Newsletter
A Study of Concurrence of Patent Infringements and Unjust Enrichment
Under the civil law system in Taiwan, patentees may request indemnity for losses on the basis of the torts, or request the return of interest on the basis of unjust enrichment. However, the right to request compensation for torts is subject to a short-term extinctive prescription of 2 years, while the right to request compensation for unjust enrichment is subject to an extinctive prescription of 15 years. Which principle may be applied in the event of concurrence? Are there differences in the scope of indemnity for losses and damages and the return of interest? The Supreme Court's Civil Judgment Tai-Shang No. 2467 dated September 26, 2017 elaborated on such concurrences.
In this case, as the patentee has exhausted the 2-year extinctive prescription for torts, it reverted to requesting the return of interest received by the infringer, based on a claim for unjust enrichment. The court of second instance held that the patentee may file a claim for unjust enrichment, and opined that there was no legal basis for using another’s patent to obtain interest equivalent to the patent licensing fee. The infringer was ordered to return interest equivalent to the patent licensing fee. With regard to this issue, the Supreme Court held that once the entitlement of a patent has been damaged, the damaged patent right invariably results in illegitimate changes in properties and profit or loss, thus leading to a concurrence of both “patent infringement” and “unjust enrichment.” The Patent Act does not preclude the applicability of unjust enrichment in the Civil Code. Based on the property law system, the patentee may naturally exercise its rights based on unjust enrichment subject to the Civil Code. However, the Supreme Court delivered a different opinion on the scope of interest to be returned.
The Supreme Court held, in accordance with Supreme Court Tai-Shang No. 1695 in 1972, that the purpose of the system of unjust enrichment was not to make up for compensation, but to return the interest that should not be acquired based on the ownership of the interest. Therefore, the scope of the request for the return of interest based on unjust enrichment should be limited to the interest acquired by the recipient. In addition, the amount of the returnable interest shall be calculated from the establishment of the obligation for such return. Therefore, the infringer's unauthorized use of another’s patent rights, which resulted in interest obtainable by the user, shall be calculated based on the actual interest that can be objectively ascertained in accordance with the implementation of the patent, instead of the damage derived from the shortfall in the licensing fee. The judgement of the second instance court, ordering the infringer to return interest equivalent to the patent licensing fee, was therefore erroneous and was remanded.
In addition, the Supreme Court also pointed out that the provision “A right shall be exercised and a duty shall be performed in accordance with the means of good faith” in Article 148 (II) of the Civil Code shall apply to the exercise of any right and performance of any obligation. Where the patentee fails to exercise its rights within a specified period of time, if a special occurrence caused legitimate trust by the obligor who may consider that the patentee no longer intends to exercise its rights, any subsequent claims shall be deemed as being in violation of the principle of good faith and would thus nullify the right. The Court shall take into consideration the nature of the right, the type of legal action, the relationship between the parties, social and economic conditions, and all other factors for making the judgment. Further, the expiration of a right is based on the principle of good faith, and is unrelated to the extinctive prescription system. It shall not be affected by the validity of the prescription period of the patentee’s right to claim compensation. In this case, the patentee has long been aware of the infringement, but only filed this suit 10 years afterwards. It has failed to file any claim for its rights against the infringer during that period of 10 years. The infringer has continued to use the patent in dispute to manufacture products over long periods of time based on legitimate trust. The patentee only exercised its rights for unjust enrichment after the products were mass-produced over a long period of time. The Supreme Court ordered the original court to include whether such actions constitute a violation of the principle of good faith and is applicable to the nullification of patent rights in its investigations.
As such, patentees should pay close attention to the interpretation of the Supreme Court. A long period of failure to exercise claims of rights may cause the expiration of rights even if such rights have not yet been exhausted by extinctive prescription. In addition, the Supreme Court held that where the patentee requests the return of interest received based on unjust enrichment, it shall be calculated based on the actual interest that can be objectively gained by the infringer’s use of the patent, instead of being based on the patent licensing fee. However, the Supreme Court has always adopted the scope of unjust enrichment for the occupation of land without authorization, based on the interest equivalent to the amount of rent. Yet the Supreme Court held that the licensing fees cannot be adopted as the standards for calculating interest from unjust enrichment through the unauthorized use of patents. Is there a conflict between the two approaches? What is the basis of the differences in reasoning? This issue would be further clarified through actual judicial implementation.