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Trademark squatting may constitute criminal offense of breach of trust
I. Introduction
The issues of resolving trademark disputes have become increasingly complicated. In addition to protecting rights through seeking administrative remedies and claiming both civil & criminal liabilities under the Trademark Act, it is worth noting that the proper assertion of criminal claims on other criminal charges also plays a crucial role in intellectual property protection. The key takeaways from the criminal decision of the Taiwan New Taipei District Court's Criminal Case Judgment 112-Su-Zi-1260 ruled in February 2025 in which the trademark dispute results in the criminal breach of trust are as follows.
II. Case analysis in brief
(i) There is a mandate relationship between the two parties, and the mandatory must not violate the principal's interests.
Based on relevant evidentiary materials and statements, Defendant was delegated by Complainant to participate in the operations of Complainant’s business. Defendant engaged in the actual operations of the delegated business under Complainant’s guidance, and that in so doing Defendant indeed engaged in operational tasks. Thus, before the termination of the mandate relationship, Defendant has fiduciary duty to the tasks it performed. Therefore, in the execution of the aforesaid business operation, Defendant shall act in the best interest of Complainant and shall not act in any way contrary to such best interest to the benefit of itself or a third party.
(ii) Defendant engaged in trademark squatting during the mandate and is liable for criminal breach of trust
During the term of mandate, Defendant acted in the interest of itself and a third party, with the criminal intent to breach trust, knowing that “MAZU” and “MAZUSAILCLOTH” are trademarks owned by Complainant for business operation and are used to market goods, Defendant applied to the Taiwan Intellectual Property Office (hereinafter referred to as “TIPO”) under the Ministry of Economic Affairs (hereinafter referred to as “MOEA”) to register the trademarks “MAZU” as the trademark owner; the trademarks are designated for use on the goods which are identical or similar to those marketed by Complainant. Thus, the actions of Defendant have glaringly conflicted with Complainant’s interests in using the complaint’s original trademark to sell goods in Taiwan. However, because the trademark applications were disapproved and unregistrable, no harm occurred. The act remained an attempted breach of trust.
The grounds for disapproving one of the trademark applications are as follows: The trademark representation of “MAZU” applied for by Defendant is highly similar to that of “MAZUSAILCLOTH” owned by Complainant. Given that the base trademark has been used earlier for identical or similar goods, it can be determined that Defendant was already aware of the existence of the earlier-used trademark owned by another party due to its business connection or as they were competitors in the same trade. This suggests that the applicant indeed intended to imitate the earlier-used trademark.
The court considers that the aforementioned grounds for disapproval sufficiently prove that Defendant applied for trademark registration in Taiwan during the mandate period, violating Complainant’s business interests. This clearly conflicts with Complainant's rights and interests.
Although another trademark application was disapproved by different grounds, the goods bearing the trademarks and the designated goods from both parties remain similar. Therefore, such trademark application also conflicts with Complainant’s rights and interests.
(iii) Defendant's claims were found to lack merit.
Defendant claimed that it believed itself to be the successor and was jointly running the business with Complainant. Thus, there was no mandate relationship between the two parties. The court, however, held that Defendant provided Complainant with invoice details for salary payment for both itself and employees, for Complainant's review and fund disbursement and as particulars for the company's financial records, and that accordingly Complainant did pay Defendant, the mandatory, the corresponding remuneration. Even if there were instances of gratuitous appointments, they would constitute gratuitous mandates and could not be used to claim that the parties did not have a mandate relationship. Furthermore, without any transfer of major company shares or assets or the handover of management authority, the so-called "succession" was merely Defendant's subjective expectation and had not been realized. Additionally, Defendant's frequent self-reference as the "successor" further demonstrated that it had not yet become the actual leader or proprietor of the business.
Defendant further argued that, after discussing with Complainant, it decided to apply for the registration of the “MAZU” trademark in Taiwan, to promote the MAZU marked goods in the near term.
However, during the investigation, Defendant instead mentioned that “I told him that I will sell the products bearing the MAZU brand, but I didn’t tell him that I intended to apply for the registration of the trademark.” It clearly indicates that the so-called “joint discussion” with Complainant is considered an ad hoc defense. On top of that, such argument is unjustifiable as an explanation for why the trademark was applied for under Defendant’s own name rather than Complainant’s name.
III. Conclusion
If any business operators discover the mandatory it delegated to run business engages in trademark squatting, they may also refer to the detailed logic in this case regarding such behavior constituting the crime of breach of trust and consider whether it is possible further to take criminal action.