Damage claims in IP disputes

Bear in mind when going to Court.

Court disputes about infringement of IP rights usually involve claims for damage compensation. The Italian legal framework does not provide for ‘punitive damages’ but only for compensation of ‘real damages’ (save cases in which ‘moral damages’ are also awarded).
This means that plaintiffs always need to substantiate such compensation claims both, with respect to damages having occurred and having been caused by the defendant as well as to the entity of damages suffered. In other terms, the burden of proof on these aspects stays with the plaintiff and no ‘discovery system’ (like the one in the US) is available: you need to come up with extensive documentary (or other) evidence on your own, no ‘blind dwelling’ into the archives of your opponent will be allowed to ease your substantiation requirements.
How the local Courts usually del with the issue.

When Courts come to deal with IP infringement and related damage compensation claims, they frequently refer to ‘price of consent’ as a standard criterion for determining the amount awarded under such claims, meaning that they consider what would be a reasonable (license) fee for the use of the infringed IP asset. However, it is not advisable to rely on automated application of such evaluation criterion.
A case handled by the IP section of a First Instance Court.
The IP Section of a First Instance Court in Genoa was approached by a well-known manufacturer of an alcoholic energy drinks, objecting against the use of its trademark and logos on apparel put on sale by a local shop. Aside from other claims, usual in the context of this kind of disputes (such as: requests for ascertaining ownership of the IP rights and of unfair competition practices, cease and desist order, notice to the general public about the Court’s decision), the plaintiff also asked for damage compensation.
While the Court entirely agreed with plaintiff’s all other claims, it followed a different path as to the requested compensation of damages, caused by the defendant.
First of all, the Court reminded, in general terms, that in IP disputes, just as in any other, the burden of proof requirement had to be duly fulfilled with respect to damages having actually occurred due to defendant’s conduct and liability. Therefore, no automated assumption of damages in presence of illegal conduct could be reasonably established (e.g. not any sale of an infringing product could be held as automatically equal to a sale not performed – and therefore a financial loss – by the legitimate holder of the IP rights).
The Court then passed on to asserting that it could not automatically rely – as an alternative – onto the ‘price for consent’ standard criterion. In fact, in the specific case, even though an expert opinion had been collected, it had not been possible to achieve sufficient data to assess which portion of the annual gross income could realistically be considered as a license fee.
The Court also noted that the plaintiff had failed to claim damage compensation specifically referred on revenue loss but had insisted – as a subordinate request – on determination based on fair and equitable equivalent.
As damage compensation had to result in awarding a substitute for an actual financial loss suffered, the plaintiff – having failed to offer the Court elements of reasonable evidence on such loss – could not expect the Court to fix an equitable equivalent, as any substantiation of the actual existence of decrease in plaintiff’s sales was missing.
Therefore, the Court:
- ascertained infringement on plaintiff’s trademark and defendant’s performance of acts of unfair competition
- issued a cease and desist order against the defendant as to further infringement,
- ordered destruction of all infringing goods,
- established a fine of Euro 500,00 for any day of delay in complying with its statements,
- ordered the defendant to go give public notice about the judgement through a single publication on two nationwide diffused newspapers.
- dismissed plaintiff’s claims for damage compensation.
- served the defendant with legal fees (in favor of the plaintiff) determined in Euro 7.250,00.

What’s to be learned.

Like it or like it not: procedural issues can have significant impact on the outcome of a lawsuit. Therefore, better check the basics, when structuring a court claim!