Continuing my discussion from Wednesday of the Judgment of the Munich Regional Court of Apr. 16, 2026, 7 O8367/25, the second portion of the decision centers on issues relating to awards of the infringer’s profits. The court states that calculating the award involves three steps: determining the infringer’s revenue, deducting the appropriately deductible costs, and determining the appropriate proportionality factor (Anteilsfaktor) (para. 61). As for the first of these, the patentee can rely on the amount the infringer discloses pursuant to its disclosure obligation (Auskunftsverpflichtung) (para. 63). In addition, the court says it is fundamentally irrelevant whether the claim is for direct or (as here) indirect infringement; in such a case, the revenues from all of the machines sold by the defendant and assumed to have been used for the purpose of practicing the patented technology are to be taken into account (para. 64). (More on this issue below.) Further, for sales made up to three months following expiration of the patent (sometimes referred to in English as “springboard” profits), the court believes that there should be a rebuttable presumption that these sales were the product of infringing offers made during the patent term (para. 65). Extrapolating from the BGH’s decision in Polsterumarbeitungsmaschine (Judgment of Nov. 14, 2023, I ZR 30/21, discussed on this blog here), moreover, the patentee also is entitled to recover profits earned from additional business (Zusatzgeschäften, a term that in the context of patent law I would normally translate as “convoyed goods,” but I hesitate to use that term here because this is a case involving indirect rather than direct infringement), including goods that were sold after patent expiration but which are traceable to infringing conduct during the patent term (paras. 66-72). These effects presumably dissipate over time, however, and so the court concludes that it is appropriate to presumes that the portion of such sales decreases in a linear fashion over a ten-year period—to wit, in the first year following patent expiration, the monetary recovery can be assessed at 100%, in the second year 90%, and so on (para. 72). The court next turns its attention to deductible costs, which in general are the variable costs of production only and not the fixed costs, in accordance with the BGH’s Gemeinkostenanteil decision as I noted the other day (see paras. 73-88, going into some detail about which costs typically should be classified as variable and which fixed). The court then turns its attention to causality and the proportionality factor, stating that this inquiry involves two steps: determining the appropriate base (Bezugsgröße) and then the appropriate percentage of the profit to allocate to that base (para. 89). Again it references the brake pad example noted on Wednesday, stating that
To answer the question of the extent to which the infringer’s profit is attributable to the infringement, the specific Bezugsgröße of the infringing product must first be determined. For example, if the infringed patent concerns a specific design of a brake pad for a motor vehicle, the proportion factor will vary depending on whether the vehicle, the brake system, or the brake pad is taken as the reference. The larger the Bezugsgröße chosen, the lower the proportion factor to be applied. Another factor in determining the Bezugsgröße is whether the patent protects a minor improvement or a completely novel invention. It is also relevant whether alternatives exist on the market and whether the product is emotionally charged (e.g., a brand-name product), which is generally unlikely to be the case (para. 91).
Tying together the proportionality factor and the presumption of springboard profits, the court states that
. . . when determining the causality factor, it must be noted that subsequent transactions concluded after the expiration of the patent’s term are likely to be based less and less on the infringement of the intellectual property right over the years (the “blurry factor”—derived from the English term “blurry”: blurred). In its Polsterumarbeitungsmaschine decision, the BGH does not postulate a right of the patent holder to perpetual participation in the profits generated by the patent infringer through subsequent transactions. Rather, the intention is to achieve a fair balance of interests. Therefore, the Chamber assumes that follow-on transactions are generally included for a period of 10 years after patent expiration, and that the proportion of the infringer’s profits attributable to the patent infringement decreases by 10% of the baseline value each year. This means that, in the first step, the causation factor must be determined as the base value, for example, 50%. This value is to be applied for the first year. In the second year, only 45% is to be applied, in the third year 40%, and so on (para. 92).
The decision concludes with the application of this methodology to the facts of the case. The defendant sold 28 machines (25 during the patent term, 3 within one month of expiration), which generated revenue of €1,994.312, from which the court deducts €986,365.40 in variable costs; the court then determines that the appropriate causality factor is 50%, reasoning that, although “the machine is solely suited to carrying out the patent-infringing process,” “particularly with such expensive machines, other factors also play a role in the purchase decision, such as the defendant’s reputation or the quality of the services it offers in connection with the machines” (para. 118). The resulting sum is, according to the court, €503,972.80 (I get €503,973.30; not sure what accounts for the missing 50 cents). The revenue from the sales of 26 canisters of solvent sold during the patent term amounts to €531,611.32, from which €245,486.08 is deductible, leaving €286,125.24, to which the court applies a causality factor of 70%, resulting in €200,287.67. The court then turns to solvents sold post-expiration but before the court hearing (36 months), and comes up with a figure of €397.26 in profit per machine per month (I’m not quite following the math here), to which the “blurry factor” analysis leads to a reduction of 10%, resulting in €360,394.27. So overall, the award is €1,064.654.74, plus interest.
