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Observations on the Application of the Trademark Exhaustion Doctrine Where Domestic and Foreign Trademark Owners Differ After the Termination of an Agency Relationship
I. Relevant Regulations on the Trademark Exhaustion Doctrine
Paragraph 2, Article 36 of the Trademark Act provides: "Where goods bearing a registered trademark have been traded in the domestic or foreign market by the trademark owner or with their consent, the trademark owner shall not claim trademark rights over such goods. However, this shall not apply if there are legitimate reasons, such as to prevent deterioration or damage of the goods after circulation in the market, unauthorized processing or modification by others, or other justifiable causes." The Taiwan Trademark Act adopts the international exhaustion principle, under which the trademark owner may not assert trademark rights over goods that have entered the market with their consent, regardless of whether the goods first entered the market domestically or abroad, thereby recognizing the legitimacy of genuine parallel imports.
The Supreme Court's Civil Judgment 108-Tai-Shang-Zi No. 397 held that where a trademark owner uses the same mark itself or authorizes others to register identical marks in different jurisdictions, although such registrations constitute different trademark rights under the principle of territoriality, the marks are identical, and the exclusive rights in substance originate from the same right holder. Where trademark owners in different countries maintain an authorization or legal relationship with one another, exhaustion shall also apply to the authorized trademark owners.
The Intellectual Property and Commercial Court's Civil Judgment 113-Min-Shang-Su-Zi No. 48 dated October 28, 2025, held that where a Taiwanese company obtained the consent of a foreign company to register trademarks in Taiwan, the principle of trademark right exhaustion still applies to the situation where goods produced by the foreign company are imported into the Taiwan market and sold by a third party, even if the agency relationship between the parties has been terminated.
The plaintiff company alleged that the defendant, without consent or license, used the plaintiff company's registered trademarks (hereinafter "the trademarks at issue") in the names and pages of Shopee stores and Facebook groups and sold goods bearing the trademark at issue, thereby constituting trademark infringement, and thus filed the present lawsuit.
III. The Grounds for Judgement
1. The defendant's use of the trademarks at issue on Shopee stores and Facebook groups constitutes nominative fair use; the defendant's sale of goods bearing the trademarks at issue constitutes trademark use:
(1) The court pointed out that in determining whether an act constitutes use of a trademark, a comprehensive assessment should be made of the layout of the graphic image, digital video or electronic media, the arrangement before and after, font, size, color, and whether the design has "particular prominence," as well as whether the nature of the use enables consumers to distinguish the source of the goods or services, and whether the purpose of use is to allude to or take advantage of another's goodwill, among other relevant evidence. In addition, merely displaying a trademark on a website, signboard, or in search results or advertisements does not necessarily constitute trademark use. If the trademark is used only to describe the name, shape, quality, nature, characteristics, or origin of one's own goods or services, and not to indicate the source of goods or services, it does not constitute trademark use.
(2) Although the defendant used the trademark at issue in the names, product names, and pages of Shopee stores and Facebook groups, the relevant content clearly indicated "Czech Republic" and did not particularly enlarge the trademarks at issue, emphasizing that the defendant was engaged in purchasing on behalf of customers from the Czech Republic, Poland, and Europe. The use was only to indicate the content and origin of others' goods and does not constitute trademark use.
(3) The defendant's sale of goods bearing the trademark at issue constitutes trademark use.
2. The defendant's import and sale of the goods at issue from Czech Company A is subject to the principle of trademark right exhaustion under the forepart of Paragraph 2, Article 36 of the Trademark Act:
(1) Czech Company A initially used the trademarks at issue on its goods and consented to its former Asian general agent, Company B, registering the trademarks at issue in Taiwan. Company B then licensed Company C as the general agent in Taiwan. Subsequently, Company B assigned the trademarks at issue to the plaintiff company, and both Company B and Company C agreed to transfer the Taiwan agency rights to the plaintiff company, which also purchased goods from Czech Company A. The court thus held that there was an economic or legal agency relationship between the plaintiff company and Czech Company A.
(2) Although the plaintiff company argued that its agency relationship with Czech Company A had been terminated and that it had established its own goodwill, the court held that the trademarks at issue were registered in Taiwan due to Czech Company A, and the termination of the agency relationship should not negate the circulation of original goods from Czech Company A in Taiwan through parallel importation. In particular, the plaintiff company, while still being the trademark owner of the trademarks at issue, transferred the agency rights to Company D, whose legal representative is the same person as the plaintiff company, and Company D continued to import original goods, which clearly constitutes a deliberate division of registration and trademark rights to exclude other parallel imports and to monopolize the market, which is manifestly improper. Furthermore, consumers still recognize Czech Company A as the source of the brand of the trademarks at issue, and thus the defendant's acts cannot be excluded from the application of the principle of trademark right exhaustion.
(3) The goods bearing the trademarks at issue sold by the defendant did indeed originate from Czech Company A, and there was an economic or legal agency relationship between the plaintiff company and Czech Company A. Even though the domestic and foreign trademark rights are held by different entities, they in fact originate from the same right holder. Therefore, pursuant to Paragraph 2, Article 36 of the Trademark Act, the plaintiff company may not assert trademark rights over the goods at issue, and the court overruled the plaintiff company's claims.
This case is at the appeal stage in the Intellectual Property and Commercial Court now, and it is worth noting to pay attention to the court's legal opinion and the progress of the case.