The Taiwan Fair Trade Commission recently fined a manufacturer of car radar devices NT$300,000 (c. US$10,000) for alleging on its website that a competitor had infringed on its patent rights without first duly confirming the infringement with one of the ‘preliminary procedures’ mandated by the Commission.
The preliminary procedures include:
- a finding by a court that the alleged infringement in fact occurred, and
- obtaining an assessment report by a qualified assessment institution
The Commission has issued Guidelines providing that where a rights holder disseminates a warning letter to a third party without first complying with these preliminary procedures, the Commission can find that the rights holder has violated the Fair Trade Act’s catch-all Article 24 prohibition against obviously unfair acts that disrupt the trading order.
A ‘warning letter’ includes:
- a warning letter
- a notification letter
- a demand letter from an law firm
- an open letter
- an advertisement or public notice, or
- other written material sufficient to inform competitors of the alleged infringement.
According to the Commission, Radarway Technology posted allegations of alleged patent infringement by a competitor on its website in July of 2010. In addition, Radarway sent letters to auto parts distributors warning them that Radarway was ” gathering evidence to stop counterfeiting.”
Although Radarway listed its competitor’s model numbers and alleged infringement of Radarway’s patent rights, the Commission found that Radarway failed to obtain an assessment supporting its allegations. The Commission also found that after receiving the warning letters, downstream businesses stopped ordering from the competitor and returned its products.
As a result, the Commission held that Radarway had acted in an obviously unfair way and that its conduct negatively affected commerce in the market. It imposed a fine of NT$300,000 and ordered Radarway to cease disseminating its unsupported allegations of infringement.
If your Taiwanese operations do not have in house counsel, it is very possible that your business people here are unaware of the rule against issuing unsupported warning letters. International technology companies with sales operations in Taiwan are particularly at risk.
The breadth of the definition of a warning letter should also be noted. In particular, posts on a website may also be deemed to be a ‘warning letter’ as in the Radarway case.
Finally, the Commission has issued letters of interpretation acknowledging defenses to claims that a warning letter has been issued to third parties without first obtaining an assessment. Those defense are beyond the scope of this update though.