Article 85.1.2 of the old Patent Law provided that: When a patentee claimed damages, he could calculate his loss according to the profits gained by the infringer from his infringing act; where the infringer was unable to provide documentation proving the costs or other necessary expenses, the total sales of the infringing article should be deemed to be the infringer's profits. As regards the so-called costs and necessary expenses, a review of a number of decisions by the IP Court in the most recent year reveals that they refer to direct cost in accounting and do not include indirect cost because indirect cost is cost that the infringer has to pay regardless of whether or not he is engaged in an infringing act and should not be deducted. Therefore, where an infringer is not able to prove the costs and necessary expenses, the patentee could ask the infringer to pay damages calculated based on profits gained from the infringing act, i.e., “gross profit” in accounting, not “net profit” or “profit after tax” from which costs or taxes have been deducted. Consequently, damages calculated on such basis are often higher than those calculated on other bases, and are generally adopted by most patentees.
The last part of the provision (i.e., the part regarding the total sales being considered as profits in the absence of proof of costs) has been deleted from the current Patent Law effective as of January 1, 2013. The reason is that giving the patentee all the profits gained from the infringer’s products as damages is excessive.
According to the current law, the following will be encountered:
1. For an infringing act conducted before the effective date of the new law, damages calculation is still based on the old law. Therefore, the practice of calculating damages based on “gross profit” may still continue for a period of time unless the IP Court changes its view.
2. For an infringing act conducted after the effective date of the new law, it remains to be seen how the IP Court will interpret and apply the new provision. Before the IP Court makes clear its views, there might be an increasing tendency for patentees to calculate damages based on reasonable royalties.
Moreover, the proviso in Article 85.3.2 of the old law that the Court can award damages up to three times the claimed damages if the infringement was found intentional, which was deleted from the current Patent Law, has been restored by an Amendment to the Patent Law passed by the Legislative Yuan on May 31, 2013, and the Amendment will take effect once it is officially published by the President.