8.7 Civil remedies
A right holder is mainly entitled to two forms of relief from patent infringement – injunction and damages. They may be sought together or separately.156 Other forms of remedies include measures necessary to reinstate the goodwill or reputation of the right holder. For employee inventions, the employee may seek compensation for employee invention for what they invented in relation to the duties of the employment.
8.7.1 Recovery of goodwill and reputation
When the plaintiff in a patent infringement lawsuit (i.e., the patentee or exclusive licensee) demands that the defendant put up advertisements in newspapers or any other periodical publications for explanatory purposes and as measures necessary to reinstate the plaintiff’s goodwill or reputation – in lieu of or in addition to compensatory damages – the plaintiff should specify in their demand in the complaint the specifics of such advertisements, such as the contents, size, font size and so on.
8.7.2 Compensation for employee inventions
An employee invention refers to an invention, utility model or creation protected under the Patent Act, Utility Model Act or Design Protection Act, respectively [hereinafter collectively referred to as an “invention” unless otherwise specified], that an employee, executive officer of a corporation or government employee [hereinafter collectively referred to as an “employee” unless otherwise specified] makes in connection with their duties, where it falls within the scope of the business of the employer, the corporation, or the national or local government, and where the activities that have led to the invention fall within the present or past duties of the employee (Article 2(ii) of the Invention Promotion Act). An employer is automatically entitled to a free nonexclusive license to an employee’s invention (Article 10(1) of the Invention Promotion Act). Where the employer succeeds, under a contract or employment regulations, the patent, utility model or design rights related to the employee’s invention – or the right to acquire them – or is to be granted an exclusive license to the right, the employee is entitled to fair compensation (Article 15(1) of the Invention Promotion Act).
Provisions concerning compensation for employee inventions fall within the sphere governed jointly by civil law, labor law and patent law. Such provisions are regarded as compulsory provisions intended to protect employees, who are often in the weaker position at the negotiation table, so that the distinct legal nature of the employee invention is acknowledged, and the employee enjoys compensation for the invention separately from the wages compensating them for their service. Typical defenses against the claim for compensation are that the statute of limitations has run (10 years, as in general credit cases) or that a certain amount was already paid to the employee and should be deducted accordingly.
The plaintiff should contend and prove (i) that they invented the employee invention; (ii) that the defendant, who is the employer, succeeded from the plaintiff the patent, utility model or design right – or the rights to acquire them – for the employee invention; (iii) that the employer earned sole and exclusive profits generated by the employee invention; and (iv) the scope of compensation for the employee invention.
First, to prove the fact that the plaintiff is the inventor of the employee invention, it must be established that (i) they are an employee; (ii) the invention falls within the scope of business of the employer; and (iii) the invention falls within the present or past duties of the employee. More importantly, the plaintiff must have contributed to the completion of the invention. The advancements of science and technology in modern society often require a group of departments or multiple parties to cooperate for inventions, raising the issue of inventorship. An employee can be a co-inventor only if they have had a mutually cooperative relationship with others for the completion of the invention. More specifically, the employee must have contributed to the actual creation of a technical idea by, for example, (i) suggesting, adding or supplementing a concrete idea to solve technical problems of the invention; (ii) embodying a new idea through experiments; (iii) providing a specific means or method to achieve the purpose and effects of the invention; or (iv) providing detailed advice or guidance to enable the creation of the invention.157
Second, considering that the employer is entitled to a nonexclusive license for free even if they do not succeed the right relating to the employee invention (Article 10(1) of the Invention Promotion Act), the term “employer’s profits,” when calculating the amount of compensation for the employee, refers to the profits the employer is expected to earn by acquiring a sole and exclusive position to practice the employee invention that surpasses a nonexclusive license.158
Third and most importantly, all these elements must be taken into consideration to reach a fair sum for compensation. The Invention Promotion Act sets forth the following factors for calculation:
- A. the profits the employer anticipates obtaining with the employee invention. This is calculated by product sales revenue × hypothetical royalty rate × contribution ratio of the exclusivity of the right;
- B. the employee’s ratio of contribution, with respect to the employer’s contribution, to the completion of the invention. This is calculated by (1 – the employer’s contribution ratio) (Article 15(6) of the Invention Promotion Act);
- C. if the employee invention is a joint invention, the employee’s ratio of contribution with respect to co-inventors; and
- D. if the product that embodies the invention is a part or component of a multicomponent final product, the employee’s ratio of contribution to the final product. In this case, the sales revenue of the final product should be used for (A).
