The Taiwan Intellectual Property Court rendered a judgement at the end of 2016, 2015-CivilPatentLitigation-No.66, signaling Rimowa’s back-to-back triumph in protecting their IP rights in Taiwan. In the judgement the infringers were ordered to stop using, making and offering for sale a luggage product that exploiting the patent at issue, and infringers should return unjustifiable gains that may be attributable to the infringing luggage articles back to Rimowa.

Sony Taiwan Ltd. (hereinafter “Sony”) gave away a piece of travel luggage free of charge for each of a particular LCDTV set sold as part of a sales event. The luggage implemented a flexible divider in its suitcase compartment, for which Rimowa GmbH possesses a patent right. Sony has an independent supply chain for procurement of complimentary gifts. SONY placed orders of luggage products at supplier Jump Media (“Jump”), which then made orders from next supplier Leader Premium Service (“Leader”). Finally Leader imported ordered luggage products from China. The luggage products at issue all bore a “SONY” wordmark.

Rimowa filed a lawsuit at the IP Court against Sony, Jump, and Leader for a count of patent infringement. Seeking remedy, Rimowa claimed for injunctions, monetary damages, and compensation due to the defendants’ unjust enrichment.

Pursuant to Article 58(1)(2) of the Patent Act, “any person shall not make, offer for sale, sell, use, or import patented products without permission.” For their defense, Sony first asserted that it did not exploit the patent in light of giving away for free is not selling under the definition of Article 58 of the Patent Act. The company did not sell the patented product, as the product was only gifted to a consumer on the condition that the consumer bought a Sony TV. As it was merely a sales campaign it did not increase the TV’s price. In other words, giving away a luggage article for free does not account for an exploitation of patent.

The Court began by explaining that although Sony’s gifting a luggage article to a TV consumer was not selling the infringing article directly, it was not absolutely exempted from considerations because whether the gift was to be transferred depends solely on consumers’ purchase of aimed product on sale. The actual cost of the gift was included in the on-sale product’s price and thus the gift essentially contributed to creating more commercial interests. Therefore the business model to sell a TV set and getting a luggage article together could be considered as an “offer for sale” or “sale” defined in the Patent Act. Sony was therefore infringing upon Rimowa’s patent.

The second question posed before the Court was whether Sony was liable for infringement damages, and if so, what was the proper amount. Mens rea is a prerequisite to award damages. The Patent Act requires that the patentee shall demonstrate the accused infringer acted either intentionally or with negligence in order to be awarded damages. A duty-of-care test is used specifically to evaluate negligence: a misfeasor is negligently liable if he fails to exercise due care as a good administrator. In more detail, several factors are taken into account by the Court, such as the parties’ type of business, operational scale, capability of performing the duty of care and costs for preventing the harm, as well as the patentee’s preventive measures adopted.

The Court concurring Sony’s argument that, although Sony is a multinational leading giant in household appliance, consumer electronics, entertainment technology, etc. having a maturely-developed IP portfolio, it does not engage in any manufacture, wholesale or retail of luggage products. The Court, being somewhat lenient, further indicated that Sony is not Rimowa’s competitor. One cannot fairly live up to an expectation that Sony possesses the same professional discernibility or judging capability as other luggage makers to identify relevant patent technology in the same field. Sony was thus deemed to have a “lower level of duty of care” according to the Court. On the other hand, the Court believed Rimowa should also take necessary steps to prevent patent infringement, and should bear much of the burden of proof in demonstrating the infringer’s negligence in the absence of patent marking To sum up, the Court deemed it not persuasive to hold Sony liable for damages.

As for unjust enrichment claim, the Court set forth Article 179 of the Civil Code that “in insufficiency of legal basis one who gains interest while other is harmed shall return said interest […].”Sony acquired infringing luggage articles from other supplier but not paid as much as it should pay to Rimowa’s patented products. Sony gained interest by saving the difference of payment. By gifting the infringing products to consumers, Rimowa was harmed as a result of reducing Rimowa’s prospective proceeds from implementing the patent. Therefore a causative relationship exists linking Sony’s gained interest with Rimowa’s harm. Rimowa’s unjust enrichment claim prevailed.

To calculate Sony’s returnable enrichment, the Court ruled that the commercial contribution of the patent should be the difference between the price of Rimowa’s patented product and the price of Rimowa’s pre-patented product. Dividing the contribution by the price of pre-patented product yields the contribution percentage of the patent. Specifically the Court arrived a formula as follows:

Enrichment = Unit cost of infringing product * Amount of distributed product * Contribution percentage of the patent.

It was so concluded that Sony should return about NTD 1,096,000 (approximately USD 36,400) to Rimowa.

For similar reasoning, Jump and Leader’s supply constitutes infringement of patent and as well unjust enrichment so the Court ordered a return of about NTD 99,000 (approx. USD 3,288) and NTD 95,000 (approx. USD 3,168) respectively.

Defendants did not appeal the decision. The case is so affirmed.

Highlights

As the sole barrister representing Rimowa in the case, Tsai, Lee & Chen would like to share with any interested reader some key topics.

Although the defendant’s mens rea is required for the patentee to claim damages based on the tort theory under Article 96 (b) of the Patent Act, it does not mean the defendant’s mens rea is the prerequisite for the patentee to obtain monetary compensation. In this case, Rimowa successfully obtained compensation based on Article 179 of the Civil Code (unjust enrichment), which does not require the defendant’s mens rea. This is one of the leading cases confirming that the patentee may also claim monetary compensation based on unjust enrichment in the Civil Code.

Rimowa successfully persuaded the Court to confirm that giving away patented gifts is also a type of infringing act under the Patent Act. A free gift attached to a main product to be sold is not free. It has its cost and contributes added value to the product.

Last but not the least, patent marking is demonstrated again to be substantially valuable in presuming an infringer’s willfulness, and the existence of which will in turn matter heavily in damage awards. Patent number being shown on the websites, specifications, user’s manuals, labels, tags, etc. will help facilitate a case toward the patentee’s advantage in potential patent infringement litigation.