Trademark post-sale confusion theory, as indicated by its name, is a theory that lengthens the point of confusion from the sale of products to the use of them. Under the traditional infringement theory, infringement occurs when a trademark, which is identical or similar to the registered trademark, is applied for goods or services, which is identical or similar to those for which the registered one is designated if consumers might confuse the trademark with the registered one. However, if a consumer willfully buys a fake, e.g., an unusually cheap “Rolex” watch, there is no likelihood of confusion when the sale occurs. Confusion may still occur, under the trademark post-sale confusion theory, when the consumer uses, and bystanders observe, the faked watch. The bystanders, as potential consumers, may confuse the fake with a genuine “Rolex” watch. If so, the fake may affect bystanders’ purchasing decisions by its low quality and may also dilute the brand value of Rolex.
Trademark post-sale confusion theory has a long and rich history in America. It was derived from the Mastercrafters Clock case (1955), implied by amendments of the Laham Act in 1962, and was applied in several cases like Levi Strauss & Co. v. Blue Bell, Inc.(1980), Ferrari S.P.A. Esercizio v. Roberts (1991) and Gibson Guitar Corp. v. Paul Reed Smith Guitars, LP (2005). However, this theory is not generally accepted in trademark infringement cases in Taiwan. The reason is quite simple. If bystanders may associate the fake with genuine products when observing the fake, the trademark of the genuine product must be very well-known. Trademarks in issue of the cases mentioned above– Levi’s, Ferrari, Gibson, are all well-known trademarks. In light of Article 70 I of the Taiwan Trademark Act, infringement occurs when a trademark, which is identical or similar to a well-known trademark, is applied for goods or services, and hence a likelihood of dilution of the well-known trademark exists. In other words, “a likelihood of confusion” is not material in a well-known trademark infringement case. The prima facie case here is “the likelihood of dilution.” As a general matter, consumers can easily distinguish top-shelf products from fakes by prices or qualities, but they may choose to buy fakes willingly. Infringement cannot be justified simply because fakes are sold cheaper and made of low quality. That is why“a likelihood of confusion” is removed from prima facie cases for well-known trademark infringements.
The Intellectual Property and Commercial Court in Taiwan had pointed out that “trademark post-sale confusion theory” provides a theoretical basis for Article 70 I of the Taiwan Trademark Act, for it establishes liability despite the absence of confusion. The court uses Article 70 I, instead of the theory itself, to solve problems. However, the stone which the builders refused becomes the headstone of the corner. Trademark post-sale confusion theory, which is unaccepted in its field, finds its place in the Taiwan Fair Trade Act. In RIMOWA GmbH v. KGT International Corp. and RIMOWA GmbH v. JINYAO International Trade Co., Ltd., post-sale confusion theory played a very impressive role in the actions and the consequences of these decisions are worth noticing.
Briefly, RIMOWA GmbH is a high-quality suitcase manufacturer, founded in 1898. Its suitcases are widely known to the public for their parallel grooves. KGT Corp., with its trademark “ROWANA,” and JINYAO Ltd., with its trademark “Centurion,” sells suitcases bearing the same parallel grooves as RIMOWA’s suitcases, for remarkably lower prices. The cause of action in both cases is Article 22 I of the Taiwan Fair Trade Act, which reads “No enterprise shall use appearance of another’s goods which are commonly known to the public, in the same or similar manner, of the same or similar category of merchandize, so as to cause confusion with such person’s goods”
The Intellectual Property and Commercial Court applied “post-sale confusion theory” in both cases, indicating that “even though consumers may not be confused the suitcases in issue with RIMOWA suitcases because of remarkable difference of their prices, bystanders, unbeknownst to the difference of price, may be confused when they observe the suitcases in issue and wrongly believe that they are from RIMOWA. These bystanders, as potential consumers, will not buy RIMOWA’s suitcases due to the false impression they received upon observing the fakes, such as the notion that the quality of RIMOWA’s suitcases is low.”
In short, RIMOWA GmbH alleged that parallel grooves of its suitcases are “well-known appearance of goods” and thus are protected by Article 22 I of the Fair Trade Act. While protection for well-known trademark only requires “risk of dilution,” protection for well-known appearance of goods requires “risk of confusion,” which provides the very stage the post-sale confusion theory needs.
