Calculation of Damages for Joint Trademark Infringement: An Analysis of Taiwan Supreme Court Decision 114 Tai Shang 452
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| Calculation of Damages for Joint Trademark Infringement: An Analysis of Taiwan Supreme Court Decision 114 Tai Shang 452 | |||||||||
| I. | Statement of Facts | ||||||||
| Burberry Group plc, a British company, is the registered proprietor of the "BURBERRY" trademarks at issue, which are designated for use on leather goods, handbags, scarves, watches, and similar products. Since December 2013, Wanshang Technology Corporation, through "ETmall Shopping Network" and "ETmall Shopping Channel," which is owned by Eastern Home Shopping & Leisure Co., Ltd., engaged in the long-term sale of counterfeit goods bearing the “BURBERRY” trademarks to consumers. In January 2015, law enforcement authorities seized substantial quantities of counterfeit bags, scarves, watches, and other goods bearing the subject trademarks at Wanshang Technology's premises. Burberry brought claims against Eastern Home Shopping and Wanshang Technology seeking damages for trademark infringement and compensation for reputational harm caused by the infringement. |
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| II. | Core Legal Issues Presented | ||||||||
| In this case, Wanshang Technology served as the manufacturer of the counterfeit goods, while Eastern Home Shopping served as the retailer. They jointly participated in the infringement, thereby causing harm to Burberry and establishing joint tortfeasorship. | |||||||||
| 1. | Calculation of "Profits Derived" for Damages | ||||||||
| §71I② of the Taiwan Trademark Act provides: " Damages demanded by the proprietor of a registered trademark may be calculated according to any of the following: ... (2) The profit earned by the infringer as a result of trademark infringement; if no proof on costs or necessary expenses can be furnished by the infringer, the total amount of income from selling the infringing goods shall be presumed to be the amount of profit" | |||||||||
| The legislative purposes underlying this provision include: | |||||||||
| (1) | Alleviating the trademark owner's burden of proof: In intellectual property infringement cases, trademark owners often face difficulty proving actual damages, and thus may rely on the infringer's derived profits as a proxy for the owner's losses. | ||||||||
| (2) | Disgorgement of ill-gotten gains: Preventing infringers from retaining profits obtained through infringing conduct, thereby achieving deterrent effects. | ||||||||
| (3) | Effectuating compensatory relief: Providing an alternative method for calculating damages where the trademark owner cannot readily establish actual losses. | ||||||||
| Pursuant to§71 I②, the formula for calculating an infringer's derived profits is: Profits Derived = Sales Revenue - Costs - Necessary Expenses. "Costs" include manufacturing costs, procurement costs, and similar expenditures, while "necessary expenses" encompass selling expenses, administrative expenses, and other outlays directly related to the infringing conduct. However, where the infringer cannot provide evidence of its costs or necessary expenses, the total revenue from sales of the goods shall be deemed the profits derived. The Intellectual Property and Commercial Court adopted an "individual calculation" approach, reasoning that because Eastern Home Shopping purchased counterfeit goods from Wanshang Technology, "Eastern Home Shopping's payments to Wanshang Technology for counterfeit goods" constituted costs that should be deducted from derived profits under the formula. The Supreme Court held that in cases of joint infringement, "profits derived" refers to "the aggregate profits obtained by all infringers through the infringing conduct." In this case, the "costs"—"Eastern Home Shopping's payments to Wanshang Technology for counterfeit goods"—were also profits derived by Wanshang from the infringing conduct. The Supreme Court explicitly stated: "Where multiple persons jointly infringe trademark rights, each infringer bears full liability to compensate the trademark owner. When calculating damages based on profits derived from the infringing conduct, the calculation must be based on the total profits obtained by all joint infringers, rather than according to the internal allocation of liability or benefit ratios among the infringers". Accordingly, under the Supreme Court's holding, Wanshang Technology and Eastern Home Shopping bear joint and several liability for the total profits from sales of counterfeit goods. Eastern Home Shopping's payments to Wanshang Technology for counterfeit goods, being part of the profits derived from infringement, are not subject to deduction. The internal allocation of damages liability between Eastern Home Shopping and Wanshang Technology is immaterial to Burberry. |
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| 2. | Recognition of Non-Pecuniary Damages for Juridical Persons | ||||||||
| (1) | Grand Chamber's Unified Jurisprudence | ||||||||
| The Grand Chamber of the Supreme Court, in Decision 112-Tai-Shang-Da-544, established the following unified rule of law: "Due to their nature, juridical persons may recover damages under§195 I of the Civil Code, to the extent they have suffered harm that materially affects achievement of their organizational purposes and cannot be quantified in monetary terms, and may claim compensation in an appropriate amount". This holding represents a significant departure from the traditional view that "juridical persons cannot claim non-pecuniary damages because they lack the capacity to experience mental suffering." Under the Grand Chamber decision, a juridical person claiming non-pecuniary damages must satisfy the following elements: |
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| A. | Material impact on achievement of organizational purposes: | ||||||||
| The claimant must establish that reputational harm has actually affected the juridical person's operational objectives, such as loss of customers, revenue decline, diminished market position, and similar consequences. | |||||||||
| B. | Inability to quantify damages in monetary terms: | ||||||||
| This does not mean damages are impossible to calculate in any amount, but rather that they are difficult to quantify with precision—for example, impairment of brand image or erosion of consumer confidence. | |||||||||
| C. | Adequate causal nexus: | ||||||||
| The impact on organizational purposes must bear a sufficient causal relationship to the tortious conduct. | |||||||||
| (2) | Application to the Instant Case | ||||||||
| Burberry asserted that the inferior quality of the counterfeit goods damaged its reputation for "fashion, elegance, and superior quality" cultivated in the luxury goods market. If Burberry can establish that: (i) circulation of counterfeit goods has in fact damaged the BURBERRY brand image; (ii) such brand image impairment affects its market positioning and operational objectives; and (iii) this harm is difficult to quantify precisely in monetary terms—then it may recover non-pecuniary damages. However, the determination remains subject to case-by-case adjudication by the trier of fact. Accordingly, the Supreme Court did not reach a definitive conclusion on this issue, but rather remanded the entire case to the Intellectual Property and Commercial Court for further proceedings. | |||||||||
| III. | Conclusion | ||||||||
| As e-commerce continues to flourish, trademark infringement has grown increasingly complex, with cross-border infringement and platform liability emerging as persistent issues. The legal principles established in this decision will serve as an important reference for adjudicating similar cases in the future. Through clear legal standards and rigorous enforcement, we may hope to construct a robust intellectual property protection regime that promotes innovation and fair competition. | |||||||||
| Our Observations & Practical Tips: | |||||||||
| 1. | Strategic Advantage for Brand Owners: | ||||||||
| Maximizing Recovery The ruling prevents joint infringers from "shifting profits" through internal transactions. When filing claims against platforms and suppliers, brand owners can now target the total gross revenue if cost evidence is insufficient. This significantly increases the potential damages award in e-commerce infringement cases. | |||||||||
| 2. | Reputational Damages for Corporations: | ||||||||
| Protecting Brand Equity This case reinforces that corporate brand equity is more than just numbers. To successfully claim non-pecuniary damages, brand owners should proactively document the decline in brand prestige or erosion of luxury positioning caused by low-quality counterfeits, as such qualitative harm is now judicially recognized. | |||||||||