Earlier this week, ip fray published a post discussing and excerpting a recent decision of the Seventh Chamber of the Munich I Regional Court, specifically the Judgment of Apr. 16, 2026, 7 O 8367/25. The patent at issue is the German portion of EP 1 501 669 B1, for a “smoothing method for layered deposition modeling,” used in layered manufacturing techniques. (I was interested to see that the inventors are from Eden Prairie, Minnesota, not much more than a stone’s throw from my house.) The patent has expired, but the defendants were found to have engaged in indirect infringement during the patent term by selling machines and solvents used to carry out the process. The present decision therefore focuses on damages, ultimately awarding €1,064,654.70 for the sale of 28 devices and 266 16-liter units of solvent (paras. 39-40), both used for carrying out the process. But because “there are therefore few decisions regarding the amount of damages,” the court perceives “a need for judicial clarification on exactly how damages should be calculated. This is particularly necessary because, as a result of the European Court of Justice’s ‘BSH-Hausgeräte’ decision (GRUR 2025, 568), national courts are likely to have to deal with an increasing number of centralized claims for damages” (para. 42; I’ll be using machine translations throughout, subject to some adjustments of my own from the original German). So beginning with paragraph 43 of the decision, the court sets out what it views as the relevant principles for calculating damages. (These are summarized in the decision’s headnotes at the beginning of the decision, and these headnotes are the focus of the ip fray article.) Overall, this appears to be quite an important decision, so I am dividing up my discussion and analysis into at least a couple of parts, with today’s post centering on the court's general statements regarding lost profits, royalties, and infringer's profits.
First, the court compares the three methods of determining damages (the aforementioned lost profits, royalties, and infringer’s profits), stating that the first of these is the hardest to prove but also tends to be result in a higher amount. Reasonable royalties are comparatively easy to prove, and infringer’s profits something of a compromise between the two (para. 49), though the latter are not dependent on the amount of the patentee’s loss (para. 47). This all seems largely correct to me, from an economic standpoint, although I would also point out that the infringer’s profit could be higher than the patentee’s own lost profit, if for example the infringer reaches markets the patentee doesn’t or is a more efficient producer of the patented article. Overall, though, this discussion is in my view a welcome change from something I recall haven previously seen (see my discussion here) suggesting that in principle all three methods should converge on the same amount.
Second, the court notes that patentees’ reluctance to disclose their own financial information means that there are few decisions in which lost profits are awarded. The court appears (to me) to want to change this, stating that all the patentee really needs to do is to prove its unit price and to offer the expert opinion of an auditor of what costs should be deducted (para. 51). Moreover, the need to prove causation need not be insurmountable; all the patentee must do is prove a decline in sales following the infringement, and a rebuttable presumption then arises that these are caused by the infringement (para. 52). The court suggests that the infringer can try to rebut the presumption through, perhaps, market reports--though the ip fray article suggests that in practice the presumption may be hard to overcome, because of the limited discovery available to defendants.
Third, the court says that patent owners can combine a lost profits award with a reasonable royalty or an award of profits, in cases in which the decrease in sales is at least partly attributable to other factors, or the infringer reaches additional markets that the patent owner didn’t serve. But reasonable royalties can’t be combined with infringer’s profits (para. 53), all of which seems economically correct to me.
Fourth, in line with the BGH’s 2001 Gemeinkostenanteil decision, as a general rule when calculating an award of infringer’s profits, only the infringer’s direct costs should be deducted from its revenue (para. 54). (The non-deductibility of allocable overhead, of course, leads to higher awards.) In addition, however, the court stresses the importance of determining the extent to which the infringer’s profit is attributable to the infringement. In this regard, it is essential to determine the appropriate base (Bezugsgröße). Here, the court uses as an example an infringing brake pad. In comparison with the entire vehicle the brake pad portion (Anteil) is vanishingly small; in comparison with the brake assembly, it is small; and in comparison with the brake pad itself it is, of course, 100% (para. 55). In this regard, especially for a very small component of an entire product, the portion may be determined not be means of a percent but rather as a multiple of the standard license rate (para. 56). In contrast, for machines which make use of a method or device claim, typically the percentage can be presumed to be 50% (para. 57).
Fifth, a reasonable royalty can be viewed as a “safe harbor,” and the requirements for calculating it are minimal (niedrig). The revenue from infringing products should be evident from the disclosure the defendant is required to make (in German, the Auskunft), after which it is necessary to determine the base (entire machine or component) and the typical license rate. According to the court, the standard rate varies from 1% in the automobile industry to 10% for high-quality mechanical engineering (para. 58). (The ip fray article suggest that these rates could really add up, since in Germany a separate action is required for each patent that is asserted by the plaintiff. Or would the court take this procedural matter into account in calculating royalties, to avoid overcompensation?)
Sixth, the court states that because of differences between a negotiated license and license rate that is determined followed a finding of infringement, the latter can be higher, citing the Munich court’s 2010 Gülleausbringung decision (which I blogged about here). This makes economic sense, since the infringer avoids certain risks that the voluntary licensee undertakes, and also because prior to final judgment there often will be some uncertainty as to infringement (though in Germany, there still may be substantial uncertainty as to validity, since the invalidation proceedings are separate from infringement proceedings). As to the amount of the enhancement, the court says it can be up to three times higher (para. 59). This actually seems pretty high to me, in view of the latter point about validity still potentially being in dispute.
There is a lot more to the decision—some of it potentially quite path-breaking—including discussion of apportionment of profits, damages for convoyed goods, and springboard damages. I will continue with my next installment on this decision in a few days.
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