No Evidence of Sales Not Absolutely Suggesting Absence of Injury

A group of luxury brands appealed a trademark infringement decision in which they believed they were awarded an unsatisfactory amount in damages in 2017. A few months later and after debates in the second instance, the Taiwan IP Court rendered a judgment reversing the lower court’s decision. The appellate judgement elaborates on how the court should exercise its discretion in setting up a multiple for the calculation of damages and on a noteworthy connection between assessment of damage suffered and the presence of evidence.

The appellee is a boutique shop owner which is located in Taipei’s most popular shopping district. Enforcement agents raided the shop and basement storage after baiting a counterfeit Louis Vuitton handbag. The police seized and held in custody in total of eight items from Marc Jacobs’, two items from Loewe, three items from Céline, three items from Givenchy, and 243 items of Louis Vuitton, all of which were counterfeit bags, each illegally bearing one of the names of the aforementioned brands. In trial, the brand owners claimed for damages in accordance with Article 71(1)(3) of the Trademark Act, in which damages can be awarded up to 1500 times the unit price of the counterfeit item. However the plaintiffs were not satisfied with the award eventually granted by the court and complained that the court accepted retail unit price and the multiple adopted were both unfairly low. The plaintiffs furthermore complained that the amount was not enough to deter such an allegedly habitual infringer.

Article 71(1)(3) of the Trademark Act stipulates that a trademark owner may claim for a total of no more than 1,500 times the retail unit price of the infringing product in seizure. Appellant Marc Jacobs claimed that the multiple that the lower court set for damages calculation was unjustifiable as it did not take into account the Appellee’s high revenue. Appellants Loewe, Céline and Givenchy claimed that the lower court only awarded them five(5)、six(6) times of the unit price, which they argued was unacceptably low. Appellant Louis Vuitton also complained that the multiple (100 times) and the unit price adopted by the lower court were unsatisfactory. The appellants therefore believed the court’s award was insufficient to equitably compensate the loss of the trademark owners.

The appellate court opined that, unauthorized use of the registered trademark in association with the identical goods/services for marketing purposes has constituted trademark infringement. Whether the infringing products are actually sold is not a requirement for the awarding of damages. Otherwise, it is no different than requiring actual sales before establishing trademark infringement if the saying of no damage without actual sales is affirmed. Such an interpretation would deviate significantly from the definition of trademark infringement (Article 68).

More importantly, trademark rights are intangible property, the exclusive right of which is not the same as that of any tangible property. Infringing use of a trademark does not prevent or exclude the right owner from use of the same trademark, while a tort against the tangible property does. Thus, damage on the trademark right cannot be analogous to damage on one’s right to use tangible properties or to collect profits therefrom. Instead, so long as there is infringing use, the trademark owner is injured by failing to collect a reasonable royalty regardless of whether or not actual sales of the trademarked products have taken place. Returning to the damage calculation, if there is evidence demonstrating sales of infringing product, the court can have the discretion to establish a larger multiple number. Even if such evidence is not available, the court should not thereby rigidly rule a smaller- or zero in the worst case- multiple.

Next, the court reemphasized that the principles pertaining to the awarding of damages revolves around compensation and restitution. Although there is no language covering punitive damages in the Trademark Act, the court rejected the infringer’s argument that the absence of evidence is equitable with the absence of injury. The hardship and effort expended in the course of trademark owner’s evidence search and collection ought to be appreciated by the court. In particular, given that a trademark is an intangible proprietary right, the value of a trademark is the combinatory endeavor of manpower, time, monetary resources, and so on, in order to build up a connection between the idea of the mark and its designated product. Infringement of trademark is a deprivation of fair and justifiable return from trademark value.

Therefore, as a policy concern, the language concerning the method in which the multiple is to be calculated (Article 71(1)(3) of the Trademark Act) was born to counter the hardship of trademark right holders in collecting evidence of infringement. This relevant language contains a clause which is not secondary to other calculation methods such as owner’s actual loss and infringer’s profit gained, but rather holds an equal position. The court shall reasonably rule for a multiple in order to recover the losses incurred by the trademark owner. The question at hand is how to set a multiple when there are many infringing products to take into account and the unit price thereof is varied. The lower court’s decision to use the “averaged unit price of all seized goods of the same kind” for multiplication was overruled because it was far too low, given that the highest amount of 1500-times of a single product’s unit price is the statutory ceiling. In fact, the lower court’s method was derived from the opinions of Judicial Yuan in 2015 to prevent trademark right holders from unjust enrichment by obtaining damages award higher than actual loss. However, in an instance where some products are priced higher than others, the average unit price to be multiplied would be unreasonably pulled down by the lower unit price. For instance, if the enforcement agent only seized an “A” handbag, a product which has a unit price of 10k each, the statutory maximum would be 10K multiplied by 1,500. However, if the enforcement agents seized a counterfeit “A” handbag, and a “B” tot bag which is sold at a unit price of 1k each, the statutory damages will be at most only 5.5k ((10+1)/2=5.5) multiplied by 1,500, which is even lower than the unit price of an “A” handbag multiplied by 1,500. As such, the court opined that if the seized items of the same kind and their unit prices are varied, at first the court shall multiply the highest unit price by 1,500 to yield the ceiling of statutory damages. And then, under the ceiling, the court shall weight all relevant factors in order to finally determine the amount to be awarded. Thus, it is understandable that the multiple actually adopted is not necessarily an integer.

The court re-examined related facts of infringement upon considering the aforementioned information. In the end, the court awarded damages which were significantly higher than those which were awarded by the lower court.