Defining enrichment payable after infringement

The plaintiff in a patent infringement lawsuit is entitled to claim damages suffered due to the defendant’s infringement. Establishing the exact level of such damages is complicated and very often requires the plaintiff to disclose sensitive or confidential information during court proceedings. Such data include turnover and profit margin, and the financial impact of the infringing activity. In most cases, plaintiffs hesitate to disclose such sensitive data.

Another major problem arises when there are several defendants and/or other market players in the field of the infringement. In such cases, it is very difficult to prove the actual damages suffered by the plaintiff as a decrease in profit could be the result of competitor activity.

This and other reasons motivate plaintiffs to use another method—the so-called unpaid licence fee model—to establish damages. It is within the normal practice of the court to establish the appropriate licence fee that the defendant would have had to pay to the patentee for the use of the patented technology and to oblige the defendant to pay this unpaid licence fee to the plaintiff as an award for damages suffered during the period of patent infringement.

“It is within the normal practice of the court to establish the appropriate licence fee that the defendant would have had to pay to the patentee for the use of the patented technology and to oblige the defendant to pay this unpaid licence fee to the plaintiff as an award for damages suffered during the period of patent infringement."

However, even this approach has some drawbacks; for example, it is not always easy to establish an average licence fee, especially if the plaintiff ’s patent is for a rarely used, remote technology. In Hungary, the number of licence agreements is quite limited; therefore it is difficult to establish the appropriate licence fee prevailing in a certain industry.

This is the reason why, in Hungary, plaintiffs prefer to rely on a third method for securing compensation for their losses: once the patent infringement has been established, suing the defendant for the payment of the enrichment obtained through the infringement. The Hungarian Patents Act provides for this situation. According to Article 35 of the act, the patentee may have recourse to civil remedies; among others, the patentee may require the surrender of the enrichment obtained by the infringement of the patent. However, neither the act nor its enacting clause defines the term ‘enrichment’.

The Act on Accountancy, the other major governing law in this area, does not offer a definition of this term either. So in the reported case, the courts had no choice but to find a proper definition, especially in view of the fact that the court expert on accountancy admitted that she was not able to provide a clear interpretation based on the Act on Accountancy.

In the particular case, the infringement was committed by the importation and sale of the patented product. The defendant claimed that no or only marginal profit was achieved by this activity. The defendant tried to identify the contribution of each of its products to its overall profit during the period of infringement and concluded that the profit generated by the infringing product was rather modest.

The courts established that this method of profit allocation was wrong. The defendant was not entitled to deduct the general costs of the overall business from the net sales value of the infringing product; on the contrary, only the direct costs could be deducted from the net sales value of the infringing product. These direct costs included the import price, duties, cost of obtaining the marketing authorisation, and product-specific costs, such as transport, storage and sales.

The profit calculated in this way was substantially higher than the profit indicated in the books of the defendant and was much higher than the amount that would have been determined by the licence fee method.

Imre Molnár is deputy managing partner and Hungarian and European patent attorney at Danubia Patent & Law Office LLC. He can be contacted at: imolnar@danubia.hu