In 2023, Japan and the Association of Southeast Asian Nations (ASEAN) celebrated 50 years of friendship and strong economic relations. Thailand, being a core member of ASEAN, sees Japan as a critical economic partner over the decades, with Japan being Thailand’s third most important trading partner, after China and the US.
Japanese businesses have heavily invested in various business sectors in Thailand. With a strong intellectual property (IP) policy being at the core of many businesses’ economic policy, Japanese companies have also made large investments in advertising and marketing their brands to Thai consumers over the years, as well as protecting their IP by registering the brands with the government authorities.
Naturally, then, when instances of infringement occur that threaten to tarnish the reputation of a business and cause economic harm, it becomes imperative to stop the infringing activity through deterrent measures, including injunctions and criminal penalties. Equally important, however, is to recuperate the economic harm suffered through claiming damages from the infringers at the court using civil remedies. But obtaining adequate damages from the courts in Thailand resulting from infringement is not so straightforward, and therefore the IP owners need to be aware of various factors, including the law on damages, the types of damages granted by the courts, and alternative remedies.
This article therefore intends to acquaint businesses and trademark owners that face trademark infringement problems in Thailand with the following three aspects regarding seeking damages in trademark litigation:
A legal overview of damages under the trademark law;
The difficulties trademark owners face in claiming adequate compensation; and
Alternative solutions, such as in-court mediation procedures.
Overview of damages under the Thai Trademark Act
The Thai Trademark Act grants an exclusive right to a registered owner to use the registered trademark in respect of the registered goods or services in Thailand. A person who infringes this exclusive right can be subject to civil and criminal penalties, by way of injunctions, a fine, and/or imprisonment, as stipulated under the law. The act also allows the owner of an unregistered trademark to initiate legal proceedings against unauthorised use of such trademark on the ground of passing off.
However, the Trademark Act neither clearly defines what activities conducted by an infringer constitute an infringement or a passing off, nor does it contain a provision stipulating the types of damages the trademark owner can claim in an infringement lawsuit, unlike the Thai Copyright Act and the Thai Patent Act, which clearly specify the types of claimable damages for acts constituting copyright and patent infringements, respectively.
To claim damages in litigation, the trademark owners must therefore rely on tort law and civil procedure law, which is determined by the court under Section 438 of the Civil and Commercial Code and simply states: “The Court shall determine the manner and the extent of the compensation according to the circumstances and the gravity of the wrongful act. Compensation may include restitution of the property of which the injured person has been wrongfully deprived or its value as well as damages for any injury caused.”
Difficulties in obtaining adequate compensation
As stated in the provision above, the court determines the extent of any compensation to be granted based on the circumstances and gravity of each case, thereby having a high discretionary power in calculating the amount it deems appropriate. The court only grants ‘actual damages’, meaning the damages that are a direct reflection of the infringing act. Hence, the trademark owners must prove that damages were sustained due to the infringing activity, as well as the amount of damages they suffered as a direct consequence of the infringing activity.
If the trademark owner is unable to prove the amount of damages suffered as a result of infringement, the court may award damages it deems appropriate, but not more than the amount claimed in the lawsuit, as the law prohibits the court from giving a judgment or an order for anything beyond what is claimed in the complaint. For this reason, the court does not grant punitive damages in infringement lawsuits, but only actual damages that the trademark owner can prove that they have suffered.
Some of the damages that are generally claimed in an infringement lawsuit include lost profit, reasonable royalty, corrective advertising, price erosion, damages to reputation and goodwill, and attorney fees. Apart from attorney fees, the owner must be able to prove the damages suffered for each type of damages claimed.
The maximum rate for attorney fees at the Central Intellectual Property and International Trade Court (IPIT Court) is fixed at 5% of the claimed amount, and a maximum of 3% at the Court of Appeal for Specialised Cases and the Supreme Court, respectively, under the Thai civil procedure law. The court has the power to grant the attorney fees at the amount it thinks fit, but not over such maximum rate. The court may decide that the losing party is liable for all costs or each party is liable for their own part of the costs.
