Wednesday, May 17, 2017

Paris Court of Appeals Holds That Patentees Are Not Entitled to Disgorgement of Profits

Since France enacted legislation implementing the 2004 EC Enforcement Directive, French courts have been authorized to take into account the benefits to the infringer when awarding damages.  More specifically, the version of the relevant statute, article 615-7 of the Intellectual Property Code, in effect from October 29, 2007 to March 14, 2014, stated that  
For assessing damages and interest, the court takes into account the negative economic consequences, including loss of profit, suffered by the injured party, the profits realized by the infringer and the moral prejudice caused to the rightholder by the infringement.
However, the court may, alternatively, upon request by the injured party, award damages as a lump sum that shall not be less than the amount of royalties or fees that would have been due if the infringer had requested authorization for the use of the right infringed. 
(Translation courtesy of Margaret Wade and me.)  The version in effect since March 14, 2014, states (in my translation) that: 
For assessing damages and interest, the court takes into account distinctly:
the negative economic consequences, including loss of profit and the loss sustained by the injured party;
the moral prejudice incurred by the latter;
and the profits realized by the infringer, including the savings of intellectual, material, and promotional investments which the latter has derived from the the infringement. 
However, the court may, alternatively, upon request by the injured party, award damages as a lump sum.  This amount is higher than the royalties or fees that would have been due if the infringer had requested authorization for the use of the right infringed.  This amount is not exclusive of the compensation for the moral prejudice suffered by the injured party.
Whether either of these provisions permit French courts to award the prevailing plaintiff the infringer's profits from the infringement, or instead only to take those profits into account in crafting an award of compensatory damages, is a matter of some debate, though from what I've read the latter view seems to be dominant for now.  For previous discussion on this blog, see, e.g., here, here, and here.

Anyway, a recent judgment of the Cour d'appel de Paris, Carrera SARL et Texas de France SAS v. Muller et Cie, PIBD No. 1067, III, 170 (Dec. 9, 2016), appears to take the latter view, namely that IP owners are entitled to recover damages for their own losses but not an award of the infringer's profits as such.  If I'm reading the facts correctly, Muller (owner of European Patent 1,067,822 for a "Heating element manufacturing process for heating or cooking apparatus, such heating element and apparatus incorporating it") is a patent holding company that had licensed the patent, royalty-free, to six affiliated companies.  Muller prevailed on liability, but sought to recover an award of the defendants' profits rather than a reasonable royalty.  The district court awarded damages in the amounts of  €327,733 and €280,130, respectively, as well as damages for moral prejudice in the amount of €100,000.  Both parties appealed.  The Court of Appeals, however, rejected Muller's argument that  it could opt for an award of profits, stating (my translation):
Moreover, while it is true that the Law of October 29, 2007, implementing Directive 2004/48, invites the judge to take into account "the benefits realized by the infringer," it does not  authorize the confiscation of those benefits; and this taking into account is limited only to the portion relating to the losses suffered as a result of the exploitation, in order to attain a complete reparation for the loss." 
Furthermore, if I'm reading this correctly, since Muller disavowed any reliance on a reasonable royalties theory, the court also threw out that award; and it also disallowed the award for moral prejudice, concluding that there was no evidence that the infringement caused any harm to Muller's reputation.

I thank Pierre Véron for a productive discussion of this case, prior to my publishing this post.

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