The Düsseldorf Appeals Court's Referral of IP Damages Questions to the CJEU

As I mentioned the other day, Thomas Musmann recently blogged about an October 16 decision in which the Oberlandesgericht Düsseldorf has referred several questions relating to IP damages to the Court of Justice for the European Union.  The case involves Community Plant Variety Rights (CPVRs), the governing regulation for which is Council Regulation (EC) No 2100/94 of 27 July 1994 on Community Plant Variety Rights (available here)--though as Mr. Musmann notes the questions also involve "the application and interpretation of the Enforcement Directive" (available here).  Mr. Musmann has graciously provided me with a copy of the decision, available here, which has not yet been published.  Below are my translations of the court's eight questions (the first of which builds on Mr. Musmann's translation)--though first I will quote article 94 of Council Regulation (EC) No 2100/94 and article 13 of the Enforcement Directive, both of which are referenced in those questions.  So here is article 94:

Infringement

1. Whosoever:

(a) effects one of the acts set out in Article 13 (2) without being entitled to do so, in respect of a variety for which a Community plant variety right has been granted; or

(b) omits the correct usage of a variety denomination as referred to in Article 17 (1) or omits the relevant information as referred to in Article 17 (2); or

(c) contrary to Article 18 (3) uses the variety denomination of a variety for which a Community plant variety right has been granted or a designation that may be confused with it;

may be sued by the holder to enjoin such infringement or to pay reasonable compensation or both.

2. Whosoever acts intentionally or negligently shall moreover be liable to compensate the holder for any further damage resulting from the act in question. In cases of slight negligence, such claims may be reduced according to the degree of such slight negligence, but not however to the extent that they are less than the advantage derived therefrom by the person who committed the infringement.

And here is article 13 of the Enforcement Directive:

Damages

1.   Member States shall ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement.

When the judicial authorities set the damages:  (a) they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement; or (b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.

2.  Where the infringer did not knowingly, or with reasonable grounds know, engage in infringing activity, Member States may lay down that the judicial authorities may order the recovery of profits or the payment of damages, which may be pre-established.

Now for the Court of Appeals' questions.  These are, obviously, not official translations, and if readers spot any errors or can suggest any improvements, please let me know.

1. In assessing the reasonable compensation an infringer has to pay to the owner of a CPVR according to article 94(1) of the Regulation, because he has performed certain actions named in article 13(2) without authorization, based on the typical fee that is demanded in the same field in arm's length licenses for the actions mentioned in article 13(2), in general is an additional, specified "infringer surcharge" always to be estimated?  Does this follow from the second sentence of article 13(1) of the Enforcement Directive?

2.   In assessing the reasonable compensation an infringer has to pay to the owner of a CPVR according to article 94(1) of the Regulation, because he has performed certain actions named in article 13(2) without authorization, based on the typical fee that is demanded in the same field in arm's length licenses for the actions mentioned in article 13(2), in a particular concrete case are the following additional considerations or circumstances to be considered for increasing the compensation:

a) The fact that, for a crucial period of time, the infringed variety is a variety that has enjoyed a unique place in the market by reason of its special qualities, if the arms-length royalty is ascertained by means of license contracts and accounts which were concluded with reference to the allegedly infringed variety;

If in a particular case this fact comes under consideration:

Is the increase in compensation then only permissible, if the features on which the unique position of the infringed variety is based, are reflected in the specification?

b) The fact that, at the time of the introduction of the infringing variety to the market the infringed variety had already been marketed with great success, whereby the infringer has been spared the costs for its own marketing of the infringing variety, if the arms-length royalty is ascertained by means of license contracts and accounts which were concluded with reference to the infringed variety;

c) The fact that the amount of the infringement of the infringed variety, in terms of time and with a view to the number of articles sold, was above average;

d) The consideration that the infringer--unlike a licensee--need not fear that he will pay the license fee and not get it back, when the infringed variety is later declared invalid in a cancellation proceeding;  

e) The fact that the infringer--otherwise than is usually the case for licensees--is not obligated to account to the CPVR owner on a quarterly basis;

