Newsletter
IP Court Rejects Legitimate Parallel Imports Claim When Foreign and Local Trademark Owners are Different
According to the prevailing court opinions, parallel import of trademarked products is legitimate and will not be deemed violation of the Trademark Act. Nonetheless, how to define the situations of parallel import is a controversial issue.
Article 36, Paragraph 2 of the Trademark Act stipulates that where goods bearing a registered trademark have been put on the domestic or foreign market by the trademark owner or with its consent, the trademark owner is not entitled to claim trademark rights on such goods. According to this article, the right in a registered trademark is consistent with the principle of exhaustion or First Sales Doctrine. This Article was amended in 1993 with the purpose to make sure that so long as a first trade of products with a trademark has been agreed by the proprietor of the registered trademark, the proprietor's right in the registered trademark is exhausted and the proprietor can no longer allege an exclusive right in the trademark unless the condition stated in this Article happened. In addition, in order to comply with the principle of international exhaustion, the word "market" in this section was changed to "domestic or foreign market" in the revisions to the Trademark Act in 2011. Because the proprietor of a registered trademark has profited from the first sale, the proprietor is prevented from demanding multiple payments for the following domestic or international uses of the particular trademark.
The Intellectual Property Court held in 2017 in a trademark infringement civil litigation that the trademark at dispute is separately owned by different proprietors in different countries. In the U.S.A., the trademark is registered by one enterprise but the trademark owner in Taiwan is another different entity. According to the principle of international exhaustion, because the importer of this case legally bought the products at dispute from the trademark owner in the U.S.A, the trademark owner in the U.S.A had profited from this first sale and will not be able to articulate the right in the registered trademark against the importer's following sale of those products in Taiwan. However, the trademark owner if Taiwan did not profit from the sale occurred in the United States, the principle of international exhaustion cannot apply to the trademark owner in Taiwan when the following uses occurred in Taiwan. As a result, Article 36, Paragraph 2 of the Trademark Act does not apply to the importer of this case under this situation and the trademark owner in Taiwan has the right in the registered trademark and the right to ask remedy for the trademark infringement.
The principle of exhaustion in Article 36, Paragraph 2 of the Trademark Act would apply to the scenario where the one is both the domestic and foreign proprietor of the registered trademark when a product is sold. For example, if a company is the proprietor of a registered trademark in the U.S.A. and Taiwan, a person who import the company's products with the trademark in the U.S.A. could further sell the products in Taiwan without being liable for trademark infringement due to the principle of international exhaustion.
To sum up, when a parallel import occurred, the importer would be liable for trademark infringement if there are different proprietors of the registered trademark between two countries; on the contrary, the importer would not be liable if the owner of the trademark registered in both countries is the same.