The resulting formula calculation for the amount of compensation is A × B × C × D: the amount of the employer’s profits × the ratio of the employee’s contribution with respect to the employer’s contribution × the ratio of the employee’s contribution with respect to co-inventors (for joint inventions) × the ratio of the employee’s contribution to the final product (for inventions that form a part or component of a multicomponent final product).
8.7.3 Permanent injunction
Once patent infringement is established, as discussed in Section 8.5, the patentee may seek a court order preventing the defendant from manufacturing, using or assigning the defendant’s products or using its processes.159 The patentee may also seek an order for the defendant to take actions, for example, to destroy the products by which the infringement had been committed.160 These are different forms of permanent injunctions. In this section, we focus on the issues arising in relation to injunctions.
There are five elements to a permanent injunction.
The person seeking an injunction against infringement (i.e., the patentee). The plaintiff must be registered as the patentee when argument at the fact-finding trial is closed. A nonexclusive licensee is not entitled to file a claim for an injunction against infringement because they do not have the exclusive rights to practice the patent. If a group of persons jointly own the patent right, one of them may independently file for an injunction because the exercise of the claim is an act of preservation.
The party subject to the injunctive order (i.e., the person committing infringement). The patentee may seek an injunction against a person who infringes or is likely to infringe on their patent right by practicing the patented invention without legitimate authority to do so. Nonetheless, a request for disposal or other actions under Article 126(2) of the Patent Act should be made to the person who owns or has the right to dispose of the infringing product or facilities subject to the destruction order.161 In cases where a group of persons has practiced the patented invention, and such acts individually constitute patent infringement,162 the patentee may seek an injunction on each act against each of the infringers.
Practicing the patented invention for business purposes. To constitute patent infringement, the infringing party must have exploited the patented invention for business purposes. Practicing the invention for personal or household purposes does not constitute infringement. As long as the patented invention was practiced for business purposes, the number and scale of the practice, as well as whether any profit was derived therefrom, are irrelevant. Implementation for nonprofit business operations is still a practice for business purposes.
Specification of the infringing act and the defendant’s duty to disclose the specific act. The plaintiff should specify each infringing act committed by the defendant. When the defendant disputes the specified infringing act, the burden of proof rests on the plaintiff. The Patent Act requires the defendant to disclose their actual conduct, and, where they fail to present the specific conduct without any justifiable reason, the court may deem the specific infringing conduct as alleged by the plaintiff to be true.
Infringement or likelihood of infringement. The patentee may seek an injunction against the implementation of the patented invention by the other party if the other party is currently committing an infringing act or, even if not, is likely to commit the infringing act in the future.
There are three elements to the scope of a permanent injunction.
Claim for an injunction. Once the aforementioned requirements for patent infringement are met, the court’s default move is to automatically issue a permanent injunction as per the plaintiff’s claim, usually to prohibit the practices of the other party that amount to patent infringement. If the patented invention pertains to a part or component of the defendant’s product, issues may arise as to what extent the permanent injunction covers the whole product and whether the plaintiff may also claim for destruction of the whole product in addition to the injunction. The law on this issue is unsettled. Some lower courts have issued injunctions only against the infringing part and have ordered the destruction of the manufacturing equipment on the ground that the infringing part could be detached and separately traded from the rest of the product.163
Claim for disposal of infringing products. The patentee may demand the disposal of the products that constituted infringement (including the products obtained by the infringement if the relevant invention is a product by process invention), the removal of the facilities used for the infringing act, and other measures necessary to prevent infringement.164 A claim for the disposal of such products must accompany a claim for injunction and may not be independently sought. The products to be disposed of should be clearly specified in an appendix. The court will dismiss a claim for any unspecified part in the plaintiff’s demand in the complaint.
Other measures necessary to prevent infringement. The Patent Act allows the patentee to claim for “other measures necessary to prevent infringement.” However, a far-fetched and unlimited interpretation of the term may cause an excessive burden to the other party beyond the protectable scope of the patent right. The need for such measures should be determined after balancing the potential disadvantage to the other party if the measure is issued and the potential disadvantage to the patentee if the claim is dismissed.165
An example of a court order for an injunction against infringement is as follows:
- A. The defendant shall not produce, use, assign, lease, import, offer to assign or lease, or display to assign or lease each product described in [Appendix 1] PRODUCTS practiced by the defendant.
- B. The defendant shall discard finished goods and semi-finished goods (articles that have the structure of finished goods but are not yet completed) of each product described in [Appendix 1] PRODUCTS practiced by the defendant in the head office, branch office, office, business office, plant, or warehouse of the defendant. The defendant shall also discard all equipment used solely for the production of the goods.
