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License of an Unregistered Trademark Not a Defense against Trademark Infringement Claim Raised by Registered Trademark Owner


Ruey-Sen Tsai/Celia Tao

Taiwan adopts a "first-to-file" trademark system, which means that the protection over a trademark is granted to the first applicant to file an application and subsequently obtain the registration. Nonetheless, according to Article 36-1(3) of the Trademark Act, a good faith user may establish a defense against an infringement claim if it has been using an identical or similar trademark on the same or similar goods or services before the date of application of another person's trademark registration. 
 
According to the majority holdings of the courts in Taiwan, in order to establish a defense based on Article 36-1(3), the good faith user should use the trademark to promote its own goods or services. In other words, the defense will not apply if the trademark was used to promote goods or services of others, such as use through a licensing agreement.  However, instead of raising defense based on Article 36-1(3), may a licensee raise a defense claiming that it reasonably rely on the licensing agreement so it was not intentional or negligent?  In a recent civil decision, the Intellectual Property Court in Taiwan demonstrated how the Courts approach this issue.
 
The plaintiff in this case is a management company for a notable local restaurant. The plaintiff acquired the ownership of the business in 2013 from the founder of the restaurant. The plaintiff subsequently registered the trademark for the name of the restaurant (hereinafter "registered trademark") in 2016.
 
However, long before 2013, the founder of the restaurant granted a license of the name of the restaurant, which was not yet registered as a trademark then (hereinafter "unregistered trademark"), to the defendant to use on prepared meal packs. The founder and the defendant only furnished the licensing agreement for the first and the second year but the defendant still used the restaurant's name on prepared meal packs later on. The plaintiff filed a civil action against the defendant for trademark infringement and the defendant raised the defense based on Article 36-1(3), prior use in good faith.
 
First of all, the first instance court determined that there was an "implied licensing agreement" between the founder and the defendant based on the fact that the founder was still teaching the defendant cooking after the second year of the licensing agreement and did not prevent the defendant from using the unregistered trademark. The first instance court further explained that, the defendant may not establish a defense based on prior use in good faith as a licensee of the unregistered trademark, but it reasonably relied on the licensing agreement. Therefore, the first instance court concluded that the defendant was not intentional or negligent for the trademark infringement.
 
The second instance of the Intellectual Property Court, however, reversed the court's decision of the first instance and took the different views. The second instance court pointed out that there was indeed an implied licensing agreement between the founder and the defendant, but the licensed trademark in the implied licensing agreement was different from the plaintiff's registered trademark.  According to the second instance court, the defendant may not use the implied license of the unregistered trademark as a defense against the trademark infringement claim based on the registered trademark owned by the plaintiff. Therefore, the second instance court made a decision in favor of the plaintiff and concluded that the defendant's use of the restaurant's name on prepared meal packs constituted trademark infringement.
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