Damages under the IP Enforcement Directive a decade on – a multi-jurisdictional perspective

Written on 17 Nov 2014

Since a flurry of speculation which surrounded its implementation into Member States’ national laws between 2006 and 2009, there has been little discussion of the Directive on the Enforcement of Intellectual Property Rights (2004/48/EC) (the “Enforcement Directive”). In a recent decision in the Intellectual Property Enterprise Court, the English Court has for the first time considered the scope of Article 13 (Damages) of the Enforcement Directive. So we took the opportunity to consider: what impact has the Enforcement Directive had, nearly a decade on, on damages awards in the UK, Germany, Italy and France?

In practice, the impact has been variable.

In France, a request to the Higher Court to refer a decision on the calculation of damages – which had resulted in an award below that which the copyright holder could charge on a commercial basis – to the CJEU for a preliminary ruling, was rejected on the grounds that the calculation of damages is a matter exclusively within the sovereign power of the lower courts.

In Italy, the implementation of the Enforcement Directive has merely codified principles already followed by Italian judges. Unfortunately the Italian judges, relying on their right to fix damages in equity according to articles 1226 and 2056 of the Italian civil code, often reduce the sums claimed by the rights holders by way of the “price of consent”. Since this approach appears materially different from either the German or English approach, there may well be scope for a reference to the Court of Justice of the European Union in due course to establish whether or not the Italian approach is compatible with the correct interpretation of the Enforcement Directive.

In Germany, the Enforcement Directive was specifically implemented into the laws governing each of the intellectual property rights, but in practice the concepts to which it refers to Background to the Enforcement Directive were already in use in German case law on the calculation of damages, see here. However, the effect of the Directive on the licence analogy – under which damages are calculated as the amount the rightholder would have received under a licence negotiated in good faith between a willing licensor and a willing licensee – has been particularly contested. The patent chamber of the Munich Regional Court has ruled that the Enforcement Directive requires a royalty rate higher than the market standard for the technology in question to be applied, whereas the copyright chamber of the Berlin Regional Court ruled that Article 13 has not changed the previously applied doctrine on damages calculation, noting that a provision stipulating a general “extra” on the infringer licence was rejected during the German implementation process. Nevertheless, the court found that the correct interpretation of section 97 of the German Copyright Act allows for a higher licence fee taking into account that Article 13 provides for “at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question.”

In Spain, the Supreme Court has referred questions to the CJEU on the interpretation of Article 13(1) of the Enforcement Directive. This will be the first time the CJEU has been asked to consider this aspect of the Enforcement Directive. Its ruling, once given, will affect the calculation of damages in all Member States.

Finally, the English courts considered the impact of the Directive for the first time only in 2014, in the context of an enquiry into damages in a case of infringement of performer’s rights. The judge concluded that the Directive’s reference to unfair profits makes relatively little change to pre-existing English case law on damages, seeing it as a substitution for the previous category of additional damages. This finding is potentially controversial, since Parliament did not delete the statutory basis for an award of additional damages when implementing the Directive. In addition, the court found that the ability to claim damages for moral prejudice did constitute a new basis for damages, but one which will only apply in limited circumstances: where the claimant suffers little or no financial loss such that there would be no compensation or where the compensation would not be proportionate to the overall damage suffered.

For a full discussion of the cases referred to, and damages calculations in the respective national laws, please read each jurisdiction below: