Statutory Damages

One way of dealing with the inherent uncertainty of calculating compensatory or restitutionary damages is to authorize courts to award so-called "statutory" damages within some pre-established range.  To my knowledge, however, few countries authorize statutory damages for patent infringement; China and Russia are the only two I am aware of (see posts here, here, here, and here).  Regarding China in particular, as I have previously written:

As discussed in my book, statutory damages appear to the most popular damages remedy for patent infringement in China, even though the amounts that can be awarded are relatively low; 1,000,000 yuan equals only about $160,000 (U.S.).  Among the relevant factors that Chinese courts take into account are “the infringer’s state of mind; the effect, manner, and duration of the use; the value, function, and materiality of the patent, including the availability of competing products; and the cost incurred in responding to the infringement.”  Id. at 359 (citing Jingjing Cao, Die Durchsetzung von Patenten in China 178–80 (2010); Cheng Miao et al., Theory and Practice Related to Patent Infringement Damages, China Pats. & Trademarks, 2009, no. 4, at 17–18).

More common is the practice of several countries (including the United States) of awarding statutory damages for copyright infringement.  In the U.S., subject to certain conditions the court--actually the jury, if there is one, since the Supreme Court in Feltner v. Columbia Pictures held that this is a jury issue--may award damages ranging from $750 to $30,000 for each work infringed.  (The figure can be lowered to $200 in certain (rare) cases involving innocent infringement, or increased to $150,000 for willful infringement.)  Recently, the U.S. Copyright Office published a White Paper making various recommendations relating to (among other matters) statutory damages.  With regard to statutory damages, the Office recommends (1) "incorporating into the statute a list of factors for courts and juries to consider when determining the amount of a statutory damages award"; (2) "changes to the copyright notice provisions that would expand eligibility for the lower 'innocent infringement' statutory damages awards"; and (3) "that, in cases involving non-willful secondary liability for online services offering a large number of works, courts be given discretion to assess statutory damages other than on a strict per-work basis" (p.85).  The proposed statutory factors would be:

(1) The plaintiff’s revenues lost and the difficulty of proving damages.
(2) The defendant’s expenses saved, profits reaped, and other benefits from the infringement.
(3) The need to deter future infringements.
(4) The defendant’s financial situation.
(5) The value or nature of the work infringed.
(6) The circumstances, duration, and scope of the infringement, including whether it was commercial in nature.
(7) In cases involving infringement of multiple works, whether the total sum of damages, taking into account the number of works infringed and number of awards made, is commensurate with the overall harm caused by the infringement.
(8) The defendant’s state of mind, including whether the defendant was a willful or innocent infringer.
(9) In the case of willful infringement, whether it is appropriate to punish the defendant and if so, the amount of damages that would result in an appropriate punishment (pp. 87-88).

I suppose that this might be an improvement over the current practice of having no statutory factors, but I'm still not sure that statutory damages are, at the end of the day, desirable.  Is it really that difficult to calculate actual harm?  Will copyright cases become mired in a multifactor test that calls to mind certain portions of patent law's Georgia-Pacific  (for reasonable royalties) and Read v. Portec (for enhanced damages) factors?  

Still and all, the question of what to do when the evidence of actual damages or defendant's gain is deficient is not an easy one.  U.S. patent law arguably requires a court to award some reasonable royalty unless the patent has no economic value, and when the parties' evidence is lacking the court may just have to muddle through (see my post on Apple v. Motorola here).  This is a topic I hope to address in some forthcoming work.  I'm not inclined to think that statutory damages are the answer in patent law (even if, maybe, they are acceptable in copyright), though it may be worthwhile that some countries are experimenting with them.  Perhaps others can learn from their experience. 

Patent Damages in Russia

Elena Beier and Anne Wright Fiero have published a paper titled The U.S. and Russian Patent Systems: Recent Amendments and Global Implications for the Protection of Intellectual Property Rights, 14 J. Marshall Rev. Intell. Prop. L. 504 (2015).  Here is a link to the paper, and here is the abstract:

Recent legislative and geo-political activity might suggest little common ground between the United States and Russia. The respective intellectual property laws of these two countries, however, share many common goals. In fact, as reflected in the Report of the Innovation Working Group of the Russia-US Bilateral Presidential Commission (initiated by the Ministry of Economic development of the Russian Federation and U.S. Department of State), the two countries are trending towards cooperative intellectual property legislation. This article compares U.S. and Russian patent laws, with a particular emphasis on recent amendments in the areas of inventorship, prior art, and technology transfers. It further explores how these legislative amendments can shape and encourage global competition and innovation.

One of the last parts of the paper discusses the new Russian law on damages, which Nadia Wood and I blogged about last year here.  The authors write:

. . . since January 2015, Russian law allows for compensation in connection with patent infringement as follows:

10,000 - 5 ,000,000 Rubs, upon court's decision;

or double the commercial value of the invention, utility model or industrial design. This value is usually comprised of the price which is usually established for using this patent or double the price of products where such patent is used.

These values are based on the prices which are charged in similar conditions for lawful use of the invention, utility model or industrial design or double value of goods in which such invention utility model or industrial design is used.

This change will strengthen liability for patent infringements and will allow right holders as an alternative to set a fixed compensation and avoid complicated calculations on damages and lost profit.

New Papers on Injunctions in the U.S. and Germany, Patent Litigation in Russia, and Other Matters

1.  John Golden has published a paper titled Litigation in the Middle:  The Context of Patent Infringement Injunctions, 92 Texas Law Review 2075 (2014).  Here is a link to the paper, and here is the abstract:

With the advent of the “Information Age,” most judges, lawmakers, and scholars tend to focus on high tech fields when discussing U.S. patent law. However, in this article, Professor Golden suggests that there may be substantial commonalities between the subject matter of present-day patents and the subject matter of patents typical of the Industrial Revolution. While performing an empirical study, Professor Golden found that many of the patents issued today cover relatively straightforward “machines and manufactures” and, further, that these simple patents play a disproportionate role in the granting of injunctive relief by U.S. district courts. These relatively mundane cases are surprising given the conventional view that patent litigation involves high stakes and costs. Professor Golden explores the implications of this discovery by first using a rational profit-maximizer model to confirm the commonly invoked bases for the view that patent litigation involves high-stakes. He then discusses the nature and contents of a patent-infringement injunction data set. Finally, Professor Golden explores potential explanations for the frequent mundanity of the subject matter targeted by injunctions in that data set. 

2.  Rainer Kuhnen has published a short paper titled Timeliness and Validity in Seeking Injunctions in Germany in BNA Bloomberg's World Intellectual Property Report, available here (behind a paywall).  Here's the intro:

Preliminary injunction actions are a very useful tool for the patentee, in Germany and elsewhere, to combat patent infringement. They are also useful in Germany with respect to infringement of utility models. Recent case law provides some thought regarding proof of timeliness and validity in such German actions.

For other discussion of preliminary injunctions in Germany on this blog, see here, here, here, and here.

3.  Vadim Savvateev has published a paper titled Litigating Technology Patent Infringement in the Russian Federation, 41 AIPLA Q.J. 671 (2013).  Here is a link to the paper on ssrn, and here is the abstract:

This Article examines the current state of patent laws and the enforcement of patent rights in the courts of the Russian Federation, focusing on the doctrinal fundamentals, costs, and outcomes of enforcing invention or utility model patents in Russian courts. This Article concentrates specifically on litigation of technology patent infringement.

Corporations mitigate the risks associated with investing in globally marketed technologies by obtaining patents in key national jurisdictions. The value of patent rights in a particular jurisdiction is the difference between the cost of obtaining patent rights and the risk of enforcing those rights in national courts.  

Dr. Savvateev discussed remedies at pages 722-28.  For previous discussion on this blog of some recent changes to the law of patent damages in Russia, see here, here, here, and here. 

4.  Matthew R. Jones has published The Fall and Rise of the Italian Torpedo in European Patent Litigation in the July/August 2014 issue of Landslide, a publication of the ABA Section of Intellectual Property Law (available here).   Here is the abstract:

The "Italian torpedo" is one of the most interesting and creative strategies in patent litigation.  But what is it and what might patentees do to defend against it?

I also discuss torpedo actions in my book at pages 250-55, and on this blog here, here, and here.

