According to Article 36-2 of Trademark Act in Taiwan, where goods have been put on the domestic or foreign market under a registered trademark by the trademark owner or with its consent, the trademark owner is not entitled to claim trademark rights on such goods. This provision governs the principle of trademark rights exhaustion in Taiwan. Under this provision, after the first sale, no matter the buyer of the goods with a registered trademark wishes to resell the goods, or to use the goods as a prize in lottery games, the trademark owner do not have rights to interfere the buyer's use of the goods with the registered trademark. However, whether the buyer may use the registered trademark to promote the goods in advertisements, has been an unsettled issue in Taiwan.

In a recent decision, the Intellectual Property Court held that, using another's mark to promote prizes in lottery games in advertisement is not actionable use for trademark infringement.

In the instant case, the defendant used the trademark owner's product as prizes for its lottery game. The trademark owner claimed that the defendant's unauthorized use of the trademark owner's registered trademark in advertising materials, such as banners, sticker and billboards, constituted trademark infringement.

Firstly, the Court stated that, according to Article 5-1 and 5-2 of Trademark Act in Taiwan, “use of a trademark” means any of the following act, in the course of trade, where such trademark is capable of being recognized by relevant consumers as an indicator of goods or services:

(1)to apply a trademark to goods or packaging or containers thereof;

(2)to possess, display, sell, export, or import the goods referred to in the preceding subparagraph;

(3)to apply a trademark to articles relating to the provision of services; or

(4)to apply a trademark to commercial documents or advertisements relating to goods or services.

The Court further explained that, in order to satisfy the requirement of actionable use in trademark infringement, the trademark owner had the burden of proof that defendant had the intent to use the trademark in the course of trade. In addition, the trademark owner had to show that the defendant actively used the trademark to indicate its own goods and the trademark was capable of being recognized by relevant consumers as an indicator of goods.

Given the above, the Court pointed out that, the defendant showed its own trademark and business name in its lottery game advertisements. As a whole, according to the Court, the purpose of using the registered trademark was only to indicate that the trademark owner's products were used as prizes for the lottery game, instead of indicating the defendant's own products. In conclusion, the Court held that the defendant's conduct was not actionable use therefore the defendant was not liable for trademark infringement.