Estimation of Damages in Patent Infringement

Damage for patent infringement is the foundation of patent system. However, a clear standard of damage estimation has not been established in practice. Consequently it is difficult for the patentees to protect their patents by raising infringement litigations. The purpose of this paper is to establish a predictable approach for estimating damages based on the Patent Act which can precisely measure and compensate the damages. The research methods include literature review, economic analysis, comparative law and case study. At the beginning this paper compares the requirements of damages for patent infringement in the United States, Japan and Taiwan, focusing on the infringement types, the exceptions and subjective requisites. Furthermore, this paper reviews the causation theory in traditional tort law in the view of economic analysis, and reconstructs a theory of proportional causation applicable to patent infringement. In comparative law, two methods to estimate damages, lost profits and reasonable royalty, in the United States and Japan are demonstrated. Finally, this paper shows by case study that in Taiwan how the courts apply the methods of damage estimation provided in the Patent Act. And suggestions are porposed based on the causation theory and comparative law. This paper proposes four suggestions as follows: First, the courts should recognize that “the balance method” is the inversion of burden of proof about causation and thus is different from “the real damages method”. And the establishment of causation should be strengthened. Second, the legal base of “the benefits method” should be clarified. It should be amended as presumptive rule if based on principle of damage, or it should be limited to intentional infringement if based on “management of affairs without mandate”. Third, when assessing the reasonable royalty, the courts can refer to the factors proposed in the United States and Japan cases. And the reasonable royalty should be the minimum of damages. Forth, as to the punitive damages, the courts can establish a standard of judgement for intentional infringement based on the infringement notice and legal advice from counsel.