The Patent Act articulates its own provision for the patentee’s right to seek compensatory damages from infringement in Article 128(1) as follows: “[a] patentee or exclusive licensee may claim for compensation for the damages caused by a person who has willfully or negligently infringed the patent or exclusive license.” Nonetheless, patent infringement is generally viewed as a type of tort under the Civil Act. Accordingly, as in cases of a tort, the plaintiff in a lawsuit seeking compensatory damages has to contend and prove that (i) the plaintiff is the patentee, (ii) the infringer has willfully or negligently infringed the patentee’s patent right, (iii) the infringer’s patent infringement is unlawful, (iv) the infringer was capable of assuming liability at the time of the infringement, (v) the patentee suffered damages, and (vi) there is proximate causation between the infringement on the patent right and the damages suffered by the plaintiff.166
Damages may be awarded only upon the showing of infringement. As the criteria for establishing infringement have been discussed in detail above, the following discussion focuses on other elements for receiving damages.
Claimant (i.e., the patentee). The claimant seeking damages must be the patentee or exclusive licensee. For a jointly owned patent, it is the judicial practice to award damages only in proportion to each right holder’s percentage of ownership. A nonexclusive licensee does not have standing, as the right has no exclusive effect, but a sole nonexclusive licensee may be successful in a tort claim based on infringement of credit.
The party responding to the claim for damages (i.e., the infringer). In most cases, the defendant in a lawsuit seeking damages for patent infringement is the direct infringer. Where indirect infringement is established under Article 127 of the Patent Act, the indirect infringer is also liable to compensate for the damages. Further, as in cases of tort under the Civil Act, any person who has aided or abetted patent infringement is also held liable for damages jointly with the patent infringer. In cases where patent infringement is divided among multiple parties,167 joint tort prescribed in Article 760 of the Civil Act may be established. Views are split on whether the objective element that each tortfeasor’s act jointly occurred is sufficient to establish joint tort (objective joint tort theory) or whether the subject element of the tortfeasors’ knowledge of acting jointly or conspiring to act should also be met (subjective joint tort theory).
Willfulness or negligence. A damages claim requires willfulness or negligence to succeed. However, the intent element is rarely disputed in practice because the Patent Act sets forth that “a person who infringes a patent or exclusive license of any third person shall be presumed negligent regarding such infringement.”168 The amended Patent Act effective on January 8, 2019, added a provision allowing the court to enhance damages up to three times the actual damages if the infringement of the patent or exclusive license of another person is deemed to be willful. This new provision is expected to be one of the key issues that draw attention in practice.
126.96.36.199 Calculation of damages
The patentee may seek compensation for any damages sustained as a result of the infringement from any person who has willfully or negligently infringed the patent or exclusive license. The Patent Act provides that an infringer is presumed to have infringed with negligence. The Patent Act recognizes four grounds in assessing damages: (i) loss suffered by the patentee, (ii) the profits earned by the infringer (which is presumed to be the amount of damages suffered by the plaintiff), (iii) reasonable royalty (at the minimum) and (iv) damages determined at the court’s discretion based on an examination of the evidence and a review of overall arguments. Discretionary damages may be awarded if the nature of the case makes it difficult to produce evidence proving the actual damages incurred.
An action for damages resulting from infringement must be filed within three years from the date the plaintiff became aware of the damages caused by the infringement or within 10 years from the date of the infringement, whichever is earlier. The plaintiff must identify the alleged infringer. An action for damages based on an infringer’s unjust enrichment may be filed within 10 years.
188.8.131.52.1 Lost profits
The patentee’s lost profits as the basis for the award of damages is stipulated in Article 128(2) of the Patent Act. This provision was recently amended to ensure fair compensation by clarifying that, on top of lost profits, the patentee may also recover reasonable royalties for the infringing goods that were transferred in excess of the right holder’s production capacity (partial amendment by Law No. 17422, effective from December 10, 2020).
For units that were within the patentee’s production capacity, lost profits may be awarded for the number of units that the patentee would have sold but for the infringement. For these units, the damages may be calculated by multiplying the number of units of the infringer’s transferred articles by the profit per unit that the patentee could have sold in the absence of the infringement (Article 128(2)(i) of the Patent Act). This excludes the number of units the patentee could not sell due to reasons other than the infringement (if any) and the number of units that were outside of the right holder’s production capacity.
