For trademark owners, counterfeiting has always been a very troubling issue. Sometimes, even if a company knows that counterfeit goods are circulating on the market in various countries, the company will, out of strategic business considerations (e.g., cost-benefit analysis), withhold immediate legal action against the infringer. In this situation, you may wonder whether the company has waived its legal rights against the infringer. The good news is that in Taiwan, trademark owners don’t have to worry about this possibility. In this article, we will take you through this topic.

There is no risk in terms of estoppel/waiver of rights

In some common law countries, under the doctrine of estoppel, the company waives its legal right when it does not take legal action against an infringer selling counterfeit goods.

However, estoppel is not a doctrine specifically prescribed in Taiwan law. Some court judgments have even found that estoppel is not recognized in Taiwan. Thus, a company withholding immediate legal action against an infringing seller does not waive its legal rights; the company may still exercise legal rights against the seller in the future.

Moreover, even if a company decides to cooperate with an infringer and have the infringer sell authentic goods on its behalf, the company may still exercise its legal rights against the resellers for selling the infringing products in the first place.

Companies should be aware of the statute of limitations to claim indemnification

According to Taiwan’s Trademark Act, the right to claim indemnification for an infringement of trademark rights is extinguished:

1. If it is not exercised within two years from the time the trademark owner becomes aware of the infringing act and of the existence of the infringer (i.e., when the statute of limitations starts running). or
2. If it is not exercised within ten years from the act of infringement (i.e., when the statute of limitations starts running) when the trademark owner had no knowledge about the damage caused by the infringing act and that its right had been infringed.

If the company was aware of the infringing act and of the existence of the infringer, the situation in point 1 applies. For example, if the company takes legal action (e.g., sends a demand letter, files a lawsuit) against the infringer on 19 August 2022, the company can request indemnification for all the infringing activities from 19 August 2020 to 19 August 2022 and onward. If an infringing activity occurred and the company was not aware of it, the situation in point 2 would apply.

It is important to note that the statute of limitations is calculated separately for each infringing act. Here, the definition of “each infringing act” should be determined on a case-by-case basis based on whether the infringing acts can be divided. For example, in the case of an infringer selling counterfeit goods, some courts have determined that each invoice or import declaration constitutes an individual infringing act. In the case of an infringer using a trademark owner’s mark as a company name, some courts have determined that this is a continuing and indivisible infringing act.

Lastly, even if the company is unable to request indemnification after the statute of limitations expires (be it after two years or ten years), the company can still compel the infringer to (1) stop importing and selling the counterfeiting products, and (2) destroy the counterfeiting products and the materials or implements used for the infringing activities.

In short, a company’s decision to withhold legal action against an infringing seller does not waive the company’s legal rights in Taiwan. The company may still exercise legal rights against the infringing seller in the future. However, it should be aware of the statute of limitations to request indemnification. In response to the problem of counterfeit goods, companies should not only consider the costs, but also pay attention to the legal limitations on their rights so as to protect them in a timely and complete fashion.

If you have any questions or require additional information on this subject, please contact Gary Kuo at gkuo@winklerpartners.com.