Taipei High Administrative Court rules that Shanq Keng Enterprise Co., Ltd. violated the Fair Trade Law

Taiwan

Case:

Taipei High Administrative Court rules that Shanq Keng Enterprise Co., Ltd. violated the Fair Trade Law

Key Words:

confusion, misidentification, secondary meaning

Reference:

Taipei High Administrative Court Judgment (89) Su Tzu No. 1665

Industry:

Wholesale of Other Foods and Groceries (4429)

Relevant Law:

Article 20 of the Fair Trade Law

Summary:

1. The Unilever Taiwan Ltd. (Unilever, the complainant) had previously, on 18 September 1999, filed a complaint with the defendant (the Fair Trade Commission) against Shanq Keng Enterprise Co., Ltd. (Shang Keng), a third-party participant in this administrative litigation case, alleging that the "Lordly Tea" sold by Shang Kenq was extremely similar to the Lipton Tea sold by Unilever in terms of the shape, appearance, craftsmanship, size, color, text layout, and so forth, of its packaging, to the extent that an average consumer would be likely to confuse or misidentify the products, in violation of Articles 20(1) and 24 of the Fair Trade Law (FTL). The Fair Trade Commission (FTC) had replied to Unilever via letter that it found that the Lordly Tea did not constitute passing off by Shanq Keng on the commercial reputation of Unilever. Unilever objected to the FTC's disposition, and filed an administrative appeal. The administrative appeal was dismissed, and Unilever then filed an administrative lawsuit against the FTC. The Taipei High Administrative Court ordered Shanq Keng to participate in the administrative litigation as a third-party participant.

2. Reasons for the court judgment

(1) Article 20(1)(i) of the FTL provides that an enterprise shall not "use in the same or similar manner a...symbol that represents another persons goods, where the symbol is commonly known to relevant enterprises or consumers, so as to cause confusion with the goods of the other person."

"Symbol" as used in Article 20(1)(i) means a particular feature that has distinctiveness or secondary meaning, and that can serve to indicate the source of goods or services, such that it can enable relevant enterprises or consumers to distinguish between different goods or services.

The legislative intent of this provision is to prohibit serious acts of commercial piracy that obstruct fair competition and are not regulated by other laws currently in force. So, if a product makes identical or similar use of overall symbols (trade dress) of another product such as could objectively cause consumers to confuse the goods or their source, such use violates this provision, regardless of whether a same trademark is used.

The complainant Unilever's Netherland headquarters began producing Lipton Tea in 1972, in packaging featuring a yellow color scheme with a red mark as a product symbol (trade dress). It is undisputed that in 1983, Unilever's headquarters licensed Unilever Taiwan Ltd.'s predecessor Kuo Lien Co., Ltd. to sell Lipton Tea in Chinese Taipei. Advertising and promotional materials and literature of the complainant also clearly substantiate that the yellow color scheme with a red mark is a symbol (trade dress) of Lipton Tea. Whether in terms of mark designs, text, color, scheme, or layout, the "yellow color scheme with red mark" package trade dress - through long-term continuous use by the complainant - has come to readily enable relevant enterprises and consumers to distinguish the source of the goods based on their appearance, and has thus acquired "secondary meaning" and is without question a "symbol" under Article 20(1)(i) of the FTL, the defendant's assertions to the contrary notwithstanding.

(2) Judgment as to whether symbols (trade dress) are used in the same or similar manner should be based on objective fact, and should consider whether relevant enterprises or consumers with ordinary knowledge and paying an ordinary amount of attention would be confused when viewing the goods in their totality and comparing their main elements, or when viewing them separately at different times and in different places. The tea beverages at issue are everyday consumer goods, and generally are displayed in sales outlets side by side with similar products of various brands. When making purchases, the relevant public, i.e. consumers, usually rely merely upon the image of the product that they have in their memory when making their selection. Seldom do they make a close comparison of the explanatory text on the packages, nor do they even tend to pay close attention to the trademark designs. Therefore, they often make purchases based on such characteristics as package color or layout. Similarity between two products in package appearance and characteristics can easily lead consumers into errors at the time of purchase.

The complainant commissioned the market research firm Taylor Nelson Sofres to study the distinguishability of the goods at issue. It arrived at the following conclusions in its report: (i) Lipton Tea and Lordly Tea have widely disparate market awareness rates of 84.5% and 0.3% respectively; (ii) nine-tenths of the subjects associated red-yellow labeling bearing no brand name with "Lipton Tea"; (iii) when shown a collective photograph of five products (not including Lipton Tea) for five seconds, nearly six-tenths of the subjects believed that Lipton was among the products; (iv) 87% of the subjects felt that the packages of Lipton Tea and Lordly Tea were very similar and could result in misidentification; (v) 87.6% of those subjects who felt such misidentification to be likely cited the red-yellow color scheme of the packages as the primary reason misidentification would occur. In this study, Taylor Nelson Sofres, without disclosing the names of brands, asked subject consumers to identify the brands they knew. The subjects identified the packaging with a yellow background and red mark as that of the complainant Lipton without any prompting by the researcher firm Taylor Nelson Sofres, whose report can be taken as credible. There is no substantiation for the defendant's contention that Taylor Nelson Sofres' market study design was not objective and impartial.

3. In sum, the court found that Article 20(1)(i) of the FTL is applicable to this case and that the FTC's disposition holding that there was no violation of that law was inappropriate, as was the administrative appeal decision that failed to correct the original disposition. The court therefore approved the complainant's request for reversal of the administrative appeal decision and the original disposition as justified, and reversed said decision and disposition. However, it found the complainant's petition for a ruling obliging the FTC to render a positive disposition was not supported by law, and dismissed the request.

Appendix: Unilever Taiwan Ltd.'s Uniform Invoice Number: 23526604

Shanq Keng Enterprise Co., Ltd.'s Uniform Invoice Number: 23555760

Summarized by Lai, Chia-Ching; Supervised by Wang, Rong-Ging