5.  Also in the July/August Landslide is an article by Eric A. Rudich, Lewis M. Koppel, and Michael P. Padden titled Post-Uniloc Reasonable Royalty Damages:  What to Do Now and How to Present It to the Jury?  Here is the paper, and here is the abstract:

The article reviews the economic approaches that have been used to meet the Uniloc decision and also discuses how juries determine damages, as well as how damages claims may be best presented to juries.

In case you're not familiar with it, Uniloc USA, Inc. v. Microsoft Corp., 632 F.3d 1292 (Fed. Cir. 2011), is the case in which the Federal Circuit  stated that “[e]vidence relying on the 25 percent rule of thumb is . . . inadmissible under Daubert and the Federal Rules of Evidence because it fails to tie a reasonable royalty base to the facts of the case at issue.”

6.  Norman Siebrasse published an interesting post yesterday on Sufficient Description titled A Principled Approach to Prejudgment Interest.  He argues that interest should be compensatory, and that in principle this should mean that courts award compound, not simple interest.  I fully agree; see my book p.277, where I critique the practice in Germany and the U.K. of not awarding compound interest in patent cases.  See also my post from this past May for citation to a recent paper on the comparative law of interest.

7.  Finally, I recently discussed the topic of "hot tubbing" and patent damages here, so I was interested to see that there will be a session titled "In the hot tub" – considering the use of hot tubbing in damages claims, moderated by Nicholas Heaton and with presentations by Helen Jenkins, Stephen Morris, David Parker, and Jon Turner, at GCR's Sixth Annual Competition Litigation Conference in London on October 7.  Here is a link with more information.  I recently spoke at one of GCR's conferences in Brussels and thought that event was quite good.

Some further notes on recent changes to patent damages law in Russia

Today's post is coauthored by Thomas F. Cotter and Nadia Wood.

In three previous posts, we have discussed Russia's recent adoption of statutory damages as a possible remedy for patent infringement (see here, here, and here).  More specifically, in Ms. Wood's (slightly revised) translation, new article 1406.1 of the Civil Code reads:

Article 1406.1. Liability for violation of exclusive rights to an invention, utility model or design patent.

In case of infringement of exclusive rights to an invention, utility model or design patent[,] author [inventor] or other rightsholder [owner of rights to the invention,] along with using other applicable methods of protection and liability measures established by the present Code (articles 1250, 1252 and 1253), has the right at their option to demand from the offender instead of [actual] damages [the following] compensation:

1)      in the amount of ten thousand to five million rubles determined at the discretion of the court based on the nature of the violation;

2)   twice the value of the right to use an invention [royalty rate], utility model or commercial sample determined based on the rate usually charged under comparable circumstances for the lawful use of corresponding invention, utility model, design patent in a manner utilized by the offender.

A recent article by Professors Andrey Kashinin and Elena Dubovitskaya, Die Reform des russischen Rechts des geistigen Eigentums ("The Reform of the Russian Law of Intellectual Property"), GRUR Int. 429 (2014), discuss these and other recent changes to Russian IP law (including clarifications as to the scope of patentable subject matter and the contents of the specification, as well as some modifications of copyright law).  The abstract to their article reads as follows (Professor Cotter's translation from the German):  

The Russian law of intellectual property was fundamentally modernized early in 2014.  The relevant changes make up a part of the large-scale reform of Russian civil law, which led to the drafting of the Law "Concerning the Modification of the First, Second, Third, and Fourth Portion of the Civil Code as well as Certain Laws of the Russian Federation."  The draft law passed the first reading in the Russian Duma on April 27, 2012.  As a result of numerous differences of opinion, which became apparent during the preparation of the draft for the second reading, it was split into several single drafts.  The partial draft concerning the law of intellectual property was approved by the Duma on February 25, 2014 and on March 5, 2014 by the Federation Council.  With some exceptions, the law (hereinafter the Reform Law) enters into force on October 1, 2014.

As for statutory damages in particular, the article briefly discusses article 1406.1 (which, according to these authors, actually enters into effect on January 1, 2015), though without commenting on the curious lack of the article "or" in between paragraphs 1 and 2 (which Ms. Wood discussed here). 

