When calculating damages in a patent infringement case, an issue often arises as to whether the “contribution rate” of the patent at issue to the alleged infringing product should be considered in the calculation. Inconsistent opinions are offered by academics and courts at home and abroad, and there is no express statutory provision in the Patent Act.
Since the establishment in July 2008 of the Intellectual Property Court of Taiwan (hereinafter referred to as the “IP Court”), “contribution rate” has not been considered in a large majority of verdicts regarding the calculation of damages. Under rare circumstances, alleged infringers resort to defense by challenging the contribution rate of the patent at issue in an attempt to reduce the amount of damages, but this seldom forms the basis for judgments.In more cases, the concept is rejected due to lack of legal basis, such as the IP Court Civil Judgments No.2013-Min-Zhuan-Shang-Zi-4 delivered on October 17, 2013 and No. 2013-Min-Zhuan-Shang-Zi-16 delivered on November 28, 2013. Those few judgments that adopted the concept of contribution rate were for patented components can be easily disassembled from the infringing product, such as the IP Court Civil Judgment No. 2010-Min-Zhuan-Su-Zi-156 (concerning the application of microphone components in mobile products) delivered on February 22, 2012, the IP Court Civil Judgment No. 2011-Min-Zhuan-Su-Zi-63 delivered on January 28, 2011 andthe IP Court Civil Judgment No. 2012-Min-Zhuan-Shang-Zi-4 (concerning the application of tire edge securing clamps to tires) delivered on November 22, 2012. The infringing products in these cases can be disassembled into separate components. These cases generally involved mechanical or device inventions for which the patents at issue cover only one of the components of the infringing products. As for patents with inseparable technical features, the IP court ruled clearly on June 28, 2012 in its Civil Judgment No. 2011-Min-Zhuan-Su-Zi-61: “The plaintiff’s patent constitutes a part of the DVD datasheet, with its technical feature adhered to the entire disc and thus inseparable therefrom. Without the patented technology, the DVD is of no value, which is sufficient to prove the 100% contribution rate of the patent at issue to the infringing DVD product.”
From past cases it may be observed that alleged infringers tend to divide the number of patents at issue by the number of patents employed by the alleged infringing product and then multiply the result (contribution rate) by the overall profit of the alleged infringing product to calculate the amount of damages. This calculation method, however, was rejected by the IP Court in the abovementioned Civil Judgment No. 2011-Min-Zhuan-Su-Zi-61: “The defendant stated that the patent at issue is just one of the 400 patents applied in the DVD6C, and the amount demanded by the plaintiff should be divided by 400. However, the defendant failed to prove the following doubts: Do all of its discs have to utilize that 400 patents applied in DVD6C? What is the proportion of the patent at issue versus the other 399 patents in terms of royalty? Since the defendant’s argument is based merely on the fact that DVD6C contains 400 patents, its statement on 1/400 damages is not convincing enough to be adopted.”
Concerning the applicability of “contribution rate,” more thorough criteria are provided in the IP Court Civil Judgment No. 2014-Min-Zhuan-Su-Zi-48 delivered on July 5, 2017. In this case, the defendants claimed that the alleged infringing products resulted from hundreds of technologies besides the patented technology covered in the two patents at issue, and thus only a small portion of the sales profit of the infringing product can be attributed to the two patents at issue. The defendants thus requested calculation of their reasonable profit based on the contribution rates. In response, the IP Court pointed out: “While determining whether the contribution rate of an infringed patent to the overall price of the infringing product should be considered in the calculation of patent infringement damages, the court shall evaluate the impact of patented technologies on the efficiency of the entire infringing product, consumers’ tendency to purchase the product and general market demand in a comprehensive manner, avoid calculationof damages based on the number of patents applied in the infringing product, and distribute damages proportionally.In other words, it is by no means pure mathematics to calculate the contribution rate of patented technologies to the overall price of the infringing product. It involves consideration both of technology (For instance, to what extent can patented technologies improve product functions? What kind of product functions do patented technologies improve, major or secondary functions? Can the product realize its major functions without patented technologies?) and economics (For instance, is the improvement in function sufficient to influence consumers’ decision to purchase the product? Can patented and unpatented components be physically disassembled? Will separable components be sold separately? And general market demand, etc.).” The court also ruled that the technical methods (of writing into memory) covered in the two patents at issue contribute to improving the major functions and efficiency of the NAND Flash Memory products at issue. It’s impossible to separate these patented technologies from the infringing products either structurally or functionally. There is thus no need to calculate how much the patents at issue contribute to the overall price of the infringing product. Even when the contribution rate must be calculated, the rate should be 100%.
According to the aforesaid latest opinions of the IP Court, when the defendant raises a defense based on the concept of contribution rate, the court should consider the overall impact of the patent at issue on the infringing product in a comprehensive manner, and deliver decisions on a case-by-case basis instead of doing simple mathematics based on the number of patents involved.