The appearance of handbag designs may not be protected by copyright law in Taiwan, a new judgment from the Supreme Court in Taiwan confirms. The trademark and copyright infringement case – which Givenchy and Celine filed in 2017 against a Taiwan-based handbag manufacturer, accusing the company of offering up copycat versions of their Luggage Tote, Pandora and Antigona styles on various e-commerce platforms – landed before the Supreme Court this spring, with a panel for the court upholding the lower intellectual property court’s determination that defendant 2 R Int’l Co.’s activities amount to unfair competition under Taiwan’s Fair Trade Act but dismissing the plaintiffs’ copyright infringement claim.
The case landed before the Supreme Court after a second instance panel of the IP Court held in an October 2019 decision that the appearance of the Pandora, Antigona, and Luggage Tote styles amount to protectable trade dress that was replicated by 2 R Int’l Co., thereby, giving rise to a likelihood that consumers would be confused as to the nature or source of the lookalike bags. As a result, 2 R Int’l Co.’s behavior amounts to unfair competition in violation of the Fair Trade Act, according to the IP Court. In making that determination, which was ultimately upheld by the Supreme Court on appeal, the IP Court’s panel considered an array of factors (some of which mirror those used to measure trademark secondary meaning), including the extent of advertising of the Pandora, Antigona, and Luggage Tote styles by the plaintiff brands; the volume of sales for the specific handbag styles; unsolicited media attention; the quality of the products; and market survey materials, among others.
The Supreme Court’s decision was not an across-the-board win for the LVMH Moët Hennessy Louis Vuitton-owned brands, though. In upholding the IP court’s earlier judgment, the Supreme Court shot down the plaintiffs’ copyright infringement claim on the basis that the handbag designs at issue have utilitarian or functional features, which are not protectable by copyright law. In its decision in 2019, the lower court held that in line with national copyright law, “If a commodity’s shape has, in itself, a specific function that enables the commodity to serve its purpose or realize its economic value and hence, obtain advantages in competition, then the primary purpose of such a shape design shall be deemed not to satisfy one’s aesthetic needs, and [such a shape design shall be deemed] not to feature an aesthetic sense through which a thought or feeling is conveyed.”
“Based on the consideration of public policy and fair competition,” the IP panel held that “such a shape design cannot be protected by the Copyright Law even if it has been used for a long time.”
Against that background, the courts acknowledged that while the visual elements of the handbags at hand have “enhanced the appeal [of the bags] and attract[ed] consumer attention” and boosted sales as a result, according to Formosa Transnational attorneys Monica Wang and Allan Pan, the lower court determined – and the Supreme Court seemingly agreed – that “these features [provide] portability and effective mobility for bags used to carry items, and do not present artistic techniques, and thus, are not protected by the Copyright Act.” In its recent decision, the Supreme Court did not explicitly rule out copyright protection for the design of handbags, but Wang and Pan assert that it can, nonetheless, “be inferred from the context of the judgment that the appearance designs of handbags may not be protected by copyright.”
With the Fair Trade Act finding in favor of Givenchy and Celine, the Supreme Court approved the IP court’s order that 2 R Int’l Co. permanently refrain from engaging in trademark infringement and pay an unspecified amount of damages in accordance with the Fair Trade Act.
Reflecting on the significance of the case, Wang and Pan state that luxury brands “should be aware of the uncertainties in court judgments when planning their advertising and marketing programs.” Beyond that, given the courts seeming unwillingness to find that visual elements of functional products, such as handbags (and presumably certain garments and footwear, as well), brands are encouraged to seek out protection for the appearance designs of their luxury handbags by way of other intellectual property doctrines, such as trade dress (as Givenchy and Celine claimed here) and design patents in order to obtain “substantial protection in the event that their products are targeted for counterfeiting by unscrupulous competitors.”
Taipei-based attorney Tony Tung-Yang Chang echoed this sentiment on the patent front, stating that in terms of other legal claims that could be available to similarly situated plaintiffs, patents make the most sense: “Being substantively examined and defined by drawings or photos, design patents have clearer scope, are more solid, and thus, are basically easier to monetize and enforce.” However, he notes that “few luxury brands have patented their designs on handbags or bag components like handles and buckles in Taiwan,” and as of an earlier round in the case, “Céline and Givenchy were no exception.”
Chang asserts that the outcome in the case follows from “a mild but long-established presumption [as established by Taiwan case law] against treating industrial design as copyrightable.” In order to qualify as a copyrightable subject matter, “An industrial design must pass an aesthetic test (also known as an artistic work test); namely, it must be proved to ‘contain artistic skills with which a thought or feeling is conveyed.” This case seems to demonstrate that this is a difficult standard to meet even for luxury brands’ arguably elevated offerings.
THE BROAD VIEW: Brands appear to be focusing their enforcement efforts in Taiwan, as the nation continues to boast significant growth in the luxury goods market, which saw it surpass Hong Kong in sales this spring. While Hong Kong’s personal luxury market dropped from $11.7 billion to $6.8 billion between 2019 and 2020, Taiwan’s grew from $7.2 billion to $7.5 billion during the same period, marking a first for sales in the Taiwanese luxury market. The boost coincided with findings from Knight Frank, which highlighted Taipei in its 2020 Wealth Report as one of the cities with the highest number of ultra-high-net-worth individuals in the world, with the commercial property consultancy predicting that Taiwan, as a whole, will exhibit a 13 percent increase over the next five years when it comes to growth of ultra-high-net-worth individuals (i.e., individuals with a net worth of over $30 million including their primary residence).
Beyond the ultra-high-net-worth individuals that reside in Taiwan, the East Asian country – and in particular, its luxury goods market – also acts as a draw for consumers from mainland China. By buying products away from the mainland, consumers can get their hands on luxury goods for significantly cheaper than on the mainland, a consumption trend that has been growing since the late 2000s, in particular, when a change in leadership resulted in what the AFP called “an economy-minded Taipei government [that] relaxed the rules in an effort to mend ties with Beijing, following decades of marred relations since the two sides split in 1949 after a civil war.”
The change-in-tune – which notably allowed for travel by solo Chinese tourists – enabled Chinese consumers to replace their Japanese counterparts as the biggest source of visitors to Taiwan in 2010, and prompted “international and local luxury brands step up their offerings in anticipation of robust demand.”
Fast forward to the 2021, and despite the impact of the COVID-19 pandemic, Taiwan joins China in that “repatriated spending from comparatively unscathed affluent and middle-class consumers [has] underpinned resilient growth in these two markets,” according to Euromoniter, enabling the two nations to fare better than several other major shopping destinations, including those in Japan, Hong Kong and Singapore, which has seen “sluggish performances.”
With such growth in mind, brands very well may begin to build out their design patent portfolio in conjunction with their efforts to crack down on infringing goods, as luxury goods sales continue to grow in Taiwan, and the sale of lookalike products inevitably follows.
The case is Celine Société Anonyme v. 2 R Int’l Co., Ltd., 107 Min-Zhu-Shang 15.