Interpretation of the Trademark Act (the “Interpretation”) published by the TIPO cites the judgment in the post office tumbler case to state:

If the disputed trademarked goods are purchased from another company but are used as giveaways, the use of the disputed trademark on the giveaway good or service cannot be said to be for marketing purposes. That is, the user has not used the purchased disputed trademarked goods for commercial purposes such as sales.[9]

This article argues for reconsideration of the above view.

By contrast, in the case of LG’s use of the LG trademark, the IPC Court did not explicitly distinguish whether LG’s use of the infringing trademark on the hand mirror should be considered as marketing the giveaway (the hand mirror) or marketing the main product (the cushion compact). The Court considered the entire package-sale act as trademark use. Consequently, in the latest version of the Interpretation, the TIPO supplementarily explains that “even if the goods with a counterfeit infringing trademark are merely gifted as giveaways to consumers, if the giveaway itself is used as a commercial means by the user for marketing purposes, after weighing the specific circumstances of the individual case, it may still constitute trademark use.”[10] This article agrees with this supplementary interpretation by the TIPO and further argues that making distinctions based on the object of the marketing (i.e., on whether the object is the giveaway itself or a separate main product) can create regulatory loopholes. We believe that further room exists for revision of the remaining interpretations on this point in the TIPO’s Interpretation.

(2) Observations on the objective elements of trademark use

As for the objective elements, the courts appear to base their determinations on whether consumers, by means of the trademarks on the giveaways, identify that goods or services originate from the trademark user. Thus, the courts held that because the Post Office and C’Est Toi Farm were not using the trademark on the giveaways to cause consumers to recognize their respective insurance services and farm services, their conduct did not constitute trademark use. LG, on the other hand, did cause consumers, by means of the trademark on the giveaway hand mirror, to recognize that the hand mirror emanated from LG, so its conduct did constitute trademark use.

This article argues that the method of determination adopted by the courts in the above cases imposes an additional restriction that is not found in the Trademark Act. Article 5 of the Trademark Act merely requires that the use of a mark be sufficient to cause consumers to recognize it as a trademark. It does not require that consumers be able to recognize whose trademark it is. In fact, if it must be shown, to satisfy the definition of use, that consumers recognize from the trademark that the goods or services originate from the trademark user itself, then the sale of counterfeit goods will not constitute use of trademark, because providers of counterfeit goods invariably aim for consumers to perceive the trademark as identifying another party (the trademark holder) rather than the user (the infringer) as the source of the goods.

The types of use at issue in trademark infringement cases are uses likely to cause consumer confusion. Consumers in such cases might perceive the source of goods indicated by the trademark to be the user or they might perceive it to be another party. So, in the context of infringing use of trademarks on giveaways, establishing trademark use should not require showing that consumers perceive the trademark on the giveaways as indicating the trademark user itself as the source of goods or services. It should suffice to show that consumers recognize that the trademark is an indication of the source of someone’s goods or services.

(3) Proposed criteria for determining infringing use of trademarks on giveaways

To sum up, this article argues that determinations of infringing use of trademarks on giveaways should always be premised on whether the alleged infringing use causes a likelihood of confusion. There is no need to distinguish whether a giveaway bearing a trademark is used to market the giveaway itself or to market other goods or services of the user. Insofar as the giveaway is one link in the course of trade between the user and the consumer, the trademark on the giveaway can automatically be considered to be used for marketing purposes. And in terms of the objective perceptions of consumers, the regulation of the manifold types of infringing use likely to confuse consumers should by no means be narrowed by premising determinations of infringing use on the consumer perceiving the trademark on a giveaway as indicating the goods or services of the user itself.

The criteria advocated in this article for determining what constitutes trademark use may at first glance appear looser—i.e., may seem to set a lower bar for establishing use—than the criteria adopted in the cases discussed above in which the courts made judgments of non-infringement based on the determination that the use of the trademarks on giveaways did not constitute trademark use. However, the element of “trademark use” is just one of the elements that must be proven to establish liability for trademark infringement. Establishing liability for infringement also requires a determination, based on various factors, of whether there is a likelihood of confusion. And to establish liability for damages, it is further necessary to prove that there was “intent or negligence.”

For the above reasons, when making determinations in individual cases, it is unnecessary to be overly strict in interpreting the definition of trademark use. A more inclusive interpretation of use will not weaken protections for trademark users. On the contrary it will give fuller rein to the mechanisms provided in the Trademark Act for curbing improper use and protecting the public interest.

For example, under such a more inclusive interpretation of use, if an infringer has purchased counterfeit goods and used them as giveaways to market their other goods or services, if the infringer can demonstrate that they had at least exercised some degree of care, their actions might not be held to reach the “intent or negligence” required to establish liability for damages. But because the infringer caused the counterfeit goods to flow into the market as giveaways, the infringer can still be held liable for remedying the infringement, for preventing further infringement, and for destroying the counterfeit goods. This will uphold market order and protect the right of consumers to be kept safe from confusion.

Conversely, under the conventional narrower interpretation, if it is determined in the first prong of examination in any individual case that offering giveaways does not constitute use, the door is automatically closed to requiring recall of the counterfeit giveaways. Meanwhile, the door is left wide open for the infringer to continue distributing the counterfeit goods beyond the reach of the law, merely because the offering of the giveaways is not technically considered a use of trademark.

This article observes that in cases involving infringing use of trademark, the courts tend to consider the subjective element of what it is that the user intends to market and the objective element of whether consumers identify the user’s goods and services by means of the trademark. In doing so, the courts are determining infringing use from the perspective of considerations that seem better suited to determinations of bona fide use. In the next part of this article, we examine cases relating to bona fide use of trademarks on giveaways, observe the criteria for determining bona fide use in practice, and further compare cases of infringing use and bona fide use of trademarks on giveaways.

This is a translation of the original article in Chinese, which can be found here.

Written by Gary Kuo, and Yi-kai Chen. Translated by Paul Cox, and Niki Chen.

[1] Article-by-Article Interpretation of the Trademark Act, 2021 Edition, p. 11.

[2] IPC Court Judgment No. 100-Min-Shang-Shang-7.

[3] Supreme Administrative Court Judgment No. 106-Pan-163.

[4] IPC Court Judgment No. 99-Min-Shang-Su-2.

[5] IPC Court Judgment No. 99-Min-Shang-Shang-6.

[6] IPC Court Judgment No. 99-Min-Shang-Su-52.

[7] IPC Court Judgment No. 100-Min-Shang-Shang-14.

[8] IPC Court Judgment No. 108-Min-Shang-Shang-5.

[9] Article-by-Article Interpretation of the Trademark Act, 2021 Edition, p. 244.

[10] Article-by-Article Interpretation of the Trademark Act, 2021 Edition, p. 244.