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Is the Creditor Moving for Revocation of PAO Held Liable for Damages to the Debtor No Matter the Creditor’s Motion for PAO Is Unlawful or Not?
Code of Civil Procedure (hereinafter referred as the “Code”) stipulates that, “where a provisional attachment order ("PAO") is revoked either by reason of being improper ab initio or by reason of the provisions of Paragraph 4 of Article 529 or Paragraph 3 of Article 530, the creditor shall compensate the debtor for any losses incurred from the PAO or the provision of countersecurity.” Also, according to Paragraph 3, Article 530 of the same Code, "the creditor may move for revocation of the PAO.” There have been different opinions in the judicial practice on whether the creditor moving for revocation of PAO is held liable for damages to the debtor without questioning if the creditor’s original motion for PAO is unlawful or not.
In the 2015 Min Gong Su Zi No. 1 Civil Judgment rendered by the Taiwan Intellectual Property Court (IPC) on November 30, 2016, the IPC dismissed the plaintiff's (i.e., debtor's) claim for compensation incurred from the PAO with the reasons as follows: “the debtor’s damage suffered from the creditor’s motion for PAO is tort in essence, legally speaking. The requirements for establishing claims for damages arising therefrom are:
1. whether an injurious act exists;
2. whether the injurious act is unlawful;
3. whether the injurious act damages other’s rights or interests;
4. whether any damage is incurred;
5. whether a causal relation exists between the injurious act and the damage incurred; and
6. whether the creditor is capable of liability."
The IPC further explained that, "After the enforcement of the PAO, it is not until many years of litigation that the judgment on the validity of the patent at dispute and on whether the product at dispute manufactured and sold by the plaintiff (debtor) infringed the patent at dispute becomes final and binding. As such, it is difficult to argue whether the defendant (creditor) was aware of a necessary cause for the revocation of the patent at dispute or the likelihood of success in winning the case for PAO upon his/her motion for PAO on October 4, 2007. As the motion for PAO is not necessarily unlawful, it is unable to prove that the creditor has unlawfully infringed the debtor's rights by improperly exercising the patent right at dispute..….Hence, the creditor’s claim is admissible that the PAO enforced in the proper exercise of the patent right at dispute should not be held liable for damages.”
After the debtor's appeal, the IPC issued the 2016 Min Gong Shang Zi No. 1 Civil Judgment dated September 22, 2016, upholding its first instance judgment and dismissing the appeal. The IPC holds in its second instance judgment that, “In this case, the PAO is revoked not because of the PAO itself but because of the final and binding loss of the patent infringement case involved, such revocation of the PAO is made not by reason of being improper ab initio, but simply due to the change of circumstance following the PAO ordered, as defined in Paragraph 1, Article 531 of the Code, with respect to the relevant intents from the judgment of the Taiwan Supreme Court. As a result, the debtor’s claim for damages to the creditor in accordance with Paragraph 1, Article 531 of the Code is groundless."
However, after the debtor's further appeal, the Taiwan Supreme Court reversed and remanded the second instance judgment in the 2018 Tai Shang Zi No. 1782 Civil Judgment rendered on November 1, 2017, holding different opinions from those in the first and second judgments rendered by the IPC. According to the Supreme Court, “the debtor claims that…… the PAO is revoked in accordance with Paragraph 3, Article 530 of the Code, the creditor should be held liable for the debtor’s damage suffered from the PAO in accordance with Paragraph 1 of Article 531. The debtor does not claim to hold the creditor liable for the damages from the PAO because it is improper ab initio and is later revoked. The second instance judgment disregards the debtor's claim whether the creditor should be held liable for damages due to his/her voluntary motion for revocation of the PAO. The second instance court should take into consideration the debtor's claims and re-investigate this case."
Subsequently rendering the 2018 Min Shang Geng (1) Zi No. 2 Civil Judgment on November 7, 2019, the IPC adopted the same opinions as those of the foregoing civil judgment rendered by the Taiwan Supreme Court: “the legislative purpose of Article 531 of the Code is to prevent the creditor from abusing the provisional attachment system and to protect debtors by imposing liability on creditors for damages. As can be seen from the legislative history, the legislative trend shows that a growing emphasis has been put to protect the right of the debtors, such as opening up the chances and providing more convenient procedures for the debtors to claim for compensation. Now that the creditor in this case filed a motion for revocation of the PAO in accordance with Paragraph 3, Article 530 of the Code, the creditor is naturally held liable for damages to the debtor suffering from the damage arising from the motion for the PAO upon revocation of the PAO……The creditor argues that it is still to be legally evaluated whether the voluntary motion for revocation of the PAO in accordance with Paragraph 1, Article 531 of the Code is seen as an improper request and belongs to an “Abuse of Motion and Voluntary Revocation;” however, the fact that the PAO is unnecessary and thus revoked can demonstrate that the creditor is liable. Therefore the creditor is certainly held liable for damages to the debtor suffering from the PAO due to the creditor’s intentional motion for the PAO despite knowing that it is unnecessary. What's more, the creditor’s final and binding loss of the case further proves that the creditor should be held liable for damages.”
Ultimately in the 2020 Tai Shang Zi No. 3134 Civil Judgment rendered on March 10, 2021, the Taiwan Supreme Court upheld the IPC's second instance judgment and dismissed the creditor's appeal. The case has become final.
It remains to be observed whether the position expressed by the court in this case becomes a definitive opinion in judicial practice. According to the conclusion of the Forum on civil legal issues held by the Taiwan High Court and its affiliated courts in November 2000, the majority opinions once held that, "to delve into legislator's original intention in the ‘PAO revoked by a motion filed by the creditor,’ this passage means that the debtor subject to the PAO is entitled to claim damages to the creditor in accordance with Article 531 of the Code. Now that the foregoing legal interpretation together with ‘a PAO revoked by reason of being improper ab initio’ and ‘the creditor’s failure to bring an action within the deadline’ is listed as a reason for claiming damages, then it should be more appropriate to narrow down the scope for the requirement of ’PAO revoked by a motion filed by the creditor.’ Namely, the creditor should not be held liable for damages to the debtor ‘unless the creditor’s motion is improper.’” However, the foregoing judgments rendered by the Taiwan Supreme Court and the IPC respectively are obviously different from the opinions reached at the aforesaid Forum. Currently, the courts seem to deem that the creditor moving for revocation of PAO is held liable for damages to the debtor even if the original PAO requested by the creditor is proper. Whether such opinion is reasonable or not still leaves many doubts unanswered.