Assessing Damages Incurred from Patent Infringements: Regulation and Implementation-related Issues Involving Compensatory Damages Sought by Taiwan Patent Law from American Cases
A patent is infringed when anyone makes, uses, or sells any patented invention within the country that granted the patent, or imports the invention into that country during the term of the patent, provided that these actions are not authorized by the patent holder. Besides prohibiting others from exploiting the patented invention, the patentee can also request damages in the case of infringements. The function of compensatory damages is to compensate for injuries or lost profits suffered by the obligee (patentee). Such compensatory damages should not be either too little or too much, otherwise they would either provide insufficient protection for the infringed obligee or else give them unjustified profits. Thus, the basic principle of compensatory damages law is to compensate the obligee’s injuries and lost profits, not to request the return of profits enjoyed by the infringer. In addition, the obligee should show the requested damages are related to the infringements only. Paragraph 1 of Article 89 of Taiwan’s Patent Law outlines three items for calculating compensatory damages. If the patentee cannot prove the injuries or lost profits, he can claim the net profit earned by the infringer through his infringements or the entire income derived from the sale of the infringing articles as the amount of damages. This regulation may allow the infringed patentee to obtain excessive profits from patent infringement litigation, which violates the basic principle of Taiwan’s legal system regarding compensatory damages. Additionally, the relevant areas of the regulations on compensatory damages for patent infringements are: (1) the extent of the patentee’s injuries that can be included in calculating the damages, (2) the patentee’s obligation to mark patent numbers, (3) the determination of the prescription for claiming compensatory damages, (4) the extent of the return of profits requested by the patentee under Taiwan’s Civil law, and (5) the criteria of determining whether infringements are intentional or not. This study analyzes decisions in patent infringement cases in Taiwan based on the nature of Taiwan’s Civil Law and Patent Law. The latest trends in the case laws on compensatory damages in the United States are discussed. The differences in the regulatory framework and courts’ opinions in similar decisions between the United States and Taiwan are then compared to illustrate issues relating to compensatory damages as set out in Taiwanese Patent Law. Based on the analysis and discussion, it is concluded that (1) the proviso of Item 1 of Paragraph 1 of Article 89 of Taiwan’s Patent Law ignores some causes of patentee injuries and thus violates the basic principle of Taiwanese compensatory damages law. Meanwhile, Item 2 of Paragraph 1 uses the net profit earned by the infringers through their infringements or the entire income derived from the sale of infringing articles to calculate the amount of damages, and thus also violates the basic principle of compensatory damages. Therefore, this study suggests that the proviso of Item 1 and Item 2 should be deleted. (2) The patentee should bear the burden of proving lost profits when claiming compensatory damages, and reasonable royalty damages should be considered if such proof cannot be established. This study suggests that another item should be added to Paragraph 1 of Article 89, stating that claims can be made “based on the royalties that should be paid for exploiting the patent”, and that this addition should replace the present Item 2. (3) Because the Intellectual Property Office often rejects requests to assess patent infringement damages in practice, Item 3 of Paragraph 1 of Article 89 may be revised to read “The amount of damages assessed by professionals entrusted by courts”. (4) When claiming for lost profits caused by the sale of unpatented products, the promotion of industrial development should be balanced against protecting the interests of the patentee. (5) The patent number should be marked substantially consistent and continuous on the patented articles in principle. Existing regulations fail to realize the spirit and purpose of patent number marking, and thus should be revised. (6) If the patentee requests the return of profits enjoyed by the infringer based on unjust enrichment as prescribed in Civil Law, the calculation of profits should be limited to the appropriate payment for exploiting the patented invention (namely a reasonable royalty). On the other hand, the recovery of profits is limited to those obtained by infringing with direct intention if requested on the basis of negotiorum gestio as prescribed in Civil Law. (7) The determination of infringement with intent should consider the totality of circumstances.
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