Taiwan: Pfizer stumped by royalty-free licence

09-05-2016

Victor Lee and Jesse Peng

Last year, the Taiwan Intellectual Property Court issued a judgment (101-CPL-112) holding that the patentee in an exclusive licensing deal in which no royalties have been paid has no standing to sue for patent infringement.

Pfizer Ireland launched an action against a Taiwanese drug store alleging infringement of its Viagra patent number 083372 by selling generic drugs for curing erectile dysfunction. The ‘372 patent was supposed to expire on May 12, 2014, but was extended to July 2, 2016. Pfizer sought an injunction on sales of the allegedly infringing drugs as well as monetary damages. The respondent argued that Pfizer did not have standing to sue. In the judgment, the court dismissed Pfizer’s claims.

A claim for damages resulting from infringement is meant to indemnify a plaintiff’s actual loss instead of awarding any additional gains. This means that damages will usually be granted when an actual loss is found. This is deeply rooted in the Taiwan Civil Code under the principle of indemnity and is also provided for in the Patent Act.

Although the law provides several methods of calculation, these merely serve as a convenient approach to reach a proper amount of damages. In other words, the law does not create an exception to the patentee’s burden to prove its own loss and the principle of indemnity.

Therefore, in the event that no actual losses are found or where the patentee fails to prove such losses, the patentee’s damages claim will not be supported by the court.

The court analysed Pfizer’s legal standing to sue for infringement. The company claimed only for damages incurred since the initiation of the action on February 7, 2012. However, Pfizer had granted the exclusive licence to Pfizer Taiwan on January 1, 2012 without receiving any royalties. That is, Pfizer Ireland had given away the entire scope of the patent rights to another entity before raising the issues in court.

Pfizer Ireland apparently had no power to practise the patent during the rest of the patent term. Most important, since the licensee did not promise anything in return for the patent licence, Pfizer Ireland’s royalty income, which remained at zero, was therefore not affected by any changes in the sales of the patented drug.

"in the event that no actual losses are found or where the patentee fails to prove such losses, the patentee’s damages claim will not be supported by the court."

Even though no damages had been incurred, those damages would have been incurred by the licensee rather than Pfizer Ireland. The link between Pfizer Ireland’s alleged losses and the infringement were therefore not established. In short, Pfizer Ireland was found to have suffered no actual loss.

In summary, because the plaintiff had exclusively licensed the patent rights to Pfizer Taiwan—another entity—and no royalty agreement had been reached between the two parties, the plaintiff suffered no actual loss. In view of this, the court said that Pfizer Ireland had no grounds to claim for damages in this case.

Victor Lee is a managing partner at Tsai, Lee & Chen. He can be contacted at: legal@tsailee.com.tw

Jesse Peng is a partner at Tsai, Lee & Chen. He can be contacted at: info@tsailee.com.tw 

Victor Lee and Jesse Peng, Tsai, Lee & Chen, Pfizer, Patent Act, Viagra,

WIPR