October 2022
Jane Tsai and Julian Lai
I. Background facts
The plaintiff in this matter is the National Taiwan University (hereinafter, the “NTU”), which was previously known as the Taipei Imperial University when it was founded in 1928. In 1945, it was renamed the National Taiwan University. Since 1990, it has registered a series of trademarks such as “台大[the Chinese abbreviation of “NTU”],” “臺大 [also the Chinese abbreviation of “NTU],” “TAIDA [the transliteration of the Chinese abbreviation of the NTU],” etc., with the Intellectual Property Office (hereinafter, the “IPO”) of the Ministry of Economic Affairs, and designated them for use in academia, education, research, and other related goods and services. The defendants in this case are Chun-teh Li, who established private short-term Taida Arts and Science Cram School, and Ming Ming Cultural and Educational Enterprise Co., Ltd., which is substantially the same entity as Taida Cram School. The name “Taida Cram School” was first used in March 1972 when the cram school was established with the approval of the Department of Education of Taipei City Government. For many years, the designs and texts such as “NTU,” “TAIDA,” and “台大TAIDA” have been used for the name of the cram school, its official website, books, etc., in providing short-term supplementary education. The defendant applied to the IPO to register “TAIDA CRAM SCHOOL” as a trademark, but the application was rejected by the IPO on the ground that if “TAIDA,” which is the abbreviated name of the National Taiwan University, is used as a trademark, it is likely to cause confusion and misidentification about the entity that provides the services.
The plaintiff in this case believed that the defendant’s above act constitutes an infringement upon the plaintiff’s trademark rights under Article 68, Subparagraphs 1 and 2 of the Trademark Act; is an act that has potentially impaired the distinctiveness or goodwill of NTU’s trademarks, which should be deemed as infringement upon trademark rights under Article 70, Subparagraph 1 and 2 of the Trademark Act; and is an act of unfair competition under Article 22, Paragraph 1, Subparagraph 2 and Article 25 of the Fair Trade Act. The plaintiff sent two warning letters in 2020, requesting the defendant to stop the aforementioned infringement, but the defendant failed to rectify and intentionally infringed the plaintiff’s trademark rights. Therefore, the plaintiff filed the lawsuit in the Intellectual Property and Commercial Court, requesting that the defendant should be prohibited from continuing to use words identical or similar to words such as “NTU”, “台大TAIDA” and “TAIDA” as the name and signboard of its cram schools and should additionally compensate the plaintiff with NT$10 million.
The defendant’s arguments are summarized below:
(1) The name “Taida Cram School” first came into being when the establishment of the entity was approved in 1972. However, the plaintiff did not apply for trademark registration until 2001 at the earliest, and items related to “cram school” were not added until as late as 2011. Therefore, the defendant meets the requirement for bona fide use of trademarks under Article 36, Paragraph 1, Subparagraph 3 of the Trademark Act and does not infringe the plaintiff’s trademark rights.
(2) The defendant has never expressed or implied any connection with the plaintiff, and the target students are domestic junior high school and senior high school students (with supplementary education demands), and the plaintiff offers education to people above university level (who need higher university education and diplomas) pursuant to the University Act but does not operate short-term cram school business. In addition, both parties deal with totally different target customers and their services are neither similar nor substitutable, not to mention that the defendant and the plaintiff have co-existed for over half a century. Therefore, the relevant consumers can adequately differentiate the different sources, and confusion and misidentification among the relevant consumers are unlikely.
(3) The defendant’s act of naming the Taida Cram School was done by 1970 at the latest. The subsequent use of the name is simply a continuation of the state of the act, and the plaintiff’s right of claim has lapsed since the 15-year statute of limitations has expired. In addition, the plaintiff has long been aware of how the name of defendant Taida Cram School has been used. Therefore, the plaintiff’s right of claim has also lapsed since the two-year statute of limitations expired and cannot be asserted again.
(4) The purpose of compensation is to make up for the damage, and the plaintiff calculated the damages by treating all the operating revenues of defendant Taida Cram School as proceeds from the infringing acts. However, the supplementary education business operated by defendant Taida Cram School includes the provision of courses and teaching materials or goods. Therefore, it is inappropriate to conclude that the TAIDA trademarks at issue contribute 100% to the business revenue of defendant Taida Cram School, and thus the amount claimed by the plaintiff is obviously too high.
Recently, the Intellectual Property and Commercial Court rendered the 109-Min-Shang-Su-35 Civil Decision, holding that since there is no ground for invalidating the plaintiff’s registered trademarks such as “TAIDA,” defendant’s use of the word “TAIDA” has infringed the plaintiff’s trademark right as stipulated by Article 68, Paragraph 1, Subparagraph 1 of the Trademark Act. Therefore, the court rendered a decision requiring the defendant not to use words identical or similar to “台大,” “台大TAIDA,” and “TAIDA,” and the defendant shall jointly and severally compensate the plaintiff with NT$6,239,211.
