Newsletter
Exhaustion of Trademark Rights Not Apply Where Domestic and Foreign Trademark Rights Belong to Different Holders
According to Article 36 (2) of the Trademark Act in Taiwan, the trademark holder of a registered trademark is not entitled to claim trademark rights where the goods with the registered trademark have been put on the domestic or foreign market by the trademark holder or with its consent. Also known as the "first sale" doctrine or "trademark exhaustion" doctrine, this Article was enacted to prevent the trademark holder from exercising its trademark rights twice while it has already received the benefit of its trademark from the first sale.
In an increasingly globalized economy, the operation and business allocation of multinational corporations get more complex and they might have different trademark holders in different countries based on the evaluation of legal or financial risk. In the situation where the same trademark has two different domestic and foreign trademark owners, whether the doctrine of trademark exhaustion can be applied still remains unclear in practice in Taiwan. In a recent civil litigation case regarding the application of trademark exhaustion, the Intellectual Property Court declared that the domestic trademark holder should not be bound by the effect of trademark exhaustion if the domestic trademark holder did not receive any benefit from the first sale in the foreign country.
The plaintiff in this case was an energy drink manufacturer and the energy drinks for the Taiwan market were bottled in slender blue and silver cans. The Custom Administration notified the plaintiff in April 2018 that the defendant had imported a batch of energy drinks carrying the same trademark but were bottled in golden aluminum cans. After applying for detention of the golden aluminum cans, the plaintiff brought a civil lawsuit for trademark infringement against the defendant. The defendant argued that the golden aluminum cans came from a legitimate source and were manufactured by the plaintiff's company in Vietnam therefore trademark exhaustion doctrine should be applied. However, the plaintiff pointed out that there is no control, subordinate or investment relationship between the Plaintiff and the trademark holder in Vietnam. Further, the plaintiff stated that the packaging, the content and the flavor of the energy drinks are different between the products sold in Taiwan and the golden aluminum cans.
Firstly, the Intellectual Property Court clarified that the trademark exhaustion doctrine only binds the trademark holder where the domestic and the foreign trademark holder is the same entity. If the domestic trademark holder did not receive any benefit from the first sale in the foreign country, the domestic trademark holder should not be bound by the effect of trademark exhaustion.
The Intellectual Property Court further pointed out that, Plaintiff's products were made in Austria while the golden aluminum cans were made in Vietnam. In addition, the trademark holder in Vietnam did not own any share in the Plaintiff's company. Also, even though the plaintiff owned the trademark in Taiwan in the past, it had assigned the trademark to Plaintiff in 2001. Therefore, the exhaustion of trademark right did not apply since the products were different, the domestic and foreign trademark rights belonged to different holders and the trademark holders did not deliberately promote the appearance or image of a single global trademark.