Amendments to the Trademark Act and the Design Protection Act effective from 20 October 2020 have added support for treble damages in certain infringement scenarios. The amendments are effective immediately and apply to acts of infringement conducted after 20 October 2020.
Prior to the amendments, damage compensation available to rights holders was generally calculated based on:
- profits lost by the rights holder due to the infringement;
- profits obtained by the infringer based on the infringement; or
- ordinarily expected royalties.
However, this system has flaws. Namely, in the case of the first bullet, damages are limited to the rights holder's sales capacity (ie, the damages cannot exceed that which the rights holder could have sold, even if the infringer committed significantly more infringement) – this is problematic especially where the infringer is a larger-scale entity than the rights holder. In the case of the second bullet, damage calculation can be affected by a non-cooperative infringer providing insufficient financial data.
These amendments follow similar changes to the Patent Act and the Unfair Competition Prevention and Trade Secret Protection Act relating to wilful patent infringement and trade secret misappropriation which came into effect in July 2019 (for further details please see "Patentee protection strengthened in series of revisions to patent law").
There are also changes to the way that royalties are determined in damage calculations and the statutory damages available in trademark infringement cases. This article examines the amendments in detail.
Enhanced damages (trademarks and designs)
The new provision allows the courts to multiply the damages calculated by one of the existing methods up to threefold in cases of intentional (wilful) infringement, going some way to alleviate the inherent shortcomings described above. In determining the multiplier, the following factors must be considered:
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Trademarks |
Designs |
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The degree to which the distinctiveness or reputation of the infringed trademark has been tarnished. The degree of intent or the extent to which the infringer was aware of the potential damage. The amount of damage suffered by the trademark holder or exclusive licensee due to the infringement. The economic benefits gained by the infringer. The period and frequency of the infringement. The fine for infringement. The infringer's economic status. The degree of effort that the infringer made to alleviate damage. |
Whether the infringer is in a position of superiority. The degree of intent or the extent to which the infringer was aware of the potential damage. The amount of damage suffered by the design rights holder or exclusive licensee due to the infringement. The economic benefits gained by the infringer. The period and frequency of the infringement. The fine for infringement. The infringer's economic status. The degree of effort that the infringer made to alleviate damage. |
In trademark infringement cases, wilfulness is presumed when the fact of trademark registration is displayed. Specifically, any person who has infringed trademark rights or the exclusive licence of another person who indicates that the trademark in question is registered will be presumed to have been aware that the trademark was already registered, in relation to their infringement (for further details please see "IP marking: risks and benefits").
Royalty rate used in damage calculation (trademarks and designs)
There has also been criticism aimed at the ordinarily expected royalties damage calculation method in that it is not always possible or appropriate to determine an ordinarily expected royalty (eg, where there is no standard royalty rate or where an average rate may not apply to the case in question).
The amendment changes this wording from "ordinarily expected" to "reasonably expected", allowing for a calculation based on factors relevant to the specific case, rather than being based on existing precedent.
Statutory damages (trademarks)
Instead of calculated damages, trademark rights owners have been able to claim statutory legal damages since 2011 up to a capped limit W50 million (approximately $42,500). This offers a way to claim damages from an infringer with a reduced burden to prove actual monetary damages incurred, instead allowing the court to determine the appropriate compensation based on the facts of the case.
In consideration of changing market conditions and inflation, this cap has now been raised to W100 million (approximately $85,000) in cases of negligent infringement and up to W300 million (approximately $255,000) in cases of intentional infringement.
