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Taiwan Supreme Court’s Judgment on Mercedes-Benz's Design Patent Infringement Case against Depo
On October 4, 2023, the Supreme Court of the third instance rendered its judgment (Case no. 2023 Tai Shang Zi No. 9) on the appeal concerning the lawsuit filed by Mercedes-Benz Group AG ("Mercedes-Benz") against Depo Auto Parts Ind. Co. Ltd. ("Depo") for infringement of its design patent. The Supreme Court reversed the judgment (Case no. 2019 Min Zhuan Shang Zi No. 43) rendered by the Intellectual Property and Commercial Court (formerly known as the Intellectual Property Court; hereinafter referred to as the "IP Court") of the second instance for contravention of the laws and regulations, and remanded the case to the IP Court. Given Depo's status as a major global manufacturer of aftermarket automotive headlights and Mercedes-Benz's renown position as a global vehicle brand and manufacturer, this lawsuit has garnered considerable attention.
1. Background facts and Litigation Process
Mercedes-Benz is the patentee of Taiwan Design Patent No. D128047 "HEADLIGHTS FOR VEHICLES" ("Patent"). The patented headlight is installed in the W212 model of the E-Class vehicles ("Vehicles"). Depo manufactures and sells headlights ("Products") suitable for the Vehicles. Consequently, Mercedes-Benz filed a civil lawsuit with the IP Court against Depo for design patent infringement.
On August 16, 2019, the IP Court of the first instance rendered its judgment (Case no. 2017 Min Zhuan Su Zi No. 34) in favor of Mercedes-Benz, whereby in addition to NT$30,000,000 in damages to Mercedes-Benz, Depo was immediately prohibited from manufacturing or selling any of the Products. In response to both parties’ appeals, the IP Court of the second instance rendered its judgment on July 14, 2022. The grounds for said judgment are generally the same as those for the judgment of the first instance; both judgments state that the Patent is valid and had been infringed. The main difference between the two judgments lies in the calculation of punitive damages. In the judgment of the first instance, because Depo failed to provide evidence to prove the sales costs and necessary expenses required to calculate damages, NT$30,000,000 in punitive damages was awarded, approximately 1.295 times the total sales amount. In the judgment of the second instance, because certain sales costs and necessary expenses were recognized, the punitive damages were reduced to NT$18,123,279, 1.5 times the total sales amount less said costs and expenses.
2. Summary of the Supreme Court Judgment
With respect to the evidence adopted by the court as the basis of a judgment, to enable the parties to exercise their right to attack and defend, they should be permitted to verbally engage in a debate on the evidence and the findings of the investigation. If this process is not followed and the results of the evidence investigation are used as the basis of the judgment, the judgment will have legal defects. Moreover, an inspection conducted by an appointed judge is one of the methods for investigating evidence. The court clerk should record the results of the inspection in the transcript of the investigated evidence. Photos attached to the transcript should be considered part of the transcript and have the same legal effect as the written transcript. This is in accordance with Paragraph 1, Article 294, Article 366, and Article 215 of the Civil Procedure Code.
With respect to the inspection of Product No. 1 submitted in the first instance and Product No. 2 submitted in the second instance by Depo, the appointed judge of the second instance only recorded that "the judge... conducted an on-site inspection and took photos, attached after this transcript, and provided them to both parties." However, upon thorough examination of the transcript and the attached photos, there seems to be no documentation of the inspection process and results. Additionally, there is no record in the transcript stating that "the court conducted an on-site inspection of the Products' photos, and found that the front view photo does not show the visual effect of double eyes." Furthermore, on the hearing date for verbal arguments, there is no indication that the IP Court required the parties to debate the results of this evidence investigation. The IP Court of the second instance directly used the results as the basis for judgment, leading to legal defects.
Moreover, the headlights creating a "double-eye" visual impression is a distinct feature that readily attracts the attention of ordinary consumers and produces a noticeable visual effect. It is a key point in comparing the overall appearance of the Products with the Patent to determine if they are identical or similar. The Patent has only one visually prominent circular light bulb, giving consumers a "single-eye" visual impression. The Products, on the other hand, have two light bulbs and a cylindrical structure inside, as determined by the IP Court of the second instance. Depo provided the front view photo of the Products showing a "double-eye" visual impression as evidence, and argued that the Products present a "double-eye" visual effect, which is not identical or similar to the appearance of the Patent, so the Products does not constitute infringement. Whether the argument is completely untenable remains to be explored. The IP Court of the second instance failed to ascertain the authenticity of this photo or instruct the parties to provide evidence. It hastily concluded that the Products present a "single-eye" visual impression, and rendered a judgment unfavorable to Depo, which was premature.
In light of the aforementioned judgment, the Supreme Court ruled that merely recording that the judge conducted an on-site inspection and took photos, even if the photos are attached to the transcript, still does not meet the requirement of the Civil Procedure Code that the inspection results should be documented in the transcript. It is necessary to further record the judge's perception of the object's condition through the five senses (such as the description in the judgment of the second instance that "the front view photo does not show the visual effect of double eyes"). In addition, even if the results of the inspection have been recorded in the transcript, they should not be used as a basis for judgment unless the court instructs the parties to debate them. Furthermore, even if the court has conducted an inspection, if the parties submit additional photos of the inspected object, the court, even if determining the content to be untrue, still needs to investigate and order the parties to provide more evidence. Since the Supreme Court's judgment only points out the procedural flaws in the second-instance judgment, whether the same conclusion will be maintained after the case is remanded to the IP Court for retrial is worth continued observation.