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Licensor’s Failure to pay a Patent Maintenance Fee to Renew the Patent Validity May be Held Liable for Damages to Licensee
The licensor may be held liable for damages to the licensee for failing to pay a patent maintenance fee for validity renewal during the valid period of the patent license agreement. This issue was specifically involved in the 111-Zhi-Tzu-No. 7 decision rendered by the Taiwan Taichung District Court on June 22, 2022.
In this case, the two parties entered into a technology transfer and license agreement for a health food in 2013 (hereinafter referred to as the "Agreement in dispute"), under which the plaintiff was transferred with the know-how by the defendant (patentee), and was licensed with the patents of Taiwan, Japan, the United States and the European Union thereof. However, since the aforesaid patent of Japan became invalid in July 2014 owing to the defendant’s failure to pay the patent maintenance fee, the plaintiff filed a suit against the defendant for requesting the return of unjust enrichment and damages.
At first considering the title and relevant provisions of the Agreement in dispute, the court held that the Agreement in dispute covered the licensed patents and know-how transfer, where the licensed patents allow the plaintiff not only to legally implement the patents, but also to gain an exclusive market advantage while the know-how transfer empowers the plaintiff to obtain a leading technological advantage in similar products in the relevant industry. Throughout the Agreement performance of the two parties, the defendant is indeed liable for paying the patent maintenance fee to the competent authorities of various countries so as to maintain the validity of the patents. The court further held that the defendant, lacking a reason for not paying the patent maintenance fee and hence causing the failure of the validity renewal for the aforesaid Japan patent, has constituted the impossible performance defined in the provision of the Taiwan Civil Code, and the plaintiff may request a refund of the patent license fee of NT$1 million in accordance with Article 226, Paragraph 1 of the Taiwan Civil Code. In addition, considering that the plaintiff indeed suffered from the damages due to the invalidation of the Japan patent for the know-how in dispute, the court determined that the plaintiff may claim additional damages in the amount of NT$1 million in accordance with the provision of Article 222, Paragraph 2 of the Taiwan Civil Code. Consequently, the defendant shall pay the plaintiff NT $2 million in total.
To conclude with the above case, if the patentee (licensor) fails to pay the patent maintenance fee for reasons attributable to himself/herself, resulting in the patent invalidity, the licensor may not only have to refund the corresponding license fee, but also be held liable to the licensee for damages. Therefore, patentees shall pay attention to the management of payment for patent maintenance fee, and especially so for cases with other licensees, lest the patent validity be lost and additional compensation be made to the licensee.