Tuesday, May 27, 2014

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.  

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