Background
Facts
First-instance court
Second-instance court
Supreme Court
Comment


Background

Requirement for technical evaluation reports for utility model patents
Article 113 of the Patent Act provides that a utility model patent application shall only undergo a formality examination. In order to avoid the abuse of rights, the Patent Act specifically establishes the requirement for a technical evaluation report for utility model patents. This enables both patentees and third parties to evaluate whether the concerned utility model patent meets the requirements for patentability.

Before the amendment of the Patent Act in May 2013, article 116 provided that "when exercising a utility model patent, the patentee shall present the technical evaluation report of a utility model patent to issue a warning". In May 2013, this article was amended to the current wording, which reads as follows: "[W]hen exercising a utility model patent, the patentee shall not issue a warning without presenting the technical evaluation report of a utility model patent." This has a different legal format and structure to that of the previous version.

The rationale for the 2013 amendment was as follows:

[I]n order to prevent an abuse of rights . . . the old Patent Act provides that, when exercising a utility model patent, the patentee shall present the technical evaluation report of a utility model patent to issue a warning . . . the presentation of the technical evaluation report should be one of the elements to claim the patentee's rights . . . If the technical evaluation report of a utility model patent is not presented when issuing a warning, the patentee shall not be entitled to claim his/her utility patent rights.

The amendment further treats "the presentation of a technical evaluation report of a utility model patent" as a legal requirement for claiming a utility model patent right. This is different from the previous version and has a significant impact on the legitimacy of the rights holder's exercise of its rights.

Failure to present technical evaluation reports for utility model patents
Putting aside the question of whether a simple failure to present a technical evaluation report for a utility model patent in accordance with article 116 of the Patent Act may be necessarily legally evaluated as an "abuse of rights", the current Patent Act is silent on the legal implications of a utility model patentee failing to present the technical evaluation report of a utility model patent but proceeding to issue a warning in accordance with the existing provision.

In this regard, the Taiwan Intellectual Property Office (TIPO) has stated as follows:

[W]hile the Patent Act does not provide relevant supporting provisions for a patentee who proceeds to issue a warning without presenting a technical evaluation report of a utility model patent, such may be addressed in accordance with the relevant provisions of the Fair Trade Act.(1)

Nevertheless, the Fair Trade Act was enacted in order to maintain trading order, not to simply "prevent an abuse of rights". It remains doubtful whether a simple failure to present a technical evaluation report for a utility model patent in accordance with article 116 of the Patent Act should be "inevitably" regarded as a violation of the Fair Trade Act, or whether it should still be judged on a case-by-case basis.

Moreover, with respect to "the relevant provisions of the Fair Trade Act" to which the TIPO refers, it should be noted that the Fair Trade Commission has issued the Guidelines on the Reviewing of Cases Involving Enterprises Issuing Warning Letters for Infringement on Copyright, Trademark, and Patent Rights (the guidelines) to address the act of issuing a warning letter to the trading counterpart.

According to points 3(2) and 4(3) of the guidelines, when an enterprise issues a warning letter to its business competitor's trading counterpart(s), it should, in principle, conduct preparatory proceedings to fulfil its obligation in verifying the facts of the alleged infringement, and duly inform the recipient trading counterpart(s). For example, where the enterprise issuing a warning letter has obtained a first-instance judgment in favour of it, or has enclosed a patent infringement analysis report within its warning letter, it would be deemed as having met the requirements for preparatory proceedings.

If the rights owner does practice the foregoing provisions, the act of issuing a warning letter may then be recognised as "proper conduct of exercising rights" without being subject to the application of the Fair Trade Act. However, given that "presenting the technical evaluation report of a utility model patent" is one of the legal requirements to claim the utility model patentee's rights in article 116 of the Patent Act, if a utility model patentee fails to present the technical evaluation report of a utility model patent but proceeds to issue a warning against its trading counterpart(s), although it is in accordance with the provisions of points 3 and 4 of the guidelines, it still remains doubtful whether such an act may be recognised as "proper conduct of exercising rights."

With respect to the foregoing legal issues, the Supreme Court expressed specific opinions in a civil judgment rendered on 5 August 2021.(4)

Facts

The plaintiffs in this case were trading companies A and B, which sold reverse folding umbrella products (the "products in dispute") via major sales channels. However, the defendant, C, sent emails or warning letters to the plaintiffs' partners with regard to the utility model patent in dispute without applying for a technical evaluation report of the utility model patent, and warned them not to sell the products in dispute, which caused the products in dispute to be pulled from the shelves.

A and B requested C to stop such acts and claimed for damages suffered from the products in dispute being pulled from the shelves on the grounds that C had violated the provisions of the Fair Trade Act. In this regard, C argued that it had already obtained a patent infringement analysis report of the products in dispute before issuing the warning letters to those trading counterparts, which was in compliance with the provisions of points 3 and 4 of the guidelines and thus pertained to "proper conduct of exercising patent rights".

First-instance court

The first-instance court decided in favour of the plaintiffs' requests and considered that C had violated the guidelines because it had failed to present the patent infringement analysis report when sending the warning letters. C had also failed to notify the potentially infringing manufacturers before or at the same time as sending the warning letters.

Second-instance court

On appeal, the second-instance court reversed the unfavourable part of the first-instance judgment against C because it considered that C had indeed obtained the patent infringement analysis report before sending the warning letters, and that plaintiff A had also been aware of the infringement dispute before C's letters. Therefore, C's conduct had complied with point 3 of the guidelines and was considered "proper conduct of exercising rights".

