The COVID-19 pandemic has driven many trademark owners to suspend or discontinue using their marks or adjust their business models. Will these activities lead to risk of non-use cancellations in Taiwan?
The Pandemic in Taiwan
Thanks to the preemptive measures Taiwan’s Government decisively adopted in combating the spread of the COVID-19 virus since the very start of its outbreak, the pandemic was substantially controlled in Taiwan in the entire 2020.
Nevertheless, in mid-May 2021, Taiwan encountered its first, and an abrupt, COVID-19 pandemic surge, resulting in a 69-day Level III Alert Period lasting until late July. Fortunately, with the joint efforts of the government and the people, Taiwan has “flattened the curve” once again since August 2021.
In the Level III Alert Period, all entertainment spaces were ordered to close, so were public religious activities, and restaurants were allowed to provide take-out services only. Many other businesses, although not ordered to change their business models, chose to do so when they could. As a result, many trademark owners discontinued using their marks or changed the modes of their trademark use. However, under Taiwan’s Trademark Law, a registration more than three years old is vulnerable to cancellation if it has not yet been put to use or the use has been suspended continuously for more than three years, unless there is a justifiable reason for the non-use.
The above facts lead to the following questions:
- Does an impact from the COVID-19 pandemic constitute a “justifiable reason” for non-use of a mark?
- Similarly, can the three-year period be extended on the ground that the services designated in the trademark registration were ordered to close to control the COVVID-19 pandemic?
- What should foreign trademark owners do to best protect their Taiwanese registrations during the COVID-19 pandemic?
To our knowledge, neither the IP Office nor any court has disclosed their opinion on whether an impact from the COVID-19 pandemic may constitute a justifiable reason for non-use of a registered trademark. Our best guess is that such an impact can be a justifiable reason if, number one, it is manifested as a business closure in compliance with a pandemic control order issued by Taiwan’s Government, like the above-mentioned Level III Alert order requesting closures of bars. More importantly, number two, the impact needs be long enough for it to “cause” a three-year-long non-use. Theoretically, any closure shorter than three years is at the risk of failing the causation test, whether or not it is in compliance with a government order, and a closure of just 69 days in this summer is obviously all too short a term.
Incidentally, per numerous judgments by the Intellectual Property and Commercial Court, a justifiable reason for non-use of a trademark is “a factual obstacle not attributable to the trademark owner,” such as: (a) pendency of a marketing approval proceeding for a drug upon which the mark is to be used; (b) an embargo or other legal ordinances that prohibit importation and selling of the designated goods in Taiwan; (c) interruption of sea transportation, shortage of raw materials, or natural disasters resulting in major damage to a (Taiwan-located) factory for producing or selling the designated goods.
Is the Three-Year Period Extendable?
There is no sign that the IP Office has considered allowing request for an extension of the three-year period critical in a non-use cancellation case due to the designated services being ordered to close per a government order to curb the pandemic. Speculatively, this issue may come up three years from now: a trademark owner might argue that as soon as its mark was registered, the ban on its designated services befell which caused at least 69 days’ depletion of trademark use and that should be compensated by extending the three-year period. However, it is quite doubtful whether trademark owners have a “right” in deferring using their registered marks and claiming compensation.
And neither does it seem possible that a “shift use” of a trademark during the COVID-19 pandemic will be considered by the IP Office as genuine use of the designated services. Even more, trademark owners should be vigilant for possible infringement risk from shift in trademark use.
For example, supposing a bar owner, in the face of a closure order from the government to combat the COVID-19 pandemic, decides to shift his/her business model from in-store services to delivery services: the mark originally designated for “bar” will be used on “cocktails, meals, and snacks” to be delivered to customers. This will not constitute genuine use of the mark under the Trademark Law. More, if there is a senior similar registered mark designated for “cocktails, meals, and snacks,” the bar owner might be at risk of trademark infringement liabilities.
Takeaways for Foreign Businesses
- During the epidemic, even if there are difficulties in providing goods and services, trademark owners should try their best to use their marks via appropriate marketing tools so as to avoid the risk of non-use cancellation actions. Among others, licensing to a local business in Taiwan is an effective method to establish trademark use, as long as the local business has put the mark into use in Taiwan.
- If foreign registrants are unable to use their trademarks in Taiwan due to the impact of the epidemic in their own countries (and let’s say the impact lasts very long), they should not presume that this will constitute a justifiable reason for non-use of its registered mark in Taiwan.
- Trademark owners planning to expand or diversify their businesses using the same mark, even if it is due in part to the impact of the pandemic, are recommended to first conduct an infringement risk assessment before launching the project, and then seek broader protection of the mark through new filings.