To clarify matters a bit, Russia's IP laws are found in Part IV of its Civil Code (see this helpful booklet on the Russian patent system, available on WIPO's website).  In relevant part article 1252 of the Civil Code (unofficial translation, as also available on WIPO's website) reads as follows:

Enforcement of Exclusive Rights

1. Enforcement of exclusive rights to the results of intellectual activity and to means of individualization shall be exercised in particular by putting forward a claim as regards:

1) the recognition of the right – against the person who denies or in another manner does not recognize the right, infringing thereby the interests of the rightholder;

2) preventing the actions infringing the right or creating a threat of its infringement – against the person being taken such actions or being prepared to take them;

3) reimbursement of damages – against the person who has unlawfully used a result of intellectual activity or means of individualization without the conclusion of an agreement with the rightholder (non-contracted use) or has infringed his exclusive right in another manner and has inflicted damage to him;

4) seizure of the physical carrier in accordance with Paragraph 5 of the present Article – against its producer, importer, depositor, carrier, seller, other distributor, or bad faith buyer;

5) the publication of the judicial decision on the infringement committed with an indication of the actual rightholder – against infringer of the exclusive right. . . .

3. In cases provided for by the present Code for certain types of results of intellectual activity or means of individualization, when the infringement of the exclusive right is being made the rightholder shall have the right, instead of reimbursement of damages, to demand from the infringer payment of compensation for the infringement of the aforesaid right. The compensation shall be subject to recovery upon proof of the fact of infringement of a right. In such a case the rightholder applying for enforcement of a right, shall not bear the burden to proof the amount of damages inflicted.

The amount of compensation shall be determined by the court within the limits as provided for by the present Code depending upon the nature of the infringement and other circumstances of the case with due account of the requirements of reasonability and justice.

The rightholder shall have the right to demand from the infringer payment of compensation for each event of unlawful use of the result of intellectual activity or means of individualization or for the infringement committed as a whole. . . .

By way of further clarification, the term "results of intellectual activity and means equated to them of individualization of legal entities, goods, work, services, and enterprises that are granted legal protection" is defined in article 1225 to include "1) works of science, literature, and art; 2) computer programs; 3) databases; 4) performances; 5) phonograms; 6) broadcasting or diffusion of radio- or television transmissions via cable; 7) inventions; 8) utility models; 9) industrial designs; 10) selection attainments; 11) topographies of integrated circuits; 12) secrets of production (know-how); 13) trade names; 14) trademarks and service marks; 15) appellations of origin; 16) commercial names."  Moreover, if we are reading this correctly, the distinction between "reimbursement in damages" (see section 1252(2)) and "compensation for damages" (see section 1252(3)) appears to be that the former consists of quantifiable damages for a proven injury, whereas the latter consists of damages that are less tied to a specific quantifiable injury.  The Kashanin & Dubovitskaya article uses the German term Geldentschädigung (rather than Schadensersatz) for this latter term and for what we are referring to as "statutory damages."

 

Apropos of section 1252, the Kashanin & Dubovitskaya article notes that the new law will revise article 1252(3).  According to the authors, in a case in which the injured party may request compensation for the infringement of its intellectual property rights and in which the defendant's act infringes rights in several IP rights belonging to the same party, the court should determine the damages for each infringed right.  The court may then reduce the damages to (no less than) 50% of the total sum.  Here is the relevant text in Russian, along with Ms. Wood's translation:

Если одним действием нарушены права на несколько результатов интеллектуальной деятельности или средств индивидуализации, размер компенсации определяется судом за каждый неправомерно используемый результат интеллектуальной деятельности или средство индивидуализации. При этом в случае, если права на соответствующие результаты или средства индивидуализации принадлежат одному правообладателю, общий размер компенсации за нарушение прав на них с учетом характера и последствий нарушения может быть снижен судом ниже пределов, установленных настоящим Кодексом, но не может составлять менее пятидесяти процентов суммы минимальных размеров всех компенсаций за допущенные нарушения.

1252(3) translation:

If one action violates the rights of several results of intellectual activity or means of individualization, the amount of compensation is determined by the court for each wrongfully used result of intellectual activity or means of individualization. In the event the rights to the corresponding results or means of individualization belong to the same rightholder, the total amount of compensation for violation of the rights to them taking into account the nature and consequences of a violation may be reduced by the court below the limits established by this Code, but cannot be less than fifty percent of the minimum amount of all compensation for the violations.