Supreme Court

The Supreme Court reversed the second-instance judgment and held that the presentation of the technical evaluation report of a utility model patent is the premise for a "proper exercise of rights" under article 116 of the Patent Act. The rationale for the Supreme Court's judgment is summarised as follows:

  • Article 116 of the Patent Act states that "when exercising a utility model patent, the patentee shall not issue a warning without presenting the technical evaluation report of a utility model patent". This provision not only intends to prevent the utility model patentee from abusing its rights, but also explicitly states that the presentation of the technical evaluation report of a utility model patent is one of the elements required to claim the utility model patentee's rights. If a utility model patentee fails to present a technical evaluation report of a utility model patent before issuing a warning, it is difficult to consider such acts to be consistent with the proper conduct of exercising rights.
  • According to the legislative intent of article 45 of the Fair Trade Act, warnings must be made in accordance with article 116 of the Patent Act so that such acts can be considered to be consistent with proper conduct of exercising rights. This article is not subject to the Fair Trade Act.
  • The patent infringement analysis report referred to in point 3 of the guidelines constitutes an analysis to determine whether patent infringement has occurred, which is made on the basis that the patent in dispute has validity. Such report is different in nature to the technical evaluation report of a utility model patent, which aims to complement patent validity. Therefore, the patent infringement analysis report cannot be used as a substitute for the technical evaluation report of a utility model patent.
  • The preparatory proceedings stipulated in points 3 and 4 of the guidelines only serve as a procedure to confirm the infringement of rights, and are not sufficient to replace the technical evaluation report of a utility model patent, which should be presented by the utility model patentee to prove the validity of its patent rights. Consequently, the practice of the preparatory proceedings is not sufficient to supplement the deficiency of the element in issuing a warning as specified in article 116 of the Patent Act.
  • If an enterprise issues a warning against its competitors' infringement of a utility model patent without presenting a technical evaluation report of the patent in question, and such a warning is sufficient to affect trading and cause unfair competition, it is natural that the Fair Trade Act shall apply.

Comment

The Supreme Court seems to hold that if a utility model patentee fails to present a technical evaluation report before issuing a warning, even if the patentee has practised the preparatory proceedings required in the guidelines, the patentee's conduct should still be regarded as an abuse of rights and will constitute a violation of the Fair Trade Act. It remains to be seen whether this opinion becomes a steady point of view under court practice.

For further information on this topic please contact Hsiu-Ru Chien or Elina Yu at Lee and Li Attorneys at Law by telephone (+886 2 2763 8000) or email ([email protected] or [email protected]). The Lee and Li Attorneys at Law website can be accessed at www.leeandli.com.

Endnotes

(1) For further information, click here.

(2) Point 3 of the guidelines states as follows:

Where an enterprise has practiced one of the following proceedings before issuing a warning letter, the conduct of said enterprise is considered as a proper one in connection with the exercise of rights pursuant to the provisions of the Copyright Act, Trademark Act, or Patent Act:

1. said enterprise is affirmed by the judgment of the first instance court that its copyright, trademark or patent has been infringed;

2. said enterprise is recognized as the one whose copyright has been infringed after the mediation of the Copyright Review and Mediation Committee; and

3. said enterprise sends the subject matter(s) that are likely to infringe the patent to a professional organization for analysis, obtains a patent infringement analysis report, and notifies the manufacturer(s), importer(s) or agent(s) that are likely to infringe the patent before or at the same time when issuing warning letters in order to stop the infringement.

Where an enterprise fails to practice the latter part of Paragraph 1, Subparagraph 3 regarding the notification of stopping the infringement, but has taken procedures of legal remedy beforehand, or has fulfilled its reasonably possible duty of care, or it is physically impossible to make such notification, or has specific evidence sufficient to prove that the party to be notified is aware of the infringement disputes, said enterprise shall be deemed as having practiced the notification proceedings for stopping the infringement.

(3) Point 4 of the guidelines states as follows:

[W]here an enterprise has practiced the following proceedings for affirming the infringement of rights without violating the provisions of Articles 20, 21, 24 and 25 of the Fair Trade Act before issuing a warning letter, the conduct of said enterprise is considered as proper in connection with the exercise of rights pursuant to the provisions of the Copyright Act, Trademark Act, or Patent Act:

1. said enterprise has requested to stop the infringement via notifying the manufacturer(s), importer(s) or agent(s) that are likely to infringe the patent before or at the same time when issuing warning letters; and

2. said enterprise clearly indicates, in the warning letter, the content and scope of the copyright, trademark or patent, and the specific facts of infringement (such as when, where and how the patent in dispute was manufactured, used, sold or imported) to a sufficient extent so that the recipient is fully aware that the patent in dispute is likely to be infringed.

Where an enterprise fails to practice the preceding Paragraph, Subparagraph 1 regarding the notification of stopping the infringement, but has taken procedures of legal remedy beforehand, or has fulfilled its reasonably possible duty of care, or it is physically impossible to make such notification, or has specific evidence sufficient to prove that the party to be notified is aware of the infringement disputes, said enterprise shall be deemed as having practiced the notification proceedings for stopping the infringement.

(4) 2021 Tai Shang Zi No. 3113. The first-instance judgment was 2017 Min Gong Su Zi No. 14 Civil Judgment, rendered by the Intellectual Property Right Court (IPC) on 5 June 2018. The second-instance judgment was 2018 Min Gong Shang Zi No. 3 Civil Judgment, rendered by the IPC on 17 October 2019.