Guidance on IPRED Directive – calculating damages

Member States are required to enable the competent judicial authorities to order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity to pay the rightholder damages appropriate to the actual prejudice suffered by him as a result of the infringement. Where the infringer acted not knowingly, or without reasonable grounds to know, Member States have the possibility to enable the judicial authorities to order the recovery of profits or the payment of damages, which may be pre-established.

According to Article 13(1), the damages should be appropriate to the actual prejudice suffered as a result of the infringement. The aim is to compensate that prejudice in full. The Directive provides for two possibilities to set such damages. Their amount can be determined by the judicial authorities:

  • by taking into account all appropriate aspects, such as the negative consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement (Article 13(1)(a)), or, as an alternative,
  • in appropriate cases, by setting as a lump sum on the basis of elements such as at least the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the IPR in question (‘hypothetical royalty/fee’) (Article 13(1)(b)).

The wording of Article 13(1) of IPRED indicates that the Member States are to ensure that both methods for setting the damages established in this provision are reflected in their national legislation. Contrary to for instance Article 13(2), these are therefore not two options for the Member States; rather, it is for the applicant and ultimately the competent judicial authority to decide which of these two alternative methods is to be applied in order to set the damages in a given case.

Where it comes to the choice between both alternative methods in a given case, the wording of Article 13(1) indicates that it should be ‘appropriate’ to apply the lump sum method referred to in its point (b) of that provision. It has been reported that in some cases under the applicable national rules applicants can only request calculation of damages in accordance with that method if the use of the method referred to in point (a) is impossible. Such interpretation is, in the view of the Commission, not in line with the Directive.

In the Commission’s view (de), the possibility to set damages on the basis of a lump sum in accordance with Article 13(1)(b) is an alternative to the method set out in Article 13(1)(a) requiring the identification and quantification of all appropriate aspects, and both methods should in principle be available to the competent judicial authorities. Those authorities should be able to award damages set on a lump sum basis under point (b) where they consider this to be appropriate in light of the circumstances of the specific case before them, in particular where it is difficult to set the damages based on the method of point (a).