So, to summarize, in a case in which the defendant was found to have engaged in indirect infringement by selling machines and solvent used by third parties to perform the patented process, the patentee is entitled to recover an allocable share of the profits earned on the sale of those machines and solvent, including a portion of the profits earned on sales made post-expiration. (Although the name of the solvent is redacted, my sense is that it is a staple article of commerce. I should also mention, perhaps, that the defendant is appealing the underlying liability determination.) Overall, I think this is pretty remarkable.
In and of themselves, awards of damages (or, in countries where the law so permits, profits) for Zugeschäften are not so remarkable, assuming that there is sufficient proof of a causal connection between the infringement and those sales—although with respect to convoyed goods as such, the law in the U.S., unlike in the U.K., France, and Germany, imposes an additional limitation that the damages must “function together with the patented component in some manner so as to produce a desired end product or result.” See Rite-Hite Co. v. Kelley Corp., 56 F.3d 1538 (Fed. Cir. 1995) (en banc) (stating further that “[a]ll the components together must be analogous to components of a single assembly or be parts of a complete machine, or they must constitute a functional unit,” and that “precedent has not extended liability to include items that have essentially no functional relationship to the patented invention and that may have been sold with an infringing device only as a matter of convenience or business advantage”). Recovery of springboard damages or profits also are not so remarkable either, again assuming proof of a sufficient connection between the infringing conduct and sales made post-expiration. German law, however, as evidenced by the Posterumarbeitungsmaschine decision, already had gone one step further, in permitting the recovery of profits on springboard convoyed sales. And now this decision applies that logic to the induced infringement of a process patent.
Even if we put aside for the moment the question of whether the court’s presumptions pertaining to post-expiration profits are sound, something about awarding the profits earned by an indirect infringer on its sales to the direct infringer of machines and solvent used for carrying out the patented process seems odd to me. Suppose, for example, that a direct infringer benefits from the use of a patented process because the process reduces its costs of production by €150; but that to carry out the process, it must first buy equipment that costs it €50, so its net benefit from using the process is €100. Suppose further that the seller of the equipment (who, let’s assume, will be liable under applicable law for some form of indirect infringement) incurs costs of €25 to produce that equipment, and thus earns a €25 profit on sales of the equipment to the third party. Alternatively, suppose that the equipment costs the direct infringer €100 but still only costs €25 for the indirect infringer to manufacture. The direct infringer’s net benefit is now €50 and the equipment manufacturer’s profit is €75. In either case, the optimal outcome ex ante would have been for the direct infringer to agree to pay a royalty for the use of the use of the process, in some amount up to €150 minus the cost of the equipment used to carry out the process. If the price of the equipment was €50, the direct infringer should have paid a royalty of up to €100, but on these facts the patentee who sues the indirect infringer can recover only €25 (assuming that profits are an available measure of monetary recovery). Conversely, if the price of the equipment was €100, the direct infringer should have paid a royalty of up to €50, but the patentee who sues the indirect infringer can recover €75. In neither case is the award of profits really tethered to the value of the use to the direct infringer, which would seem to me to be the more appropriate measure. Of course, this is just a stylized example, and I suppose one could argue that a rule allowing for the recovery of either the direct or indirect infringer’s profit encourages the parties to negotiate ex ante rather than to infringe. Even so, it seems like an odd result to me, though I need to give the matter some more thought. (On the topic of damages for indirect infringement, see this article by the late Professor Dmitri Karshtedt, which I noted here.)
Another thing that is striking about the decision is the court’s summoning out of thin air its three-month, ten-year, and “blurry factor” presumptions. Oddly enough, in a talk earlier this week to a group in the Netherlands, I mentioned at one point how the conventional view is that common-law judges have some measure of discretion to make law in response to changing circumstances, whereas civil-law judges are constrained to follow the code; but in fact, it’s not very difficult to come up with examples in which civil law judges have sometimes crafted judge-made standards dehors the text. The example I actually had in mind when I made the comment was the development by French and German courts, over a hundred years ago, of moral rights in copyright law, though later I thought about the Huawei v. ZTE “dance” as articulated by the CJEU and further refined by the UPC and domestic courts; and the above decision would seem to be yet another example. Meanwhile in the U.S., our (in my view, sometimes excessively) textualist-minded courts seem to be moving in precisely the opposite direction, as witness, e.g., cases like Romag Fasteners (discarding both precedent and common sense in adopting a literal reading of the Lanham Act's provision on disgorgement of profits, see discussion here), AMG Capital Management (in contrast, holding that the FTC cannot seek disgorgement of profits, see discussion here), or in a related vein Grupo Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999) (holding that the Judiciary Act of 1789 precludes U.S. district courts from entering injunctions of a type that were unknown in 1789). Freaky Friday, anyone?
