Damages for unjustified temporary injunctions

The party which has obtained a temporary injunction which finally turned out to have been injustified, has to indemnify the opposing party for all economic loss due to this temporary injunction. This is an absolute liability irrespective of any fault. Unjustified is a temporary injunction in IP matters e.g. when as an outcome of the main proceedings the IP right in question is declared invalid or non-existent or when finally no infringement was found. The losses are due to this injunction if sales or other acts like advertisements had not been made, because the injunction was obeyed. These losses comprise the full amount of attorneys’ costs in relation to the suit, all sales’ losses, and all costs spent for the reconquering of the previous market shares.

In a very recent decision (Higher Regional Court Vienna, 12 January 2007), the amount of payments as indemnification for such an unjustified injunction was finally judged. The interlocutory injunction for infringement of an European Patent was granted in July 1998. The patent was finally revoked for Austria in a decision served on the parties in September 2004. The Court of 1st Instance (Commercial Court Vienna) revoked the unjustified injunction in March 2005, but for the time between the serving of the final invalidity decision and that revocation no indemnifications are due since legally in that time the unjustified injunction was no longer in force. As part of the indemnification also immaterial damages to the health of the defendant due to the unjustified court order were claimed since for patent infringement such could be asked for. However, the courts found that the law on compensation for unjustified interlocutory injunctions does not support such a claim. Out of court attorneys’ costs for the defence and the proceedings were, however, granted.

The main part of the request were lost profits for not being allowed to sell the infringing products in Austria and from Austria into Germany, and the elevated costs for re-entering the market. Although the 2nd Instance ruled that offering for sale from Austria into Germany and ensuing sales there would also be covered by the injunction. However, for the loss of sales in these two countries only a small sum of indemnification is due. Such indemnifications presuppose that the defendant has obeyed the injunction and refrained from selling. However, the former patentee has proven that the defendant had circumvented the injunction and continued selling. Therefore, also no costs for re-entering the market were due since the defendant never left the market. The amount of possible profits were calculated by a business expert at a relatively low amount which was further reduced to 3/4 of it by the court because of the continued sales.

As result of this procedure, one can learn that the indemnification for an unjustified injunction might not be as high as expected.

Dipl.-Ing. Helmut Sonn