In case of the infringed invention patent, where patentees choose to calculate damage based on the gains obtained by infringers from infringing acts, such as manufacturing, in accordance with the Patent Law before amendment, the infringers will try their best effort to substantiate their costs or necessary expenses to reduce their liabilities of compensation. A while ago, the Taiwan Supreme Court rendered the 103-Tai-Shang-973 Civil Decision (hereinafter, the "Decision") to explain about the contents of substantiation by patent infringers by pointing out that patent infringers shall not prove their manufacturing costs or necessary expenses simply based on annual financial reports certified by CPAs.
According to the facts underlying the Decision, Company A, who is the owner of a certain invention patent (hereinafter, the "Patent-in-suit"), asserted that Company B, Company C and their employees manufactured power management chips by practicing the Patent-in-suit without Company A's consent for distribution to other companies, thereby infringing Company A's patent rights. Company B contended that relevant products do not infringe since they do not have the technical features in the patent claims. As a result of examination, the original trial court pointed out that Company A is the owner of the Patent-in-suit and affirmed its right to claim damages against Company B. Company B produced income statements, a statement on the sales of product families, and a table containing monthly sales statistics and arrived at the amount of damages after obtaining the sales margin by deducting the cost of goods sold and subtracting the necessary expenses from the sales margin.
Although the Decision also affirmed Company A's right to claim damages against Company B, still it differs from the original decision in the determination concerning the calculation of damages. The highlights of the Decision on the scope of patent infringement damages are summarized as follows:
- Patent infringers shall substantiate their costs or necessary expenses.
Pursuant to the Patent Law before amendment, when patentees claims damages, they may choose to calculate damages based on the gains obtained by infringers from infringing acts, and the total proceeds from the sale of such items shall be deemed the gains obtained if the infringers cannot prove their costs or necessary expenses. It was pointed out in this Decision that according to the regulatory objectives of the Patent Law before amendment, if patentees choose to calculate their damage based on the gains obtained by infringers from infringing acts, the infringers should substantiate their costs or necessary expenses.
- The manufacturing costs and expenses cannot be based solely on annual financial reports certified by CPAs.
It was further pointed out in the Decision that when the gains from infringing acts were calculated in the original decision, the statistics table prepared by Company B was the sole basis. Although Company B also produced financial reports certified by CPAs and a CD containing scanned images of sales invoices of products, still it was found in the decision that the information in the reports certified by CPAs pertains to the entire business revenue, cost and expense of Company B and is not limited to the products at issue, not to mention that the CD containing scanned images of sales invoices of products contains sales vouchers, which can hardly serve as evidence for costs and necessary expenses. Therefore, the original decision, which accepted Company B's assertion without compelling Company B to substantiate relevant manufacturing costs and expenses, violates the requirements of the Patent Law.
Based on the foregoing reasons, when patent infringers substantiate their relevant costs and expenses, according to the opinion reflected in the Decision, they shall not rely solely on financial reports certified by CPAs and sales vouchers. The provision about infringers' inability to substantiate their costs or necessary expenses was removed from the Patent Law after amendment, and the total revenue from the sale of such item of goods is no longer included as the gains obtained. The reason of such amendment is that gains from infringing acts may be derived from competitive products and market gains derived from third parties, and the gains obtained by infringers are not equal to the gains rights holders are entitled to. Therefore, when damages are sought under the newly amended Patent Law, calculation will be made based on the actual circumstances of individual cases. The controversy in this case will gradually diminish.