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Attitude of Intellectual Property and Commercial Court Towards Design Patent's Contribution Rate



Among the design patent infringement cases heard by the Intellectual Property and Commercial Court (hereinafter referred to as IPCC) in the past, the number of cases in which the IPCC deemed infringement established and finally made rulings based on patent contribution rate is small though there were defendants arguing that the patent contribution rate should be taken into consideration.

 

I. Since the defendant failed to produce evidence, the amount of damages was the overall sales revenue of the product at issue, or the patent contribution rate was deemed as 100%.

 

In Judgment No. 101-Min-Zhuan-Su-Zi-34 issued on January 25, 2013, the IPCC pointed out as follows:

The defendant argued that, with respect to “the profit earned by the infringer as a result of patent infringement,” it was necessary to discuss the actual contribution rate of patent infringement to the profit earned by the infringer as a result of selling the infringing product. According to the online survey results of Pollster, “styling” accounted for only 9.8% among the most important factors when consumers buy a motorcycle. The defendant therefore asserted that there was no direct causal relationship between the patent infringement and the sales profit of the product at issue. However, the defendant failed to prove the credibility and reliability of the foregoing online survey; additionally, the foregoing online survey was designed for “motorcycles” rather than “E-bikes” to which the product at issue pertains; furthermore, even if it was accepted that only 9.8% consumers considered “styling” as the most important factor affecting their purchase of a motorcycle, the aforesaid survey does not reveal the percentage of consumers who considered styling as a second or third important factor, and thus fails to fully demonstrate the actual contribution rate of “styling” to the purchase of motorcycle by consumers. Consequently, even if the defendant argued that there was no direct causal relationship between patent infringement and sales profit of the product at issue, such an argument could hardly be accepted.

The IPCC then calculated the profit earned by the defendant as a result of patent infringement as the gross profit based on the average unit price (i.e., sales revenue) of the E-bike at issue, and left aside the defense regarding patent contribution rate.

 

Additionally, in Judgment No. 108-Min-Zhuan-Su-Zi-2 made on December 24, 2019, the plaintiff argued that the automotive lighting product manufactured and sold by the defendant infringed on 2 utility model patents (patent 1 and 2 at issue) and 1 design patent (patent 3 at issue). While the IPCC deemed patent 1 at issue invalid, the product at issue did infringe on patents 2 and 3 at issue. Regarding the contribution rate of patent 3 at issue, the IPCC pointed out as follows:

In accordance with the requirement “the profit earned by the infringer as a result of patent infringement” set forth in Item 2, Paragraph 1, Article 97 of the Patent Act, if the defendant demanded a favorable method of calculation, he/she shall provide evidence. That is, if the defendant intended to claim that the contribution of the patent at issue only accounted for a portion of the sales revenue of the product at issue, then the defendant shall bear the burden of proof and calculate the proportion of the revenue as a result of the patent at issue. However, the defendant has not yet provided any evidence to prove his/her argument.

In this case, the IPCC also holds that defendants shall bear the burden of proof with regard to the applicability and rate of patent contribution.

 

In the above case, it is worth mentioning that, apart from the failure of the defendant to provide evidence, another reason the IPCC finally ruled 100% technical contribution rate of the patent 3 at issue to the product at issue lies in the key fact that the design protected by the patent at issue is indispensable and inseparable from the product at issue as a whole. The IPCC made its decision on the following grounds:

The visual appeal presented by the automotive lighting product at issue is similar to that of patent 3 at issue. This visual appeal is presented by the lamp as a whole, and the lamp in its entirety is sold as a unit and could not be further subdivided into smaller units. Therefore, the overall price of the product at issue should be deemed as basis of damage calculation. That is, the technical contribution of patent 3 at issue to the product at issue is 100% in terms of the technical content of a design patent.

The IPCC also pointed out that:

Technically, the product at issue has fallen into the scope of patent 2 at issue, and in terms of appearance design, the product at issue is similar to those in the scope of patent 3 at issue. When products derived from patents 2 and 3 at issue enter the market, their appearance design as a whole, in addition to the technical quality thereof, also accounts for an indispensable and inseparable portion during transaction. Consequently, both the contribution rates of patents 2 and 3 at issue are 100%.

As the IPCC further stated in its decision:

The product of the instant case differs from a composite product protected by multiple patents, and thus there is no such thing that “applying the theory of profit obtained by the infringer to a composite product with multiple patents would likely result in unreasonable excessive compensation since each patent only accounts for a portion of the product.” In the said discourse, a composite product generally comprises a large number of components and is related with a great number of pertinent patents. In theory, each patent should only have a small contribution to the value or overall profit of the composite product. If “the profit of the product as a whole” is determined as damages of each patent involved, the amount of the overall damages would far exceed the value of the product itself.