f) The consideration that the CPVR owner bears the risk of inflation, which arises when the assertion of rights extends over a significant period of time;

g) The consideration that the CPVR owner--otherwise than is the case with one who earns revenue from granting licenses relating to the infringed variety--cannot make plans based on the revenue to be derived from the infringed variety, on account of the necessity of asserting its rights;

h) The consideration that, by reason of the infringement of the infringed variety, the CPVR owner bears not only the normal litigation risk that arises from judicial proceedings but also the risk of ultimately not being able to successfully to execute against the infringer;

i) The consideration that the unauthorized behavior of the infringer takes away the owner's freedom to decide whether it wants to permit the infringer's use of the infringed variety at all?

3.  In assessing the reasonable compensation an infringer has to pay to the owner of a CPVR according to article 94(1) of the Regulation, because he has performed certain actions named in article 13(2) without authorization, is an assessment of interest on the annually obligated payment due under a typical default interest rate to be considered, if it is assumed that reasonable licensing parties would have provided for such a payment?

4.  In calculating the "further damage resulting from the infringement," which an infringer has to pay to the proprietor of a CPVR according to article 94(2) of the Regulation, because he has performed certain actions named in article 13(2) without authorization, is the typical fee that is demanded in the same field in arm's length licenses, for the actions mentioned in article 13(2), to be consulted as a basis for calculation?

5.  If the answer to question (4) is yes:

a) In calculating the "further damage" on the basis of an arm's length license under the first sentence of article 94(2) of the Regulation, in a specific case are the considerations or circumstances listed above under 2(a) to 2(i), and/or the fact that asserting its rights has obligated the CPVR to expend the ordinary amount of personal time for determining whether infringement has occurred and for dealing with the matter, and to investigate (to the extent that is usual for CPVR infringement) whether a CPVR infringement has occurred, to be taken into account in such a way, that they justify a surcharge on the arm's length royalty?

b) In calculating the "further damages" on the basis of an arm's length license under the first sentence of article 94(2) of the Regulation, is a general "infringer surcharge" always to be added?  Does this follow from the second sentence of article 13(1) of the Enforcement Directive?

c) In calculating the "further damage" on the basis of an arm's length license under the first sentence of article 94(2) of the Regulation, is an assessment of interest on the annually obligated payment due under a typical default interest rate to be considered, if it is assumed that reasonable licensing parties would have provided for such a payment?

6.  Is the first sentence of article 94(2) of the Regulation to be interpreted as meaning that the infringer's profit constitutes "further damage" in the sense of this Regulation, which can be demanded on top of the reasonable compensation under article 94(1), or is the infringer's profit under the first sentence of article 94(2) incurred for culpable conduct only as an alternative to reasonable compensation under article 94(1)? 

7.  Does a damages claim under article 94(2) of the Regulation negate national regulations, according to which the CPVR owner against whom the costs of a proceeding for a preliminary injunction against CPVR infringement have been lawfully imposed, cannot under substantive law demand compensation for these costs on appeal, even if he later prevailed in a principal action involving the same CPVR infringement?

8.  Does a damages claim under article 94(2) of the Regulation negate national regulations, according to which the injured party cannot demand compensation for its expenditure of time in and out of court for the resolution of a damages claim, outside the narrow grounds for cost recovery proceedings, as long as the expenditure of time does not extend beyond the usual time frame? 

The Court of Appeals' own answers to the above questions are: (1) no (opinion paras. 21-22); (2) yes (paras. 23-24); (2a) no (para. 26); (2b) no (para. 29); (2c) no (para.31); (2d) yes (para. 33); (2e) no (para. 35); (2f and 2g) yes (para. 37); (2h) no (para. 39); (2i) no (para. 41); (3) yes (para. 43); (4) yes (para. 46); (5a) unclear (para. 48); (5b) no (paras. 50-53); (5c) yes (para. 54); (6) no (para. 57); (7) no (para. 63); and (8) no (para. 68).

For the CJEU's 2012 Geistbeck judgment on reasonable compensation for CPVR infringement, see here.