Patent contribution rate deemed to be 100%
Patent contribution rate determined ex officio
Comment
Among the design patent infringement cases that have been heard by the Intellectual Property and Commercial Court, the number of cases in which the Court has established infringement and made rulings based on the patent contribution rate is small. However, some defendants have argued that the patent contribution rate should be taken into consideration. This article explores key case law in this regard.
Patent contribution rate deemed to be 100%
E-bike case
In a judgment issued on 25 January 2013,(1) the Court held as follows:
The defendant argued that, with respect to "the profit earned by the infringer as a result of patent infringement," it was necessary to discuss the actual contribution rate of patent infringement to the profit earned by the infringer as a result of selling the infringing product. According to the online survey results of Pollster, "styling" accounted for only 9.8% among the most important factors when consumers buy a motorcycle. The defendant therefore asserted that there was no direct causal relationship between the patent infringement and the sales profit of the product at issue. However, the defendant failed to prove the credibility and reliability of the foregoing online survey; additionally, the foregoing online survey was designed for "motorcycles" rather than "E-bikes" to which the product at issue pertains; furthermore, even if it was accepted that only 9.8% consumers considered "styling" as the most important factor affecting their purchase of a motorcycle, the aforesaid survey does not reveal the percentage of consumers who considered styling as a second or third important factor, and thus fails to fully demonstrate the actual contribution rate of "styling" to the purchase of motorcycle by consumers. Consequently, even if the defendant argued that there was no direct causal relationship between patent infringement and sales profit of the product at issue, such an argument could hardly be accepted. (Emphasis added.)
The Court calculated the profit earned by the defendant as a result of patent infringement as the gross profit based on the average unit price (ie, sales revenue) of the e-bike at issue, and left aside the defence regarding the patent contribution rate.
Automotive lighting product case
In a judgment issued on 24 December 2019,(2) the plaintiff argued that the automotive lighting product manufactured and sold by the defendant infringed two utility model patents (patents one and two) and one design patent (patent three). While the Court deemed patent one to be invalid, the product at issue did infringe patents two and three.
Regarding the contribution rate of patent three, the IPCC pointed out as follows:
In accordance with the requirement "the profit earned by the infringer as a result of patent infringement" set forth in Item 2, Paragraph 1, Article 97 of the Patent Act, if the defendant demanded a favorable method of calculation, he/she shall provide evidence. That is, if the defendant intended to claim that the contribution of the patent at issue only accounted for a portion of the sales revenue of the product at issue, then the defendant shall bear the burden of proof and calculate the proportion of the revenue as a result of the patent at issue. However, the defendant has not yet provided any evidence to prove his/her argument. (Emphasis added.)
In this case, the Court also held that defendants bear the burden of proof with regard to the applicability and rate of patent contribution.
Apart from the defendant's failure to provide evidence, another reason why the Court determined a 100% technical contribution rate of patent three to the product at issue was that the design protected by the patent at issue was indispensable and inseparable from the product at issue as a whole. The Court made its decision on the following grounds:
The visual appeal presented by the automotive lighting product at issue is similar to that of patent 3 at issue. This visual appeal is presented by the lamp as a whole, and the lamp in its entirety is sold as a unit and could not be further subdivided into smaller units. Therefore, the overall price of the product at issue should be deemed as basis of damage calculation. That is, the technical contribution of patent 3 at issue to the product at issue is 100% in terms of the technical content of a design patent.
The Court also pointed out as follows:
Technically, the product at issue has fallen into the scope of patent 2 at issue, and in terms of appearance design, the product at issue is similar to those in the scope of patent 3 at issue. When products derived from patents 2 and 3 at issue enter the market, their appearance design as a whole, in addition to the technical quality thereof, also accounts for an indispensable and inseparable portion during transaction. Consequently, both the contribution rates of patents 2 and 3 at issue are 100%. (Emphasis added.)
The Court further stated further stated the following in its decision:
The product of the instant case differs from a composite product protected by multiple patents, and thus there is no such thing that "applying the theory of profit obtained by the infringer to a composite product with multiple patents would likely result in unreasonable excessive compensation since each patent only accounts for a portion of the product." In the said discourse, a composite product generally comprises a large number of components and is related with a great number of pertinent patents. In theory, each patent should only have a small contribution to the value or overall profit of the composite product. If "the profit of the product as a whole" is determined as damages of each patent involved, the amount of the overall damages would far exceed the value of the product itself.
Patent contribution rate determined ex officio
Packaging case
On 29 December 2017,(3) the Court examined the contribution rate of a packaging container to the overall selling price of a cosmetic product. The plaintiff provided three contribution rates:
- 100% – based on the plaintiff's claim that the product was unsaleable without packaging;
- 41% – the price difference between the defendant's similar products and the plaintiff's products; and
- 43% – the proportion of the container compared with the total cost of the plaintiff's product.