This court opinion on the major defenses of the defendant, such as bona fide use, the statute of limitations, and the calculation of damages, is briefly described below.
II. Court opinion
(1) Bona fide use does not apply to defendant Taida Cram School
In addition to the unawareness of the registered trademark of another person, the “bona fide” in Article 36, Paragraph 1, Subparagraph 3 of the Trademark Act also includes the unawareness of the trademark of another person that was used earlier when such a trademark is used without the purpose of unfair competition. If the earlier use of another person’s trademark is obviously known, a trademark identical or similar to the unregistered trademark of another person is used to leverage the association with the established reputation of another person, even if the use takes place before the registration date of such another person’s trademark, there is also no room for asserting “bona fide use.”[1]
The court concluded that according to literature such as the commemorative anthology of the defendant’s founder,[2] the reason for naming Taida Cram School with “Taida” when it was established in 1971 was that “Taida” is the same as the Chinese name of the NTU, “Taida” is the Chinese abbreviation of the NTU, and the name implies that joining Taida Cram School for supplemental education will lead to admission to the NTU. This shows that defendant Taida Cram School did not use words such as “Taida” first, and the plaintiff had begun to use the Chinese abbreviation “Taida” in its name as early as 1971 when Taida Cram School was established. In addition, the relevant consumers and defendant Tai Cram School are all clearly aware that “Taida” represents the plaintiff, and this move obviously attempted to leverage the association with the reputation earned by the plaintiff in the education arena. In addition, the defendant’s trademark registration application for Taida Cram School used to be rejected. The defendant should have known that the word “Taida” it uses in its supplementary education business is identical or similar to the plaintiff’s school name and services as provided. Therefore, it can hardly be concluded that the use of the word “Taida” by defendant Taida Cram School is bona fide.
(2) The requirement under Article 68, Subparagraph 1 of the Trademark Act is not preconditioned by the likelihood of confusion and misidentification among the relevant consumers.
For the defendant’s argument that confusion and misidentification among the relevant consumers are unlikely since its service recipients and target customers are different from the plaintiff’s, and a search of the related registration data shows that many cram schools or companies use “Taida” as their names, the court first pointed out that the provision of Article 68, Subparagraph 1 of the Trademark Act is not preconditioned by the likelihood of confusion and misidentification among the relevant consumers. In addition, although the education services such as cram school programs run by defendant Taida Cram School and Ming Ming Cram School primarily target junior and senior high school students, still the plaintiff also provides promotional education, language learning, or event talent cultivation to senior high school students. As previously stated, the education and learning services provided by both parties are highly overlapping without any clear distinction between their markets. Therefore, it can hardly be concluded that confusion and misidentification among the relevant consumers are absolutely unlikely.
(3) The statute of limitations for the plaintiff’s right of claim over an infringing act two years before the complaint was filed has not expired.
Even though the defendant has used the word “Taida” for more than 50 years, the plaintiff’s claim for infringement liability is not subject to the subjective 2-year statute of limitations under Article 69, Paragraph 4 of the Trademark Act, since the statute of limitations for the plaintiff’s right of claim is renewed time and again due to the continued unlawful infringement by the defendant, and the calculation of such damages is based on the defendant’s annual operating revenue and can be used for mutual differentiation. Therefore, the plaintiff can claim damages for infringement within 2 years prior to the filing of the complaint.[3]
(4) The court held that if all of the defendant’s gross profits are regarded as profits from “infringement of trademark rights” within the meaning of such subparagraph, the amount of compensation would be incomparable. Therefore, it is necessary to reduce it on a discretionary basis in accordance with Article 71, Paragraph 2 of the Trademark Act. After the possible factors the consumers may consider in choosing a cram school are generally considered, it should be reasonably concluded that the Taida trademarks contributed to 5% of the defendant’s operating revenue. Hence, the decision awarded the plaintiff NT$6,239,211 in damages against the defendant.
1. The court did not accept the plaintiff’s assertion that the damages should be calculated in accordance with Article 71, Paragraph 1, Subparagraph 3.
