In coping with counterfeiters’ unlawful trademark-infringing acts, brand owners (trademark holders) in Taiwan may claim civil damages against counterfeiters simultaneously in addition to filing criminal lawsuits to pursue the counterfeiters’ criminal liabilities.  Most brand owners would also choose to bring an ancillary civil action to save on court costs and reduce the plaintiff’s burden of proof because the findings of fact by a criminal court in the relevant criminal case would directly serve as the basis of the judgment on the ancillary civil action.

 

As a defensive strategy, counterfeiters often seek to refuse to pay damages by mounting the defense of extinctive prescription.  Its design has basis in legislative reasons and various academic opinions, the most common being "The law supports the waking, not the sleeping."  While some believe that it also helps to reassure debtors by easing their burden of preserving proof of performing obligations, some suggest that it be born out of the consideration of stability in legal order and the result of respecting a new order formed after an extended period of time in which right holders neglect to exercise their rights. 

 

As the determination of the starting point of an extinctive prescription term can directly affect the outcome of a lawsuit, its importance cannot be overstated.

 

 

Article 197-1 of the Civil Code: "The claim for the damage arising from a wrongful act shall be extinguished by prescription, if not exercised within two years from the date when the damage and the person bound to pay the damages became known to the victim.  The same rule shall apply if ten years have elapsed from the date when the wrongful act was committed." 

 

In any given case of trademark infringement, there are numerous dates involved, such as the date the public files a report, the date of credit investigation and evidence collection, the date confirming the items as counterfeits after appraisal, the date of search and seizure by law enforcement agencies, the date confirming the items as counterfeits after appraisal (after search and seizure), and the date of the first-instance criminal judgment.  Which one of these dates should mark the start of the prescription? 

 

We would like to cite a recent court case, in which the courts of first and second instance rendered different opinions, with a view to highlighting again the fact that the defense of extinctive prescription is an extremely important and noteworthy legal issue in trademark infringement cases.

 

 

 

The company run by the defendant is alleged to have been selling suspect goods infringing upon the rights in and to numerous brand owners' registered trademarks, including the plaintiff's registered trademark.  With a search warrant issued by the court, the police on 11 May 2021 searched the premises of the business and seized counterfeit goods displaying the plaintiff's trademark. Subsequently, the plaintiff on 4 November 2021 issued an appraisal report to the police, claiming that such goods infringe the rights in and to the plaintiff's trademark.  The plaintiff on 18 October 2023 filed with the court an ancillary civil action along with the criminal procedure, demanding that the defendant pay damages for its infringement of the plaintiff's trademark.  In response, the defendant asserted that the plaintiff's claim for damages had clearly been extinguished by prescription as it was not exercised within two years from the date of damage. 

 

(Taiwan Taipei District Court Criminal Judgment with Ancillary Civil Action 112-Zhi-Fu-Min-7)

 

The Court holds that the plaintiff, by 11 May 2021 at the latest, i.e. the time the police conducted the raid, should have been in a position to know about the infringement of the trademark rights at issue and the identity of the person bound to pay damages, and that therefore, it is justifiable for the defendant to refuse to pay damages on the grounds that the plaintiff's claim for damages had apparently been extinguished due to the fulfillment of the two-year extinctive prescription term. 

 

(The Intellectual Property and Commercial Court Criminal Judgment with Ancillary Civil Action 113-Fu-Min-Shang-7)

 

Regarding the meaning of the term “knowledge of damage”, the Court holds that if the infringer's infringing act takes place continuously, the victim's rights to claim relevant damages shall also continue to renew; accordingly, the extinctive prescription term for such claims shall also continue to restart.  Therefore, prior to the cessation of a continuous infringing act, the damage will continue to happen and the victim could not know the actual extent of the damage and therefore could not exercise the claim for damages, and the extinctive prescription term shall not start until the extent of the damage is ascertained and known (citing the Supreme Court Judgment 96-Tai-Shang-Zi-188). 

 

In this case, the acts of infringing the plaintiff's trademark are deemed continuous.  The scope of the damages claimed by the appellant (the plaintiff in the court of first instance), namely the facts determined in the criminal judgment, is the counterfeit goods bearing the trademark at issue, i.e. the seized counterfeit goods.  Therefore, it cannot be established that the appellant had known about the actual cause for the damage and the extent thereof before the appraisal report for the counterfeit goods bearing the trademark at issue was completed on 4 November 2021.  Therefore, the starting point of the extinctive prescription term for claiming damages caused by the infringing acts in this case shall be 4 November 2021, the date the extent of the damage done to the appellant was ascertained and known.  Accordingly, it is clear that when the appellant filed the ancillary civil action on 18 October 2023, the period of the two-year extinctive prescription was not past, and the appellee's assertion based on extinctive prescription against the appellant's claim for damages is unjustifiable.

 

 

As shown in the same case above, the court of first instance and the court of second instance respectively held drastically different opinions, which directly concern whether the defendants are entitled to refuse to compensate the trademark owner on the grounds of extinctive prescription.  Therefore, it is advisable that any trademark owner that would like to seek civil damages from the defendants shall file their claims as early as possible.  To elaborate further, trademark owners would need to pay more attention to the starting point of extinctive prescription and take proper measures in time accordingly, and adopt the most secure method in calculating the period of extinctive prescription so as to safeguard their rights.  In particular, a trademark owner choosing to file an ancillary civil action (rather than an independent civil lawsuit with the civil court) is entitled to file such an action only after the presiding prosecutor indicts the defendant.  As a result, if the prosecutor spends too much time on investigation, it is possible that the period of extinctive prescription has already passed or nearly passed when the case is finally indicted.  Therefore, it is advisable that trademark holders shall pay more attention in this regard.

 

Another noteworthy issue is the effect of the fulfillment of an extinctive prescription term.  In Taiwan, where the doctrine of acquisition of the right of defense is adopted, upon fulfillment of an extinctive prescription term, the debtor obtains the right to refuse to perform the obligation.  Yet, the creditor's right to obligation remains; it is merely that the debtor may refuse to perform his obligation by citing the fulfillment of the prescription.  As the creditor's right to obligation is not extinguished, the debtor's performance of obligation after the fulfillment of the extinctive prescription term will not raise the issue of unjust enrichment on the part of the creditor.  With the fulfillment of an extinctive prescription term, the creditor’s ability to claim the right to the obligation is extinguished, but the ability to receive and maintain the debtor's performance of obligation remains.