Mr. Lam (“Plaintiff”) is the owner of Taiwanese patent 420783 (“’783 patent”) titled “Commandless programmable controller”, granted in 2001. The Plaintiff complained that Nyquest Technology had implemented the Plaintiff’s patented technology in a particular software tool product without consent or a license. Nyquest Technology had allegedly infringed five claims in the ‘783 patent.

  The IPC Court as both the trial and the appellate court held that the ‘783 patent was invalid and Nyquest Technology had therefore not infringed. The Plaintiff further appealed to the Supreme Court, which vacated and remanded the IPC Court’s appellate judgment. In November 2023, the IPC Court reviewed the case and again ruled in favor of Nyquest Technology, finding the ‘783 patent invalid and that therefore no infringement had occurred.[1]

  For all five claims—Claims 21, 27, 28, 36 and 37—in the ‘783 patent, the court found that they were not inventive under either reference one (document “State Machine Design” published by AMD company, 1993) combined with reference three (user’s manual for IC W528X published by Winbond company, 1995) or reference one combined with reference two (research paper “VFSM Executable Specification” by F. Wagner, 1992). All three references were disclosed before the filing day of the ’783 patent and they were technical related in the same field, namely the digital circuit controlling method. They correlated to share commonality in technical functions and effect by teaching the modification of output signal via changing the state or mode of a device. Therefore, a person having ordinary skill in the art has the motivation to combine them. In view of the above, although not all of the technical elements in the five claims were anticipated by reference one, either references two or three disclosed the remainder of the elements. Therefore, all five claims were found to be lacking inventiveness and as a result were deemed invalid.

  The Plaintiff, being reluctant to concede, added that the wider acceptance of the claimed invention of the patented technology constituted solid proof of attainment of significant success in business. Such success should be attributed to the technical advancements of the ‘783 patent. Presenting copies of license agreements as evidence, the Plaintiff argued that many third-party IC companies had implemented the patented technology in their products and that these licenses were an indicator of commercial success.

  When the commercial success of an invention applied for a patent was attributed specifically to the outstanding technical features of the invention rather than factors such as sales skills or promotion through advertising, this would indeed contribute to the inventiveness. The Plaintiff alleged that the invention had been licensed to many companies and utilized in several products. However, the fact that the Plaintiff had previously been employed in the globally-renowned toy manufacturing company Mattel Inc. means that the possibility cannot be ruled out that it was his past employment which had equipped him with the necessary negotiating power in the course of IC procurement projects. Taking this personal factor into account, some questions remained as to whether the licensing contracts had been reached entirely due to the outstanding technical achievements, which were obviously non-personal factors. Moreover, the signing of a license contract is a business deal in conjunction with a number of other complex factors. Being no more than essentially a covenant not to sue, a patent license can be agreed, for example, as a result of a pragmatic cost-effect evaluation, where the expenditures of the dispute resolution amount to more than the royalty payments. Entering into a license does not necessarily imply the contribution of an invention’s technical features.

  Furthermore, the Plaintiff was seemingly unable to produce enough compelling evidence in connection between the commercial success and popularity of the invention in the market. According to the Plaintiff’s evidence, both the size and reputation of the third-party IC companies were considerable. They designed and produced a myriad of IC models. The Plaintiff did not present any evidence demonstrating what percentage was accounted for by the invented technology in those models. Even if some microcontroller unit products on the market were embedded with the invented technology, some skepticism remained as to whether this equated to commercial success.

  Most decisively, commercial success is only a secondary factor in determining inventiveness. Inventiveness hinges primarily on the technical quality of a claimed invention and an enquiry as to whether the claimed invention is different yet not easily accomplished in view of the prior art. That is, the question of whether the inventiveness requirement is met is firstly based on a comparison of the claimed invention with a combination of prior art references. As the court emphasized, when the invention is found lacking inventiveness in light of the prior art, an investigation into the secondary factors is deemed no longer necessary.[2] In the present case, since the claimed invention was found not to be inventive in view of two combinations of prior art references, the issue of whether the claimed invention is successful in commercial terms did not play a determinative role in the finding of inventiveness.

  The Plaintiff’s appeal was subsequently dismissed.

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