Damages for Moral Prejudice in Spain and Elsewhere

Miquel Montañá recently published a post on the Kluwer Patent Blog about a January 15, 2016 judgment of the Court of Appeal of Madrid in a case alleging infringement of EP 860.161B1, titled "Feminine Garment with Sexual Stimulation Effect."  According to Dr. Montañá's write-up, the patent owner sued the defendant for infringing this patent, prevailed, and the defendant's liability was affirmed on appeal.  The owner sought damages under article 66 of the Spanish Patent Act, which Dr. Montañá summarizes as permitting recovery for "moral damages . . . even if the existence of an economic damage has not been proven," and article 68, which he quotes as permitting the patent owner also to "claim for indemnification for damage resulting from the loss of prestige of the patented invention caused by the infringer by producing a defective working or improper presentation of the same on the market."  (I should note that, in the new Spanish Patent Act, which goes into effect on January 1, 2017, these provisions are renumbered into articles 74(2)(a) and 76.)  On appeal, the court reversed a judgment for moral damages in the amount of €20,000, concluding that although such damages (which may include “psychological suffering or distress, which is considered to exist in a variety of situations such as psychological or spiritual shock or suffering, helplessness, worry (as a mental sensation of disquiet, sorrow, fear or foreboding uncertainty), anxiety, anguish, uncertainty, shock, affliction and other similar situations”) are in theory compensable, the patent owner had not proven the facts alleged in support of them.  On the other hand, the court affirmed a judgment in the amount of €12,500 for loss of prestige, citing evidence in the record supporting the claim that the infringing products were of lower quality, presented "in simple cardboard boxes as opposed to the luxury image attributed to the products of the complainant."

Putting aside the racy subject matter, the case raises some interesting issues about what sort of damages are recoverable in a patent infringement action.  Article 13(1)(a) of the EC Enforcement Directive states that, when judicial authorities set damages, they should "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 . . . ."  A few months ago I mentioned (here) an article by Nicholas Fox, Bas Berghuis, Ina vom Feld, and Laura Orlando titled Accounting for Differences:  Damages and Profits in European Patent Infringement, 37 European Intellectual Property Review 566 (2015), which discusses (among other things) how different countries in the EU interpret the term "moral prejudice."  These authors conclude (pp. 572-73):

Moral prejudice has barely any constancy between European jurisdictions even under the Enforcement Directive, and so there is no clear line to follow. All of the above-mentioned jurisdictions, with the exception of Germany, have it as an available claim, though it is rare (to an extreme) in the Netherlands, and England and Wales. In France, while theoretically tied to reputation, it appears to be used as a mechanism to adjust the quantum equitably. In Italy, moral prejudice must be demonstrated (essentially, damage to reputation), and then quantified as up to as much of 50 per cent of the loss of profits.

More recently, the CJEU in the Liffers decision (a copyright matter also arising out of Spain) concluded that IP owners can recover both reasonable royalties and damages for moral prejudice (see blog post here); and while it states in paragraph 17 that "As noted by the Advocate General in point 28 of his Opinion, moral prejudice, such as damage to the reputation of the author of a work, constitutes, provided that it is proven, a component of the prejudice actually suffered by the rightholder," it doesn't purport to state definitively what else if anything may come within the heading of moral prejudice.  In addition, the article by Charlotte Scott on damages judgments in the Intellectual Property Enterprise Court of England and Wales, which I blogged about here, indicates (consistent with Fox et al.) that damages for moral prejudice are rare in the U.K. and might be confined to cases of "acute emotional distress."  If I understand correctly, the Spanish case discussed by Dr. Montañá appears to agree that moral prejudice involves emotional harm and is distinct from harm to reputation.

My understanding is that damages for loss of reputation are in principle recoverable in U.S. patent litigation, see Lam v. Johns-Manville, 718 F.2d 1056, 1068 (Fed. Cir. 1983)--and may be relevant in determining whether the patent owner is entitled to an injunction, as discussed in Judge Reyna's concurring opinion in Apple v. Samsung, 809 F.3d 633, 647-56 (Fed. Cir. 2015)---but they are difficult to substantiate and rarely awarded.  As for emotional distress, however, there is a famous line from the Federal Circuit's decision in Rite-Hite v. Kelley, 56 F.3d 1538, 1546 (Fed. Cir. 1995) (en banc) that  "remote consequences, such as a heart attack of the inventor or loss in value of shares of common stock of a patentee corporation caused indirectly by infringement are not compensable."  

For other (brief) discussion of damages for loss of reputation or moral prejudice, see my book pp. 118 (U.S.), 256-57 (Europe), 320 (Japan).  The subject deserves further treatment.