The bottom line, then, appears to be that Russian law soon will allow for statutory damages for patent infringement, and that a court generally should award such damages for each patent (or other IP) right that is infringed by the defendant's manufacture, use, or sale of an infringing good; but that the court may reduce the amount of such damages in a case in which the infringing good embodies multiple patents (or other IP rights).  These features are, to our knowledge, uncommon among the patent systems of the world, and we would appreciate further clarification from readers who are familiar with the new law.  

A Brief Addendum to Our Two-Part Series on Statutory Damages for Patent Infringement in China and Russia

The current issue of Patent Lawyer features an article by David Aylen of Gowlings International titled Revealing Russia's New Court, about the new IP Court (an appellate court) that was launched last year in Russia.  (Hat tip to the PatLit Blog.)  As we noted in yesterday's post, the Gowlings firm's website also published a short article on the new court last year, available here. 

Statutory damages for patent infringement in China and Russia, Part 2

This is the second of a two-part series on statutory damages for patent infringement.  (For part 1, see here.)  It begins with a continuation of Nadia Wood’s analysis of the recent Russian legislation.

Wood:  Further research suggests that, under the Russian law, the amount of damages must be determined at the time of filing of the suit, that the court may not award damages higher than the amount requested by the plaintiff, and that the second option, the double penalty, is used as a floor rather than (or perhaps in addition to) the alternative to the first option.  Here’s why:  

1.      It seems that Russia last year launched an Intellectual Property Rights Court  (for discussion, see this article on the Canadian firm Gowlings’ website.)  The IP Court has an FAQ section on its website, http://ipc.arbitr.ru/faq (link in Russian). In that FAQ section, the IP Court has the following Q & A:

Q: Можно ли заявить требование о выплате компенсации за нарушение интеллектуальных прав в размере, определенном по усмотрению суда, поскольку суд вправе по своему усмотрению уменьшить размер взыскиваемой компенсации по сравнению с размером, указанным в иске?

A: Согласно п. 43.1 Постановления Пленума Верховного Суда РФ № 5, Пленума Высшего Арбитражного Суда РФ № 29 от 26.03.2009 «О некоторых вопросах, возникших в связи с введением в действие части четвертой Гражданского кодекса Российской Федерации» несмотря на то, что размер подлежащей взысканию компенсации определяется по усмотрению суда (абз 2 ст. 1301, абз. 2 ст. 1311, пп. 1 п. 4 ст. 1515, пп. 1 п. 2 ст. 1537 ГК РФ), в исковом заявлении должна быть указана цена иска в твердой сумме. Если истцом не указана цена иска (размер требуемой компенсации), суд выносит определение об оставлении соответствующего искового заявления без движения (ст. 136 ГПК РФ, ст. 128 АПК РФ).

My translation of that Q&A:

Q: Can I make a claim for compensation for the violation of intellectual property rights in the amount to be determined at the discretion of the court, since the court has the discretion to reduce the amount of the ordered compensation compared to the amount specified in the complaint?

A: According to § 43.1 of the Resolution by the Plenum of the Supreme Court of Russian Federation number 5, Plenum of the Supreme Arbitration Court of the Russian Federation dated 26.03.2009 number 29 “On some issues that have arisen in connection with the introduction of Part IV of the Civil Code of the Russian Federation” despite the fact that the amount to be recovered as compensation shall be determined at the discretion of the court (paragraph 2 of Art. 1301; para. 2 of Art. 1311; para. 1, para. 4 of Art. 1515; para. 1, para. 2 of Art. 1537 Civil Code), the complaint must specify the price of the claim a fixed amount. If the plaintiff does not specify the price of the suit (the amount of the demanded compensation), the court shall enter an order precluding the suit from moving forward (Art. 136 of the CPC RF [Civil Procedure Code], Art. 128 RF APC [Arbitration Procedure Code]).

2.      All of the articles referenced above impose liability for violations of various IP rights: 1301 for violation of exclusive right to production; 1311 for rights adjacent to author’s (for theater production, for example); 1515 for trademark, 1537 for designation of origin (links in Russian). All of these articles impose liability using nearly identical language as the newly-enacted article 1406 for patents. The structure of the relevant part for all of these articles is as follows (this is a generic summation for the purposes of illustration):

The owner at his option may demand from the offender instead of actual damages payment of compensation:

in the amount of ten thousand to five million rubles determined at the discretion of the court based on the nature of the violation;

twice the value of [here where the articles differ, some using twice the value of the produced goods or twice the royalty rate, but they all have this double- penalty option here].

