In recent years, Taiwan’s intellectual property court has begun to make internal reforms regarding case judgements due to criticisms that the success rate for a plaintiff in patent infringement litigation is too low. One of the most notable changes was the reduction in the percentage of holding that a patent is deemed invalid from 60 percent to 30 percent. This is good news for patentees because it will give them a better chance of winning a civil lawsuit and being awarded damages. Therefore, we believe that the practices for remedies will become more important in the future.
Provisions on remedies for patent infringement
Lost profits/disgorgement/accounting of infringers’ profits/royalty
Paragraph I of Article 97 of the Taiwan Patent Act provides: “[T]he damages claimed pursuant to the preceding article may be calculated according to any of the following methods:
(i) The method as set forth in Article 216 of the Civil Code; if no method of proof can be produced to prove the damages suffered, a patentee may claim damages based on the difference between the profit earned through patent exploitation after infringement and the profit normally expected through exploitation of the same patent;
(ii) the profit earned by the infringer as a result of patent infringement; or (iii) the amount calculated on the basis of reasonable royalties that may be collected from exploiting the invention patent being licensed.”
Item (i) relates to compensation for the plaintiff’s actual damages and lost profits because of infringement. The court will normally request the plaintiff to provide the causal relationship between the infringement and the actual damages or lost profit earned by the plaintiff after the infringement. However, because the causal relationship is normally difficult to prove, this approach is less popular than accounting of the infringer’s profits.
Item (ii) relates to compensation for the plaintiff’s damages through disgorgement or accounting of the infringer’s profits. Under current practices, the patentee still needs to provide prima facie evidence to show an infringer’s possible earned profit. If unacceptable, the infringer needs to prove the actual earned profit by including deductible costs and necessary expenses for the infringer for producing infringing products into the damage calculations.
The deductible costs and necessary expenses should include only direct costs other than indirect costs in accounting practices. The direct cost means the traceable ones, namely, the costs that can be directly recognised as or attributed to the cost factors. The indirect cost means the cost that cannot be directly recognised as and attributed to the cost factors, and should be apportioned through specific approaches.
Therefore, in the situation that the infringer provides evidence showing deductible costs and necessary expenses, the earned profit of the infringer should be calculated based on the gross profit (ie, revenue minus the direct cost) rather than the net profit on which the indirect cost is further deducted from the gross profit.
Item (iii) relates to compensation for the plaintiff’s damages through reasonable royalty payments. According to the principle of equity, the court considers the totality of the circumstances of royalties of patents for similar technologies, features and scopes of the licensing agreement predicated upon the infringement facts, market positions of licensor and licensee, contribution percentage of the patented technology for the earned profits of the infringing products or technologies, market shares of the infringing products, and so on, to decide a reasonable royalty.
The Taiwan Patent Act provides punitive damages. Paragraph II of Article 97 of the Taiwan Patent Act provides: “[S]ubject to the preceding paragraph, where the infringement is found to be intentionally committed, the court may, upon request and on the basis of the severity of the infringement, award damages greater than the loss suffered but not exceeding three times of the proven loss.”
Joint and several liabilities
The Taiwan Patent Act does not mention joint and several liabilities, so we must revert to the Taiwan Civil Code to deal with this issue. Paragraph I of Article 185 of the Taiwan Civil Code provides “[If] several persons have wrongfully damaged the rights of another jointly, they are jointly liable for the injury arising therefrom.”
A patentee has exclusive rights to make, offer for sale, sell, use, or import patented products. If several persons infringe any of the exclusive rights jointly, they are definitely jointly liable for the injury.
However, in practical manufacturing and marketing situations, those infringing acts may be carried out by different entities in the supply chain. In this circumstance, the court of Taiwan may also hold that these entities are jointly liable for the infringement.
In Taiwan, joint and several liabilities may also occur in cases of indirect infringement, which can be described as an infringement committed by the abettor. The basis for this practice is Paragraph II of Article 185 of the Taiwan Civil Code, which provides that “[i]nstigators and accomplices are deemed to be joint tortfeasors”.
This indirect or inducement of infringement can only arise when the accused indirect infringer has at least some knowledge of the patent and has intent to help or participate in the infringement. However, if there is no direct infringement, there is no such indirect infringement either. Contributory infringers are joint tortfeasors and are jointly liable for the damages. Therefore, the remedies for direct and indirect infringement are basically the same.
Preliminary and permanent injunctions are both applicable in Taiwan.
Regarding preliminary injunctions, a creditor or claimant may apply for a provisional injunction or measure with regard to monetary or non-monetary claims for purposes of securing the satisfaction for specific performance or compulsory execution.
A provisional injunction or measure will not be granted unless there is shown impossibility or extreme difficulty to satisfy the claim by specific performance or compulsory execution in the future should there arise a change in the status quo of the matter.
If a patent is found valid and infringed in the first instance, the appeal against the injunction by the infringer is more likely to be dismissed, while the injunction may remain in force until an irrevocable decision of the infringement action is made.
Border measures for patent protection were formally put into the Taiwan Patent Act in 2014, and they provide another option for the patentee to enforce its rights. Paragraph I of Article 97-1 of the Taiwan Patent Act provides: “[A] patentee may request customs to detain the imported articles that are suspected of infringing the patent right(s).” However, Paragraph II of Article 97-1 of the Taiwan Patent Act provides “[T]he request referred to in the preceding paragraph shall be made in writing, accompanied by a preliminary demonstration of the facts of infringement and a security amounting to the duty-paid price of the imported articles, as assessed by customs, or an equivalent assurance.”
Because the causal relationship between the infringement and the actual damages or lost profit earned by a plaintiff after the infringement is normally difficult to prove, we suggest that the plaintiff first consider adopting the approach of accounting for the infringer’s profits. However, if the infringer provides insufficient evidence to show deductible costs and necessary expenses for producing the infringing products, the case might become complicated. If this dilemma arises, the plaintiff may alternatively consider adopting the approach of reasonable royalties.
If there are joint and several liabilities, the plaintiff can claim damages against any of the joint tortfeasors. In addition, if it is urgent to exclude the infringement, the patentee is encouraged to utilise border measures before filing a civil action with the court, which is more efficient than moving for a provisional injunction.