The Intellectual Property Court rendered the 103-Xing-Zhi-Shang-Yi-37 Criminal Decision of November 20, 2014 (hereinafter, the "Decision"), holding that if goods are not manufactured with the permission of the trademark owner, are not circulated in domestic or overseas markets by the trademark owner or any party permitted by the trademark owner, and are illegally manufactured by actors, such goods are not "genuine goods," and the trademark exhaustion doctrine under Article 36, Paragraph 2 of the Trademark Act does not apply.

According to the facts underlying the Decision, Defendant Ching-hsin Luo is the representative of TOPWORLD Co., Ltd., who was clearly aware that the "NEC" trademark is registered by Nippon Electric Co., Ltd. and designated for use on goods such as standard batteries. Without a license or permission from Nippon Electric Co., Ltd., the Defendant produced or manufactured 80,000 AA alkaline batteries that counterfeit the NEC trademark (hereinafter, the "Batteries at Issue") for distribution. After the Defendant was prosecuted by the Taipei District Prosecutors Office upon complaint of Nippon Electric Co., Ltd., the Taipei District Court of Taiwan, the first instance court for this matter, ruled that the Defendant was guilty for using the same registered trademark on the same goods without the permission of the trademark owner under Article 95, Subparagraph 1 of the Trademark Act. Dissatisfied, the Defendant appealed.

According to the Decision, Article 36, Paragraph 2 of the Trademark Act specifically provides: "Where goods have been put on the domestic or foreign market under a registered trademark by the proprietor or with his consent, the proprietor is not entitled to claim trademark rights on such goods, unless such claim is to prevent the condition of the goods been changed or impaired after they have been put on the market or there exist other legitimate reasons." This is what is known as the trademark exhaustion doctrine. If goods bearing trademark rights are sold in domestic or overseas markets with the permission of the trademark owner or any party permitted by the trademark owner, trademark rights cannot be asserted again to promote the circulation of goods. Therefore, parallel import of genuine goods does not infringe trademark rights.

However, it was also indicated in the Decision that the Defendant asserted in its appeal reasons that the Batteries at Issue were purchased by Tohma, a Japanese company, from a subsidiary company of Nippon Electric Co, Ltd. before they were delivered to third parties. Under the exhaustion doctrine, Nippon Electric Co., Ltd. certainly should not assert trademark rights over the Batteries at Issue. However, since the Batteries at Issuers were neither manufactured with the permission of the trademark owner nor circulated in domestic or overseas markets by the trademark owner or any party permitted by the trademark owner and were instead illegally manufactured by the Defendant, the Batteries at Issue are not "genuine goods" and the trademark exhaustion doctrine does not apply. The Defendant's arguments are certainly unacceptable.