Roger Chang, Partner – Lee and Li, Attorneys-At-Law
Byline article published May 2, 2019 by Commercial Times, Taipei, Taiwan at www.chinatimes.com
The Intellectual Property Court recently issued a first-instance judgment on the patent infringement case of the Reticle SMIF Pod constantly used by the semiconductor industryand decided that the defendant should award the patentee for NTD 980 million. It is worth noting that the court also ordered the defendant to recall and destroy the infringing reticle pod products. This judgment immediately caused heated discussion in the industry. The author has discussed the importance of IP and patent positioning for the transformation and upgrading of Taiwan industry in the article of “Heading towards a Knowledge Economy and Industrial Upgrading: Patent Matters that High-Tech Companies should not Neglect.” This article will elaborate on the practice of Intellectual Property Court and IP lawsuits, to call for Taiwanese high tech companies' attention to avoid the risk of patent infringement litigations.
Verdicts of Taiwan IP lawsuits become more mature and in line with prevailing international practices.
It was not until 2016 did the Korean government establish similar institution, while the Intellectual Property Court has been established in Taiwan since 2008. It can be said that Taiwan is unrivaled in Asia in terms of institutional creativity.
Patent or copyright is invisible and intangible. If a bicycle disappears, it will be discovered immediately. But if the patent or copyright is infringed, it can’t be seen nor perceived, let alone the difficulty of proving the damages. Therefore, when it comes to intellectual property rights litigation, evidence collection is extremely important and the Intellectual Property Court (IP Court) plays an important role in collecting and preserving evidence for intellectual property litigations. If the IP Court adopts a more passive attitude, it can be difficult for plaintiff to search for evidence in order to prove his claim.
In the patent litigation case of the reticle pod, the court spent considerable effort on all aspects of the evidence collection and trial process. On one hand, the case took nearly 4 years, which is 4 times much longer than the process the IP Court announced (it will take 300 days to return a verdict by a court of first instance). On the other, the written evidence submitted by the two companies exceeds 150 pieces, which is many more times the amount of written information in other litigations (the amount of evidence in normal cases is about 20-25). Since the infringing product of the case is not a physical commodity sold in the retail market, it is difficult for the patentee to collect the defendant's product as evidence. Without the assistance to search for strong evidence, the court cannot function well as the system designed. The author believes that Taiwan Intellectual Property Court was in line with the external expectations for the establishment of the special court in the process of collection and preservation of evidence, and after carefully reading every detail of the judgment, we can find that the judge is extremely cautious in reviewing all testimonies of relevant witnessesand physical evidence during the trial, which was an arduous task.
Damages or compensation to deter patent infringement and encourage enterprises to devote into R&D
According to the research conducted by Associate Professor Su-hua Lee of the National Taiwan University Law School, in the past 4.5 years, among the Intellectual Property Court’s trials of first instance for the patent infringement lawsuits, the amount of damages granted by the court is often between NTD1 million and NTD 5 million, and the patent owners wereoften the losing party. In particular, the litigation winning rate for invention patents is only 12.2%. Even if a case involves an intentional patent infringement, the court is still typically conservative in the application of the punitive damages system, and it tends to be more unfavorable to the patent owners who claim the rights under the civil remedy procedure. In this regard, the author believes that the Entegris vs. Gudeng case involving reticle podsrevives the industry's expectation of patent protection.
However, in terms of industrial practice, it is normal for the R&D cost of any invention to exceed ten millions or hundred millions. For developers, this is a large investment forresearch and development, therefore they want to protect it with IP Rights. For infringers that use the patented technology without authorization, they typically bear no R&D cost for manufacture and sales of infringing products and no cost for IP protection. Historically, the compensation amount awarded in patent infringement litigation is too low to highlight the large R&D investment and the value of patent rights, which in turn encourages others to use patents through infringement of patent rights and makes them unwilling to engage in innovative R&D activities. Meanwhile, as the defendant’s “winning rate” is relatively high and the legal risk of infringement is extremely low, the intention of intellectual property rights and the design of the patent system are distorted to destroy the willingness to innovate in the industry. Once enterprises are unwilling to dedicate to R&D and innovation, or the incentives to put efforts into R&D decrease, the Taiwanese industry will eventually become low value-added labor-intensive economy, making the transformation and upgrading to knowledge economy become an empty talk. The patent infringement case between Gudeng and Entegris on the reticle pod can be regarded as getting the IP-innovation cycle back on track.
The amount of damage compensation often varies according to different industry attributes. Meanwhile, according to the provisions on punitive damages in the current patent law, if the infringement is intentional, the court may, at the request of the victim, specify a discretionary compensation in the amount of damage according to the circumstances of the infringement, but the amount of compensation may not exceed the threshold of three times the amount of the proved damage.
In the recent patent case involving reticle pods, the Intellectual Property Court awarded punitive damages of 1.5 times, for a total of approximately NTD 980 million, as the amount of compensation. It can be said that the court considers the technical intensive nature of the high-tech industry and achieves a deterrent effect through high damages by a multiplier. In fact, some scholars believe that the multiple ceiling of the punitive damages should be abolished in order to achieve better punitive and deterrent effects.
Referring to the past judgments in Taiwan, the patent infringement compensation of NTD 980 million is not particularly high. In 2007, the Taipei District Court ruled that the defendant should compensate NTD 2 billion for a patent infringement case. In 2010, the Intellectual Property Court awarded a compensation of NTD 2 billion for a patent infringement case. In 2011, the Kaohsiung District Court determined that a defendant company with a paid-in capital of only NTD 600 million should compensate for NTD 700 million in patent infringement. In 2017, the Intellectual Property Court awarded the defendant to a compensation of NTD 1.05 billion in a patent infringement case. It can be seen that patent infringement cases with high compensation amount are not uncommon in Taiwan.
This article calls for company owners' action to take intellectual property protection seriously—leading staff to learn necessary knowledge of IP, and with the help of IP professionals obtaining and using IP in a legal way. Furthermore, company owners need to evaluate if there is any risk of patent infringement within the process of R&D, production and sales, which the author believes will keep a strong momentum for a company's long-term development.
Read the online Chinese version: www.chinatimes.com