The previous part of this article presents prevailing judicial views and the authors’ observations regarding infringing uses of trademarks on gifts. Below we focus on the bona fide use of trademarks on gifts for the purpose of maintaining trademark rights—specifically, the issue of whether the use of a registered trademark on a gift qualifies as trademark use to protect the trademark from cancellation for non-use. We compare the elements of infringing use and bona fide use of trademarks on gifts and attempt to sort out some principles regarding the use of trademarks on gifts.
1. Cases relating to bona fide use of trademarks on gifts
- The “心靈SOUL” handcrafted soap case
The underlying facts of this case are that the trademark holder, Sunnix International Inc. (“Sunnix”), registered the trademark “心靈SOUL” designated for use on goods including “soap, hair styling gel.” A third party applied for cancellation of the mark on the grounds of non-use. Sunnix submitted evidence that it used the trademark on “心靈SOUL” handcrafted soap. The handcrafted soap was used as a gift to promote Sunnix’s other brand “莎順shasun”, which is used on styling liquid and skin care cream. Sunnix did not sell the “心靈SOUL” handcrafted soap independently.
The Taipei High Administrative Court found in its judgment that the “心靈SOUL” handcrafted soap was labeled as a “Gift, Not For Resale” and was packaged together with the “莎順shasun” brand products for sale. Therefore, Sunnix’s subjective purpose was merely to use the “心靈SOUL” handcrafted soap as a gift to promote the main “莎順shasun” products. There were no marketing purposes for the “gift itself,” and this perception was shared by consumers, so “心靈SOUL” was not used as a trademark.
- Eslite photo frame gift case
The judgment discussed above held that in the absence of independent sale of the gift, the use of the trademark on the gift did not constitute use as a trademark. However, more recent judgments of the Intellectual Property and Commercial Court (IPC Court), such as in the Eslite photo frame gift case, seem to take a different view and affirm that using trademarks on gifts to market other goods or services also constitutes trademark use on the “gift itself.”
The facts of the present case are that Eslite Corporation (“Eslite”) registered the trademark “Eslite” for goods including “bookcases and photo frames.” A third party applied for cancellation of the trademark on the grounds of non-use. Eslite presented evidence that it had used the “Eslite” trademark on photo frames that were gifts given to consumers who swiped a certain amount on their Eslite cards.
The Court held that the term “marketing purposes” in the Trademark Act means to promote the sale of goods or to promote goods with the intention of selling them. It further held that the use of trademarked goods as gifts accompanying sales has the function of promoting sales, is closely related to sales, has marketing purposes, is different from mere gift-giving, and thus constitutes use as a trademark. Eslite’s complimentary photo frame was a gift to reward purchases using the Eslite card and had the function of promoting purchases by consumers using the Eslite card. Consumers recognized that the gifts were given by Eslite, so they constituted a use of the Eslite trademark. The Court therefore found that Eslite had used the Eslite trademark on the photo frame.
- Valentino perfume gift case
The IPC Court reiterated its above view affirming the bona fide use of trademarks on gifts in two judgments in 2015. The underlying facts of these two judgments are the same. The Italian luxury fashion house Valentino S.p.A. had registered the “V in ellipse” and “VALENTINO” trademarks for use on “perfume” products. A third party applied for cancellation of these trademarks. Valentino provided evidence to prove that it had used the “V in ellipse” and “VALENTINO” trademarks for perfume products, but the perfume products were gifts to reward the purchase of a certain amount of Valentino brand products and were not sold separately.
The IPC Court noted that “marketing purposes” in Taiwan’s Trademark Act is similar in concept 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). It refers to a transaction behavior or flow of trade with commercial intent and is not limited to sales or marketing involving payment of a price. The Court further held that the perfume goods were gifts accompanying sales rather than merely gifts, had the function of promoting sales, were closely related to the sales, and should be considered to have a marketing purpose. The gift of trademarked perfume goods was furthermore a promotional commercial transaction that conveyed a marketing message in the market, achieved the function of a trademark indicating the source of the goods, and “acquainted consumers with the ‘V in ellipse’ / ‘VALENTINO’ trademarks through the perfume gifts.” It thus met the definition of use of a trademark under Article 5 of the Trademark Act. Valentino had therefore used “V in ellipse” / “VALENTINO” as trademarks on the perfume products.
