To determine whether the launch of the drug at issue by an enterprise which uses a package similar to other drugs with the same functions in the market constitutes an act of unfair competition which confuses the consumers and undermines the trading order, the Supreme Court held that factors such as the business trading practices for prescription drugs, industry characteristics and the placement location of the advertisement for the drug at issue should be generally considered. (Taiwan)

Elva Chuang

The Supreme Court rendered the 107-Tai-Shang-1967 Civil Decision of January 31, 2019 (hereinafter, the “Decision”), holding that if an enterprise uses an appearance or feature highly plagiarizing a well-known product of another party, exploits the fruit of labor of others by actively leveraging their well-known advertisements or goodwill, actively misrepresents or passively conceals important trading information, or engages in trading acts by misleading means to the extent of causing an extreme imbalance between the parties in the distribution of benefits or assumption of risks of private law, this can be deemed to constitute a “deceptive or obviously unfair act sufficient to undermine trading order” under Article 25 of the Fair Trade Law.

According to the facts underlying this Decision, the Appellee asserted that the Exforge drug it had distributed has continuously used a package with arrangements of blue, white and orange blocks since it was marketed in Taiwan in June 2010.  Such package is obvious, unique and distinctive and has become well-known.   However, the package of Astarn (i.e., the “Drug at Issue”), a relatively less well-known drug produced by the Appellant, uses the same color blocks, arrangements and presentation.  Therefore, damages were claimed against the Appellant on the ground that the Appellant had deliberately violated Article 25 of the Fair Trade Law.  According to the original decision, the above-mentioned act of the Appellant would cause the trading counterparts to erroneously perceive that the Drug at Issue and the Exforge drug were of the same source or products of the same series.

According to the Decision, the “Exforge” drug and the Drug at Issue are both medicine for controlling chronic hypertension, and a patient is required to obtain a physician’s prescription before presenting it to a contract pharmacy to receive the drug, and such drugs should not be displayed on open shelves.  Therefore, the Supreme Court held that the original trial court had failed to consider the trading habits for prescription drugs, industry characteristics and the requirement that advertisements may be placed in academic medical publications only and to explore the factors considered by trading counterparts of prescription drugs [such as pharmaceutical companies, hospitals, clinics and other relevant medical, examination or academic research institutions, ordinary citizens (patients), etc.] in making trading decisions.  In addition, whether the above trading counterparts are likely to be confused about the entity packaging and producing the Drug at Issue was not considered.  This also calls into question as to how the Appellant affected the trading order of the Exforge drug market (including horizontal competitive order or the operation of the market order in vertical trading relations).  The number of victims and the quantity and extent of the damage are also pertinent matters.  These are all matters relating to whether the Appellant’s act was deceptive or obviously unfair sufficient to undermine trading order and what were the scope and extent of damage but were not considered.  Instead, the original court elected to reach the conclusion, based on the consumers of the Drug at Issue and the Exforge drug as well as ordinary people, that the drug package that plagiarizes the package of the Exforge drug was likely to cause the trading counterparts to misidentify the entity associated with the goods and held that leveraging the appearance of the Drug at Issue and the advertising effect were sufficient to undermine trading order underpinning fair competition.  Since the original decision was rash, it was reversed and remanded.