Thursday, October 15, 2015

Fox et al. on Infringers' Profits in European Patent Infringement Cases

Nicholas Fox, Bas Berghuis, Ina vom Feld, and Laura Orlando have published a paper titled Accounting for Differences:  Damages and Profits in European Patent Infringement, 37 European Intellectual Property Law Review 566-74 (2015).  Here is the abstract:
Although the IPR Enforcement Directive has gone some way towards harmonising practice, the various courts across Europe have different approaches to the assessment of damages for patent infringement.  This article reviews the different approaches in Germany, France, Italy, the Netherlands, and England and Wales, and questions how a future Unified Patent Court might address these differences.
As the abstract suggests, the paper provides an overview of how courts award damages for patent infringement in the top five European jurisdictions for patent infringement litigation, and note some interesting differences, among them that French courts are much more likely to take into account "moral prejudice" (which, according to the authors, often does not involve "examining whether the inventor's reputation has suffered damages," but rather is "used to 'round up' the final damages following an overall assessment"); that Italian courts often take "the standard royalty applied in the specific market and increas[e] it to take account of the infringement," and also make "a strong distinction . . . between  the innocent, the negligent, the grossly negligent and the wilful (i.e. the intentional) infringer," with wilful infringers potentially liable for "the claimant's loss of profits, and their own infringing profits" [!]; and that awards of infringer's profits are, following the 2000 BGH judgment in Gemeinkostenanteil, "more frequent in Germany than elsewhere."  Overall, they state, "moral prejudice, liability attached to culpability, and the role and assessment of an account of profits, have significant divergences in the national case law . . . ."

The most interesting part of the paper, however, is the discussion of how courts are likely to determine damages under the Unified Patent Court (UPC) system, once it is up and running.  UPC article 68 states:
The Court shall, at the request of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in a patent infringing activity, to pay the injured party damages appropriate to the harm actually suffered by that party as a result of the infringement.
The injured party shall, to the extent possible, be placed in the position it would have been in if no infringement had taken place. The infringer shall not benefit from the infringement. However, damages shall not be punitive.
When the Court sets the damages:
it shall take 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; or
as an alternative to point (a), it may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least the amount of the royalties or fees which would have been due if the infringer had requested authorisation to use the patent in question.
Where 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.
As the authors note, "[m]uch of the wording . . . is copied directly from art. 13 of the IPR Enforcement Directive.  However, given the existing differences in damages law from one jurisdiction to another, the authors wonder to what extent such couleur locale will influence the damages jurisprudence of UPC decisions.  They speculate that claims for moral damages will, "if granted at all . . . be nominal," and that the UPC will treat all infringers equally "once the threshold of scienter is crossed."  Nevertheless, as they note, only "[t]ime will tell."  

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