Newsletter
INFRINGEMENT SETTLEMENT CLAIMS BOUND BY GOOD FAITH PRINCIPLE
In a 2005 civil appeal judgment involving a claim for payments under a patent infringement settlement, the Supreme Court indicated that Article 148 Paragraph 2 of the Civil Code re-quires that rights be exercised, and duties be performed, in an honest and trustworthy manner. This principle of good faith means that all legal relationships must be subject to the concepts of justice and balance, in order to achieve appro-priateness and legitimacy. Once parties enter into a lawful contract they are bound by its terms, and a party having contractual rights may exer-cise those rights in accordance with the contract. But if a party does not exercise such rights within a reasonable period, and there are facts that jus-tify the obligor's reliance that the other party does not intend to exercise its rights, subsequent enforcement of those rights may be deemed to be acting contrary to the principle of good faith.
In the case before the court, the patentee had reached a settlement with the infringer, and had received one of the agreed settlement payments from the infringer at the time when the settle-ment agreement was made. However, the pat-entee had subsequently repudiated the settlement agreement, refused to accept the remainder of the settlement payments, instituted civil proceedings for damages, and did not assert its rights against the infringer under the agreement. It was not until five years later that the patentee, citing the settlement agreement that it had previously re-pudiated, demanded that the patent infringer perform the agreement. The Supreme Court re-fused to enforce the agreement, on the grounds that the patentee's demand was against the prin-ciple of good faith.