UPC Court of Appeal Reverses Moral Prejudice Damages Award

The case is Bhagat Textile Engineers v. Oerlikon Textile GmbH & Co. KG, decided by Panel 1b of the UPC Court of Appeal on December 9, 2025.  In one respect at least it resembles the Federal Circuit decision I blogged about earlier this week, in requiring non-speculative evidence of alleged reputational harm.

Plaintiff Oerlikon owns EP 2145848 for a “false twist texturing machine.”  In July 2023, Oerlikon initiated an action for infringement in the Milan Local Division of the UPC.  That court found Bhagat liable based upon its “promotion and offer to the public of a structuring/textiling machine exhibited at the ITMA trade fair in June 2023 in Milan” (para. 6).  It also entered an injunction and awarded “provisional damages in the amount of €15,000 as a result of reputational  damage to Oerlikon’s image” and “ordered Bhagat to bear 80% of the proceedings costs” (id.) 

On appeal, the court notes that, consistent with IPRED article 13, UPCA article 68 “distinguishes between situations in which the infringer knew or had reasonable grounds to know that he or she was engaging in a patent infringing activity (Art. 68(1) to (3) UPCA) and situations where the infringer did not knowingly, or with reasonable grounds to know, engage in the infringing activity (Art. 68(4) UPCA)” (para. 18).  For the first situation, the court shall award “damages appropriate to the harm actually suffered,” taking 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 injured party by the infringement (Art. 68(3)(a) UPCA) or, alternatively, may decide to set the damages as a lump sum under certain conditions (Art. 68(3)(b) UPCA)” (paras. 19-20).  On the other hand, “[w]here the infringer did not knowingly, or with reasonable grounds to know, engage in the infringing activity, the Court may order the recovery of profits or the payment of compensation (Art. 68(4) UPCA)” (para. 21).  Here, there was no “evidence of negative economic consequences such as lost profits . . . or unfair profits made by Bhagat,” but the parties disagree regarding damages for moral prejudice (para. 22).  First, Bhagat argues that it did not know or have reasonable grounds to know that the product it exhibited at the trade fair was infringing, but the court disagrees:

Bhagat . . . presents itself as an international leading manufacturer of texturing and winding machines (see a press release in the magazine Textile Insights dated 13 July 2023, cited in Oerlikon Exhibit # 20) and is a direct competitor of Oerlikon in the field of textile and winding machines. It actively participated in the ITMA trade fair, which Bhagat does not deny is the most important textile machines trade fair globally, and exhibited a sizable textile machine (the attacked embodiment).

 

It follows that, being an active stakeholder in the industry, Bhagat was at least reasonably expected to monitor the patent landscape before exhibiting its product on the market and should have had reasonable grounds to know about the existence of the Patent and the infringing nature of the attacked embodiment. Failure to do so was at least negligent . . . (paras. 24-25).

Nevertheless, there was no evidence of reputational harm resulting in moral prejudice.  Oerlikon’s evidence consisted merely of “general statements” made by Bhagat about its success at promoting its products at the trade fair; and that further evidence submitted by Oerlikon for the first time on appeal concerning the accused product exhibited at the fair, even if admissible, did not change this result.

On costs, the court affirmed that Bhagat was liable for 80% of Oerlikon's recoverable costs, and Oerlikon 20% of Bhagat's, in accordance with UPCA article 69.  Oerlikon did not cause Bhagat to suffer any unnecessary costs by not first sending a warning letter, given the urgency and the short time frame of the fair.  The specific amount of costs to be recovered, however, will be determined in view of the value of the proceedings, which the court lowered from €750,000 to €250,000 (meaning that recoverable costs cannot exceed €38,000).