- BEING bathrobe gift case
In this case, a trademark infringement case, the defendant argued that the plaintiff, President Being Corp., had not used its registered “BEING” trademark (designated for clothes, scarves, headscarves, pajamas, bathrobes, underwear, etc.), so there were grounds for non-use cancellation of the “BEING” trademark. President Being Corp. responded with evidence of use of the BEING trademark, including on bathrobes given to members as birthday gifts by the BEING SPA operated by President Being Corp.
The IPC Court held that President Being Corp.’s gift of the bathrobes to members constituted use of a trademark on the bathrobes, because BEING SPA has a membership system and the gift was given only to people with membership status. It was not a gift available for free to the public. Moreover, to become a member, consumers had to pay a stored-value membership fee ranging from TWD$ 20,000 to TWD$ 400,000. Therefore, although the bathrobe was formally a gift, President Being Corp. used the birthday gifts to offer members the gratification of receiving a special benefit. Such gifts can promote consumption and are a commonly employed marketing tactic. The Court also stated that the cost of purchasing and distributing the bathrobe gifts effectively came out of the stored value paid by the members because the bathrobes could only be obtained after paying toward consumer purchases. Therefore, the circumstances of the bathrobe gifts in this case differed from mere distribution of gifts for free. The members actually paid de facto compensation for the bathrobes.
- View of the TIPO on bona fide use with gifts—items that promote sales versus mere advertising tools
Many decisions by the Taiwan Intellectual Property Office (TIPO) share the view of the IPC Court that if a certain threshold exists for obtaining a trademark-bearing gift (such as spending a certain amount or purchasing specific goods), then the use of the trademark on the gift has the function of “promoting sales,” meaning that the trademark is used on the gift for marketing purposes. In its Notice on the Use of Registered Trademarks, however, the TIPO brings up the concept of “advertising tools,” and states:
If a giveaway is used merely as an advertising/promotional tool and does not promote the sale of the giveaway itself, the relevant consumers will not regard the trademark on the giveaway as a trademark representing the giveaway, and hence such use will not be deemed use of the trademark with respect to the giveaway goods.”
The TIPO gives the example of a department store offering balloons marked with a trademark to passersby. It states that the balloons are merely advertising tools for the purpose of promoting the department store’s services, so the use of the trademark on the balloons is considered trademark use for its department store services, but not trademark use for balloon goods.
The TIPO has also espoused this view in an actual cancellation case. The underlying facts of the case are that the Japanese company POLA ORBIS Holdings Inc. (“ORBIS”), which is in the business of cosmetics and nutritional supplements, registered the “ORBIS” trademark on products including “calendars.” A third party applied for cancellation of the trademark. ORBIS provided evidence that it had used the “ORBIS” trademark on gift calendars. However, the TIPO determined that ORBIS’s main business is cosmetics and nutritional supplements, so the gift calendar functioned to promote “cosmetics and nutritional supplements” rather than to promote “desk calendar goods.” The gift desk calendar was merely an advertising medium. Therefore, ORBIS’s printing of trademarks on the gift calendars cannot be regarded as the use of a trademark on “desk calendar products.” Interestingly, the gift desk calendar in this case was not an unconditional gift. Consumers had to spend a certain amount to get the gift desk calendar, but the TIPO still considered the calendar to be merely an advertising medium.
2. Some observations on bona fide use of trademarks on gifts
- “Function of promoting sales” and “purposes of marketing the gift itself”
The above cases show that a key issue in determining bona fide use of trademarks on gifts is whether the trademark holder has used the trademark with respect to the gift itself (as at issue in the cases of the photo frames and desk calendars discussed above) or has used the trademark with respect to other goods or services of the trademark holder (the Eslite card and the cosmetics goods). According to the view taken by the IPC Court and the TIPO in recent cases, a relevant determining factor in practice is whether the gift functions to “promote sales.” Even if the trademark holder does not sell the gift itself, as long as the gift has the function of promoting the sale of other goods and services of the trademark holder (Eslite photo frames to promote Eslite card consumption, Valentino perfume to promote boutique goods consumption), it can be regarded as the use of a trademark in the class of goods to which the gift belongs.
The authors of this article agree with this standard of judgment, because if a gift has the function of promoting sales it means that, to some extent, consumers have the desire to obtain the gift itself, and the trademark holder is, to some extent, attracting consumers to consume other goods and services through use of the gift goods in marketing. The consumer likewise is aware that the gift comes from the trademark holder and will link it to the trademark holder’s other goods and services, thereby increasing consumption. Such use by the trademark holder satisfies the definition in Article 5 of the Trademark Act.
