Redress of damage from infringement of intellectual property rights | In Principle

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Redress of damage from infringement of intellectual property rights

In a judgment issued on 9 June 2016, the Court of Justice ruled on the factors that should be considering when determining the extent of damage and the amount of reasonable compensation for IP infringement. The ruling was issued under Council Regulation (EC) 2100/94 on Community plant variety rights.

Hansson v Jungpflanzen Grünewald GmbH, Case C-481/14, judgment of the Court of Justice of 9 June 2016

Art. 94 of Regulation 2100/94 provides for payment of “reasonable compensation” to the holder for infringement of a plant variety right. If the infringement is committed intentionally or negligently, the holder may also demand compensation for any “further damage” resulting from the infringement.

In this case, the plaintiff, Jørn Hansson, was the holder of a Community plant variety right for a variety of the flower known as the Cape marguerite. In 2002–2009 the defendant, Jungpflanzen, marketed a variety of the Cape marguerite which was determined to be the same variety as Hansson’s. The court in Düsseldorf awarded Hansson compensation based on the licence fees which the defendant should have paid for use of the protected variety but denied his further claims for a flat 50% “infringer supplement” and costs. The appellate court sought a preliminary ruling from the Court of Justice on interpretation of the provisions of the regulation concerning “reasonable compensation” and “further damage.”

Nature of compensation

The first question was whether in determining “reasonable compensation” the court could add a flat “infringer supplement.”

The Court of Justice pointed out that the “reasonable compensation” payable to the holder under Regulation 2100/94 for intentional or negligent infringement “covers solely the damage which he has sustained as a result of the infringement.” Any “infringer supplement” in the nature of punitive damages is not permitted.

Method for determining damage and compensation

The referring court also sought to determine whether further damage may reflect such factors as market position, the duration and quantitative aspects of the infringement, the litigation risk to the holder, enforcement costs, default interest on the imputed licence fee, and the infringer’s profit.

The Court of Justice held that the infringer’s profit cannot be equated with the damage suffered by the holder. The possibility of obtaining disgorgement of profits gained by the infringer is a separate claim governed by national law. Nonetheless, the court held that some of the factors indicated in the request for a preliminary ruling may be grounds for increasing the compensation, but only if failure to award them would prevent full redress of the damage suffered. This includes more specifically default interest.

Valuing the claim for damage

The court also sought to determine the factors that should be taken into consideration in establishing the amount of the further damage resulting from intentional or negligent infringement, and whether this includes enforcement costs such as court costs.

In the case of negligent or intentional infringement, for “further damage” the plaintiff must prove that its financial loss exceeds the amount of “reasonable compensation.” With respect to court costs, national law usually governs when they can be recovered, under separate regulations. Thus there is no basis for including them within the holder’s loss. But out-of-court costs closely connected to the holder’s enforcement of its rights may be reflected in the further damage. This is possible when the court, examining all the circumstances, finds that the total costs incurred in the case could deter an injured party from bringing legal proceedings to protect its rights.

Ruling relevant for patents and trademarks

Although this ruling was issued pursuant to the regulation on plant varieties, the Court of Justice also cited the Enforcement Directive (2004/48/EC). This means that the conclusions reached by the court may be helpful in pursuing damages for infringement of other intellectual property rights, particularly patents and trademarks.

This applies especially to the compensatory function of the regulations protecting IP rights. Any “infringer supplement” that is punitive in nature should be regarded as impermissible. The award of damages should comply with what the Court of Justice called “the principle of objective and full compensation.” But some circumstances can justify an increase in the amount sought. As a rule, court costs and out-of-court costs are not covered when awarding damages. In exceptional situations the court may recognise out-of-court costs as damage to the claimant.

Aleksandra Burda, Intellectual Property Practice, Wardyński & Partners