Formosa Transnational - Taiwan
A recent judgment handed down by the Supreme Court contains useful guidance for owners of luxury brands, particularly on using the Fair Trade Act in infringement claims. Company A – a handbag supplier in Taiwan – was known to make and supply handbags with features largely copied from the appearance design of well-known bags. Four types of accessory produced by Company A were alleged to have been knock-off products bearing the features of the well-known French brands Celine’s Céline Luggage and Givenchy’s Givenchy Pandora and Givenchy Antigona. In 2017, these two companies initiated litigation and brought claims of copyright infringement, as well as infringement of trade dress and unfair competition under the Fair Trade Act and sought damages and an order that Company A cease the infringement.
After two instances of trial at the IP court, and according to the final judgment of the Supreme Court issued in mid-2021, Company A’s copying of the appearance designs of luxury handbags in an essential manner were deemed to be unfair competition under the Fair Trade Act. It was ordered to cease the infringement and was held liable for damages pursuant to the Fair Trade Act.
The Supreme Court judgment upheld the following reasoning on which the second-instance judgment was based:
- The appearance features of the subject handbags are designs that have utilitarian functionality. While the overall design features of the handbags have enhanced the visual appeal and boosted the product textures to attract consumer attention and to stimulate purchases, the main purposes of these features are ease in portability and effective mobility for bags used to carry items, and neither present artistic techniques or thoughts or sensations, nor carry any originality. The appearance features of the subject handbags are not art works, and thus not protected by the Copyright Act.
- The subject luxury handbags have been widely and repeatedly reported on by the media and have won awards. The following aspects of the subject luxury handbags were taken into consideration:
- advertisement volume;
- marketing times, sales volume and market shares;
- the extensiveness of media coverage;
- product quality;
- goodwill and the market survey materials that are fair and objective; and
- guidance from the competent authorities, the relevant public or consumers cannot commonly recognise the origin of the sources of the subject luxury handbags, and therefore, their appearance designs are not considered to be trade dress under the Fair Trade Act.
- In an essential manner, Company A has copied the trade dress of both Celine’s and Givenchy’s luxury handbags, and marketed the counterfeit products on online platforms, misleading consumers into believing that the counterfeits and the luxury handbags are from the same sources or that the counterfeits have certain connections with the luxury handbags, thus eventually boosting its own business opportunities. These actions are deemed to be unfair conduct, and therefore constitute unfair competition as prohibited by the Fair Trade Act.
Although the Supreme Court did not expressly address the issue of copyright infringement, it can be inferred from the context of the judgment that the appearance designs of handbags may not be protected by copyright. Whether these designs are protected by the Fair Trade Act will depend on whether the appearance design of a specific handbag is considered on the same level as trade dress, and whether the copying thereof constitutes obviously unfair conduct.
Luxury handbag brands should be aware of the uncertainties in court judgments when planning their advertising and marketing programmes. In addition, to secure protection for the appearance designs of their luxury handbags, high fashion brands are advised to apply for and obtain design patents to obtain substantial protection in the event that their products are targeted for counterfeiting by unscrupulous competitors.