Thursday, May 26, 2016

Scott on Damages and Profits in the IPEC

Charlotte Scott has published a very interesting article titled Damages Inquiries and Accounts of Profits in the IPEC, 38 E.I.P.R. 273 (2016).  (For readers without a subscription to the European Intellectual Property Review, the article is available on Westlaw, and I highly recommend taking a look at it.)   Here is the abstract:
In recent years, inquiries as to damages and accounts of profits have become more and more common, especially in the Intellectual Property Enterprise Court. This article addresses the general principles that will be applied in determining the quantum of an intellectual property claim pursuant to an inquiry or an account, as they have been interpreted and applied in recent IPEC decisions. The article considers lost profits, convoyed goods, "user principle" damages, damages pursuant to the Enforcement Directive, and profits and deductible costs.
Among the more interesting points of discussion:

1.  Although traditionally there have been relatively few cases addressing damages for the infringement of intellectual property rights in the U.K., "in recent years there have been an increasing number of inquiries and accounts, especially in the" IPEC, in which there have been 15 (out of 58 judgments altogether) from January 1, 2014 to January 31, 2016.  The author attributes this to the fact that liability for costs is capped in the IPEC at £25,000 (though as Ms. Scott notes, damages are also capped, at £500,000).

2.  In Henderson v. All Around the World Recordings Ltd, a case involving an alleged infringement of performers' rights, Judge Hacon held that for purposes of calculating a reasonable royalty "it is relevant whether, at the time of the hypothetical negotiation, the defendant would have had available a non-infringing course of action."  In my view, this is a positive development in English damages law, even if courts in the U.K. still ignore noninfringing alterntives in the context of lost profits and awards of infringer's profits.  (See also my previous post titled Are noninfringing alternatives relevant to the determination of reasonable royalties in U.K. patent cases?)

3. Also on the topic of royalties, in the absence of comparable licenses the court will consider how much profit the defendant actually made, on the assumption "that the parties would have accurately predicted this figure and based their negotiations on determining the split of those available profits," with the actual split "likely to depend upon how profits tend to be split in that industry and the division of work between the licensee and licensor."  

4. In some recent cases, the IPEC has had to consider claims for "moral prejudice" under article 13 of the Enforcement Directive," but have indicated that such damages should be relatively uncommon--for example, "where a defendant infringes the copyright in photographs disclosing private grief" causing no lost profit but possibly acute emotional distress (though I imagine the person suffering the grief wouldn't always be the copyright owner).  For other posts on this blog on moral prejudice, see here and here.

5.  The IPEC also has considered claims for "unfair profit" under article 13, with the understanding that such profits are not identical to awards of defendant's profits attributable to the infringement--which in some instances may be zero--but may reach other profits related to the infringement, such as an expansion of business that is likely to cause the plaintiff to suffer future losses, where the defendant engaged in knowing infringement.

6.  There is also an extended discussion of the IPEC and appellate decisions in OOO Abbott v. Design & Display Ltd, previously discussed on this blog here and here

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