July 2024
Discussion on the Risks of Comparative Advertising from Recent Taiwan Intellectual Property Court Rulings
July 2024
Aaron Chen and Yuki Chiang
When businesses advertise their products, they often aim to highlight unique or practical features by comparing them with competitors' products. This is so call the "comparative advertising" usually used by companies in marketing to attract consumer attention, enhance brand recognition, and boost sales. However, using this approach requires careful attention to the relevant regulations under the Fair Trade Act. Recently, the Intellectual Property and Commercial Court in Taiwan issued a ruling on March 28, 2024 (Case No. 112- Mín-gong-shàng-3), which provides insights into the application of comparative advertising rules. Here is a brief overview.
This case involved a civil lawsuit for the removal of infringement under the Fair Trade Act. The plaintiff (the respondent in the appeal) and the defendant (the appellant in the appeal) were both producers of health supplements. The plaintiff claimed that the defendant's advertisement displayed a photo of the plaintiff's product, referring to it as "First Generation" and to the defendant's product as "Second Generation," thereby intentionally demeaning the plaintiff's product as older or inferior. The plaintiff argued that this constituted misleading and unfair comparative advertising, violating the principles of handling comparative advertising cases, and causing significant reputational damage. The plaintiff requested, pursuant to Article 29 of the Fair Trade Act, that the defendant be prohibited from using "First Generation" to describe the plaintiff's product on its website or in advertisements. The defendant argued that the terms "First Generation" and "Second Generation" were merely references to the chronological order of their technological development, without any intent to demean the plaintiff's product or affect its market, and thus did not constitute comparative advertising as defined by the Fair Trade Act.
The Intellectual Property Court (the “Court”) held that "according to Article 21, Paragraph 1 of the Fair Trade Act, no enterprise shall make or use false or misleading representations or symbols on the matter that is relevant to goods and is sufficient to affect trading decisions on goods or in advertisements, or in any other way make it known to the public. Furthermore, businesses should conduct comparative advertising in a fair, objective manner with comparable standards (referring to Point 4 of the Fair Trade Commission's Principles on Handling Comparative Advertising Cases). Whether or not the competing business is explicitly identified, comparing products as old versus new or different grades, or emphasizing only the superior aspects of one’s own product while disregarding the advantages of the competitor's product may constitute a violation of Article 21 of the Fair Trade Act, as stated in Points 5 and 7 of the Fair Trade Commission's Principles on Handling Comparative Advertising Cases. In this particular case, the Court found that the plaintiff's product had been in the market for several years before the defendant's product was introduced, and consumers were already familiar with it. Without consent, the defendant referred to the plaintiff's product as "First Generation" and its own as "Second Generation," potentially leading consumers to believe that the defendant's product was superior based on the reputation of the plaintiff's product. The advertisement only highlighted the superiority of the defendant's product in terms of activity and purity, failing to mention the advantages of the plaintiff's product. This created an unfair overall impression that could influence transaction decisions and harm the plaintiff's market performance, thereby violating Article 21, Paragraph 1 of the Fair Trade Act.
In sum, businesses are advised to ensure that comparative advertising complies with the "Fair Trade Commission's Principles on Handling Comparative Advertising Cases," which include conducting comparisons in a fair, objective manner with comparable standards. These comparisons should be supported by objective data (e.g., market reports, scientific research) to substantiate the results, and the advertisements should not contain false information or damage the competitor's business to avoid legal violations.
The contents of all materials (Content) available on the website belong to and remain with Lee, Tsai & Partners. All rights are reserved by Lee, Tsai & Partners, and the Content may not be reproduced, downloaded, disseminated, published, or transferred in any form or by any means, except with the prior permission of Lee, Tsai & Partners.
The Content is for informational purposes only and is not offered as legal or professional advice on any particular issue or case. The Content may not reflect the most current legal and regulatory developments. Lee, Tsai & Partners and the editors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The contributing authors' opinions do not represent the position of Lee, Tsai & Partners. If the reader has any suggestions or questions, please do not hesitate to contact Lee, Tsai & Partners.
