Legal entities may also claim damages from trademark infringers for non-pecuniary harm

【QUESTION】

Can a legal entity, which does not experience emotional or mental distress, claim non-pecuniary damages from a trademark infringer?

【The Decision】

A legal entity is an organization established in accordance with the law and possessing legal capacity (personality). Except for restrictions imposed by law or inherent to its nature, it may enjoy rights and bear obligations (see Articles 25 and 26 of the Civil Code). While a legal entity cannot exercise the special personality rights listed in Article 195, Paragraph 1 of the Civil Code that are exclusively held by natural persons—such as the rights to life, body, health, freedom, and portrait—the right to reputation is not exclusively reserved for natural persons.

However, in today's society—characterized by evolving social dynamics, changing transaction patterns, the transformation of mass media, rapid advancements in information transmission methods, the internationalization and diversification of corporate operations, and the increasing scale of organizations—the extent and duration of damage caused by reputational harm are significantly greater than in the past. Such damage can even jeopardize the successful achievement of a corporation's established objectives. Therefore, the legal protection of corporate reputation is increasingly important, and the law should provide comprehensive safeguards for these personality rights.

However, since legal entities do not possess sensory perception and are fundamentally different from natural persons, the nature of the non-pecuniary damages they suffer also differs. Therefore, based on their characteristics, damages should be limited to those that significantly impact the achievement of their established purpose and cannot be quantified in monetary terms. They should be entitled to claim appropriate compensation under Article 195, Paragraph 1 of the Civil Code to balance the protection of personality rights with the legislative intent to prevent abuse and to deter similar infringements from recurring. This position was unified in the legal opinion issued by the Grand Court in case 112 Taishan Da Zi No. 544.

Regarding Burberry's claim that EHS Company and two others sold inferior-quality products, severely damaging its long-established reputation for fashion, elegance, and superior quality in the high-end luxury market, and its request for EHS Company and the others to pay non-joint liability for non-pecuniary damages amounting to NT$10 million in principal and interest, the validity of this claim certainly warrants further investigation. The lower court held a different view, stating that since Burberry is a legal entity, it could not claim non-pecuniary damages under Article 195, Paragraph 1 of the Civil Code, which remains a topic of debate.

【Ching-I Lu’s comment】

1.        The issue in this case is whether a trademark owner who is a legal entity can claim non-pecuniary damages from a trademark infringer under Article 195, Paragraph 1 of the Civil Code. The lower court determined that a legal entity does not experience mental anguish and, therefore, cannot seek non-pecuniary damages.

2.        The Supreme Court clarified in this case that, although legal entities do not possess rights such as life, body, health, freedom, and portrait, their reputation is not solely the domain of natural persons. Since legal entities lack sensory and cognitive abilities and are fundamentally different from individuals, the nature of the non-pecuniary damages they incur also varies. Therefore, the damages should be limited to those that significantly impact their established purposes and cannot be quantified in monetary terms. As a result, legal entities are allowed to claim a corresponding amount of compensation under Article 195, Paragraph 1 of the Civil Code.

3.        The opinion of the Supreme Court in this case was based on the Grand Court's ruling, 112 Taishan Da Zi No. 544, issued on July 3, 2025. This ruling addressed the legal question: "Can a legal entity that suffers damage to its reputation or credit due to another party's incomplete performance claim non-pecuniary damages under Article 227-1 of the Civil Code, in accordance with the provisions of Article 195, Paragraph 1, First Paragraph?"

The Grand Court's ruling, 112 Taishan Da Zi No. 544, established a clear legal opinion on this matter: If a legal entity suffers damage to its reputation or credit due to tortious actions or failure to meet a debt obligation—resulting in significant harm that affects its ability to achieve its established goals and cannot be measured in monetary terms—it is entitled to seek compensation equivalent to the loss. This is in accordance with Article 195, Paragraph 1 of the Civil Code. The compensation claim cannot be denied solely because the legal entity does not experience mental anguish.

4.        If we adhere to the Supreme Court's opinion in this case, can all trademark owners representing legal entities in trademark infringement cases seek non-pecuniary damages? In trademark infringement cases, what defines "damages that significantly impact the achievement of their established purpose and cannot be quantified in monetary terms"?

5.        Upon review, it was found that the amendment to Article 71 of the Trademark Act in 2011 removed the third paragraph, which was previously Article 66, concerning damages for business reputation. The original third paragraph stated, "When the business reputation of a trademark owner is diminished due to infringement, the trademark owner may also claim compensation for an equivalent amount." As a result of this deletion in the 2011 amendment, it seems that claims for damages related to trademark infringement are now limited to monetary compensation only.

6.        The Supreme Court's ruling in this case, referencing the Grand Court Ruling 112 Taishan Da Zi No. 544, determined that Burberry, the trademark owner, could seek non-pecuniary damages for reputational harm caused by the sale of inferior products by EHS Company and others. This decision is based on Article 195, Paragraph 1 of the Civil Code. However, it appears to contradict the principles established by the amendment to the Trademark Act in 2011.

7.        Additionally, before the amendment of the Trademark Act in 2011, the criteria for claiming damages for business reputation under Article 66, Paragraph 3 of the former Trademark Act specifically focused on whether the trademark owner's business reputation was diminished due to trademark infringement. The Supreme Court ruling (99 Taishan No. 1180) clarified one of these criteria as "whether consumers' social evaluation of the trademark owner's genuine products has decreased."

8.        In this trademark infringement case, the Supreme Court ruled that a legal entity can claim reputation damages under Article 195, Paragraph 1 of the Civil Code only if the damages significantly impact its established purpose and cannot be quantified in monetary terms. This raises the question of how it relates to the previous standard of practice, which considers whether the social evaluation of the trademark owner's genuine products has been diminished in the eyes of consumers. Is the former considered non-pecuniary damage, while the latter is deemed pecuniary damage? How will these distinctions be applied in future trademark infringement cases? Further insights will depend on more specific practical cases.