How pandemic driven non-use could affect trademark cancellations

The coronavirus pandemic has driven many trademark owners to suspend or stop using their marks, or else to adjust the services offered under them. In Taiwan a trademark becomes vulnerable to cancellation after three years of non-use, unless there are “justifiable reasons” – yet it is still not clear whether non-use due to lockdowns qualifies as such.

The pandemic in Taiwan

Thanks to the measures decisively adopted by Taiwan’s government to combat the spread of covid-19 since the very start of its outbreak, the pandemic was substantially controlled in Taiwan for the entirety of 2020.  

Nevertheless, in mid-May 2021, Taiwan encountered its first steep surge in cases, resulting in a 69-day Level III Alert Period lasting until late July. Fortunately, with the joint efforts of the government and the people, Taiwan has flattened the curve once again since August 2021. 

In the Level III Alert Period, all entertainment spaces were ordered to close, public religious activities were suspended and restaurants were allowed to provide take-out services only.  Many other organisations, although not ordered to change their business models, chose to do so when they could.  As a result, many trademark owners stopped using their marks or changed how they used them.

This has raised the following questions:

• Does an impact from the pandemic constitute a justifiable reason for non-use of a mark?  
• Similarly, can the three-year period be extended on the ground that the services designated in the trademark registration were ordered to close to control the outbreak?  
• What should foreign trademark owners do to best protect their Taiwanese registrations during the pandemic? 

Justifiable reasons

To our knowledge, neither the IP Office nor any court has disclosed its opinion on whether covid-19 constitutes a justifiable reason for non-use. Our best guess is that such an impact can qualify if a designated service was forced to close as a result of a pandemic control order issued by Taiwan’s government, such as the above-mentioned Level III Alert order. More importantly, the impact needs be long enough for it to cause a three-year period of non-use. Theoretically, any closure shorter than three years is at the risk of failing the causation test, regardless of whether it was in compliance with a government order. This summer’s 69-day closure would thus not qualify. 

According to numerous judgments by the Intellectual Property and Commercial Court, a justifiable reason for non-use of a trademark is “a factual obstacle not attributable to the trademark owner”, such as:

• pendency of a marketing approval proceeding for a drug upon which the mark is to be used;
• an embargo or other legal ordinances that prohibits the import and sale of the designated goods in Taiwan; and
• interruption of sea transportation, shortage of raw materials or natural disasters resulting in major damage to a (Taiwan-located) factory for producing or selling the designated goods.   

Is the three-year period extendable?

There is no sign that the IP Office has considered granting requests for an extension of the three-year period due to the designated services being ordered to close.  Speculatively, this issue may come up three years from now: a trademark owner might argue that as soon as its mark was registered, the ban on its designated services caused at least 69 days depletion of trademark use, and that should be compensated by extending the three-year period by the same amount. However, it is doubtful that trademark owners have a right to defer using their registered marks and claim compensation.   

Shifting use

It also seems unlikely that a shift in use of a trademark during the pandemic will be considered by the IP Office as genuine use of the designated services. However, trademark owners should be vigilant for possible infringement risks from a shift in trademark use. 

For example, supposing a bar owner, in the face of a closure order from the government, decides to shift their business model from in-store services to delivery services: the mark originally designated for bar services will be used on cocktails, meals and snacks to be delivered to customers.  This will not constitute genuine use of the mark under the Trademark Law. Moreover, if there is a senior similar registered mark designated for cocktails, meals and snacks, the bar owner might be at risk of infringing this senior mark.

Takeaways for foreign businesses

During the pandemic, trademark owners should try their best to use their marks via appropriate marketing tools so as to avoid the risk of non-use cancellation actions. Licensing to a local business in Taiwan is an effective method to establish trademark use, provided that the local business has put the mark into use in Taiwan. 

If foreign registrants are unable to use their trademarks in Taiwan due to covid restrictions in their own countries (and this situation is ongoing), they should not presume that this will constitute a justifiable reason for non-use of a registered mark in Taiwan.   

Finally, trademark owners planning to expand or diversify their businesses using the same mark, even if it is due in part to the impact of the pandemic, should first conduct an infringement risk assessment before launching the project, and then seek broader protection of the mark through new filings.