Taiwan: Analysing a trade mark dispute involving a second-hand vendor

Louis Vuitton Malletier, the owner of the LV registered trade mark, recently filed a civil lawsuit with the IP Court against a second-hand luxury goods vendor, accusing the vendor of selling LV branded counterfeits online. In November 2017, the IP Court issued a judgment. The defendant was found guilty of trade mark infringement while Louis Vuitton was awarded compensatory damages.

During the court proceedings, Louis Vuitton and the defendant each engaged an expert to authenticate the LV branded goods at issue. While the expert engaged by Louis Vuitton (also one of its employees) determined the goods at issue to be counterfeits, the expert hired by the defendant thought otherwise. Since Louis Vuitton refused to disclose any details of its examination procedures, claiming that trade secrets were involved, neither the IP Court nor the defendant were in a position to challenge the credibility of the examination results that Louis Vuitton submitted to the IP Court. The IP Court, under such circumstances, still issued a judgment, deeming that the defendant had committed infringement. The defendant, as a second-hand luxury goods vendor, was found by the IP Court not to have exercised due diligence in authenticating whether the goods sold online were genuine. It also did not retain a record of the purchase of the goods at issue to prove non-infringement.

Nonetheless, the IP Court significantly reduced the amount of monetary compensation payable to Louis Vuitton to around $21,820, in comparison with around $348,000 as claimed by Louis Vuitton, for the following reasons:

"According to the principle of trade mark right exhaustion, it is legitimate to sell second-hand products in the market. The owner of a registered trade mark has no right to prohibit others from selling second-hand products branded with their registered trade mark(s). In this case, a question that should be first answered is whether or not the goods at issue are fake. However, that the plaintiff (trade mark owner) refused to disclose details of its examination procedures makes the examination results they submitted somewhat questionable. On this score, if the examination results submitted by the plaintiff were taken as an impeccable key reference, it would be tantamount to giving the trade mark owner powerful influence over the second-hand market, which is against the principle of trade mark right exhaustion."

This case sheds light on the necessity of a second-hand luxury goods vendor to avoid purchasing counterfeits and to retain a complete purchase record lest the trade mark owner should have the final say over the authenticity of suspected counterfeits.

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