In addition, this article agrees with the IPC Court’s holding in the Valentino perfume case that the determination of “marketing purposes” does not depend on whether a gift is provided gratuitously or not, but rather depends on whether the user offers the gift in the course of a transaction or flow of trade with commercial intent. Thus, the perfume gift, given in the course of trade with commercial intent (given free with the purchase of a certain amount of boutique goods) can be regarded as use of a trademark for marketing purposes. However, although the Court has held that gratuitous gifts can constitute use of trademarks, it has in related cases still placed emphasis on the relevant gifts being “not a mere gift.” In the BENG bathrobe case, the Court even expounded at some length on the bathrobe being “not a gift that could be gotten by the general public without spending money” and that “the members actually paid de facto compensation.” This article observes that the courts still care to some extent whether the consumer has paid a price (whether a direct payment of money or otherwise) to obtain a gift, when determining whether the gift has the function of promoting sales and whether the user has a marketing purpose.
- Gifts that promote sales versus mere advertising tools
Perhaps the Court emphasizes “not a mere gift” to distinguish such gifts from those that have no sales promotion function and are merely advertising tools (e.g., balloons or desk calendars). The TIPO’s example of balloons, and its determination that a calendar given with a purchase of a certain amount is merely an advertising tool, suggest that whether a gift is a sales promotion item or merely an advertising tool is related to the degree of attractiveness of the gift or the nature of the gift itself. In the TIPO example and the court case discussed above, the respective items determined to be mere advertising tools are balloons and desk calendars. Products of this type are widely used in large quantities by businesses across all industries as gifts to promote their main lines of business. The value of such gifts themselves is low, and consumers are not likely to increase their consumption to get such gifts. It would be difficult to claim that the trademark holder has any marketing purposes with respect to such gifts themselves. At most, such gifts are used to make consumers aware of the trademark holder’s main business. They thus do not constitute a use of the trademark in the goods class of the gift itself. As for the perfume and photo frame gifts that were determined to be bona fide use of trademark for maintenance of rights, these are not items that are commonly given away in mass. When offered as gifts under certain conditions, such items may be more attractive to consumers and have the function of promoting sales.
However, this article argues that taking the nature of the gift itself as the basis to determine whether a gift has the function of promoting sales may complicate the criteria for judgment. Even in the case of desk calendars or balloons, there can be those that are so exquisitely designed that consumers are willing to spend more to get the gift. The desk calendar in the above-mentioned ORBIS case, since it was a gift given upon purchasing a certain amount in goods, should still be considered to have a sales promotion function, just like the Eslite photo frame.
As to the criteria for determining whether the giving of a gift is “marketing of the gift itself” or is “merely use of the gift as an advertising tool,” this article believes that we can return to the standard set out by the IPC Court and observe the course of trade between the trademark holder and consumers to determine whether the gift has the function of promoting sales. For example, calendars given away in large quantities during the holiday season and balloons given away in the street by department stores do not involve any sales behavior in the giveaway process and are more in the vein of pure marketing and advertising of the giver’s main line of business. By contrast, calendars given away upon purchases of a certain amount in business anniversary promotions and balloons given away with purchases in shops are a part of the transaction between the trademark holder and the consumers, so the trademark holder can be considered to have the purpose of “marketing the gift itself.”
3. Differences with respect to infringing use and bona fide use of trademarks on gifts
The case examples relating to infringing use and bona fide use show that whether the use of a trademark on a gift constitutes use as a trademark is consistently determined in practice based on the standard set out in Article 5 of the Trademark Act, i.e., the user subjectively has marketing purposes, it presents the trademark on relevant goods or materials, and relevant consumers objectively recognize it as a trademark. However, our observation and discussion of the above cases leads us to the view that, based on the different regulatory purposes and counterparts contemplated with respect to the infringing use and bona fide use of trademarks, these two types of use ought to be treated differently in the interpretation and application of the subjective and objective elements.
In cases of infringing use of trademarks on gifts, the practice seems, regarding the subjective elements, to distinguish between “the user marketing the gift itself or using the gift to market other goods and services” and, regarding the objective elements, to hold that “infringing trademark use is not constituted if consumers will not, by means of the trademark on the gift, identify goods or services as originating from the user.” Meanwhile, in cases relating to bona fide use of trademarks on gifts, when judging the subjective and objective elements of trademark use, the courts and the TIPO still attach importance to “whether the trademark holder is marketing the gift itself” and “whether consumers identify the gift as originating from the trademark holder.” Thus, the TIPO and the courts appear not to adopt any significantly different criteria for establishing use in cases relating to infringing use and cases relating to bona fide use.
