Application of Trademark Post-Sale Confusion Theory in Taiwan’s Trademark Law and Fair Trade Law

The aftermarket confusion theory of trademarks, as the name suggests, is a theory that lengthens the point of confusion from the sale of products to their use. According to the traditional theory of infringement, infringement occurs when a mark, identical or similar to the registered mark, is applied for goods or services identical or similar to those for which the registered mark is designated if the consumers are likely to confuse the trademark with the registered one. However, if a consumer deliberately buys a counterfeit, for example an exceptionally cheap “Rolex” watch, there is no risk of confusion at the time of sale. Confusion can still occur, according to the brand’s aftermarket confusion theory, when the consumer uses and passers-by observe the counterfeit watch. Passers-by, as potential consumers, may mistake the fake for a genuine “Rolex” watch. If so, the counterfeit may affect passersby’ purchasing decisions due to its low quality and may also dilute the value of the Rolex brand.

The brand aftermarket confusion theory has a long and storied history in America. It is derived from the Mastercrafters Clock case (1955), implicated by amendments to the Laham Act in 1962, and has been applied in several cases such as Levi Strauss & Co. v. Blue Bell, Inc. (1980), Ferrari SPA Esercizio v. Roberts (1991) and Gibson Guitar Corp. against Paul Reed Smith Guitars, LP (2005). However, this theory is generally not accepted in trademark infringement cases in Taiwan. The reason is quite simple. If passers-by can associate the fake with genuine products when they observe the fake, the brand of the genuine product must be well known. Trademarks involved in the cases mentioned above – Levi’s, Ferrari, Gibson, are all well-known brands. In light of Article 70 I of the Trademark Law of Taiwan, there is infringement when a mark, identical or similar to a well-known mark, is applied for goods or services, and therefore there is a risk of dilution of the well-known mark. . In other words, “a likelihood of confusion” is not material in a well-known trademark infringement case. The prima facie case here is “dilution probability”. Generally speaking, consumers can easily distinguish premium products from counterfeits by price or quality, but they may choose to buy counterfeits voluntarily. Counterfeiting cannot be justified simply because counterfeits are sold cheaper and of poor quality. This is why the “likelihood of confusion” is removed from prima facie cases for well-known trademark infringements.

The Taiwan Intellectual Property and Commercial Court had pointed out that the “after-trademark confusion theory” provides a theoretical basis for Article 70 I of Taiwan’s Trademark Law, as it establishes liability despite the lack of confusion. The court uses Article 70 I, instead of the theory itself, to solve the problems. However, the stone that the builders refused becomes the corner tombstone. The theory of after-sales confusion of trademarks, which is not accepted in its field, finds its place in the Taiwan Fair Trade Act. In RIMOWA GmbH v. KGT International Corp. and RIMOWA GmbH v. JINYAO International Trade Co., Ltd., after-sales confusion theory has played a very impressive role in the actions, and the consequences of these decisions are worth noting.

In short, RIMOWA GmbH is a high-quality suitcase manufacturer, founded in 1898. Its suitcases are widely known to the public for their parallel grooves. KGT Corp., with its “ROWANA” brand, and JINYAO Ltd., with its “Centurion” brand, sell suitcases with the same parallel grooves as RIMOWA’s suitcases, at remarkably lower prices. The cause of action in both cases is Article 22 I of Taiwan’s Fair Trade Law, which reads: “No company shall use the appearance of the products of others which are commonly known to the public, in the same or similar manner, of the same or similar class of goods, so as to create confusion with the property of that person”

The Intellectual Property and Trade Tribunal applied the “after-sales confusion theory” in both cases, stating that “even if consumers cannot confuse the cases in question with RIMOWA cases because of the difference remarkable price, viewers, unaware of the price difference, may be confused when they observe the cases in question and mistakenly believe that they are from RIMOWA. These passers-by, as potential consumers, will not buy RIMOWA suitcases because of the false impression they received from observing counterfeits, such as the notion that the quality of RIMOWA suitcases is poor.

In short, RIMOWA GmbH alleged that the parallel grooves of its cases are the “notorious appearance of the goods” and are therefore protected by Section 22 I of the Fair Trade Act. While the protection of a well-known mark only requires a “risk of dilution”, the protection of the well-known appearance of goods requires a “likelihood of confusion”, which is the very step at which the theory of after-sales confusion needs.

