CJEU: IP Owners Can Recover Damages for Moral Prejudice in Addition to Reasonable Royalties

Today the Court of Justice for the European Union (CJEU) held in the Liffers case that, under article 13(1) of the EC Enforcement Directive, the owner of an IP right may recover damages for moral prejudice (e.g., harm to the reputation of the IP owner resulting from the infringement) in addition to a reasonable royalty.  (Here is a link to the judgment, and here is a link to a more extensive write-up on IPKat.)  Article 13(1) reads:

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.

The question posed was:

May Article 13(1) of Directive 2004/48 be interpreted as meaning that the party injured by an intellectual property infringement who claims damages for pecuniary loss based on the amount of royalties or fees that would be due if the infringer had requested authorisation to use the intellectual property right in question cannot also claim damages for the moral prejudice suffered? (Judgment para. 12)

Or, as paraphrased by the court,

whether Article 13(1) of Directive 2004/48 must be interpreted as not permitting a person injured by an intellectual property infringement, who claims compensation for the material damage suffered as calculated, in accordance with heading (b) of the second subparagraph of Article 13(1) of that directive, on the basis of hypothetical royalties, also to claim compensation for his moral prejudice as provided for under heading (a) of the second subparagraph of Article 13(1) of that directive (Judgment para. 13).

According to the court:

. . . the reply to the question referred is that Article 13(1) of Directive 2004/48 must be interpreted as permitting a party injured by an intellectual property infringement, who claims compensation for his material damage as calculated, in accordance with heading (b) of the second subparagraph of Article 13(1) of that directive, on the basis of the amount of hypothetical royalties, also to claim compensation for the moral prejudice that he has suffered, as provided for under heading (a) of the second subparagraph of Article 13(1) of that directive (Judgment para. 27).

The court therefore concludes by ruling that:

Article 13(1) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights must be interpreted as permitting a party injured by an intellectual property infringement, who claims compensation for his material damage as calculated, in accordance with heading (b) of the second subparagraph of Article 13(1) of that directive, on the basis of the amount of royalties or fees which would have been due to him if the infringer had requested his authorisation to use that right, also to claim compensation for the moral prejudice that he has suffered, as provided for under heading (a) of the second subparagraph of Article 13(1) of that directive.

Liffers is a copyright case out of Spain, but since it is based on an interpretation of the Enforcement Directive the principle announced would apply in patent and other IP cases throughout the EU as well.  French courts in particular sometimes do award damages for moral prejudice in patent cases, though according to a recent article by Fox et al. such damages often do not involve "examining whether the inventor's reputation has suffered damages," but rather are "used to 'round up' the final damages following an overall assessment" (see my post here).