Practical Observations on the Nature of Warning Letters and the Procedural Obligations

09/26/2025

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I.              Overview of Relevant Rules on Warning Letters 

Article 45 of the Fair Trade Act provides: "Acts performed in accordance with the Copyright Act, the Trademark Act, the Patent Act, or other intellectual property laws in the exercise of rights shall not be subject to the provisions of this Act." 

Nevertheless, prior to issuing a warning letter, a business must comply with the preliminary procedures set forth in the Principles for Handling Cases Involving Warning Letters Concerning Alleged Infringement of Copyright, Trademark, or Patent Rights (hereinafter "Principles for Handling Warning Letters"), specifically Points 3[1] and 4[2], in order to qualify as a legitimate exercise of rights. If these procedures are not followed, under Point 5 of the Principles for Handling Warning Letters, where the conduct constitutes deception sufficient to affect trading order or is obviously unfair, it will be deemed a violation of Article 25 of the Fair Trade Act[3], and the authority may impose a fine in accordance with the first part of Article 42 of the Fair Trade Act[4]. 

It is noteworthy that, pursuant to Subparagraph 3, Paragraph 1, Point 3 of the Principles for Handling Warning Letters provides that where patent infringement is alleged, the enterprise shall submit the potentially infringing object for professional appraisal and obtain an appraisal report. The same subparagraph and Subparagraph 3, Paragraph 1, Point 4 further require that, if the case involves a utility model patent, a utility model technical report must be provided.

 

II.           Case Background 

The respondent, a manufacturer of aluminum formwork, engaged an attorney to send legal letters to two well-known domestic aluminum formwork distributors, Company A and Company B (collectively, the "Complainants"), with copies sent to Company C (a downstream customer of Company A), the National Association of Architects of the R.O.C., and the Taiwan Regional Engineer Contractors Association. The legal letters alleged that the Complainants had, without consent or authorization, exploited 25 patents listed in the appendix (collectively, the disputed patents, including 20 utility model patents and 5 design patents), but no utility model technical evaluation report was attached. 

On 28 July 2025, the Fair Trade Commission ("FTC") issued an administrative decision No. 114072, finding that the respondent failed to fulfill the preliminary procedures prescribed in Points 3 and 4 of the Principles for Handling Warning Letters and had thereby violated Article 25 of the Fair Trade Act.

 

III.        Grounds for the FTA's Decision 

The FTC determined that the respondent violated the Principles for Handling Warning Letters and Article 25 of the Fair Trade Act based on the following: 

1.            The Legal Letters Constituted a Warning Letter 

(1)    The Complainants are both well-known domestic aluminum formwork agents and are in a horizontal competitive relationship with the respondent. 

(2)    The recipients of the legal letters were expressly listed in the main and copy fields. The copy recipients, including Company C, the National Association of Architects of the R.O.C., and the Taiwan Regional Engineer Contractors Association, were trading counterparts or potential trading counterparts of the respondent or other enterprises and could infer from the letter that the Complainants were suspected suppliers of infringing goods. 

2.            Failure to Fulfill the Requirements of Subparagraphs 1 and 3, Paragraph 1, Point 3 the Principles for Handling Warning Letters 

The respondent did not file an infringement lawsuit with the court regarding the disputed patents listed in the legal letters, , did not obtain an appraisal report, and did not provide utility model patent technical evaluation reports for the utility model patents. In addition, many of the disputed patents were still under invalidation proceedings when the legal letters were issued. 

3.            Failure to Fulfill the Requirements of Subparagraphs 2 and 3, Paragraph 1, Point 4 of the Principles for Handling Warning Letters 

(1)    The respondent argued that the legal letters did not specify infringement by any particular enterprise or product, and that its purpose was merely to inform the recipients that it had acquired the disputed patents and to urge them to avoid unknowingly purchasing or using infringing or counterfeit products. The respondent further contended that the number of imported products from China was too large, making appraisal or preparation of utility model technical reports too costly, and therefore such documents were not attached; nor did the letter specify how the disputed patents had been infringed. 

(2)    However, the FTC did not accept the respondent's defense. Considering that the respondent had previously reported to the Industrial Development Administration, Ministry of Economic Affairs regarding unlawful importers of aluminum formwork from China, the FTC held that the respondent's letters to the Complainants, requesting that they refrain from purchasing or using infringing products, implied an accusation of infringement against the Complainants, and that the recipients were not chosen at random. 

4.        The FTC considered that the recipients of the legal letter might associate the Complainants' products with patent infringement, and might refuse or reduce transactions with the Complainants to avoid litigation, thereby causing improper interference and harm to the transaction costs and market order of competitors. This is evidenced by the fact that the Complainants had to clarify or guarantee to each downstream trading counterpart in the construction industry in order to continue transactions. Accordingly, the FTC concluded that the respondent's conduct constituted obviously unfair conduct sufficient to affect trading order under Article 25 of the Fair Trade Act, , and thus ordered the respondent to cease the unlawful conduct immediately, and imposed a fine of NT$100,000.

 

IV.        Conclusion 

When issuing legal letters, enterprises should carefully assess whether the contents may be deemed to constitute warning letters and ensure compliance with the pre-action procedures required under the Principles for Handling Warning Letters. If such procedures are omitted on the assumption that the letter does not allege infringement by any specific business or product, the conduct may still be found by the authority to constitute a violation of Article 25 of the Fair Trade Act, resulting in administrative penalties. It is advisable for enterprises to adopt a cautious approach, obtain professional legal advice, and establish a comprehensive internal review mechanisms to mitigate compliance risks and potential disputes.