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The Boundary of Legitimate Exercise of Rights: Procedural Obligations and Risks in Issuing Warning Letters
I. Regulations Regarding Warning Letters
The Fair Trade Commission (FTC) of Taiwan has promulgated the Principles for Handling Cases Involving Warning Letters Concerning Alleged Infringement of Copyright, Trademark, or Patent Rights (hereinafter "Principles for Handling Warning Letters"). Points 3 and 4 of Principles for Handling Warning Letters prescribe the procedural requirements that must be fulfilled prior to issuing a warning letter for such act to be deemed a legitimate exercise of rights. Failure to follow these procedures may constitute a violation of Article 25 of the Fair Trade Act (FTA), as stipulated in Point 5 of the Principles for Handling Warning Letters.
Notably, under Point 3 (3) and Point 4 (1) of the Principles for Handling Warning Letters, the party alleged to have committed infringement and who must be notified prior to or concurrently with sending a warning letter is limited to the "manufacturer, importer, or agent" of the allegedly infringing product, but do not include the "distributors" who sell the products.
[Point 3 of the Principles for Handling Warning Letters]
The act of a business issuing a warning letter only after following one of the procedures listed below shall be considered a legitimate exercise of rights in accordance with the Copyright Act, the Trademark Act, or the Patent Act.
(1) There is a first-instance court judgment confirming infringement of the relevant IP right.
(2) A copyright dispute has been resolved through mediation by the Mediation and Review Committee and approved by a court.
(3) A professional institution has issued an infringement assessment report regarding the allegedly infringing product. For utility model patents, a technical examination report must also be provided. Additionally, prior to issuing the warning letter, the rights holder must have notified or concurrently notify the manufacturer, importer, or agent to cease the alleged infringement.
Before the business implements the removal notice specified in the latter part of the Subparagraph 3 of the preceding paragraph, if it has already initiated a rights remedy procedure in advance, or has exercised reasonable possible diligence, or if the aforementioned notice is objectively impossible, or if there is concrete evidence sufficient to recognize that the notified party is already aware of the infringement dispute, it shall be deemed that the procedure of issuing the removal notice has been carried out.
[Point 4 of the Principles for Handling Warning Letters]
The exercise of all the following procedures in the course of business, with the issuance of a warning letter as the initial step, constitutes a legitimate exercise of rights in accordance with the Copyright Act, the Trademark Act, or the Patent Act:
(1) Prior to or concurrently with the letter, the rights holder notified the manufacturer, importer, or agent of the alleged infringement.
(2) The letter clearly sets out the IP right, its scope, and the factual basis for the alleged infringement (e.g., time, place, manner of manufacture, sale, importation, or use).
(3) For utility model patents, a technical report must be enclosed.
Before the business implements the removal notice specified in the Subparagraph 1 of the preceding paragraph, , if it has already initiated a rights remedy procedure in advance, or has fulfilled the duty of reasonable care to the greatest extent possible, or if the aforementioned notice is objectively impossible, or if there is concrete evidence sufficient to recognize that the notified party is already aware of the infringement dispute, it shall be deemed that the procedure of issuing the removal notice has been carried out.
Article 25 of the FTA prohibits businesses from engaging in any deceptive or obviously unfair conduct that may affect trading order, unless otherwise specified in the FTA. Whether an act constitutes "obviously unfair conduct" is determined based on the method of competition or commercial conduct used. Factors for evaluating whether a practice affects trading order include: number of affected parties, degree of damage, potential deterrent effect on other businesses, targeting of specific groups, and the extent of the conduct, including frequency, scale, information asymmetry, availability of remedies, market power, industry practices, and dependency relationships. Notably, actual impact on market order is not required. (see Principles for Handling Cases under Article 25 of the Fair Trade Act as Referenced by the FTC)
Violations of Article 25 of the FTA may result in the competent authority ordering the offender to cease or rectify their actions or take necessary corrective measures and imposing fines in accordance with Article 42 of the FTA: "The competent authority may order businesses that violate the provisions of Articles 21, 23 to 25 to cease or rectify their actions or take necessary corrective measures within a specified period, and may impose fines ranging from NT$50,000 to NT$25,000,000. If the business still fails to cease or rectify their actions or take the necessary corrective measures after the deadline, the authority may continue to order cessation, rectification, or corrective measures within a specified period and impose fines ranging from NT$100,000 to NT$50,000,000 for each occurrence, until the actions are ceased, rectified, or the necessary corrective measures are taken."