While the lost profit approach had been around before the amendment to the Patent Act, the pre-amendment statute did not answer the lingering question as to whether the patentee could also recover damages for the number of units that were outside of their production capacity. In response, the amended Patent Act effective on December 10, 2020, added a provision that, if the transferred amount of the infringer’s articles exceeds the patentee’s own production capacity, the patentee can recover reasonable royalty for the excess (Article 128(2)(ii) of the Patent Act).
This new provision clarified that an amount equivalent to the royalty prescribed in Article 128(5) of the Patent Act can be awarded as damages for the infringing products transferred to third parties that (i) exceed the quantity calculated by deducting the number of units actually sold from the number of units that could have been produced by the patentee or (ii) could not be sold due to any reason other than the infringement. The amendment clarified that a reasonable royalty for practicing the patented invention may be recovered for the above units (except for those for which the patentee could not have earned royalties even without the infringement: e.g., any number of units for which the patentee could not have granted an exclusive or nonexclusive license on the patent or for which the exclusive licensee could not have granted a nonexclusive license on the exclusive license).
184.108.40.206.2 Infringer’s profits
As it is relatively easier to establish the amount of profits gained by the infringer than the actual loss incurred to the patentee from the patent infringement, the infringer’s profit is often presumed to be the patentee’s lost profit. The “profit” here includes all types of profits earned by the infringer through the infringement on the patent right without specific limits. In practice, the net profit theory (i.e., profit = sales revenue – [fixed costs + variable costs]) and the marginal profit theory (profit = sales revenue – variable costs. Unlike the net profit theory, fixed costs are not deducted) are commonly adopted. While less challenging than proving lost profits, an infringer’s profits may also be difficult to prove without proper evidence. This has led courts to resort to awarding discretionary damages, as discussed below in Section 220.127.116.11.5.
18.104.22.168.3 Reasonable royalties
A patentee can recover reasonable royalties that they would have ordinarily received. The patentee should contend and prove (i) the infringement on the patent right, (ii) the sales revenue or quantity of the products manufactured and sold, and (iii) the reasonable amount of royalty that would have been received by the patentee. The patentee is not required to contend and prove specific occurrences of loss.
To determine the reasonable royalty for a particular patent, the following may be considered:
- the objective technical value of the patented invention;
- license agreements with third parties for the patented invention, if any;
- license agreements with the defendant in the past, if any;
- royalties that may be received for similar inventions in the same technical field;
- the remaining term of the patent;
- the type of the patentee’s use of the patent;
- the existence of substitute technologies for the patented invention; and
- the infringer’s profits from the infringement.169
The reasonable royalty provision does not set forth a ceiling for damages. Therefore, when the amount of loss exceeds the reasonable royalty, the patentee may also seek compensatory damages for the excess amount in accordance with the principle of compensation for actual harm.
22.214.171.124.4 Reduced damages
For balanced protection of both sides, the Patent Act protects the patentee by presuming the infringer’s negligence in Article 130 and prescribing the method of calculating damages in Article 128(2)–(5) while providing a protective measure for the infringer in Article 128(6). Article 128(6) prescribes that the court may consider the lack of willfulness or lack of gross negligence by the infringer when awarding damages, so the infringer should contend and prove as such to argue that an award should be reduced. However, even if the amount of damages is reduced accordingly, the reduced amount may not be lower than a reasonable royalty.
126.96.36.199.5 Calculation at the court’s discretion
When the nature of the relevant facts makes it extremely difficult to prove the underlying facts for establishing the amount of damages under any of the preceding grounds, even though the occurrence of harm itself has been acknowledged, the Patent Act allows the court to determine a reasonable amount of damages by taking into account the overall purport of the arguments and other relevant circumstances found based on the evidence, notwithstanding the provisions of Article 128(2)–(6). However, discretionary awards are by no means arbitrary, and most court decisions clearly state the calculation basis even when the amount of damages has been determined at the court’s discretion.
188.8.131.52.6 Enhanced (treble) damages
The amendment to the Patent Act effective on July 9, 2019, included provisions for an enhanced damages system that provides compensation up to three times the amount of damages when an infringement was willful. The term “willful” means that the infringer committed the act while being aware of the fact that the act would result in patent infringement. Under the amended Patent Act, in determining willfulness, the court should comprehensively consider the following factors: (i) whether the infringer is in a superior position to the patentee, (ii) willfulness or how well the infringer was aware of the likelihood that the infringing act would cause harm, (iii) the significance of the harm to the patentee, (iv) the economic benefits to the infringer resulting from the infringement, (v) the frequency and length of the infringing act, (vi) the criminal penalty for the infringing act, (vii) the financial status of the infringer, and (viii) the level of effort the infringer exerted to provide relief.