But you may concern, how may “trademark post-sale confusion theory” be applicable in fair trade cases when it is not yet well-established in its home–trademark cases? That’s the very question the Supreme Court in Taiwan asked. The Supreme Court overruled both decisions and returned the cases back to the Intellectual Property and Commercial Court, for the same reason that “the risk of confusion in Article 22 I of the Fair Trade Act shall not be speculative.” To determine whether there is a risk of confusion, the Supreme Court considers the distinctiveness of the appearance of goods, the familiarity of appearance to the public, the similarity in the goods and categories, and the difference in consumer groups and prices between the goods (case number: 109年度台上字第2369號判決、110年度台上字第3161號判決). The key points here are “consumer groups” and “differences in prices.” As a general matter, genuine products and fakes share different consumer groups and have different strategy in pricing. Furthermore, only the consumers who buy goods can perceive the difference in price. It seems that the Supreme Court rules bystanders out of the determination of “risk of confusion” and thus “post-sale confusion theory” is not applicable in fair trade cases.
The cases went back to the Intellectual Property and Commercial Court, and it strongly disagreed with the Supreme Court’s opinion. In the decision of the returned case (case number: 110年度民公上更(一)字第2號判決), the Intellectual Property and Commercial Court straightly stated that “the difference in prices is not material in the determination of the risk of confusion.” The reason here is simple: Even though low price or low quality is a feature consumers may rely upon to distinguish fake from genuine products, it’s no justification for fake.
However, the Intellectual Property and Commercial Court failed to ease the Supreme Court’s concern: is post-sale confusion theory, as a base of infringement, too speculative? Let’s take a look at the classic hypothesis of this theory: the buyer “A” buys a “Centurion” suitcase that looks similar to a RIMOWA suitcase and B, after observing and mistaking the suitcase with a RIMOWA suitcase, has a false impression that a RIMOWA suitcase has low quality. If B’s purchasing decision is affected, B’s decision can only be “to buy” or “not to buy” a RIMOWA suitcase (because B does not know the existence of the “Centurion” brand, he thinks the suitcase he sees is from RIMOWA.) If B chooses to buy, he is no longer a “bystander.” In case B is confused Centurion’s suitcases with RIMOWA’s, traditional infringement rules apply. We don’t need post-sale confusion theory here because it only focuses on the confusion of bystanders. The post-sale confusion theory may be applicable only when B chooses not to buy. But how can we make sure that B chooses not to buy a RIMOWA suitcase solely because of his false impression after observing a fake, not the other reason like “a genuine RIMOWA suitcase is not affordable for him” or “he doesn’t need a suitcase anyway”? How can we prove that the false impression is the actual cause and proximate cause of the plaintiff’s damages? Moreover, if the defendant proves that the fakes have reasonable quality, can it be a defense? The inference of post-sale confusion theory is so speculative that it is no more than a leap of faith jumping to the conclusion where our notion of justice deems it should be.
The well-known appearance of goods is similar to well-known trademarks in many aspects. Neither of them requires registration as a prerequisite for protection; both of them share the same definition of “well-known” and use the same kind of evidence to establish it. The well-known appearance of goods deserves the same protection as well-known trademarks. However, infringement of a well-known trademark, as stipulated in Article 70 I of the Taiwan Trademark Act, requires “a likelihood of dilution,” while infringement of a well-known appearance of goods, under Article 22 I of the Taiwan Fair Trade Act, requires “a likelihood of confusion.” If consumers can easily distinguish fakes by their prices or qualities but still buy fakes willingly, as shown in RIMOWA’s case, the court has to find some “imaginary buyers” and presumes that they are confused to satisfy the element of Article 22 I of the Taiwan Fair Trade Act.
To be honest, this is a problem derived from poor legislative skills. The difference in price or quality between fakes and genuine products has nothing to do with the determination of unfair competition; however, ironically, it is the prima facie case in Article 22 of the Fair Trade Act. The culpability of infringement of well-known appearance of goods lies in unfair competition. By substantially copying the appearance of well-known goods, fakes take a free ride on the well-known good’s goodwill, competing with genuine goods at a lower price because it saves costs for design, development, and marketing. Such conducts constitute unfair competition. Even though consumers can easily distinguish fakes from genuine products by lower price, the lower price is a fruit of infringement and hence should not be used to prevent the establishment of liability.
To solve this problem, the court may use Article 25 of the Fair Trade Act, which is a general term forbidding any unfair conduct that is not expressly provided in the law, to deal with cases in which consumers are not confused but unfair competition still occurs. In any case, the post-sale confusion theory is the last solution to this problem. Imaginary consumers and speculative damages do not make things better.