II. Case Background
The respondent is a midstream LED packaging manufacturer that had expanded into downstream LED lighting products, for which it owns three patents covering packaging structures. These patented technologies can improve the production speed and yield of light-emitting devices, as well as enhance the electrical conductivity and heat dissipation of the devices, and are applied in LED lighting products.
Beginning in October 2022, the FTC received complaints from several distributors claiming they had received warning letters from the respondent demanding that allegedly infringing LED lighting products be removed from sale within a short period. This gave rise to the present case.
On July 8, 2025, the FTC issued Disposition No. 114058, finding that the respondent violated the procedural requirements under the Principles for Handling Cases when sending the warning letters and had therefore engaged in conduct that violated Article 25 of the FTA.
III. Grounds for the FTA's Decision
The FTC identified the following breaches of procedural obligations:
1. Violation of Point 3 (1) and 3 (3) of the Principles for Handling Warning Letters
(1) Although the respondent had filed a patent infringement lawsuit with the Intellectual Property and Commercial Court on November 7, 2022, no first-instance court ruling confirming infringement had been rendered by the time the warning letters were issued. Therefore, this does not meet the requirements of Point 3 (1) of the handling principles for warning letters.
(2) The respondent attached only self-prepared product lists and analysis reports, without submitting an expert opinion from a third-party institution, thereby failing to meet the requirements of Point 3 (3) of the Warning Letter Handling Principles.
2. Violation of Point 4 (1) and 4 (2) of the Principles for Handling Warning Letters
(1) Before the respondent sent warning letters to the distributors selling the products, the respondent did not simultaneously notify the "manufacturer, importer, or agent" involved in the patent infringement dispute. Although the respondent argued that some of the distributors who received the letters had developed their own branded lighting products and commissioned others to manufacture them, thus falling under the category of manufacturers, the FTC considered that the lighting products involved in this case did not include such distributors' own branded products, and the respondent was unaware of the patent status of other branded products. Moreover, the respondent had also stated that industry peers in the lighting sector all knew that distributors were responsible for sales of the suspected infringing products and were of a distribution nature, rather than product manufacturers. Based on this, the respondent’s actions violated Point 4 (1) of the Warning Letter Handling Principles.
(2) The warning letters did not specify the allegedly infringing products or state the basis, scope, or reason for infringement in sufficient detail to inform recipients of the alleged rights violations, thus breaching Point 4(2) of the Warning Letter Handling Principles.
3. The FTC found that many distributors, to avoid being entangled in legal disputes, chose to delist products or demand warranties from suppliers upon receiving the letters. The respondent pressured them to act within an unreasonably short period, resulting in business disruption and a chilling effect, particularly on small and medium-sized enterprises. Although some manufacturers were notified, the scope and detail of the notification were limited, leaving them unable to mount a proper defense. This constitutes a manifestly unfair act that affects the order of transactions and violates Article 25 of the Fair Trade Act.
4. Considering that the respondent was a leading company in the LED industry with significant revenues and business scale, and that it had sent over 100 warning letters to more than 80 entities, the FTC ordered the respondent to immediately cease the unlawful conduct and imposed a fine of NT$2 million.
IV. Conclusion
When enterprises use warning letters as a means of protecting their rights, they must strictly comply with the preliminary procedures stipulated in the Principles for Handling Warning Letters. If the timing, choice of recipient, or content of the warning letter is inappropriate or incomplete, there is a risk of violating the FTA. Enterprises should establish clear internal review mechanisms to ensure that all procedural requirements are met before issuing warning letters, thereby reducing the risk of illegality and strengthening the legitimacy of rights protection.