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Guidance on IPRED Directive – moral damages and setting damages as a lump sum

A difficulty in calculating damages has been reported when there is the possibility to obtain compensation for the moral prejudice suffered. In this regard Article 13(1)(a) of IPRED is clear, as it expressly mentions that other elements than economic factors, such as the moral prejudice caused to the rightholder by the infringement, can be one of the ‘appropriate aspects’ to be taken into account when setting the damages in accordance with the method provided for in this provision.

Article 13(1)(b) of IPRED, in contrast, does not expressly mention the possibility of compensation for moral prejudice when setting the damages in accordance with the lump sum method. However, the CJEU has indicated that that provision does not preclude awarding such compensation either and that it is in fact required to take the moral prejudice suffered into account when setting the lump sum in order to achieve the objective of providing for full compensation of the actual prejudice suffered.

A party injured by an IPR infringement who brings a claim for damages to compensate for the prejudice suffered, set in accordance with the lump sum method of Article 13(1)(b) of IPRED, may claim and, if the claim is substantiated, be awarded not only compensation for material damage but also for the moral prejudice caused by that infringement.

It was claimed that awarding damages corresponding to only the single amount of the hypothetical royalty/fee is not sufficient to compensate for the actual prejudice suffered and does not provide for a sufficient deterrent effect. In that context it was discussed whether the Directive allows for a possibility to award damages that would consist in a multiple value of the hypothetical royalty/fee.

The Commission concludes (de) that the damages set using the lump sum method are by no means to be restricted to only once the amount of a hypothetical royalty/fee and may, depending on the case, well need to constitute a higher amount. It also appears that the competent judicial authorities have a margin of discretion when setting the damages through applying this method. Accordingly, the method described in Article 13(1)(b) can be seen as resembling an empowerment for those authorities to estimate the amount of prejudice suffered on the basis of the available elements.

Article 13(1)(b) of IPRED does not preclude national legislation under which a holder of an infringed IPR may claim from the infringer the payment of a sum corresponding to twice the hypothetical royalty/fee. While Article 13(1)(b) of IPRED does not necessarily require such doubling of that hypothetical royalty/fee, the national legislation implementing this provision should enable the rightholder to demand that the damages set as a lump sum are calculated not only on the basis of the single amount of that hypothetical royalty/fee, but also on the basis of other appropriate aspects. This can include compensation for any costs that are linked to researching and identifying possible acts of infringement and compensation for possible moral prejudice or interest on the sums due.