By means of the Directive 2004/48/EC on the Enforcement of Intellectual Property Rights (hereinafter abbreviated to Enforcement Directive) the European legislator – in order to guarantee a high and homogeneous level of protection within the European Union – has provided a framework for the national legislators of the Member States relating to substantive and procedural sanctions and the implementation of procedural instruments for the enforcement of intellectual property rights. The core of the Directive, besides Articles 6 to 9 concerning the enforcement and protection of a variety of claims deriving from property rights, are Articles 10 to 15 that are devoted to the legal consequences resulting from an ascertained infringement of property rights. Besides the rights to claim destruction, recall and removal, damage claims according to Article 13 are of particular significance.
The decision of the European Court of Justice
So far, the European Court of Justice has been given the opportunity in four decisions [here, here, here and here] to clarify some questions relating to damage claims and cost compensation. Two of the three decisions are dealing with national regulations concerning damages, while the third decision discusses damage claims resulting from the infringement of a Community plant variety right, which is to be discussed here. A fourth decision concerns the reimbursement of procedural, in particular attorneys’, fees in accordance with Article 14 IPR.
The European Court of Justice was called to determine what is to be understood by “reasonable compensation” and “amount of the reimbursement of further damages resulting from the infringement” in the sense of Article 94(a) of the Directive No. 2100/94 on Community Plant Variety Rights. In the initial proceedings before the courts in Dusseldorf, besides the customary licence, the Plaintiff had requested an adequate increase of the same and reimbursement of further costs incurred by the Plaintiff in relation to the infringement (e.g. for travels to places of negotiation and court hearings as well as preceding, albeit failed, interim injunction proceedings).
Although the Court declines the awarding of a lump sum payment by the infringer as well as the surrender of the profits and advantages gained by the infringer, it emphasizes nevertheless that the term “reasonable reimbursement” includes – besides the customary fee that would have to be paid for a licensed propagation – any and all damages that are closely related to the fact that this fee had not been paid, to which in particular the payment of interest on arrears may belong, and that it is up to the competent material court to determine which circumstances demand an increased fee, whereby no circumstances may be utilized more than once to calculate a reasonable compensation. The amount of the damages mentioned in Article 94(2) of the Directive was to be ascertained on the basis of arguments presented by the proprietor of the infringed variety and was, possibly, to be turned into a lump sum payment in case that the valuation factors justifying an increase in the regular licence fee were not quantifiable. Non-consideration of the costs incurred in the course of unsuccessful interim injunction proceedings or of extrajudicial costs incurred in the course of the initial proceedings was compatible with the Directive; this required, however, that the amount of the legal fees possibly to be borne by the infringed party should not prevent it from enforcing its rights in litigious proceedings.
Hence, the European Court of Justice obliges the national court to include the circumstances of the individual case, beyond the customary licence fee, in its calculation of damages to be paid. Thus, all aspects that have occasionally been considered by the German legislators as “increase factors” have to be included in the assessment, following the provision of relevant arguments by the infringed party. In addition to the unique position of the protected object and an associated lacking alternative option for third parties, inter alia the lack of an obligation to keep records and to advertise the object in question as customarily agreed upon in licence agreements, the payment risk in case of invalid property rights or the fact that, to round up one’s own scope of products, the protected object is necessary as a “must have” are potential factors justifying an increase in the regular licence fee. Owing to circumstances, this might result in doubling the customary licence fee.
Non-consideration of the actual costs of unsuccessful interim injunction proceedings or of judicial and extrajudicial costs incurred in the course of initial proceedings is compatible with the Directive; it requires, however, that the amount of the legal fees to be borne by the infringed party must not prevent it from enforcing its rights with the assistance of a court. The national courts are therefore obliged to evaluate, irrespective of possibly existing national regulations, in their calculation of the costs to be reimbursed by the losing party and following the provision of relevant arguments whether the reimbursable costs, according to the national law on costs, might be grossly disproportionate with actually necessary judicial costs and fees.
On the basis of this decision and the further decisions rendered by the European Court of Justice dealing with the question of damages in accordance with the IPR, it is certain that a damage payment in the amount of a customary licence fee is not at all in compliance with the Enforcement Directive. This is actually even emphasized by the Court in its decision of 25 January 2017 in Case C-367/15, ECLI:EU:C:2017:36, margin no. 30 – Olawska Telewizja Kablowa.