Entegris v. Gudeng Precision
– One of the Highest Damage Awards for
Patent Infringement Lawsuit
published on 23 May 2019
In April of 2019, Taiwan IP Court released a press statement after ruling a patent infringement with a damage award with an amount of more than NTD 978,000,000, equivalent to about USD$ 31,600,000. The court also granted a permanent injunction against the defendant for any act of sale, offer for sale, use, or importation of the patented products. As for the products of infringement by the defendant in inventory, they were ordered for confiscation and destruction.
Entegris, Inc., US semiconductor manufacturing system supplier, filed a law-suit in 2015 against the Taiwanese competitor Gudeng Precision Industrial Co., Ltd. for patent infringement. The patent in dispute by Entegris, I317967 (’967) is about the “reticle carrier and an associated method using the same,” whereas the product at issue is a EUV pod used in photolithographic semiconductor processing. During the suit, Entegris raised its damages claim up to NTD 1,000,000,000, and further sought a punitive damage in triple of the loss in view of the willfulness by the defendant.
Though the defendant attempted to raise an invalidity defense but was denied by the court. Patent claims challenged were, in all, considered to be novel and inventive, in view of the arts at time of priority date. Besides, the court found Gudeng's products not only read on more than one of ‘967’s claims but determined the infringement by equivalence on some patent claims as well.
Entegris and Gudeng are engaged in direct competition in the business of mask handling equipment such as a reticle box, which rests in a rather small and specific position within the entire wafer industrial chain. A reticle carrier is a technical solution that safely and cleanly stores and transports the reticle after it is manufactured to reduce its chance of being damaged. Hence, it is a critical strategy in semiconductor manufacturing. Being in a shoulder-to-shoulder competition in the industry, it implies that Entegris and Gudeng should have more comprehensive information about the innovative capacity or even patents of each other. The defendant, Gudeng, should have exercised a higher degree of due care, and known about the patents granted or at least had motivation to stay alert for IP development by Entegris. Since Gudeng had been continuously engaging in the sales and manufacture of infringement even after the suit was initiated, the court found Gudeng willful.
As for the amount of damages, the court indicated specifically that the damage calculation would not take the ‘967 patent’s contribution percentage in the product value into account. The structure of a reticle box at issue, which the ‘967 directs to, is quite simple for it is composed of some elements, and the court found the technical features of the patent at issue are attached to and cannot be deviated from the entire product, namely, the reticle box. Besides, Gudeng is selling the entire reticle box as a unit instead of any specific component of the same. Therefore the ‘967 patent which embodies the entire reticle box is significant to its function and structure. Consequentially, the damage calculation was made based on the sales figures of the entire reticle box.
Finally, the court ruled for 1.5 fold with Gudeng’s gross profit from its sales summed up for approximately 10 years, with further consideration of Gudeng’s willfulness in the act of infringement, the duration of infringement, and competition status, etc. As such, the sum has come up to more than NTD 978,000,000, yet the case remains appealable.
Many are disappointed for the court did not determine the contributive percentage of the patent at issue commensurable to the sales figures of the product at issue. In fact, the profit of an enterprise may result from many factors including refined control of manufacturing process, lower cost of raw materials, improved sales channels, efficient financial operation, and so on. Instead of merely viewing the patented technology, to reckon the damage amount of the patent infringement based upon the gross profit of the infringing products is an over-estimation of the patent value.
The civil law of Taiwan is rooted in the fundamental principle of loss recovery, suggesting that the purpose of a damage award is to make up for what have been lost so as to resume to the status as if no infringement has ever occurred. If two companies of different sizes are engaged in an infringement suit, the loss of plaintiff may not necessarily be the same as the gain of defendant. An award of the entire profit gain by the defendant to the plaintiff would either be too much a compensation for plaintiff loss, or too less than enough for compensation. Therefore, an award based on the infringer’s entire profit gain might have deviated from the principle of loss recovery.
Actually, the contributive percentage of a patent serves to fairly evaluate the value of a patent rendered by a technology or product improvement. Without the patent, the infringer can also make a reticle box, and the only difference may be that the box won't have such a design embodied with technological advancement. Hence, if the contributive percentage of a patent in a product is excluded, it would have unreasonably awarded the added value both from the patent at issue and also from the existing art to the plaintiff.
The defendant, Gudeng, believes the finding of the court defected, and has sought legal remedy with further appeal. With respect to the permanent injunction and the order of product destruction, Gudeng emphasizes, in its public statement that the order will only become enforceable until the case is final and binding. At current stage, Gudeng will remain its regular operation, and will not destruct their products on its own. However, the stock price of Gudeng plunged on the day when the court released its ruling. Soon after, the stock price has gradually rebound to the first quarter average as of April.
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