While patentees often send warning letters to competitors’ transaction counterparty (e.g. dealer or distributor) to exert pressure, such exercise of patent rights, however, might border on disrupting trading order and fair competition. To regulate such letter-sending behavior, the Taiwan Fair Trade Commission (hereinafter referred to as the “FTC”) has formulated the “Fair Trade Commission Disposal Directions on the Reviewing of Cases Involving Enterprises Issuing Warning Letters for Infringement on Copyright, Trademark, and Patent Rights” (hereinafter referred to as the “Guidelines”). According to the Guidelines, if a patentee intends to notify a transaction counterparty of a competitor’s patent infringement, the patentee must first or simultaneously notify the competitor or the competitor’s importer or agent, and must explain the patent details, provide specific facts about the infringement, and provide an infringement analysis report to the transaction counterparty. Only by doing so can the letter be considered a legitimate exercise of patent rights without violating the Fair Trade Act. On the extent to which the patentee’s letter content to a transaction counterparty will be subject to the Guidelines, the Taiwan Intellectual Property and Commercial Court (hereinafter referred to as the “IPC Court") made a civil judgment in May 2024 (2023 Min Gong Su Zi No. 8), which can serve as a reference to patentees for sending such letters.
In said case, the patentee possessed a series of technologies related to aluminum foil bags for hair dye, and applied for and obtained from the Taiwan Intellectual Property Office (hereinafter referred to as the “TIPO") three invention patents and one utility model patent. Subsequently, the patentee sent letters to many hair dye product manufacturers, distributors, and online sellers in the market, stating that: (1) the patentee has obtained invention and utility model patents on the relevant technology; (2) according to the Patent Act, no one may manufacture or sell the patented products without patentee’s consent, or the patentee may seek damages and injunction; and (3) as manufacturers or sellers of hair dye products, the letter’s recipients might have exploited the patents so that they need to proceed cautiously to avoid infringement, or, if recipients wish to use the patent, they should contact the patentee to discuss cooperation. A competitor, upon discovering the abovementioned letter-sending behavior by the patentee, filed a lawsuit with the IPC Court, alleging that the patentee did not provide specific facts of infringement and an infringement analysis report when sending letters to trading counterparts, as prescribed in the Guidelines. The competitor further argued that the patentee did not obtain a technical evaluation report of utility model patent, so that its letter-sending behavior also violated the Fair Trade Act.
The IPC Court ruled against the plaintiff (i.e., the competitor) in the first instance, holding that the Guidelines apply to “publicizing to trading counterparts or potential trading counterparts that someone else infringes copyrights, trademarks, or patent rights,” while the content of patentee’s letter merely stated that the patentee owns the patents, citing the provisions of the Patent Act, and informed recipients not to infringe the patents when selling or using products. The IPC Court determined that the patentee did not accuse any competitor or someone else of infringing the patents, nor make or disseminate any false statement for the purpose of competition. Therefore, the IPC Court concluded that the patentee’s letter-sending behavior did not fall within the scope of the Guidelines. Consequently, there was no need to discuss whether the patentee was required to provide a technical evaluation report of utility model patent when sending letters. Furthermore, the IPC Court also determined that the patentee’s letters merely cautioned trading counterparts to be aware of any possible patent infringement, rather than restricting the trading counterparts from engaging in related business activities; therefore, patentee did not violate the Fair Trade Act.
Apart from this case, the IPC Court previously rendered a similar case (2013 Min Gong Shang Zi No. 2 Civil Judgment) stating that the Guidelines apply to “accusation of someone else infringing intellectual property rights.” In that case, the patentee’s letters did not state or imply that anyone had infringed patents, so that the IPC Court also ruled that such behavior did not violate the Guidelines and the Fair Trade Act. However, on the other hand, even though the patentee did not identify the specific infringers in the letter, the patentee’s stating that there are enterprises manufacturing and selling infringing products in the market could potentially constitute a violation of the Guidelines. For example, in FTC’s Gong Chu Zi No. 99076 decision, the FTC found that the patentee’s behavior (not indicating specific infringers but stating that there are infringers in the market) could cast doubts among trading counterparts, which leads other competitors to provide explanations or even to offer non-infringement declarations to trading counterparts, in order to secure trading opportunities, and thus increases other competitors’ transaction costs. Therefore, the patentee’s letter-sending behavior had violated the Guidelines and the Fair Trade Act.
Based on the aforementioned opinions from the IPC Court and the FTC, one of the main considerations on whether a patentee’s letter to trading counterparts falls under the Guidelines hinges on whether the patentee has expressly or implicitly indicated that others have infringed the patent. Once the patentee sends a letter indicating an infringement, even without naming the infringer, the patentee may still be subject to the Guidelines. Furthermore, in March 2024, the FTC amended and issued the New Guidelines, adding a requirement for utility model patentee to provide a technical evaluation report of utility model patent when sending letters to trading counterparts. Therefore, when exercising patent rights by sending letters, a utility model patentee should not only consider the aforementioned opinions from the IPC Court and the FTC, but also assess the necessity of applying to and obtaining from the TIPO a positive technical evaluation report.