1 April 2013Jurisdiction reports

What has changed for patent damages?

Subjective element of patent infringement

The civil remedy of patent infringement in the old Patent Act has been categorised into “damage claim” and “removal/prevention of infringement”. According to the Civil Code, the infringer’s intent or negligence is clarified as a prerequisite for a “damage claim”, while “removal/prevention of infringement” is similar to the removal and prevention of interference in the right of claim for tangible objects.

Consistent with the rationale of damage claims under the Civil Code, the new Patent Act clarifies that, for the “removal or prevention of patent infringement” factual infringing acts or likelihood of infringement are deemed sufficient, regardless of the infringer’s subjective element. For claiming damages, however, the patentee should further prove that the infringer has intent or is negligent of the alleged patent infringement.

To satisfy the subjective element requirement when claiming damages, a warning letter may be served before filing a case to the court; if the infringement continues after the warning letter is served, the infringer will be deemed to have subjective intent or negligence.

Damage claims

In the old Patent Act, one of the methods for calculating damage claims was based on “total sales”, which stipulated that, when an infringer is unable to produce proof to justify his/her costs or necessary expenses, the entire income derived from the sale of the article will be deemed the gained profit. However, the stipulation of “entire sales income” for computing the infringer’s gained profit has been abolished; instead, the new act specifies “income of the infringer derived from the infringing act” as the new way of defining the infringer’s profit gain.

This is because many factors may contribute to the infringer’s total sales, including the competitiveness of the infringing products and the infringer’s original market share. As such, the total sales of infringing products should not be deemed equivalent to the infringer’s profit gain as a result of patent infringement.

“UNDER THE CIVIL CODE, DAMAGE COMPENSATION IS AIMED TO MAKE UP THE LOSSES THE RIGHT HOLDER ACTUALLY SUFFERED. AS SUCH, ‘PUNITIVE DAMAGES’ IS INCONSISTENT WITH THE CIVIL LAW PRINCIPLE.”

Second, “reasonable royalties” is added to the new act as one of the methods for damages calculation. The amount of royalties receivable in a potential patent licensing deal is deemed as losses the patentee would suffer. In other words, the law sets a reasonable bottom line for compensation, while it reasonably exempts some burden of proof from the patentee. However, scholars oppose this royalty mechanism because in an infringement case where no patent licence was obtained, the amount of compensation is merely equivalent to the amount receivable in case of licensing the patent, and thus it is hard to achieve a deterrence effect.

Scholars therefore regard this new method of damages calculation as likely to encourage and induce infringements. Nevertheless, it is opined that the royalties should only be a basis for calculating damages; other expenses such as litigation expenses should still be additionally considered.

Third, “punitive damages” provided in the old Patent Act, is deleted. Punitive damages are deemed as an idea derived from the common law, where damages awarded are greater than the actual losses. Under the Civil Code, damage compensation is aimed to make up the losses the right holder actually suffered. As such, “punitive damages” is inconsistent with the civil law principle.

Damage claims in cases where no patent marking is available

The old Patent Act specifies that the patentee of an invention should mark the serial number of the patent certificate on his/her patented article or the packaging thereof, and may require that his/her licensee, or the grantee of a compulsory licence, do the same. If there is no marking, no claim for damages is allowed. The old law was intended to encourage the patentee to put clear marking on a patented article, thereby demonstrating to the general public not to infringe upon another’s patent.

Under the new act, patent marking is not a necessary requirement for claiming damages in patent infringement but serves as a proof for an infringer’s subjective intent. The new act clearly specifies that “where no marking is made, evidence shall be produced when claiming damages to prove that the infringer had knowledge or should have had knowledge with respect to the fact that the said article is under patent protection”.

Victor S.C. Lee is an attorney at law, patent attorney and partner at Tsai Lee & Chen. He can be contacted at: legal@tsailee.com.tw

Crystal J. Chen is an attorney at law and partner at Tsai Lee & Chen. She can be contacted at: cjchen@tsailee.com.tw

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