Amended good-faith prior use clause could threaten predictability in trademark suits

A May amendment to Taiwan’s good-faith prior use clause both altered its wording and shifted it from Article 36.1.3 to Article 36.1.4 of the country’s Trademark Law. Although the amendment was not mentioned in an official press release from the IP Office, it may significantly impact the application of the good-faith prior use defence.

The origin of good-faith prior use

In 1993 an amendment to Taiwan’s Trademark Law officially introduced the good-faith prior use clause via Article 36.1.3.

Over the last 30 years Taiwan established the concept of good-faith prior use as a legal defence against trademark infringement claims rather than a right. This meant that prior use in good faith could not be independently licensed, assigned or transferred to a third party but instead was only transferable to another person through the assignment of the entire corresponding business. The scope of ‘use’ protected by good-faith prior use clause is defined in the Trademark Law, covering advertisement-related trademarks as well as those used for goods or services (Article 5).

The new amendment

Until May of this year, the good-faith prior use clause stated that a registered trademark shall not entitle a proprietor to prohibit a third party from:

… using in good faith, prior to the filing date of the registered trademark, an identical or similar trademark on goods or services identical with or similar to those for which the registered trademark is protected, provided that the use is only on the original goods or services; the proprietor of the registered trademark is entitled to request the party who use the trademark to add an appropriate and distinguishing indication.

The 2023 amendment crucially altered this portion of the clause – now found in Article 36.1.4 – to say that a registered trademark shall not entitle a proprietor to prohibit a third party from:  

…using in good faith, prior to the filing date of the registered trademark, an identical or similar trademark on goods or services identical with or similar to those for which the registered trademark is protected, provided that the use is within the original scope; the proprietor of the registered trademark is entitled to request the party who use the trademark to add an appropriate and distinguishing indication. 

According to official legislation remarks, this “original scope” refers to:

… goods or services, geographical regions, scale of productions and sales, marketing channels and other factors that may determine how the trademark was used. [It] shall be determined on a case-by-case basis, as well as to what extent that such limitations shall be imposed.

Possible effects of the amendment

The original clause in Article 36.1.3 allowed courts to use submitted evidence to determine the goods or services – or even the specific model of goods – that a defendant could include in their good-faith prior use defence. A defendant’s utilisation of a trademark within the scope of goods or services protected by legal prior use was permitted; any other use constituted infringement.

The amended clause in Article 36.1.4 is less clear, particularly with regard to whether the original scope includes “original goods or services, geographical regions, scale of productions and sales and marketing channels” or can be limited to one or a selection of these factors.

This term is too vague to help establish a standard method of determining the scope within which a defendant can claim good-faith prior use or to assist courts in judging infringement. The confusion it causes will likely increase the degree of unpredictability for parties in good-faith prior use suits. This is because the petitioner in a suit is usually unable to obtain precise information on the scale of productions and sales of the prior user of the mark at issue. An obligation to take this scale of production into account could hinder their overall acquisition of substantial evidence and make it more difficult for them to decide if present use exceeds the original scale of productions and sales, which would constitute infringement.

The road ahead

Compared to the original clause in Article 36.1.3, similar doctrines in other countries (eg, China, Japan and the United Kingdom) have a more extensive list of requirements needed to employ the good-faith prior use defence – such as clearing the hurdle of reputation – and impose more specific limits on its protection (eg, the “particular localit[ies]” outlined in the UK Trademarks Act).

Now, the new Article 36.1.4 amplifies these differences even further. The term ‘original scope’ in the new Taiwanese legislation is vague, making it unclear what can be protected by the good-faith prior use defence.

Once this new legislation comes into force, it will be crucial to closely monitor the practice of good-faith prior use defences, as the effects of a successful one will need to be determined on a case-by-case basis.