3.      I tracked down the 2009 Resolution that the IP court referenced, which appears to me analogous to Rules of Civil Procedure promulgated by the courts of highest jurisdiction in the US, except that it also seems to interpret the laws. The Resolution is available here in .html: https://www.arbitr.ru/as/pract/post_plenum/23485.html (link in Russian) and here in .pdf format: https://www.arbitr.ru/?id_sec=353&id_doc=20245 (link in Russian).

Paragraphs 43 and 43.1 of the Resolution direct the courts in interpreting articles 1299–1301, 1309–1311, 1515 и 1537 of the Civil Code to demand a fixed compensation amount to be listed in the complaint and to preclude the case from moving forward without it, which is the part that IP court cited in its FAQ. The rationale for that seems to be that the government collects a fee based on the listed amount. If I am reading this correctly, a $100,000 lawsuit would cost less to file than a $1,000,000 lawsuit.

The most interesting part comes next. Paragraph 43.4 of the Resolution directs the courts to do the following:

43.3. Рассматривая дела о взыскании компенсации в размере от десяти тысяч до пяти миллионов рублей, суд определяет сумму компенсации в указанных законом пределах по своему усмотрению, но не выше заявленного истцом требования. При этом суд не лишен права взыскать сумму компенсации в меньшем размере по сравнению с заявленным требованием, но не ниже низшего предела, установленного абзацем вторым статьи 1301, абзацем вторым статьи 1311, подпунктом 1 пункта 4 статьи 1515 или подпунктом 1 пункта 2 статьи 1537 ГК РФ.

Размер подлежащей взысканию компенсации должен быть судом обоснован. При определении размера компенсации суд, учитывая, в частности, характер допущенного нарушения, срок незаконного использования результата интеллектуальной деятельности, степень вины нарушителя, наличие ранее совершенных лицом нарушений исключительного права данного правообладателя, вероятные убытки правообладателя, принимает решение, исходя из принципов разумности и справедливости, а также соразмерности компенсации последствиям нарушения.

My translation:

43.3. In deciding the claim for compensation in the amount of ten thousand to five million rubles, the court shall determine the amount of compensation within these legal limits, at its discretion, but not higher than the plaintiff’s claim. The court is not deprived of the right to order compensation in the amount lower than the stated demand, but not less than the lower limit set by the second paragraph of Article 1301, second paragraph of Article 1311, subsection 1, paragraph 4 of Article 1515 or subparagraph 1 of paragraph 2 of Article 1537 of the Civil Code of the Russian Federation.

The court must justify the amount of compensation it orders. In determining the amount of compensation the court takes into account in particular the nature of the violation, the period of illegal use of intellectual activity, degree of guilt, the existence of previously-committed violations of the exclusive right of this right holder by the offender, the probable losses to the right holder, and makes its decision based on the principles of reasonableness and fairness, as well as the proportionality of compensation to the consequences of the violation.

The next paragraph after that, 43.4, directs the court to use non-exclusive licensing agreement in the existence at the time of the infringement as a base rate when a claim for damages is in the amount of double licensing or royalty fee.

4.      Based on the above, I have a few tentative thoughts about the genesis and application of the new law, but I would welcome input from readers who are more knowledgeable about the specifics:

a.       Obviously, article 1406 on patents mirrors the language of the other articles discussed above, but it is not covered by the same Resolution. I would expect that the courts will most likely interpret it the same, however, and that another Resolution would be forthcoming, if necessary.

b.      What the Resolution suggests is that to utilize option 2, you actually need to have a licensing agreement with someone somewhere, even though the text of the law itself describes the base rate as a “rate usually charged under comparable circumstances.” The language of 43.4 is still somewhat vague though. I wonder if the highest court felt the need to make a resolution based on “some issues” in interpreting the statute; perhaps there are some decisions out there that would indicate how the courts have interpreted these similar provisions?

c.       It also appears that the double-penalty option 2 serves as “the floor” for option 1, damages to be determined by the court.

d.      The closest counterpart to these provisions of the Russian law in the U.S. would be 17 U.S.C. § 504, which provides for statutory damages in copyright infringement cases. In the U.S. statute, the owner may make a selection “at any time before final judgment is rendered.” 17 U.S.C. § 504(c)(1). Russian law has no such language, but the Resolution seems to demand that the election is made at the time of filing or the case cannot move forward.