Damages for loss of reputation and goodwill are difficult to quantify and prove for a brand owner. Hence, the court may use discretionary power to grant an appropriate amount, which may be lower than claimed.
To claim lost profits, the trademark owner may need to demonstrate all the potential causes for their lost sales, other than through the conduct of the infringer, requiring the owner to provide clear-cut evidence to demonstrate the exact amount of damages. The stringent requirement is further exacerbated for the brand owner as they cannot use the infringer's profits gained as a benchmark.
The trademark owner may use specific methods such as collating the volume of product sales that they missed out on due to infringement, net profit from the sales that the owner could have expected if not for the infringement, etc. But if the trademark owner cannot sufficiently prove that the infringer’s activity caused actual damages, the court may not grant any damages or compensation. Consequently, the onerous burden of proving damages in an infringement lawsuit, especially if the infringer is not a ‘big fish’ but a small or medium-sized enterprise, can be troublesome and discouraging for brand owners, and deter them from using civil litigation to claim damages.
There have been several IPIT Court decisions in which the court granted significantly lower compensation than claimed by the petitioner or, in some cases, refused to grant compensation at all, ruling that the petitioner could not prove that the infringer’s activity caused damages. Examples of rationales given by the courts in various cases to grant low damages or refuse to grant damages include the defendant’s product mainly being sold for export and not affecting the plaintiff’s product sales in Thailand, the plaintiff being unable to prove the damages claimed, and the lost profit claimed was also due to misconduct of the plaintiff and not just the defendant’s act of infringement.
Alternative solutions for brand owners
In view of the limitations trademark owners face in proving the damages sustained directly due to an infringing activity, alternative approaches to such dispute resolution mechanisms are becoming more popular.
In-court mediations for settlement provided by the IPIT Court have proven to be a more reliable, efficient, and cost-effective approach for trademark owners. The court has well-established rules for mediation to ensure fairness, convenience, and efficiency for the parties, and allows mediation in English for foreign brand owners. A court-supervised mediation process allows the parties to resolve the dispute amicably; in most cases, the infringers agree to pay a compensation to the brand owner to avoid getting a criminal record, and the brand owner can save litigation costs early on and obtain a reasonable compensation by executing a settlement agreement.
The parties may also agree on additional issues, such as the surrender or destruction of infringing products, a penalty amount for the infringer for a repeat of the offence, and an undertaking to not engage in the infringing activity. A well-drafted and executed settlement agreement during the mediation proceedings supervised by the court is legally binding on the parties and ensures that the infringer does not renege on their obligations.
In 2024, on behalf of a major fashion luxury brand whose products were being copied and sold by a local infringer on a wide scale, Satyapon & Partners filed a civil infringement lawsuit, and during the court-supervised mediation proceedings, successfully negotiated a comprehensive compensation package in exchange for withdrawing the lawsuit against the infringer. The compensation amount obtained via a settlement agreement not only recovered a significant investment made by the brand owner, including litigation fees, but also resulted in the brand owner obtaining possession of the infringing goods, the infringer’s website and social media platforms that were used to advertise and sell the infringing goods being taken down, and a massive penalty amount for violation of the settlement agreement in the future.
Final thoughts on damages in trademark infringement cases in Thailand
In conclusion, as Thailand is a civil law country, the courts will continue to assess the damages to be awarded based on the circumstances and gravity of the infringement in each case, and may not entirely rely on the traditionally low amount of damages granted for future cases.
Nonetheless, the current system of civil remedies for trademark infringement, as discussed above, grants a clearer picture to brand owners regarding the difficulties they may face in achieving satisfactory damages. Brand owners should look at in-court mediation through a civil case as a viable approach to seek a speedier closure of the lawsuit and to obtain a possibly higher amount as a settlement offer than what they may expect to get from the court after a lengthy trial.
