France: How to calculate damages for infringement

20-05-2016

Aurélia Marie

European Directive 2004/48/EC (the enforcement of intellectual property rights directive) allows an injured IP owner seeking compensation to choose between different methods for evaluating the loss/injury suffered because of the infringement and compensating for it.

 Judicial authorities applying article 13(1) may calculate the amount of damages owed based on either all the negative consequences linked to the infringement or based on lump-sum royalties. 

Evaluation based on all the consequences enables the judge to calculate damages by taking into account different types of loss suffered, mainly economic ones, while compensation based on lump sum royalties does not require establishing the nature of the loss actually suffered. Is it then possible to add on to the lump sum compensation for the material loss another compensatory amount for moral injury?

This question was submitted to the Court of Justice of the European Union (CJEU) by the Spanish judicial authorities in view of the following facts.

Christian Liffers, the rights owner, sued production company Producciones Mandarina for allegedly making a documentary including some sequences from his audiovisual works without any authorisation. He also sued television company Mediaset Espana Comunicacion, which broadcast the documentary.

Liffers wanted to stop the infringement of his IP rights and requested financial compensation for the infringement related to moral injury. The calculation method chosen was a lump-sum royalty payment not only for the economic loss but also for compensation of the moral injury.

The court of first instance accepted the request and awarded the claimant an amount based on the material loss that had been suffered, as well as moral injury. This calculation was contested by the losing companies and also by the Court of Appeal, which denied the existence of a right to any compensation based on moral injury on the ground of article 140 of the Spanish IP law, the terms of which differ a little from the European directive.

"calculation of damages to be paid to the rights owner must seek to ensure that the latter is compensated in full for the actual injury suffered."

In particular, the Court of Appeal considered that a party who chooses a royalty-based calculation method is no longer entitled to claim compensation for moral injury.

CJEU intervenes

Thus, the Supreme Court of Spain requested the CJEU to interpret article 13(1) of the 2004 directive. In its decision of March 17, 2016, the CJEU stated that:

By providing for the possibility of setting the damages as a lump sum on the basis of “at least” the elements referred to, that provision allows other elements to be included in the amount such as, when appropriate, compensation for any moral injury caused to the rights owner;

The first subparagraph of article 13(1) of the 2004 directive sets out a general rule that the competent judicial authorities must order the infringer to pay the injured rights owner damages that are appropriate to the actual loss suffered by him as a result of the infringement. As noted by Advocate-General Melchior Wathelet, moral injury, such as damage to the reputation of the author of a work, constitutes a component of the loss actually suffered by the rights owner, provided that it is proved; and

In light of the objectives of the 2004 directive, the first subparagraph of article 13(1) of that directive must be interpreted as establishing the principle that the calculation of damages to be paid to the rights owner must seek to ensure that the latter is compensated in full for the actual injury suffered, which also includes any moral injury.

On those grounds, the court ruled that article 13(1) of the 2004 directive must be interpreted as permitting a party injured by an IP infringement who claims compensation for material damage calculated based on heading (b) of the second subparagraph of article 13(1) to use that right to also claim compensation for the moral injury suffered, as provided for under heading (a) of the second subparagraph of article 13(1).

This decision is of interest for clarifying in EU member states the different types of loss that shall be taken into account for compensating the damage caused by infringement, whatever the evaluation method used for calculating the payment to make amends for this infringement.  

Aurélia Marie is a partner at Cabinet Beau de Loménie. She can be contacted at: amarie@bdl-ip.com 

Aurélia Marie, Cabinet Beau de Loménie, Court of Appeal, Court of Justice of the European Union, infringement, royalty, patent, trademark, copyright,

WIPR