 

II. IPCC determined ex officio the contribution rate

 

The IPCC examined the contribution rate of the packaging container to the overall selling price of a cosmetic product in Judgment No. 106-Min-Zhuan-Su-Zi-12 rendered on December 29, 2017. The plaintiff provided three calculation methods of contribution rate, the first being 100% by claiming that the product was unsaleable without packaging, the second being 41% which was the price difference between the defendant’s similar products and the plaintiff’s products, and the third being 43% which was the proportion of the container in the total cost of the plaintiff's product. However, all of the three calculation methods were rejected by the IPCC. The IPCC cited the paper “The Effects of Motivations and Consumption Value for the Decisions of Purchasing Cosmetics” co-authored by teachers and students at Department of Business Administration of Ming Chuan University, and held that the functions emphasized by cosmetic products—revitalizing bottom and outer layers of skin, rebuilding the elasticity of the dermis, enhancing moisture retention and firmness of skin, tightening the skin, reducing the dullness of skin, and making skin translucent—are the main considerations of consumers in making purchase decisions. The IPCC further cited the paper “The Open Frame Cosmetic Packaging Imagery Impact to the Consumer Behavior” co-authored by a teacher and a student at Department of Cosmetology and Fashion Design of Ching Kuo Institute of Management and Health, and concluded that, even though the packaging container of the product at issue is not related to the functions claimed by the product, the packaging of cosmetics does affect consumers’ purchase decision. Consequently, the IPCC ruled as follows:

The packaging container of the product at issue not only holds cosmetics, but also enhances the overall visual beauty and appearance of the product and hence influences consumers to make purchase decisions, as compared with packaging containers without special design. Therefore, its contribution to the selling price of the product at issue should be acknowledged. Given the above, this Court holds that, while the function of the product at issue is skin care, even though the packaging container shown in the appendix is not related to skin care, the visual beauty produced thereby is able to attract consumers’ attention and generate a sense of demand for the product at issue. This Court therefore determines that the packaging container has a contribution rate of up to 30% to the product at issue. Specifically, the contribution rate of the packaging container to the profit of each bottle of the product at issue is NT$765.9.

However, the IPCC does not specify how it arrives at the contribution rate of 30%.

 

In addition, the IPCC also decided the contribution rate by itself after determining the product at issue as a composite product involving multiple patents in Judgment No. 109-Min-Zhuan-Su-Zi- 61 newly rendered on August 12, 2021. The IPCC ruled as follows:

Regarding the argument presented by the defendant that the patent at issue contributes to only 2.4% to 4% of the product at issue, the patent at issue relates to a UV lamp base, and the patented invention is used at both ends of the product at issue. According to the plaintiff, all of the products marketed thereby are comprised of the patented portion and a UV lamp tube, and the patented portion, i.e., the base, is not sold alone (page 463 of the case files of this Court). Obviously, the product at issue is a composite product. A composite product generally comprises a large number of components and may be related to multiple patents. In theory, each patent should only have a small contribution to the value or overall profit of the composite product. If the profit of the product as a whole is determined as damages of each patent involved, the overall amount of the damages would far exceed the value of the product itself. The plaintiff argued that the value of the patent at issue should account for 100% of the value of the product at issue when the damages were estimated. However, the product at issue is a UV lamp device whose main function is disinfection, hence signifying that the lamp tube accounts for the main function of the product at issue, though the patent may be adored by customers for the design of the base and may affect use habits of consumers. From the perspective of this Court, the main function of the product at issue is disinfection, to which the patented portion, i.e., the base, is irrelevant. The design of the base—a cylinder of smaller diameter connected to a slightly larger disc on a long straight round tube, with a circular groove disposed therebetween, and the disc further connected to a four-column curved arc body integrated by four small cylinders—does attract consumers and generate a sense of demand for the product at issue. Therefore, the design of the base is deemed to have a contribution rate of up to 30% to the product at issue. Specifically, the contribution rate of the patent at issue to the profit of the product at issue is [redacted] (calculation formula: [redacted] rounded to the nearest integer). Hence, the plaintiff could request damages amounting to [redacted] from the defendant.

 

Given the above, the IPCC tends to hold that in principle, the defendants should bear the burden of proof with respect to the applicability and determination of the contribution rate in design patent infringement cases, and the Court may determine the contribution rate ex officio depending on specific circumstances of individual cases. In addition, an observation of the abovementioned cases shows that the Court determines the contribution rate based on the relation(s) between the patent(s) and product(s) at issue. Should the patent(s) at issue be deemed as indispensable and inseparable appearance design(s) of the product(s) as a whole, the patent contribution rate may be determined as 100%. As a result, the overall profit of the infringing product(s) is calculated as damages.

 

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