The Supreme Court in Taiwan (the “Supreme Court”) recently ruled in favor of parallel importers in the “PHILIP B” case (“PHILIP B”), involving the issue of the parallel import of branded goods under the Trademark Act in Taiwan (the “Trademark Act”).
 
Summary of the Case:
1.  PHILIP SCOTT, INC. (CALIFORNIA CORPORATION), DBA PHILI P B, INC. (“PHILIP B, Inc.”) is a manufacturer of cosmetics and skincare products sold in the United States and is also the proprietor of the “PHILIP B” trademark registered in the United States.
2.  紅創意公司 (OHWIN INC.; “OHWIN”) is an authorized retailer of PHILIP B, Inc. in Taiwan and also the proprietor of the “PHILIP B” trademark registered in Taiwan.
3.  哿鑫公司 (INFINITY BEAUTY LTD.; “INFINITY BEAUTY”) ordered and purchased “PHILIP B” brand goods from the official website of PHILIP B Inc. in the United States, and imported those goods into Taiwan for sale. OHWIN constantly identified itself to various distributors as the proprietor of the “PHILIP B” trademark, consequently affecting the sales of INFINITY BEAUTY’s goods. INFINITY BEAUTY thus filed a lawsuit against OHWIN requesting a court order prohibiting OHWIN from continuing to commit acts of obstruction of the sales of INFINITY BEAUTY’s goods.
 
Analysis:
This case has attracted wide attention primarily because this case involves a critical legal issue, namely, whether the acts of INFINITY BEAUTY constitutes a parallel import of branded goods immune from liability (or, in other words, whether the acts of INFINITY BEAUTY infringe on a trademark registered by OHWIN in Taiwan).
 
 
Article 36, Paragraph 2, of the Trademark Act provides that “[w]hen goods bearing a registered trademark are traded and circulated in the domestic or foreign market by the proprietor or a third party authorized by the proprietor, the proprietor is no longer allowed to claim trademark rights on such goods unless such claim is grounded on preventing such goods from deterioration or damage after such goods are circulated in the market, or grounded on other justifiable causes.” This is generally known as the “first-sale doctrine” or the “exhaustion doctrine,” which rests on the principle that a proprietor’s right to realize the full value of the proprietor’s intellectual property in goods is exhausted by the first sale of such goods made by the proprietor.
 
 
The PHILIP B case presents a situation where the proprietor of a trademark registered in Taiwan is not the proprietor of the identical mark registered in a jurisdiction abroad. In PHILIP B, the proprietor of the “PHILIP B” trademark registered in the United States is PHILIP B, Inc., whereas the proprietor of the “PHILIP B” trademark registered in Taiwan is OHWIN. Moreover, OHWIN did not give its consent to INFINITY BEAUTY for the sale of “PHILIP B” brand goods in Taiwan, which were ordered and purchased by INFINITY BEAUTY from the United States, and imported into Taiwan for sale.
 
 
In the PHILIP B case, the Intellectual Property Court found that: Under the exhaustion doctrine, PHILIP B, Inc.’s right on the very goods bearing the “PHILIP B” trademark was exhausted by PHILIP B, Inc.’s first sale of such goods in the market. Accordingly, PHILIP B, Inc. is not allowed to claim (as a proprietor of a registered trademark) its trademark rights against INFINITY BEAUTY with respect to the said trademark. However, the mark at issue is registered as a trademark in Taiwan by OHWIN rather than by PHILIP B, Inc. Moreover, the goods at issue were not circulated in the market by OHWIN. From the perspective of OHWIN, OHWIN did not make the first sale of such goods. Neither did OHWIN realize any value of its trademark in those goods at issue. Accordingly, there is no exhaustion of OHWIN’s trademark rights in this case. The Intellectual Property Court did not take OHWIN as “a proprietor of a registered trademark” under Article 36, Paragraph 2, of the Trademark Act. The Intellectual Property Court thus found that the doctrine of exhaustion prescribed under the aforesaid provision does not apply in this case and held that OHWIN could claim its trademark rights against INFINITY BEAUTY (the Intellectual Property Court Civil Judgment 105-Min-Shang-Shang-14 (2017)).
 
 
However, the Supreme Court did not uphold the view of the Intellectual Property Court in the PHILIP B case. Rather, the Supreme Court found that “when goods bearing a registered trademark are traded and circulated in the domestic or foreign market by the proprietor or a third party authorized by the proprietor, the proprietor is no longer allowed to claim trademark rights on such goods, unless such claim is grounded on preventing such goods from deterioration or damage after such goods are circulated in the market, or grounded on other justifiable causes. This is expressly stipulated in Article 36, Paragraph 2, of the Trademark Act. The said provision indicates the Legislature’s intent to adopt the doctrine of international exhaustion of trademark rights. Unless the proviso of the said provision applies, the said provision does not allow the proprietor of a registered trademark to claim his trademark rights on goods bearing a registered trademark of the proprietor as long as such goods are traded and circulated in the domestic or foreign market following the first sale of such goods consented by the proprietor. The said provision expressly acknowledges the legitimacy of the parallel import of branded goods. Furthermore, the trademark rights of the proprietor of a registered mark are exhausted as long as the proprietor of a registered mark (by the proprietor himself or by a third party authorized by the proprietor) registers the same mark in various countries, resulting in the registration of different trademarks in various countries under the territorial doctrine; the designs of the said mark registered in various countries are identical; the exclusive right of a registered mark is originated from the same proprietor; and there is a licensing agreement or any other legitimate grounds with respect to the said mark between the proprietors of different trademarks registered in various countries (the Supreme Court Civil Judgment 108-Tai-Shang-397 (2020)).
 
In other words, according to the Supreme Court’s opinion in the PHILIP B case, PHILIP B, Inc. is the proprietor of the “PHILIP B” trademark registered in the United States and has consented to the registration of the “PHILIP B” trademark by OHWIN in Taiwan, resulting in making OHWIN the proprietor the “PHILIP B” trademark registered in Taiwan. Since INFINITY BEAUTY purchased the “PHILIP B” branded goods from PHILIP B, Inc., OHWIN is no longer allowed to claim trademark rights against INFINITY BEAUTY.
 
 
【The author hereby states that this article presents the author’s analysis based on the reasoning of the courts’ decisions. The very case was remanded to and is now pending in the appellate court. The final outcome of this case may vary as a result of evidence presented by the parties or an alternative finding of facts by the court during the proceeding.】
 
Court Decisions Information:
The Supreme Court Civil Judgment 108-Tai-Shang-397 (2020)
The Intellectual Property Court Civil Judgment 105-Min-Shang-Shang-14 (2017)