Aaron Chen and Yuki Chiang
When businesses advertise their products, they often aim to highlight unique or practical features by comparing them with competitors' products. This is so call the "comparative advertising" usually used by companies in marketing to attract consumer attention, enhance brand recognition, and boost sales. However, using this approach requires careful attention to the relevant regulations under the Fair Trade Act. Recently, the Intellectual Property and Commercial Court in Taiwan issued a ruling on March 28, 2024 (Case No. 112- Mín-gong-shàng-3), which provides insights into the application of comparative advertising rules. Here is a brief overview.
This case involved a civil lawsuit for the removal of infringement under the Fair Trade Act. The plaintiff (the respondent in the appeal) and the defendant (the appellant in the appeal) were both producers of health supplements. The plaintiff claimed that the defendant's advertisement displayed a photo of the plaintiff's product, referring to it as "First Generation" and to the defendant's product as "Second Generation," thereby intentionally demeaning the plaintiff's product as older or inferior. The plaintiff argued that this constituted misleading and unfair comparative advertising, violating the principles of handling comparative advertising cases, and causing significant reputational damage. The plaintiff requested, pursuant to Article 29 of the Fair Trade Act, that the defendant be prohibited from using "First Generation" to describe the plaintiff's product on its website or in advertisements. The defendant argued that the terms "First Generation" and "Second Generation" were merely references to the chronological order of their technological development, without any intent to demean the plaintiff's product or affect its market, and thus did not constitute comparative advertising as defined by the Fair Trade Act.
The Intellectual Property Court (the “Court”) held that "according to Article 21, Paragraph 1 of the Fair Trade Act, no enterprise shall make or use false or misleading representations or symbols on the matter that is relevant to goods and is sufficient to affect trading decisions on goods or in advertisements, or in any other way make it known to the public. Furthermore, businesses should conduct comparative advertising in a fair, objective manner with comparable standards (referring to Point 4 of the Fair Trade Commission's Principles on Handling Comparative Advertising Cases). Whether or not the competing business is explicitly identified, comparing products as old versus new or different grades, or emphasizing only the superior aspects of one’s own product while disregarding the advantages of the competitor's product may constitute a violation of Article 21 of the Fair Trade Act, as stated in Points 5 and 7 of the Fair Trade Commission's Principles on Handling Comparative Advertising Cases. In this particular case, the Court found that the plaintiff's product had been in the market for several years before the defendant's product was introduced, and consumers were already familiar with it. Without consent, the defendant referred to the plaintiff's product as "First Generation" and its own as "Second Generation," potentially leading consumers to believe that the defendant's product was superior based on the reputation of the plaintiff's product. The advertisement only highlighted the superiority of the defendant's product in terms of activity and purity, failing to mention the advantages of the plaintiff's product. This created an unfair overall impression that could influence transaction decisions and harm the plaintiff's market performance, thereby violating Article 21, Paragraph 1 of the Fair Trade Act.
In sum, businesses are advised to ensure that comparative advertising complies with the "Fair Trade Commission's Principles on Handling Comparative Advertising Cases," which include conducting comparisons in a fair, objective manner with comparable standards. These comparisons should be supported by objective data (e.g., market reports, scientific research) to substantiate the results, and the advertisements should not contain false information or damage the competitor's business to avoid legal violations.
The contents of all materials (Content) available on the website belong to and remain with Lee, Tsai & Partners. All rights are reserved by Lee, Tsai & Partners, and the Content may not be reproduced, downloaded, disseminated, published, or transferred in any form or by any means, except with the prior permission of Lee, Tsai & Partners.
The Content is for informational purposes only and is not offered as legal or professional advice on any particular issue or case. The Content may not reflect the most current legal and regulatory developments. Lee, Tsai & Partners and the editors do not guarantee the accuracy of the Content and expressly disclaim any and all liability to any person in respect of the consequences of anything done or permitted to be done or omitted to be done wholly or partly in reliance upon the whole or any part of the Content. The contributing authors' opinions do not represent the position of Lee, Tsai & Partners. If the reader has any suggestions or questions, please do not hesitate to contact Lee, Tsai & Partners.
