Chen v. ChengYi: Assessment of Damages in Default Judgement

Taiwan civil litigation adopts the adversary system which requires the parties themselves to provide arguments and evidence. Nevertheless, if one of the parties fails to respond to a court summons and does not appear in court to make an oral argument, the court may, upon motion or ex officio, enter a default judgment. A recent judgment[1] shows how the Intellectual Property and Commercial Court (“IPC Court”) took the arguments of the appearing party into consideration and determined the amount of damages.

Chen accused ChengYi Ltd. Co. (“ChengYi”) of manufacture and sale of the accused product which infringed her design patent at issue (patent no. D208862). Pursuant to Article 96(1)-(3) of the Patent Act applied mutatis mutandis in Article 142 of the said Act, Chen sought monetary damages and an injunction against further infringement of the design patent right. With regard to the amount of damages, Chen requested that it should be determined based on ChengYi’s total sales and tax return as the primary claim, or based on the licensing agreement between a third party and her as the secondary claim. If the evidence provided was not sufficient to prove the damages claimed, Chen would request that the IPC Court determine the amount of damages according to its own assessment while taking all circumstances into consideration.

However, if a defendant who has been legally summoned does not appear in court, there are provisions of the Code of Civil Procedure that apply to this situation. Article 385(1) of the Code of Civil Procedure reads, “[w]here one of the parties fails to appear at the oral-argument session, the court may, on the appearing party's motion, enter a default judgment based on the appearing party's arguments; where the party who fails to appear is summoned and fails to appear again, the court may also on its own initiative enter a default judgment based on the appearing party's arguments.” In other words, the court may enter a final judgement based on only the evidence presented by the appearing party. In addition, pursuant to Article 280(3) of the Code of Civil Procedure, a fact will be deemed admitted if a party neither appears in the oral-argument session nor submits a pleading to dispute such fact alleged by the opposite party.

Applied to the present case, ChengYi had been legally summoned but failed to appear in the oral-argument session without any justifiable reason, so the IPC Court entered the default judgement upon Chen’s motion.

First, based on the evidence presented by Chen, the IPC Court held that the accused product fell within the scope of the design patent at issue. Moreover, Chen had authorized her attorney to issue a cease and desist letter to ChengYi, but there was no action taken by ChenYi to respond to the letter. The IPC Court stated that ChengYi was at least negligent about the infringement and should be liable for damages.

When determining the amount of damages, according to the primary claim (i.e., based on ChengYi’s total sales and tax return), the IPC Court took into consideration the scope of ChengYi’s registered businesses, and found that ChengYi engaged in a number of business activities other than that related to the accused product. Chen simply claimed that the total sales of ChengYi were relevant to the sale of the accused product, but failed to provide persuasive evidence showing this to be the case. Accordingly, there was no reason to use ChengYi’s average monthly sales, which were around TWD 6 million, as grounds for determining the amount of damages.

Moving on to the discussion of the secondary claim, Chen provided the licensing agreement between the third party and her, and requested compensation based on the annual royalty amount of NTD 180,000. The IPC Court believed that it was reasonable to award damages by an amount equal to this annual royalty.

Comments

In this case, it is worth discussing how the IPC Court determined the amount of damages. Based on the fact that Chen had sent the cease and desist letter to ChengYi but did not receive any response, the manufacture and sale of the accused product could be deemed willful infringement. Nevertheless, the IPC Court simply awarded damages by an amount that was equal to the annual royalty paid by the third party. That is, the awarded amount of damages would have been the same if the defendant had entered into a licensing agreement with Chen.

According to Article 97(2) of the Patent Act, “[s]ubject to the preceding paragraph, where the infringement is found to be intentionally committed, the court may, upon request and on the basis of the severity of the infringement, award damages greater than the loss suffered but not exceeding three (3) times of the proven loss.” If the plaintiff had failed to claim a higher amount in her favor, she could still have claimed for damages not exceeding three times of the proven loss. However, in the present case, it seems that Chen did not make such a claim in the compliant, or increase the amount of damages claimed in the trial proceedings, so the IPC Court had no discretionary power to award punitive damages according to the principle of party disposition.

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