Major LED lighting firm fined a hefty TWD2 million by FTC for abusive cease and desist letters in violation of Fair Trade Act

　The Taiwan Fair Trade Commission (“FTC”) announced in a press release that Everlight Electronics, Ltd. (hereinafter “Everlight”) engaged in obviously unfair conduct that is able to affect trading order by issuing cease and desist letters to its LED lighting distributors and thus violated Article 25 of the Fair Trade Act.  The FTC ordered Everlight to cease its illegal conduct and fined TWD2 million.  

　According to the FTC, Everlight claimed ownership of three patents relating to LED chip components used in LED lighting products.  The FTC’s investigation revealed that since October 2022, Everlight had issued cease and desist letters alleging patent infringement to several competitors’ downstream LED lighting distributors and major retailers, including ADATA Technology Co., Ltd. and Jan Cheng Lighting Co., Ltd., RT-Mart, Carrefour Market, Test Rite Retail Co., Ltd., PX Mart, and PChome.  However, before issuing these letters, Everlight had neither obtained a court judgment sustaining the alleged infringement nor provided an independent third-party agency’s patent infringement analysis report.  Instead, Everlight issued these letters and attached thereto only its internally prepared analysis report or lists of the alleged infringing products.  Simply by doing so, Everlight asserted its patent rights against its competitors and their downstream trading counterparts (i.e., the distributors and retailers) and demanded the removal of alleged infringing products within a designated deadline.  As such, distributors and retailers were unable to fully understand the situation of the alleged infringement occurrence for assessing if they should continue selling the alleged infringing products.  

　According to the FTC’s investigation, Everlight failed to, in advance or simultaneously, notified the relevant manufacturers, such as ADATA Technology Co., Ltd., to seek infringement removal before issuing the letters to their retailers.  Moreover, in the letter, Everlight did not clearly specify the content and scope of its patents and the facts of infringement.  As a result, the aforesaid major retailers were unable to determine whether the products truly infringed and, to avoid being involved into disputes, they immediately removed the alleged infringing products upon receipt of the letters.  On the other hand, with no knowledge of this matter in advance, the manufacturers involved, such as, ADATA Technology Co., Ltd. and Jan Cheng Lighting Co., Ltd. were unable to prepare their defense against the infringement claims. Therefore, Everlight’s act of issuing such letters should be reprehensible under commercial ethics.

　The FTC further found that even though Everlight provided advance notice to certain manufacturers, the alleged infringing products identified in those notices to the manufacturers were not consistent with those identified in the letters to the downstream retailers.  For example, Everlight identified 4 infringing products in the letters to 2 manufacturers, while it informed the retailers in the letters that there were 6 or 33 infringing products.  Moreover, in the letters issued to the retailers, Everlight demanded the retailers to dispose of the infringing products within an extremely short time period, such as, 3 days or 1 week.  Also, Everlight had been consistently issuing more than one hundred cease and desist letters to over 80 small- and medium-sized retailers, including hardware and electrical supply stores, which led to the removal or suspension of sales of the competing lighting products.  The FTC held that Everlight’s such conduct had already affected the trading order and thus violated Article 25 of the Fair Trade Act.  

　The FTC indicated that patentees are entitled to seek remedies for infringement according to relevant IP-related laws to as long as their exercise of patent rights are not abused.  It also noted that the “Disposal Directions (Guidelines) on the Reviewing of Cases Involving Enterprises Issuing Warning Letters for Infringement on Copyright, Trademark, and Patent Rights” has been enacted to guide businesses.  Patent holders asserting their rights are reminded to comply with the Fair Trade Act and relevant regulations to avoid violating the laws.  (Released 2025.06.26)  
/CCS