In the event of patent infringement, the patentee may request that the infringer eliminate or prevent infringement and pay damages. Article 97 of the Patent Law provides for three methods to calculate the damages for invention patents as discussed below:
- Article 216 of the Civil Code can be followed. However, if no evidentiary method can be provided to substantiate the damage, an invention patent holder may assess his damage based on the difference between his normally expectable gain from the practice of his patent and the gain from the exercise of the same patent after the infringement takes place.
- The gain obtained by the infringer from an infringing act may be used.
- The reasonable royalty that can be collected from licensing the invention patent may be used as the basis for damages calculation.
In addition, since the Intellectual Property Case Adjudication Law does not exclude Article 222, Paragraph 2 of the Code of Civil Procedure, when a patentee has substantiated damage but cannot prove the amount, the court shall set the amount at its discretion after considering all circumstances.
Therefore, at least four calculation methods for the amount of damages in patent litigation in Taiwan are provided under current laws. In this essay, damages calculations by courts in patent lawsuits in 2013 through 2014 were summarized. There are 42 cases in which a judgment was rendered in favor of the plaintiff and involved damages calculations with damages calculations bases summarized in the following table:
Click here to view the table.
In addition, it is worth mentioning that of all the 42 cases, 5 cases involve the court's award of punitive damages at a multiple of 1.5 to 3 under Article 97, Paragraph 2 of the Patent Law.
The above table shows that currently in practice, damages are still calculated primarily based on "an infringer's gains from infringing acts." However, although such calculation method is based on an infringer's gain, still the patentee shall assume the burden of proof. Since we currently do not have a system like the discovery procedure in the US, adjustments were made in practice in the 2011 amendments to the Patent Law concerning how an infringer's gain can be calculated.
In practice, it is often difficult to substantiate the lost in a patentee's gain to calculate the damages under Subparagraph 1. Even if a patentee can provide evidence to illustrate the reduction in sales amount after the patent is infringed, the court would still require the plaintiff to substantiate the causal relationship between the reduction in sales and patent infringement (102-Min-Zhuan-Su-136), which is very difficult to substantiate in practice. As a result, there has been no decision in patent litigation in the last two years where damages were calculated based on lost in gains under Subparagraph 1.
As for calculations based on an infringer's gain under Subparagraph 2, the Patent Law of 2003 adopted a theory of total sales volume. To wit, a patentee is only required to substantiate the sales volume of all of an infringer's infringing products with the deduction of the costs and necessary expenses substantiated by the infringer. If the infringer cannot substantiate the costs and necessary expenses, the total sales volume will be used as the total gain obtained from infringing acts. However, after the effective date of the new law (amended on December 21, 2011 and effective on January 1, 2013), which adopts a theory of total gain, the court may consider all evidence to determine an infringer's gain and should not rely solely on the total sales volume as the basis for damages calculation (The 102-Min-Zhuan-Su-13 Civil Decision of the Intellectual Property Court, which stated: "According to the Statement on the Plaintiff's Gist of Oral Arguments on June 11, 2014 in this matter, the Plaintiff requested that his damages be calculated based on the gain from the infringer's infringing acts in accordance with Article 97, Paragraph 1, Subparagraph 2 of the 2013 Patent Law. In addition, the difference between the above provision and Article 85, Paragraph 1, Subparagraph 2 of the 2003 Patent Law is merely that Article 85, Paragraph 1 of the 2003 Patent Law also adopts a theory of total sales volume "to use the total revenue from the sale of such items as the gain if the infringer cannot substantiate his cost or necessary expenses").
If Subparagraph 2 is relied on as the basis of calculation, the following two calculation methods are common in practice:
- (Sales Volume * Selling Price) – (Cost + Necessary Expense):
This calculation method is the most common in practice, even though it is not true that all expenses asserted by the defendant are always accepted by the court as costs or necessary expenses. Usually, the court tends to regard purchase costs, freights, customs tariffs and processing fees, which are expenditures directly related to product sales, as costs or necessary expenses, while indirect expenditures such as labor costs, rents and typical operating costs are usually excluded by the court.
- Sales Volume * Typical Standard Profit in the Industry (Table on Standard Profits for Industries Released by the Ministry of Finance):
This calculation method was practically not adopted in most cases before the Patent Law was amended in 2011 (The 99-Tai-Shang-2437 Decision of the Supreme Court, which stated: "The original trial court failed to conduct exhaustive investigation, elected to calculate the Appellant's damage by taking the sales volume obtained from the materials submitted by Hsiang Kang Co. in May and June of 2009, such as invoices, shipping records, export declarations, and from the trading information submitted by Ya Kuan Co. in May 2009, multiplied by a 10% net profit rate for the industry as mentioned above, and demanded the Appellee not to seek real joint and several damages. This approach is certainly inappropriate"). This calculation method was affirmed after the Patent Law was amended (the 102-Min-Zuan-Su-3, 13 and 56 Decisions of the Intellectual Property Court). In addition, the net profit rate may also be set as mutually agreed between the parties (the 101-Min-Zhuan-Su-34 Decision of the Intellectual Property Court).
In practice, there are not many cases in which calculations are based on reasonable royalties, since only very few patent lawsuits involve licensed patents, not to mention that such subparagraph was amended in 2011, there have only been four cases in the last two years. In practice, reasonable royalties are determined in manners similar to those under Article 222, Paragraph 2 of the Code of Civil Procedure, under which such royalties will be determined by the court according to other royalty information submitted by the patentee after relevant circumstances are considered (The 102-Min-Zhuan-Shang-3 Decision of the Intellectual Property Court, which states: "Pursuant to the above provisions, however, the court is empowered to set an appropriate royalty by considering the royalties for similar technology patents and inferring all circumstances such as the characteristics and scope of a licensing agreement, the market position of the licensor and the licensee, the contribution of the patented technology to the profitability or technology of infringing products, and the market share of infringing products based on facts of infringement").
As to the damage amount awarded by the court under Article 222, Subparagraph 2 of the Code of Civil Procedure, since the court may grant such award only when the party concerned cannot substantiate the amount of damage, this provision is supplemental by nature in its application. This is different from Article 97 of the Patent Law, under which the court shall not be requested to determine the damage amount if the patentee can provide an explanation backed by evidence. To wit, if the Plaintiff can choose another calculation method, such method shall not be selected as the basis for damages assessment. When damages are awarded by the court, the consideration is usually based on information such as the duration of infringement, selling prices and profit margins of infringing products, the authorized capital and operating revenues of the infringer, etc.