Nora Shih
1. Parallel import of genuine goods and exhaustion of trademark rights
Parallel import of genuine goods, commonly known as “parallel goods,” refers to the importation of goods from the original manufacturer in a foreign country in the name of a private person or company without obtaining a formal regional authorization and is a common form of business in practice, even though relevant intellectual property laws and regulations and the Fair Trade Law may apply. Although the Trademark Law in Taiwan is silent about parallel import, still Article 36, Paragraph 2 of the Trademark Law, which provides: “Where goods have been put on the domestic or foreign market under a registered trademark by the owner or with his consent, the owner is not entitled to claim trademark rights on such goods, unless such claim is to prevent the condition of the goods from being changed or impaired after they have been put on the market or there is any other legitimate reason, ” adopts the principle of international exhaustion. This means that trademark rights owners cannot assert rights over goods that are put in the market with their consent anymore, regardless of whether the goods are first put in a domestic or overseas market. This also shows that the Trademark Law recognizes the “legitimacy of parallel import of genuine goods.”[1]
2. If the authorized agent or distributor of the original manufacturer is the registered trademark owner in Taiwan, can it claim trademark rights over parallel importers of genuine goods? Does the principle of exhaustion of trademark rights under Article 36, Paragraph 2 of the Trademark Law apply to the scenario where the “domestic and overseas trademark rights owners are the same person”?
Although Article 36, Paragraph 2 of the Trademark Law provides for the principle of international exhaustion, since trademark rights are territorial, the term “trademark owner or a person with his or her consent” refers to the situation where a trademark owner has registered the trademark in Taiwan pursuant to law, or a person who makes or sells goods that are traded and circulated in domestic and foreign markets with the consent of the trademark owner in Taiwan.[2] In practice, if the trademark right in Taiwan is registered by an authorized agent or distributor of an original foreign manufacturer but not directly registered in Taiwan by the original foreign manufacturer, resulting in the circumstance where the domestic and foreign trademark rights do not belong to the same person, can parallel importers of genuine goods invoke Article 36, Paragraph 2 of the Trademark Law to claim that the registered trademark owner in Taiwan cannot assert the trademark right in respect of the parallel imported genuine goods?[3]
In this regard, different opinions are reflected in past court decisions. Some decisions held that if a genuine product is purchased from the original foreign manufacturer and parallel imported to Taiwan, since the original foreign manufacturer is not directly registered as the trademark owner in Taiwan and the registered trademark owner in Taiwan is an agent or distributor authorized by the original manufacturer, then the principle of exhaustion under Article 36, Paragraph 2 of the Trademark Law does not apply to the genuine parallel importers, and the trademark owner may still assert trademark rights[4]. There were also court decisions that held that when an importer purchases genuine products from the original foreign manufacturer for parallel import to Taiwan, even if the original foreign manufacturer is not registered as the trademark owner in Taiwan and its agent or distributor is registered as the trademark owner in Taiwan, the products imported by the genuine parallel importers are still governed by the principle of exhaustion of trademark rights under Article 36, Paragraph 2 of the Trademark Law, and the registered trademark owner in Taiwan is still not entitled to assert trademark rights against importers[5].
3. Recent opinion – Supreme Court’s 108-Tai-Shang-397 Civil Decision: In the case of genuine goods imported in parallel from an original foreign manufacturer, the effect of exhaustion of trademark rights shall also apply to the authorized registered trademark owner in Taiwan
The Supreme Court has recently issued a new opinion on the issue of exhaustion of trademark rights and specifically indicates that with respect to the parallel import of genuine goods, if the trademark owner is registered in Taiwan with the authorization of the original foreign manufacturer, since the trademark rights are in essence derived from the same rights holder, the genuine goods imported by an importer from the original foreign manufacturer are still subject to exhaustion of trademark rights with respect to the trademark owner who has registered the trademark in Taiwan with the authorization of the original foreign manufacturer. Therefore, except for the circumstances under the proviso of Article 32, Paragraph 2 of the Trademark Law, the trademark owner in Taiwan shall not assert trademark rights against the parallel importer of the genuine goods. In this regard, reference can be made to gist of the Supreme Court’s 108-Tai-Shang-397 Civil Decision, which states: “The principle of international exhaustion of trademark rights means that trademark owners can no longer assert their rights over the goods distributed in the market with their consent in the absence of the circumstances under the same proviso of the same article, regardless of whether the goods were first put on the market at home or abroad, thus recognizing the legitimacy of parallel import of genuine goods via specific legal provisions. In addition, if the trademark owner registers the same design as a trademark on his own or authorizes another person to do so in different countries, although the trademark rights are different under the concept of territoriality, still the design is the same, and the exclusive rights in essence are also derived from the same rights holder. As long as there is an authorization or legal relationship between the trademark rights owners in different countries, the effect of exhaustion will also apply to the trademark owner authorized to register” (Date of Decision: 16 January 2020).
4. Conclusions
The Supreme Court’s 108-Tai-Shang-397 Civil Decision cited above affirmed: the principle of exhaustion of trademark rights should also apply to the authorized registered trademark owners in Taiwan with respect to parallel imported genuine goods from the original foreign manufacturer. As a result, the legal risks for parallel importers of genuine goods subject to assertion of trademark infringement by an authorized agent or distributor of the original foreign manufacturer are reduced. However, it is still necessary to observe if there is any contrary opinion in subsequent court decisions to avoid the risk of legal violation.
[1] Intellectual Property Office of Ministry of Economic Affairs, Article-by-Article Interpretation of the Trademark Law, New Edition, January 2017, Page 141
[2] Intellectual Property Office of Ministry of Economic Affairs, Interpretation and Dynamics of Trademark Laws and Regulations and the Clarifications on the Determination of Trademark Owners and Persons with Their Consent (February 26, 2016) https://www1.tipo.gov.tw/ct.asp?xitem=599499&ctnode=7050&mp=1。
[3] Yi-ming Wang, Boundaries for Parallel Import of Genuine Goods – Centering on the Trademark Law, Intellectual Property Monthly, Issue 230, Page 21, February 2018
[4] The 105-Min-Shang-Shang-14 Civil Decision of the Intellectual Property Court
[5] The 106-Xing-Zhi-Shang-Yi-6 Criminal Decision of the Intellectual Property Court