According to Taiwan’s Trademark Act, a trademark shall be unregistrable if it is identical or similar to a trademark previously used by another person in respect of the same or similar goods or services, and the applicant – due to a contract, geographical link, business transaction, or other relations with such third party – had good knowledge of the third-party mark but filed for registration of the same or a similar trademark with an intention to plagiarise. However, this restriction does not apply if the prior user consents to registration of the trademark.
A judgment rendered by the Supreme Administrative Court in 2002 suggests that, to determine if a trademark falls under the above-mentioned non-registrability provision, one should simply evaluate whether the trademark meets the statutory requirements, regardless of whether the trademark owner is the person who filed the trademark or acquired it through assignment. Additionally, since trademark use is of a continuous nature, once a trademark right is transferred, the assignee spontaneously succeeds to all rights and defects associated with the trademark following the completion of the legal transfer.
The Intellectual Property and Commercial Court (the IPC Court) held the same point of view in a judgment rendered in an administrative litigation case on November 1 2024. It ruled that the assignee of a trademark must comprehensively succeed to all rights and defects of the trademark, even if there is an unsettled distributorship dispute between the trademark owner and another party.
Summary of the case
Ailiya International (the Applicant) filed an application on August 12 2016 for registration of ‘DT56a’ under Class 5 of the Nice Classification in respect of “nutritional supplements” and the application matured into Registration No. 01840068 (the Disputed Trademark). In 2019, the Disputed Trademark was assigned to Mediera Corporation (the Assignee).
In 2021, Se-cure Pharmaceuticals (the Petitioner), based in Israel, filed an invalidation action, averring that the Applicant was well aware of the trademark ‘DT56a’ that had already been used by the Petitioner when filing for registration of the trademark. It claimed that the Disputed Trademark should be unregistrable in the first place.
Upon a review, the Taiwan Intellectual Property Office (TIPO) issued a decision in favour of the Petitioner. The Assignee filed an appeal and, in turn, an administrative litigation with the IPC Court against the decision.
The main issues in this case were:
Whether the Applicant had good knowledge that ‘DT56a’ had already been used by the Petitioner at the time of filing for registration of the trademark;
Whether the Applicant had obtained the Petitioner’s consent to register the Disputed Trademark; and
If not, whether the Assignee spontaneously assumed all rights and defects associated with the trademark.
The IPC Court’s observations
Regarding the first issue, the IPC Court found that, in 2012, the Petitioner entered into an exclusive distributorship agreement with Great Union Trading for the Femarelle product line, which included the goods covered by the Disputed Trademark. On September 27 2013, the Applicant assumed all rights and obligations specified in the aforementioned distributorship agreement. Given the distributorship relationship between the Petitioner and the Applicant, it can be concluded that the Applicant had good knowledge of the Disputed Trademark due to its business dealings with the Petitioner.
Regarding the second issue, according to the IPC Court, there is no provision in the distributorship agreement regarding who shall have the right to apply for registration of the Disputed Trademark. However, the agreement explicitly states that all intellectual property rights related to the Femarelle product line belong to the Petitioner.
The agreement does not include any mention of whether the Petitioner has consented to the distributor registering the Disputed Trademark. During the prosecution of the trademark application, however, the Applicant expressed in its response to the TIPO’s tentative rejection of ‘DT56a’ that the trademark was filed for on behalf of the Petitioner and needed to be transferred to the Petitioner at a later time. In this regard, while the Applicant never transferred the trademark as agreed, the trademark was eventually transferred to the Assignee before dissolution and liquidation of the Applicant. Based on these facts, the IPC Court found it difficult to assume that the Applicant filed for registration of the Disputed Trademark in good faith without any intent to plagiarise. Instead, it is very likely that the Applicant did not obtain the Petitioner’s consent when applying for registration of the Disputed Trademark.
Regarding the third issue, the Applicant expressed in the above-mentioned response that the Disputed Trademark needed to be assigned to the Petitioner after registration. However, the trademark rights were not transferred as agreed before the Applicant’s dissolution and liquidation. Although the Assignee argued that it had an unsettled distributorship dispute with the Petitioner, the IPC Court held that it has nothing to do with the fact that the Assignee, the sole shareholder of the Applicant, had acquired the Disputed Trademark through assignment. As such, the Assignee should have comprehensively succeeded to all rights and defects associated with the Disputed Trademark, and the defects unfortunately render the Disputed Trademark subject to invalidation.
Key takeaways
This case suggests that when acquiring trademark rights with or without consideration, the assignee must carefully assess whether the trademark to be transferred potentially imitates a third party’s previously used trademark. If a trademark is acquired with defects in rights, as demonstrated in this case, the assignee will probably face the risk of trademark invalidation, regardless of whether the trademark was filed in good faith.
To mitigate the risk, a good-faith assignee should first conduct an online search to determine if a third party has already been using an identical or similar trademark in respect of the same or related goods/services. If such prior use exists, it is advisable to request the assignor to provide relevant documentation proving that consent has been obtained from the prior user for trademark registration. Indeed, taking such precautions can help to prevent future invalidation of the acquired trademark rights.