We observe, however, that in practice in the determination of infringing trademark use on gifts, the spirit of emphasizing the class of goods and whether the trademark indicates the user—appropriate to determinations of bona fide use—has been carried over and applied to determinations of infringing use. In fact, what should be emphasized with respect to infringing use is the likelihood of confusion by consumers. Seldom do infringers use trademarks on gifts to indicate the source of their own goods. More commonly, infringers use counterfeit goods as gifts to attract consumers. Invariably the infringers in such cases are misleading consumers to believe that the gift originates from the true trademark holder rather than from the infringer itself. Therefore, in terms of objective elements, whether consumers identify, based on the trademark, that goods or services originate from the user is not something that should be considered when determining infringing use of trademark. On the contrary, taking this as an element for consideration can create a regulatory loophole for infringers.
Also, the key point in cases of infringing trademark use on gifts is to deal with gifts that cause consumer confusion. Whether the trademark user intends to market the gift itself is beside the point. So, when examining the subjective elements, there is no need to make a distinction between whether the object of the infringer’s marketing is the gift itself or other goods and services. To make such a distinction could lead to the inappropriate conclusion that because the infringer is marketing not the giveaway itself but other goods or services, the infringer distributing the counterfeit goods has no obligation to cease or refrain from infringement, nor to destroy the counterfeit goods. This surely is not a legal outcome intended under trademark infringement provisions. In practice, even if the criteria for determining the infringing use of a trademark are relaxed, a nuanced and appropriate determination on each individual case can still be achieved through the subsequent stages of examining the elements of likelihood of confusion and intent or negligence.
With regard to the bona fide use of trademarks on gifts, because what bona fide use protects is the validity of registered trademarks designated by individual trademark holders for specific classes of goods, this article agrees with the courts’ practice of determining whether the trademark holder has marketing purposes for “a gift itself” based on “whether the gift has a function of promoting sales.” As for the difference between a “gift that promote sales (one with marketing purposes)” and a gift that is merely an “advertising tool,” this article argues that the role of the gift can be judged from the course of trade between the trademark holder and the consumer.
In summary, the prevailing practice in Taiwan appears not to distinguish between bona fide and infringing use in determining whether the use of a trademark on a gift constitutes use under the elements of Article 5 of the Trademark Act. But precisely because no distinction is made, we see a tendency to judge all trademark use under the rubric used to judge bona fide use. In this article, we argue that the regulatory subjects and purposes with respect to infringing use and bona fide use are different. The considerations appropriate to infringing use are protecting consumers from confusion and safeguarding fair competition. The considerations appropriate to bona fide use are the goods and services classes and the function of a trademark to indicate the source of specific goods or services. Therefore, although the statutory elements set out in Article 5 of the Trademark Act apply to both infringing use and bona fide use, it would behoove the courts to apply different criteria when interpreting the individual elements of use, to reflect the different regulatory purposes relating to infringing use and bona fide use.
Written 26 August 2022 by Gary Kuo and Yi-Kai Chen.
This is a translation of the original article in Chinese, which can be found here (Part 1) and here (Part 2). Translation by Paul Cox and Niki Chen.
If you have any questions or require additional information on this or other subjects related to intellectual property, please feel free to contact Gary Kuo (email@example.com) and Yi-Kai Chen (firstname.lastname@example.org).
 Taipei High Administrative Court Judgment No. 96-Su-80.
 IPC Court Judgment No. 98-Xing-Shang-Su-202.
 IPC Court Judgment No. 103 Xing-Shang-Su-128.
 IPC Court Judgment No. 103 Xing-Shang-Su-128, IPC Court Judgment No. 103 Xing-Shang-Su-140.
 IPC Court Judgment No. 106-Min-Shang-Su-30.
 TIPO Disposition No. Disposition No. Zhong-Tai-Fei-L01050119, Disposition No. Zhong-Tai-Fei-L01060407, Disposition No. Zhong-Tai-Fei-L01070162.
 Notice on the Use of Registered Trademarks, 2019 Edition, p. 21.
 TIPO Disposition No. Zhong-Tai-Fei-L01080328, Disposition No. Zhong-Tai-Fei-L01080329.