But you might be wondering how the “aftermarket confusion theory of trademark” can be applicable in fair trade cases when it is not yet well established in its trademark cases? This is the very question that the Supreme Court of Taiwan asked. The Supreme Court reversed both rulings and returned the cases to the Intellectual Property and Trade Court, for the same reason that “the likelihood of confusion in Section 22 I of the Fair Trade Act should not be speculative”. To determine whether there is a likelihood of confusion, the Supreme Court considers the distinctiveness of the appearance of the products, the familiarity of the appearance to the public, the similarity of the products and categories, and the difference of groups consumers and prices between products (file number: 109年度台上字第2369號判決、110年度台上字第3161號判決). The key points here are “consumer groups” and “price differences”. Generally speaking, genuine products and counterfeits share different consumer groups and have different pricing strategy. Moreover, only consumers who buy goods can perceive the price difference. It appears that the Supreme Court excludes bystanders from the “likelihood of confusion” determination and therefore the “aftermarket confusion theory” does not apply to fair trade cases.

The cases were referred to the Intellectual Property and Trade Tribunal, and the Tribunal strongly disagreed with the Supreme Court’s opinion. In the decision of the referred case (case number: 110年度民公上更(一)字第2號判決), the Intellectual Property and Commercial Court stated bluntly that “the difference in price is not significant in determining likelihood of confusion. The reason here is simple: even though low price or poor quality is a characteristic that consumers can rely on to distinguish counterfeit products from genuine products, it does not justify counterfeiting.

However, the Court of Intellectual Property and Commerce did not allay the concern of the Court of Cassation: is the theory of after-sales confusion, as the basis of infringement, too speculative? Let’s go back to the classic hypothesis of this theory: buyer “A” buys a “Centurion” suitcase that looks like a RIMOWA suitcase and B, after observing and confusing the suitcase with a RIMOWA suitcase, has the false impression that a La RIMOWA suitcase is of poor quality. If B’s ​​purchase decision is affected, B’s decision can only be “to buy” or “not to buy” a RIMOWA suitcase (because B does not know of the existence of the “Centurion” brand, he thinks the suitcase he sees is from RIMOWA. ) If B chooses to buy, he is no longer a “spectator”. In the event that B confuses Centurion’s suitcases with those of RIMOWA, the traditional infraction rules apply. We don’t need the aftermarket confusion theory here because it only focuses on spectator confusion. The after-sales confusion theory may apply only when B chooses not to buy. But how can we make sure that B chooses not to buy a RIMOWA suitcase only because of his false impression after observing a fake one, and not the other reason like “genuine RIMOWA suitcase is not affordable for him” or “he doesn’t need a suitcase anyway”? How to prove that the misprint is the real and proximate cause of plaintiff’s damages? Also, if defendant proves that the forgeries are of reasonable quality , can this constitute a defence?The post-market confusion theory inference is so speculative that it is no more than a leap of faith jumping to the conclusion where our notion of justice holds that she should be.

The well-known appearance of the products is similar to that of the well-known marks in many respects. None of them require registration as a precondition for protection; both share the same definition of “well-known” and use the same type of evidence to establish it. The well-known appearance of the goods deserves the same protection as well-known marks. However, counterfeiting a well-known trademark, as stipulated in Article 70 I of Taiwan’s Trademark Law, requires “risk of dilution”, while counterfeiting a well-known appearance of goods , under Article 22 I of the Taiwan Fair Trade Act, requires “likelihood of confusion”. If consumers can easily distinguish counterfeits by price or quality but still voluntarily buy counterfeits, as the RIMOWA case shows, the court must find “imaginary buyers” and presume they are confused to satisfy the element of Article 22 I of the Taiwan Fair Trade Law.

To be honest, this is a problem derived from poor legislative skills. The difference in price or quality between counterfeits and genuine products has nothing to do with determining unfair competition; however, ironically, this is the prima facie case of Article 22 of the Fair Trade Act. The responsibility for infringement of the notorious appearance of the goods lies in unfair competition. By substantially copying the appearance of well-known products, counterfeits enjoy the goodwill of the well-known for free, competing with genuine products at a lower price as it saves design, development and marketing costs. Such behavior constitutes unfair competition. Even though consumers can easily distinguish counterfeits from genuine products by a lower price, the lower price is the product of a counterfeit and therefore should not be used to prevent liability.

To solve this problem, the court can use section 25 of the Fair Trade Act, which is a general term prohibiting unfair behavior that is not expressly provided for by law, to deal with cases in which consumers do not are not confused but where unfair competition persists. . In any case, the aftermarket confusion theory is the last solution to this problem. Imaginary consumers and speculative damage do not make things better.

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