Fact

MERCEDES-BENZ GROUP AG (hereinafter “BENZ”), former Daimler AG, claimed that the headlight products, including product models “440-1179MLD-EM”, “440-1179MRD-EM”, ”340-1133L-AS”, “340-113R-AS” (hereinafter “disputed products”), manufactured by DEPO Auto Parts Ind. Co., LTD. (hereinafter “DEPO”) infringe Taiwan design patent D128047 (hereinafter “disputed patent”) owned by BENZ and requested compensation of NT$60 million according to Article 142 of the Patent Act, Article 96, 97 of the Patent Act, Article 184 of the Civil Act, and Article 23 of the Company Act.

Brief Summary of Argument by DEPO

1. The disputed products do not infringe on the disputed patent right.
2. The disputed patent is invalid.
3. BENZ violated Article 9, Article 20, and Article 25 of the Fair-Trade Act and Article 148 of the Civil Act (namely, the principle of good faith), based on BENZ’s refusal of license the design patent right to DEPO and unfairly “locked in” the car selling market (main market) and the car repair market (the aftermarket).

However, the Intellectual Property Court (hereinafter “IP court”) is not convinced by the argument of DEPO to decide in favor of DEPO. The IP court thinks that the appearances of the disputed products are similar to the disputed patent; the disputed patent is valid based on the evidence provided by DEPO; and the BENZ is not obligated to grant a license to DEPO. Moreover, even though the car-selling main market is somehow locked in the repairing aftermarket, the market share of BENZ automobile is merely 6-8%, where the competition restriction in the aftermarket is impossible. Such a low market share of BENZ represents that BENZ competes fiercely in the main market, so that BENZ does not restrain competition to violate the Fair-Trade Act.

Judgment

The IP court rendered the first-instance judgment in August 2019 to order DEPO to stop infringement and DEPO and its person in charge to jointly pay BENZ NT$30 million. After that, both parties appealed.

Recently, the appeal against the above-mentioned judgment is heard and decided by the court of the second instance. The Intellectual Property and Commercial Court (former Intellectual Property Court) made the second-instance judgment on July 14, 2022 to order DEPO to stop infringement and DEPO and its person in charge to pay a guarantee of NT$18,123,279 to BENZ, to avoid provisional execution. DEPO filed an appeal to the court of the third instance on August 15, 2022.

Aftermath

DEPO is one of the greatest companies in the compatible automotive parts industry Therefore, the judgment does not only impact the interest between DEPO and BENZ, but also the entire the automotive compatible parts industry in Taiwan and even the world. Once the judgment is unfavorable against DEPO, other patentees are likely to be encouraged to follow the example to initiate an infringement suit, and the risk of being sued for infringement that is taken by other similar parts companies will be significantly increased. Then, the compatible automotive parts industry would be hard to survive in Taiwan, the industry may move to China, Malaysia, or other countries with the repair clause in their design law.

Therefore, the discussion of introducing the repair clause becomes popular and is particularly concerned. However, the pros and cons of the clause are not easy to be balanced. In case, the repair clause is passed and introduced into the patent law, the protection provided by the design patent will be extremely restricted, which may probably reduce the inflow of foreign investment. Additionally, the repair clause can merely protect the compatible automotive parts manufacture that happens in Taiwan. After compatible automotive parts are exported, the infringing risk still exists because of the territoriality of patent law.

Before everything is settled down, the design patent for protecting the appearance of the component of the complex product (e.g. car) is still extremely important and valuable to the designer of the complex products. On the other hand, compatible automotive parts manufacturers have to aggressively find a way to transform or design around to avoid infringing the design patent of the original component.