However, the Court rejected all three rates. The Court cited the paper "The Effects of Motivations and Consumption Value for the Decisions of Purchasing Cosmetics"(4) and held that the functions of the cosmetic products – namely, revitalising the bottom and outer layers of skin, rebuilding the elasticity of the dermis, enhancing the skin's moisture retention and firmness, tightening the skin, reducing the dullness of the skin and making the skin translucent – were the main considerations of consumers in making purchase decisions. The Court further cited the paper "The Open Frame Cosmetic Packaging Imagery Impact to the Consumer Behavior",(5) and concluded that, even though the packaging container of the product at issue was not related to the functions claimed by the product, the packaging of cosmetics does affect consumers' purchase decisions. Consequently, the Court ruled as follows:
The packaging container of the product at issue not only holds cosmetics, but also enhances the overall visual beauty and appearance of the product and hence influences consumers to make purchase decisions, as compared with packaging containers without special design. Therefore, its contribution to the selling price of the product at issue should be acknowledged. Given the above, this Court holds that, while the function of the product at issue is skin care, even though the packaging container shown in the appendix is not related to skin care, the visual beauty produced thereby is able to attract consumers' attention and generate a sense of demand for the product at issue. This Court therefore determines that the packaging container has a contribution rate of up to 30% to the product at issue. Specifically, the contribution rate of the packaging container to the profit of each bottle of the product at issue is NT$765.9. (Emphasis added).
However, the Court did not specify how it arrived at the contribution rate of 30%.
UV lamp base case
On 12 August 2021,(6) the Court also decided the contribution rate ex officio after determining that the product at issue was a composite product involving multiple patents. The IPCC ruled as follows:
Regarding the argument presented by the defendant that the patent at issue contributes to only 2.4% to 4% of the product at issue, the patent at issue relates to a UV lamp base, and the patented invention is used at both ends of the product at issue. According to the plaintiff, all of the products marketed thereby are comprised of the patented portion and a UV lamp tube, and the patented portion, i.e., the base, is not sold alone (page 463 of the case files of this Court). Obviously, the product at issue is a composite product. A composite product generally comprises a large number of components and may be related to multiple patents. In theory, each patent should only have a small contribution to the value or overall profit of the composite product. If the profit of the product as a whole is determined as damages of each patent involved, the overall amount of the damages would far exceed the value of the product itself. The plaintiff argued that the value of the patent at issue should account for 100% of the value of the product at issue when the damages were estimated. However, the product at issue is a UV lamp device whose main function is disinfection, hence signifying that the lamp tube accounts for the main function of the product at issue, though the patent may be adored by customers for the design of the base and may affect use habits of consumers. From the perspective of this Court, the main function of the product at issue is disinfection, to which the patented portion, i.e., the base, is irrelevant. The design of the base—a cylinder of smaller diameter connected to a slightly larger disc on a long straight round tube, with a circular groove disposed therebetween, and the disc further connected to a four-column curved arc body integrated by four small cylinders—does attract consumers and generate a sense of demand for the product at issue. Therefore, the design of the base is deemed to have a contribution rate of up to 30% to the product at issue. Specifically, the contribution rate of the patent at issue to the profit of the product at issue is [redacted] (calculation formula: [redacted] rounded to the nearest integer). Hence, the plaintiff could request damages amounting to [redacted] from the defendant. (Emphasis added.)
The Court tends to hold that, in principle, defendants should bear the burden of proof with respect to the applicability and determination of the contribution rate in design patent infringement cases. The Court may determine the contribution rate ex officio depending on the specific circumstances of individual cases. In addition, the cases discussed in this article show that the Court determines the contribution rate based on the relation(s) between the patent(s) and product(s) at issue. Should the patent(s) at issue be deemed as indispensable and inseparable appearance design(s) of the product(s) as a whole, the patent contribution rate may be determined as 100%. As a result, the overall profit of the infringing product(s) is calculated as damages.
For further information on this topic please contact Hsiu-Ru Chien or Powei Huang at Lee and Li Attorneys at Law by telephone (+886 2 2763 8000) or email ([email protected] or [email protected]). The Lee and Li Attorneys at Law website can be accessed at www.leeandli.com.
Endnotes
(1) Judgment No. 101-Min-Zhuan-Su-Zi-34.
(2) Judgment No. 108-Min-Zhuan-Su-Zi-2.
(3) Judgment No. 106-Min-Zhuan-Su-Zi-12.
(4) Co-authored by teachers and students at Department of Business Administration of Ming Chuan University.
(5) Co-authored by a teacher and a student at Department of Cosmetology and Fashion Design of Ching Kuo Institute of Management and Health.