Two recent rulings by the Taiwan Intellectual Property Court (IP Court) illuminate the court’s view that certain types of unauthorized use of a registered mark as a search engine “sponsored link” may not constitute trademark infringement under Taiwan law.
In the first case, the plaintiff owned the registered Chinese character trademark in question, “Chu Yi Zhang Zui” (which translates roughly as “just bring your appetite”). The plaintiff had licensed use of the mark to the defendant, who operated a well-known Japanese BBQ buffet restaurant chain in Taiwan. The plaintiff claimed that such authorization ended in February 2007.The plaintiff asserted that the defendant infringed the plaintiff’s trademark rights by registering the plaintiff’s mark as a search engine keyword which, when searched, elicited the sponsored advertisement search result “Chu Yi Zhang Zui Lai Chi Shao Kao (“just bring your appetite to eat BBQ”). This search result link in turn directed one to the defendant’s website. The sponsored ad ran from 14 April 2007 to 10 January 2009, well after the plaintiff claims to have terminated the aforementioned authorization.
The plaintiff sued the defendant claiming infringing use of its registered “Chu Yi Zhang Zui” trademark. In response, the defendant claimed that the authorization had not been terminated because the plaintiff failed to inform the defendant of the termination of the franchise agreement in writing one month in advance as required. The defendant also argued that its use of the trademark in question as an ad did not constitute trademark use and, therefore, did not violate Taiwan’s Trademark Act (Act). The IP Court ruled in the defendant’s favor in this case.
On the issue of “trademark use”, the IP Court cited Articles 2 and 6 of the Act, which provide that a party seeking trademark rights in order to distinguish its goods or services shall apply for trademark registration and that “use of a trademark” connotes the use of a mark for marketing purpose on goods, services or relevant articles thereof, or the use of a mark through means of two-dimensional graphic, audio and visual digitization, electronic media, or other media to enable relevant consumers to recognize it as a trademark.
The IP Court reasoned that for “trademark use” to have occurred in this case, the defendant must have attempted to use the mark through marketing means to distinguish its goods/services and in such a way that consumers recognize it as a trademark. Furthermore, the court held that placement, size, color or other representation by means of two-dimensional graphics, audio-visual digitization, or electronic media must be taken into consideration when determining whether consumers are likely to recognize a representation as distinguishing the source of a product.
In this case, the defendant purchased keyword advertising incorporating the mark in question under the “pay per click” (PPC) advertising model whereby a search of the keyword  “Chu Yi Zhang Zui” elicited the sponsored ad link “Chu Yi Zhang Zui go to eat BBQ”. The IP Court concluded this does not constitute use of the mark for marketing the defendant’s goods or services. The IP court found that a  person searching the keyword in question would not necessarily come to the conclusion that the elicited sponsored ad is associated with or provided by the plaintiff. . The court did not address, however, whether the the defendant’s registration of the plaintiff’s trademark as a search engine keword did not constitute  trademark infringement.
During the IP Court proceedings, the plaintiff raised the additional claim that the defendant’s use of the mark as a keyword had not only infringed the plaintiff’s trademark rights but also violated Taiwan’s Fair Trade Act (FTA). The IP Court rejected the fair trade claim on the basis of the prohibition under Taiwan’s Code of Civil Procedure against raising additional claims after the service of a complaint, except where the addition of such claim is based on the same fundamental fact or where the defendant agrees to such addition. The plaintiff appealed the IP Court’s ruling on the fair trade issue with the Supreme Court. The Supreme Court has remanded the case back to the IP Court for reconsideration of the fair trade issue because the Supreme Court deemed that fundamental facts in the fair trade and trademark infringement matters were the same. It remains to be seen how the IP Court will rule on the fair trade issue.
The second recent case involves the unauthorized use of a famous local entertainer’s name“Ye Quan-zhen”, which was registered as a trademark by the plaintiff in December 2010. The defendant had sold skin-care products on an online shopping website operated by the plaintiff and continued to sell the same products on another online shopping website after cooperation between the plaintiff and defendant ended. The plaintiff’s name did not appear on the products sold by the defendant, . However, the defendant set up the name as a search engine keyword which linked to the latter online shopping site that included a claim that the product sold was recommended by Ye Quan-zhen.
The IP Court ruled that the defendant’s use of the Plaintiff’s trademarked name on the sponsored ad was for marketing purposes, however, the related products did not bear the plaintiff’s trademarked name and, therefore, consumers are not likely to consider this use of the plaintiff’s name to be use as a trademark. In addition, the court found that the apparearance of another famous enterentainer’s name next to aforementioned claim indicated that the defendant was using entertainers’ names only as references and not as trademarks.
The IP Court’s rulings in these two cases indicate that the court’s position that unauthorized use of another’s registered mark in keyword advertising does not necessarily constitute “infringing trademark use”, unless the content of the ad is likely to mislead consumers.
While keyword advertising such as in these cases was found not to constitute trademark infringement, decisions issued by the Fair Trade Commission (FTC) from 2006 to 2010 indicate that such forms of advertising could constitute unfair trade in violation of the FTA. In these cases, the advertising buyers not only purchased keyword advertising but also incorporated advertising slogans indicating that the goods advertised were superior to that of the trademark owner. One such case involved a distributor of KELTI products. KELTI owned the rights to sell the  “CHLITINA” brand in Taiwan. The distributor, the defendant in this case, purchased a keyword ad on Yahoo! for the “CHLITINA” mark. A search for the term would yield as a top result the wording “CHLITINA new products on sale” and “je-salon – EPO new products”, both of which linked to the defendant’s website. In addition, the defendant claimed on this site that its products were of higher quality than CHLITINA and can replace CHLITINA products. The defendant claimed that as KELTI had ceased selling some products, the defendant’s products having the same function could certainly replace the discontinued KELTI’ products. In this case, however, the FTC determined that the defendant failed to provide objective evidence such as quality inspections or sales figures to support its defense. Therefore, the FTC determined that such representations constituted “false or misleading representations” and harmed trading order.
Furthermore, the FTC ruled that a party that had purchased keyword advertising using another’s trademark, name or business symbol in such a way as to steer potential buyers to its website was free-riding on the fame of the others’ trademark and would therefore harm the trading order. The defendant filed an appeal against FTC’s decision with the appeal authority and with the courts. However, the court has upheld the FTC’s original decision.
These types of cases are all extremely fact-determinative, so any future case must be assessed on a case-by-case basis. However, based on the IP Court and FTC decisions to date in Taiwan, it would appear that the unauthorized use of another’s trademark mark in a keyword advertisement via the PPC advertising model may not be deemed trademark infringement, but could constitute a violation of Taiwan’s FTA even if the trademark is not used in the hyperlinked website.