From a practical perspective, I should think it is very difficult for the plaintiff to determine the value of the damages at the time of filing, since the plaintiff rarely knows the scope of the infringement. Even if the plaintiff knows that a certain factory in Russia is producing counterfeit purses, it would not necessarily know how many purses the infringer had made. Without knowing the value of the suit, it would be difficult for the plaintiff to decide whether to ask for actual or statutory damages. I would welcome further insights on whether or to what extent discovery is available in Russian courts, and whether the amount of damages can subsequently be amended.

e.       The U.S. counterpart also has “additional damages” provision allowing for damages for twice the licensing rate in certain cases, but the text of the law makes it clear that these damages are “in addition to any award of damages under this section.” 17 U.S.C. § 504(d). Again, Russian law brings no such clarity.

f.          Whereas in the US the courts have broad discretion in imposing damages within the statutory limits, the discretion of the Russian courts appears to be far more constrained by the enumerated factors in the Resolution. One of the key differences is proportionality: the Resolution directs Russian courts to consider losses to the owner and “proportionality of the ordered compensation to the consequences of the violation.” By contrast, United States Congress has specifically sought to ensure that “the cost of infringement substantially exceeds the costs of compliance, so that persons who use or distribute intellectual property have a strong incentive to abide by the copyright laws.” H.R. Rep. 106-216, at 6 (1999). Consistent with this Congressional intent, the U.S. Supreme Court has repeatedly held that a statutory damages award for copyright infringement requires no proof of or relationship to actual damages. See F.W. Woolworth Co. v. Contemporary Arts, 344 U.S. 228, 231, 233 (1952) (affirming statutory maximum award where proven damages were significantly lower to “vindicate the statutory policy”); Douglas v. Cunningham, 294 U.S. 207, 208 (1935) (reversing where lower court reduced damages award from statutory maximum to statutory minimum on ground that no actual damages were proven); L.A. Westermann Co. v. Dispatch Printing Co., 249 U.S. 100, 106 (1919) (holding plaintiff entitled to statutory damages where no evidence of actual damages was presented).

Thus, even though Russia appears to be strengthening protection for intellectual property, the new law may lack teeth given difficulties in valuing the suit prior to filing and court’s focus on proportionality of compensation to actual damages even though statutory damages are available. Without the powerful “stick” of statutory damages, the deterrent effect on others besides the defendant is low, and creates no strong incentive for Russian citizens to comply with intellectual property laws.

Finally, as Professor Cotter discussed in Part 1 of this series, in determining statutory damages for patent infringements China appears to focus on “the value, function, and materiality of the patent.” Thomas F. Cotter, Comparative Patent Remedies:  A Legal and Economic Analysis 359 (2013). This approach seems to be similar to that of Russia rather than the United States.

Cotter:    In my book, I observe at pages 359-60 (citing Roger D. Blair & Thomas F. Cotter, Intellectual Property: Economic and Legal Dimensions of Rights and Remedies 74–83 (2005)):

statutory damages may be a sensible tool to apply when actual damages are difficult to prove; or when an act of infringement individually causes little harm, but is of a type that is likely to go undetected or is likely to be replicated by many actors, such that the potential harm in the aggregate is substantial. In such cases, a damages multiplier may be necessary to achieve adequate deterrence, and statutory damages are in theory one way to impose such a multiplier. On the other hand, statutory damages that are not tied to some underlying estimate of actual harm, lost royalties, or probability of detection give rise to risks of substantial over- or underdeterrence.

I further speculated that the risk of underdeterrence might be of greater concern in China, given that even the highest amount of statutory damages awardable is relatively low (about $ U.S. 160,000); and I would consider this risk substantial in Russia as well, given that the highest award is comparable (about $ U.S. 140,000).  I’d also question whether it makes sense to award statutory damages that in practice may not reflect the amount of actual harm to the patentee.  But it is interesting to see two countries now experimenting with this procedure, and I’ll be eager to hear how matters work out over the coming years.