Quantifying damages for infringement in Germany — the Tripp-Trapp chair case

Most parents in the industrialised world will probably know the Tripp-Trapp chair. It is a children’s chair made of wood with a quite simple but memorable design, advertised by the original manufacturer as the ‘chair which grows with your child’.

The success of the original chair has spurred many competitors (or companies that aspired to be competitors) to market and distribute chairs whose design was at least very similar to the original chair design. The Tripp-Trapp chair case decided by the Federal Supreme Court of Germany on May 14, 2009 concerns one of the many ‘copies’ of the original chair.

The defendant had not contested the evaluation of the appeal court in Hamburg that the original Tripp-Trapp chair enjoys copyright protection as a “work of applied art”. The subject matter of the case concerned the computation of quantified damages for copyright infringement. In that respect, the decision of the Federal Supreme Court will not only affect copyright cases, but all cases involving the infringement of intellectual property rights.

In principle, according to German law, the owner of an intellectual property right may quantify damages with one of three different methods. The owner may quantify the damages on the basis of a licence rate that reasonable parties would have agreed on had they concluded a licence agreement prior to use. Second, the owner of the intellectual property right may claim profits lost as a consequence of the infringement.

This is widely regarded as unsatisfying as the plaintiff would have to establish concrete losses and that these were the result of the infringement. Therefore, in recent years, owners of intellectual property rights have mostly chosen to quantify the damages on the basis of the profits that the ‘infringer’ made with the infringing goods.

A 2001 decision of the Federal Supreme Court established that the defendant infringer must not reduce the profits claimed by plaintiffs by deducting a quota of his overhead costs. Instead, the court ruled that only those costs that could be precisely attributed to the infringing products could be deducted. This decision potentially offered a sharp increase in the damages that could be claimed by owners of intellectual property rights.

The Tripp-Trapp chair case now addresses some of the problems that had arisen in many cases involving the quantification of damages for patent, design and copyright infringement alike. First of all, the court again stresses the fact that only the infringer’s profits that can be attributed to the infringement can actually be claimed as damages. While this rule is generally accepted and well known, in practice, it presented many problems.

How to assess exactly which part of the infringer’s profits can be attributed to the infringement? The Tripp-Trapp chair case gives at least some clues as to what aspects are relevant for answering that question in a certain case, namely in cases of copyright infringement. First, the court says that since works of applied art are not only important in terms of their design, but also for their technical function, an assumption that the entire profits of the product are attributable to the copied design cannot be sustained.

The amount the design has contributed to the customers’ decision to buy the product should be weighed according to a couple of factors. First, the kind of product in question is decisive. For instance, the technical function may be more important for pieces of furniture than for jewellery. Second, what is arguably not relevant is the fact that the design in question makes use in part of the prior art.

The court also addressed another practical problem. This concerns the question whether the IP rights owner may claim the profits made by several infringers in a supply chain (manufacturer, wholesaler, retailer) as a result of their individual infringement.

The Federal Supreme Court held that, in principle, each of the infringers may be sued individually for damages and the owner of an intellectual property right may claim the profits made by each infringer. However, if the manufacturer has already reimbursed his customers for the damages these customers paid to the IP rights owner, the manufacturer may deduct his reimbursement payments from the damages the IP rights owner now claims from him.

If the rights owner sues the manufacturer first, and collects full damages, and then sues the customers and collects again, with the result that the manufacturer has to reimburse its customers for their damage, the manufacturer may claim back those parts of the damages that it had to reimburse to its customers.

The Tripp-Trapp chair case of the Federal Supreme Court therefore addresses many relevant questions for the IP practitioner in Germany. The legal question of which part(s) of the infringer’s profits may be attributed to the infringement if there are other factors that may have contributed to this profit is an especially important question for counsel. The decision provides at least some guidelines as to the criteria the courts will use.

Jens Künzel, LLM, is a partner at Krieger Mes & Graf v. der Groeben. He can be contacted at: jens.kuenzel@krieger-mes.de