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THE SALE OF DEFECTIVE GOODS MADE BY LICENSED MANUFACTURERS DOES NOT VIOLATE THE TRADEMARK ACT
Trademark owners usually arrange for their licensed manufacturers to destroy defective goods for their quality control and reputation. However, it is still not uncommon for such goods to make their way into the marketplace. Courts have divided over whether the sale of these defective merchandises violates the Trademark Act.
The Shihlin District Court determined in its 1994 criminal judgment (No. 83-Yi-1733) that such ac-tions constitute trademark infringement. The Taipei District Court reached the opposite conclusion in its 2004 criminal decision (No. 93-Yi-1667). In that case, the Court reasoned that whether trademark owners agreed to the sale of any particular products is irrelevant to the question of infringement be-cause the fact remains that the trademark owners have properly consented to the use of their trade-marks on those products. Therefore, the sale of goods made by licensed manufacturers, even if they are defective and should have been destroyed, is not a violation of Articles 81 (unauthorized use) and 82 (sale of goods bearing unauthorized trademarks) of the Trademark Act.
Most recently, the Keelung District Court adopted the Taipei District Court's reasoning in its 2009 criminal judgment (No. 98-Yi-414). The Court further emphasized that the distinguishing factor be-tween genuine and counterfeit goods is the identity of the manufacturer. Whether the product satisfies internal quality control standards is generally not observable to buyers in the market and is therefore irrelevant.