If we were asked to name the 5 most impactful Taiwan IP law cases in 2019, Daimler AG v. DEPO would definitely appear very high on the list. Daimler AG v. DEPO Auto Parts Ind. Co., Ltd., 106 Min Zhuan Su 34 (Taiwan’s IP Court, August 2019) (see our report on this decision here).
In the IP Court decision made in August 2019, a headlight design patented by Daimler for Mercedez-Benz E-Class (W212) was held infringed by the defendant DEPO, leading to awards including permanent injunction, order to destroy molds, and NT$ 30 million damages, despite the defendant’s contention that, by ways of refusal to license, Daimler constrained competition in the aftermarket where it was alleged to have dominant power.
In one of the five expert opinions DEPO submitted to the IP Court in the first instance, an expert said that this case is so important that it “will determine the life or death of the entire industry,” namely the independent auto parts manufacturing or simply the aftermarket industry. DEPO has appealed the case to an appellate panel of the IP Court.
A possible way out for the aftermarket industry is to change the law by introducing into Taiwan’s Patent Act a “repair clause” that releases the actor from design infringement liability if the spare part of concern is made or sold for the purpose of appearance repair. In some markets, the repair clause has come into play for years and proves to be a key reason for the success of Taiwan’s aftermarket industry. Although some legislators proposed to amend the Patent Act for this purpose, it is unclear whether they could gather enough momentum both inside and outside the Congress to change the status quo.
Another possible solution through Taiwan’s Congress is to have the rules of compulsory licensing extend to cover design patents, since, under the current patent law regime, only invention and utility model patents are eligible subject matters for compulsory licensing. No relevant bill has been proposed yet in this regard.
However, to amend the law is only the first step. The critical part for winning a compulsory license is to prove before the TIPO that one of the few special circumstances enumerated in the Patent Act’s Compulsory Licensing Chapter has occurred that calls for the need of compulsory licensing. In fact, there is only one clause in the Patent Act that the aftermarket industry can possibly rely upon: “the patentee is held by a court or the Fair Trade Committee to have constrained competition or committed unfair competition acts.” Article 87.2.3. While the IP Court’s first-instance decision indicated, “[w]hether a refusal to license constitutes abuse of a dominant position and risks restricting competition in the market shall not be determined on a lenient basis,” how the IP Court’s appellate panel will address this issue is yet to be seen.