The plaintiff first asserted that since dividing the defendant’s operating revenues for 2018 and 2019 by the quoted prices of the courses it sold shows that the number of units sold was far more than 1,500, the total revenues for these two years should be used for calculating the damages in accordance with Article 71, Paragraph 1, Subparagraph 3 of the Trademark Act. However, the provision of the subparagraph pertains to goods that infringe the trademark right as actually detected, while defendant Taida Cram School primarily provides supplementary education services. In this case, the actual unit prices and quantities of sale to the consumers by defendant Taida Cram School were not found. In addition, the unit prices for supplementary education often vary by full courses or single courses and the duration of the supplementary education, and the consumers usually have room and capability for price negotiation when they sign up. Therefore, it is certainly inappropriate for the plaintiff to infer the sales volume of defendant Taida Cram School based on the above-mentioned calculation method, and the plaintiff’s assertion that its damages should be calculated based on the provision of such subparagraph is hardly justified.
2. The court calculated the damages in accordance with Article 71, Paragraph 1, Subparagraph 2 of the Trademark Act and exercised its discretion to reduce it in accordance with Paragraph 2 of the same article.
The plaintiff also asserted that the total operating revenue of defendant Taida Cram School should be used to calculate the damages in accordance with Article 71, Paragraph 1, Subparagraph 2 of the Trademark Act. However, the provision of this subparagraph provides that the costs and necessary expenses may be deducted. In this case, the defendant did not submit any evidence for the costs or necessary expenses. The court used the defendant’s business revenues for 2018 and 2019 according to the defendant’s tax data requested by the court from the National Taxation Bureau, and considered the profit margin of 62% of this industry announced by the Ministry of Finance to calculate the defendant’s gross profits for 2018 and 2019. Since no data about the filing of business execution income for 2020 was found, the court used the average gross profit in the past two years to infer the gross profit for 2020.
In addition, the court pointed out that when calculating damages under Article 71, Paragraph 1, Subparagraph 2 of the Trademark Act, the benefits received by the actor should have an adequate causation with the actor’s infringement of the trademark rights. The court considered that since the consumers’ choice of whether to contract with the defendant was not only based on the name of the cram school, it is difficult to recognize that the trademarks at issue contributed 100% to the business revenue of defendant Taida Cram School. If all the gross profits of defendant Taida Cram School are treated as the benefits from the “infringement of trademark rights,” the amount of compensation is obviously not comparable and should be reduced on a discretionary basis in accordance with Article 71, Paragraph 2 of the Trademark Act. Therefore, it should be reasonably concluded that the contribution of the Taida trademarks at issue to the business revenues of defendant Taida Cram School was 5% after the possible consideration factors for the consumers’ choice of a cram school are considered. Finally, the court determined that the amount of damages to be paid by the defendant was 5% (i.e., NT$6,239,211) of the total gross profit generated within two years before this complaint was filed when the statute of limitation had not expired (July 9, 2018 to July 8, 2020).
[1] This is a stable opinion of the Intellectual and Commercial Court on “bona fide use of a trademark.” See 109-Min-Shang-Su-39 Civil Decision of the Intellectual and Commercial Court, the 108-Min-Shang-9 Civil Decision of the Intellectual Property Court, the 103-Xing-Zhi-Shang-Yi-6 Criminal Court of the Intellectual Property Court, and the 102, Min-Shang-Su-1 Civil Decision of the Intellectual Property Court
[2] According to the Decision, “Mr. [Redacted] Lin’s Commemorative Anthology indicated: ‘Since I felt that the supplementary education sector was somewhat conservative in terms of its management approach, I founded Taida Cram School together with several good friends of mine… In less than three years, it dominated Nanyang Street (commonly known as the cram school street). The advertisement slogan ‘If you wish to be admitted to Taida [meaning “the National Taiwan University”], you have to join Taida first’ is terse, powerful, and catchy to students from everywhere, who were eager to sign up,” “the [Redacted] Brothers wished to develop a business to support another business. I think this business was a cram school. In 1971, Brother [Redacted] established cram schools such as ‘Taida,’ ‘Chengkong,’…etc.,” “at the end of 1970, …I resigned from my teaching position in Chungli Senior High School…applied to the Department of Education to establish Taida Cram School. (Since the word ‘Taida’ in Taida Cram School is the same as the ‘Taida’ in the Chinese name of the NTU, it was extremely difficult to get a license),” and “the song of the cram school (Taida Cram School and Ming Ming Cram School are the springboard to the NTU and the cradle of you ascension on the ladder of education. After this song was aired on TV and radio stations, it became very catchy and popular among students.”
[3] This is the stable opinion of the courts in Taiwan on the “starting point in time for the calculation of the subjective statute of limitations for continuous tort.” See the 107-Tai-Shang-1169 Civil Decision of the Supreme Court, the 108-Tai-Shang-778 Civil Decision of the Supreme Court, and the 94-Tai-Shang-148 Civil Decision of the Supreme Court.
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