Compensation and Damages

Recently two decisions were handed down regarding payments for infringement of IP rights, one in a copyright case concerning use of a databank (4 Ob 133/13g), and one in a trade mark case concerning the mark GRANT’s for artificial whisky sold in cans (4 Ob 182/13p). Both were actions by stages.

In both cases infringement was established and accounting was ordered. Action by stages here means that the plaintiff, once he has received the necessary information, has to request continuation of the proceedings by stating the amount claimed. One has also to know that for all IP rights there exist in Austria two forms of sanctions in that regard, namely compensation payments (a form of payment for unjust enrichment) without culpability requirement and in case of culpability damages which could be in the form of lost profits of the plaintiff or in the form of the profits gained by the defendant through infringement.

In the databank case, accounts were not timely rendered, so the plaintiff in the interim requested as compensation the fixed fee for downloading individual entries in the databank which were granted. The court explained that the decision on this part of compensation does not stop the plaintiff asking for additional compensation once the accounts are rendered upon enforcement of the original judgment (pending) if it could be shown that by commercialisation against the will of the plaintiff of the downloaded set of databank entries additional unjust gains were made besides the unpaid costs for downloading. That compensation would usually amount to an adequate licence fee for the infringing commercial use.

In the whisky case, accounts were timely rendered and the plaintiff asked for delivery up of the profits of the infringer on the basis of his culpability (negligence – Grant’s is a known mark for whisky). 15,433.584 cans of artificial whisky were sold yielding a turnover of 3,804.105 €. The defendant calculated its profits after deduction of all costs (including overheads) with 50.133 €. However, the court decided that fixed costs not directly related to the production and sales of that artificial whisky in cans are not deductible but only the variable costs specifically attributable to the infringing product. With the help of an accountant as court expert, it was clarified that such profit to be delivered up amounts to 242.283 €.

This sum is much more than could have been received if the plaintiff would have only asked for compensation since it can be assumed that a licence fee for trade mark use would not have been judged more than 1% to 4% of the turnover. But such compensation would have been more than the profit as calculated by the defendant. Therefore, in the past, it was usual to ask for such compensation.

The lesson is if one has any chance to show culpability, the owner of the IP right suing for infringement should go for delivery up of the profits of the infringer. This is especially so if the establishment of the level of adequate licence fees is very difficult.

What is important here is the formulation of the request for accounting. Since the defendant has only to give that information and those figures asked for in this request or what the court ordered, respectively, on the basis of it the information necessary for determining the profits of the infringer has to be requested already during the proceedings in the first instance of the main infringement action.

DI Helmut Sonn