Technical Evaluation Report as an Essential Requirement Accompanying a Warning Letter for Utility Model Enforcement
Liu holds a utility model (“UM”) patent M508941 for an umbrella featuring a foldable shell; the patent was granted on September 21, 2015. From September 22, 2015 to December of the same year, Liu sent warning letters to several Taiwanese online marketplaces, including GOMAJI, Buy123, 17Life and Poya, alleging that umbrella products provided by Splendors Biotech Co., LTD. were infringing on UM M’941. In order to avoid legal disputes, some marketplaces removed Splendors’ umbrella products. Liu later sued Splendors for UM infringement, but the IPC Court dismissed the complaint, finding M’941 being lack of inventiveness. Seizing this advantage, Splendors filed a lawsuit against Liu for tort and abuse of legal rights under the unfair competition laws.
After several rounds of appeals and remands, the Supreme Court ruled in favor of Splendors in March 2024, affirming a remanded decision[1] and thus ending the case.[2]
In the remanded review, the IPC Court first addressed unfair competition law in the field of warning notices related to IP rights. According to the Fair Trade Act, no enterprise shall engage in deceptive or obviously unfair conduct that could undermine trading order, except in the legitimate exercising of rights under the Copyright Act, Trademark Act, Patent Act or other intellectual property laws.[3] Whether this exemption applies to warning notices depends on the benchmarks outlined in the Fair Trade Commission Disposal Directions on Reviewing Cases Involving Enterprises Issuing Warning Letters for Infringement on Copyright, Trademark and Patent Rights (“FTC Directions”). The FTC Directions provide a set of recommended preliminary measures to justify such a letter. For instance, a comprehensive argument included in a warning letter to clearly state the time and place of the asserted IP right—as well as details of the production process, use, sale or import—can ensure that the recipient has sufficient awareness of any possible infringement, thereby supportive of a defense against unfair competitive charges.
The IPC Court further emphasized the pivotal role of a Technical Evaluation Report (“TER”) as a necessary component of any warning letter. A utility model is granted after a formality examination without the need for a substantive examination. As a result, even if a UM patent certificate is issued, it does not inherently imply a solid or legally stable right. In this context, a TER becomes essential to strengthen the validity of a UM when asserting it. The Patent Act codifies the indispensability of the TER, stating that “[w]hen exercising a utility model patent, the patentee shall not issue a warning without presenting the technical evaluation report of the utility model patent”[4]. Without a TER, a warning notice lacks legitimacy as an enforcement measure. Only by attaching a TER can the serving of a warning notice be considered compliant with the Fair Trade Act’s exemption.[5]
The IPC Court went on to explain that a Technical Evaluation Report (TER) is irreplaceable. An infringement analytical report produced by a non-authoritative legal expert (such as a law office) is intended to determine whether an accused product or method falls within the claimed scope of a patent, based on the assumption that the patent claims are valid. An infringement analytical report and a TER serve different purposes; the former cannot be used as a replacement for the latter. Additionally, following the preliminary measures outlined in the FTC Directions does not eliminate the need for a TER. At most, these measures can only set out the facts of the alleged infringement; implementation of the measures does not override a required opinion on validity.
As the IPC Court emphasized, when a party fails to present the TER for a UM before issuing an infringement warning letter to a competitor, and the severity is enough to undermine trading order and result in unfair competition, the penalties prescribed in the Fair Trade Act shall apply.
In this case, Liu failed to take sufficient preliminary measures before sending warning notices to the online marketplaces. For instance, the letter sent to 17Life did not even include an infringement analytical report, and Splendors was neither copied into nor informed about the notice. The letter to Buy123 lacked specific details of the alleged infringement and only provided the registration information for M’941. In the letter to GOMAJI, Liu stated that “the product in question is at risk of infringing the asserted UM, and we will not take this matter lightly; since we are now pursuing legal means to claim compensation from the seller, you are officially advised not to violate the related laws”. None of these letters included a Technical Evaluation Report (TER), nor were there any urgent circumstances that would have justified the omission. Liu sent these letters directly to the marketplaces, implying legal action would be taken if the accused products were not removed, but did not simultaneously notify Splendors of any alleged potential infringement. As a result, the letters undermined trading order and thus violated the Fair Trade Act.
Furthermore, the forced removal of Splendors’ products from the marketplaces as a result of these letters constituted a tort, causing injury to Splendors and breaching the Fair Trade Act. Accordingly, the IPC Court awarded damages to Splendors.
On March 29, 2024, following the finalization of the case, the Fair Trade Commission refined the preliminary measures by revising the Directions. In particular, the revisions mirrored the Patent Act by requiring that if the asserted patent is a utility model (UM), the party must present both an infringement analytical report and a Technical Evaluation Report, and must notify the potential sellers, importers or agents of the likely infringement either beforehand or simultaneously.[6] However, even if a party fully complies with the preliminary measures before issuing a warning letter, this does not provide absolute immunity from an unfair competition charge. The FTC retains the discretion to review each warning letter on a case-by-case basis.[7] Furthermore, the format of the warning letter, whether in paper or electronic form, is irrelevant and will be governed by the Directions.[8]
Finally, in an effort to disseminate community-level legal knowledge learned from this case to the general public, the TIPO has published a summary guide titled “How to Handle IP Warning Letters”, which can be accessed at: https://www.tipo.gov.tw/en/cp-976-935796-45425-2.html.
[1] IPCC-110-CivilPublicAppealRemand(1)-No.4 (2023.01.19)
[2] SC-112-TaiwanAppeal-No.1106 Ruling (2024.03.28)
[3] Articles 25 and 45 of the Fair Trade Act
[4] Article 116 of the Patent Act (after amendment in 2013)
[5] Article 45 of the Fair Trade Act
[6] Item 3(1)(3) of the Directions
[7] Item 5(2) of the Directions
[8] Item 2(1)(6) of the Directions