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Can Enterprises Lawfully Claim Compensation for Damage to Business Reputation in Intellectual Property Disputes?
In intellectual property disputes, if an enterprise considers its business reputation to have been damaged as a result of infringement, whether the enterprise can claim compensation for the same is an issue to be determined.
When the Taiwan Patent Act was amended in 1986, an affirmative stance was adopted on this issue. Article 82, Paragraph 2 of that version of the Patent Act added the provision:
"If the patent holder's business reputation is injured due to infringement, the patent holder may additionally request compensation of an appropriate amount."
The legislative rationale clearly stated:
"When a patent holder suffers infringement by others, property damages may be handled according to the provisions of the preceding paragraph. However, the injury of the patent holder's business reputation is a type of non-property damage. Therefore, Paragraph 2 was added to stipulate that compensation of an appropriate amount may also be requested."
However, this provision was removed in the 2011 amendment of the Act. The legislative rationale for the deletion was given, based on the judicial practice, as the following:
"Since legal persons cannot suffer mental anguish, judicial practice generally holds that when their reputation is damaged, a public apology is sufficient to restore their reputation, and claims for consolation damages are not allowed. Therefore, explicitly stipulating in the Patent Act that patent holders may additionally request compensation for injury of business reputation, when the patent holder is a legal person, may deviate from the damage compensation system under our Civil Code. Hence, this provision is deleted, reverting to the application of the tort liability system under the Civil Code."
Nonetheless, the Supreme Court has recently changed its view.
First, in June 2025, the Supreme Court issued Ruling No. 2023-TaiShangDa-544, holding that, unless there are specific restrictions imposed by law or nature, rights and obligations of legal persons are no different from those of natural persons. Moreover, legal persons also enjoy the personality rights of reputation and credit as enumerated in Article 195, Paragraph 1 of the Civil Code. Therefore, the so-called "non-property damage" need not be synonymous with "mental anguish." The Supreme Court further pointed out that since legal persons lack the sensory cognition of natural persons, there is an essential difference in the nature of a non-property damage suffered by legal persons from that suffered by natural persons. Accordingly, such damage should be limited to such harm that significantly affects the achievement of the legal person's establishment purposes and cannot be quantified in monetary terms. Hence, provided that legal persons can explain the content of the damage and fulfill the burden of proof regarding the existence of damage, they may request compensation of an appropriate amount pursuant to Article 195, Paragraph 1 of the Civil Code.
Following this ruling, on July 3, 2025, the Supreme Court, in Judgment No. 2021-TaiShang-580 with respect to an IP-related unfair competition case, overturned the original judgment of the Intellectual Property and Commercial Court ("IP Court") and remanded the case for retrial. In that case, the plaintiff claimed that, knowing that its patent has expired, the defendant nonetheless filed a lawsuit alleging that the plaintiff infringed on the patent after the plaintiff's listing on the over-the-counter market. This forced the plaintiff to disclose Material Information to the public about being sued. The plaintiff argued that the defendant's conduct violated the Fair Trade Act and the Civil Code, causing damage to the plaintiff's business reputation, and thus sought damages compensation from the defendant. The first-instance court ruled partially in favor of the plaintiff, but the second-instance court reversed the decision on March 26, 2020 in Judgment No. 2019-MinGongShang-4, ruling against the plaintiff. The plaintiff then appealed to the Supreme Court, which, in the aforementioned Judgment No. 2021-TaiShang-580, annulled the second-instance judgment and remanded the case.
In its reasoning, the Supreme Court explicitly stated that when a legal person's reputation or credit is harmed by infringement or breach of obligation, resulting in damage that significantly affects the achievement of its establishment purposes and cannot be quantified monetarily, the legal person is allowed to request compensation of an appropriate amount under the first part of Article 195, Paragraph 1 of the Civil Code. The Court emphasized that the mere fact that a legal person cannot suffer mental anguish does not justify outright denial of such claims. The Supreme Court further cited the rationale of the Ruling No. 2023-TaiShangDa-544 and criticized the second-instance court view that "legal persons cannot claim compensation for non-property damage to business reputation due to lack of mental anguish," thereby annulling the second-instance judgment and remanding the case.
Following this ruling, whether the current Patent Act will be further amended accordingly remains subject to evaluation by the competent authority and the legislature. Meanwhile, before any amendment to the Patent Act, judicial approaches to claims for damages to business reputation based on the noted Supreme Court rulings have yet to be seen.