Many stakeholders ask for more legal clarity on the calculation of damages and their fairer allocation arguing that the amount of damages ordered by the courts often does not cover the harm suffered by the right holder, does not sufficiently deter the infringer from carrying out the infringement and thus provides no incentive to seek legal redress in the first place. In practice this can provide a competitive advantage to the infringer.
Possible ways to address this issue include:
- Clarifying the rules for the calculation and allocation of damages in IPRED, stating that any injury suffered must be compensated in full (including interest) and ensuring that due account is given to all possible sources of harm, and not only the forgone royalties.
This option will provide enhanced guidance to national courts and is backed up by existing CJEU jurisprudence. In order to facilitate the calculation and allocation of damages an additional option could be:
- to ensure that (a) the burden of proof required by Member States for the quantification of harm suffered does not make the right to damages practically impossible to exercise or excessively difficult and that (b) national courts are empowered to estimate the amount of prejudice suffered if it is practically impossible or excessively difficult to quantify precisely the harm suffered.
An additional option could be:
- Raising the minimum level of damages in case of lump sum damages to double the royalties or fees.
This option would provide an increased baseline for damages, has the advantage of simplicity and would improve deterrence. A CJEU judgment (Case 367/15) concluded that such a provision at national level, as foreseen in Polish law, would be compatible with the general principles of IPRED, at least where the court seized has an opportunity to lower the amount in exceptional cases in order to avoid abuses.
This option, however, runs the risk of being perceived, in some cases, as “punitive”: proposing to bind national courts to this minimum might give rise to overcompensation in cases where the lump sum exceeds the actual loss (or it could constitute an abuse of rights prohibited by Article 3(2) IPRED) and there is not sufficient evidence proving that double the royalties corresponds on average to the real harm suffered. At the same time, it may result in under-compensation: it risks making it more difficult for right holders to claim damages higher than this lump sum where it is merited, as judges will tend to stick to this benchmark.
In order to enhance legal clarity and emphasize that certain measures provided for in IPRED cannot be invoked in respect of individuals acting in their private sphere it was proposed to define “commercial scale” in IPRED. A possible wording for a definition in the operative part of the Directive would be the following:
“Acts carried out on a commercial scale are those carried out for direct or indirect economic or commercial advantage; this would normally exclude acts carried out by end consumers acting in good faith.”
Any wording would need to provide a corrective element to the definition, to avoid that it also covers consumers. Otherwise an illegal download of a film for free could already be considered commercial scale as the consumer saves the retail price.
Strengthening the protection of IPRs, which is an important objective, should at the same time not lead to increased abuses to the detriment of the users of protected goods. At the same time, the advent of the digital age has also meant that fundamental rights can be violated in new ways. Given the importance of this issue, and bearing in mind the experience with ACTA, it is essential to ensure that the delicate balance between the fundamental right to property, including IP, and the other fundamental rights, is respected.