Newsletter
TRADEMARK NOT INFRINGED BY UNDESTROYED SECONDS
Trademark owners sometimes put trademarked goods that do not meet their quality control re-quirements on the market at a reduced price. But more usually, in order to protect their commer-cial reputations, trademark owners destroy such goods by themselves or through a contractor, to prevent them from reaching the market. How-ever, one often hears of cases in which defective goods earmarked for destruction are not de-stroyed, and do reach the market. The courts hold differing opinions on the issue of whether the sale of defective goods that were condemned but not destroyed constitutes trademark in-fringement.
For example, in a 2004 judgment the Taipei District Court took the view that when a trade-mark is used on goods with the consent of the trademark owner, regardless of whether the trademark owner subsequently consents to such goods being sold, the goods are not infringing goods. Even if such goods are defective, their sale does not infringe the trademark.
Another related issue is whether the scope of a trademark license is exceeded if trademarked goods produced under the license are sold without having been inspected and approved by the trademark owner, and whether the legal po-sition would be different if such uninspected goods do in fact conform to the relevant speci-fications and quality requirements. In a 2004 civil judgment, the Supreme Court held that if a licensing agreement does not expressly prohibit the use of the licensed trademark on goods that have not passed inspection, then the mark may be used on both conforming and non-conforming goods, and provisions of the licensing agreement concerning the configuration, specification or quality of the goods are not criteria that restrict the use of the trademark. Accordingly, even if goods are sold without having been inspected by the trademark owner, such sale does not consti-tute trademark infringement, but merely involves an issue of whether there is a breach of the li-censing agreement.
However, there is also a different line of thinking. Where the license agreement stipulates that the quality of goods bearing the mark should be subjected to a specific review procedure, or that the goods should conform to certain quality control requirements, as a condition for the li-censor's consent to the goods being sold on the market, if goods have not been inspected and approved by the specified procedures, or do not conform to specification, and the licensee still sells such goods onto the market, then arguably, regardless of whether such goods are defective, the sale would appear to exceed the scope of the license, and should be regarded as an infringe-ment of trademark.
In view of the fact that the courts have come to widely differing views as to whether such sales do indeed exceed the scope of trademark licenses or constitute trademark infringement, it is ad-visable for trademark owners to make thorough provisions addressing these aspects in their trademark licensing agreements.