Chroma v. ITECH, ILOAD & Z-FONE:
How to Determine Damages due to the Act of Offering for Sale[1]

Chroma ATE Inc. (“Chroma”) is a Taiwan-based manufacturer of precision testing and measurement instruments. Chroma purchased the accused product in China and conducted an infringement analysis, and then accused ITECH Electronic Co., Ltd. (the manufacturer, based in Nanjing, China, hereinafter “ITECH”), ILOAD Electronic Co., Ltd. (the Taiwan-based parent company of ITECH, hereinafter “ILOAD”) and Z-FONE Technology Co. Ltd. (the distributor in Taiwan, hereinafter “Z-FONE”) of infringing its patent at issue (patent no. TW I488197). While the IP Court stated that the accused product falls within the literal scope of the patent at issue, the IP Court ruled in February 2022 that the damages claimed by the plaintiff should be dismissed because the infringement was merely an act of offering for sale.

When the Court has confirmed that there is an infringement, the next step is to calculate the amount of damages, and the person claiming damages bears the burden of proof as to the damages he or she suffered as a result of the infringement. According to Article 58 of the Taiwan Patent Act, “the patentee of an invention patent has an exclusive right to prevent others from exploiting the invention without the patentee’s consent (“exclusive right clause”); where the invention is a product, exploiting of [that product] means the acts of making, offering for sale, selling, using or importing that product for the aforementioned purposes (definition of exploitation clause).” In cases where an act of exploitation only involves offering for sale, there are divided opinions in precedents over whether damages can be claimed.

In this case, the IP Court said that the accused product purchased by Chroma in China falls within the literal scope of the patent at issue. However, Chroma could not prove that the same product could be purchased in Taiwan from any of the defendants (although there was an introduction of the accused’s serial products on the homepage of Z-FONE) or that Z-FONE had ever sold other products of ITECH. From the evidence submitted by Chroma, the packaging of the accused product came with a certificate of calibration. The contact information on the certificate at issue showed that ITECH was based in Taiwan; thus, the Court may infer that ITECH had offered for sale in Taiwan. However, while ITECH and ILOAD are from the same business group, it is hard to further prove that ILOAD had ever advertised the accused product on its company webpage, or even sold the accused product. Besides, the defendants argued that the products sold in Taiwan and in China are different because it is common for manufacturers to customize their products according to the availability of raw materials, market orientation, or regulatory compliances in various countries. The IP Court accepted the defendants’ argument and ruled that ITECH and Z-FONE’s act of introducing ITECH’s products on their company webpage only constitutes an act of offering for sale in Taiwan.

Nevertheless, according to Article 96(1) of the Patent Act, “[a] patentee of an invention patent may demand a person who infringes or is likely to infringe the patent right to stop or prevent such infringement”; the court stated that there are justified reasons for considering that ITECH and Z-FONE may exploit the patent in the future in Taiwan as a manufacturer and a distributor, respectively. Therefore, the IP Court ruled that the defendants shall not make, offer for sale, sell, use or import the accused product for the aforementioned purposes in Taiwan.

With regard to the damages claimed by the plaintiff, according to Article 216 of the Civil Code, “the compensation shall be limited to the injury actually suffered and the interests which have been lost.” In addition, according to Article 179 of the Civil Code, “[a] person who acquires interests without any legal grounds and prejudice to the other shall be bound to return it.” When claiming damages, the claimer should prove not only the infringer's willfulness or negligence but also the damage he or she caused to the claimer. In practice, those who are in support of not awarding damages argue that if the alleged infringers only conduct an act of offering for sale, the patentee has not suffered any damages or loss of profits, so there is no reason to claim for damages. However, it is still possible to demand a person who is likely to infringe the patent right to stop or prevent such infringement.

As a result, there is no justified reason for Chroma to claim damages merely because of the defendants’ act of offering for sale in this case.

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