On October 29, 2015, the Court of Milan, presiding over a patent case, awarded €200,000 as compensation for damages to the reputation of an alleged infringer after the patentee had sought to disparage the alleged infringer in the eyes of its customers.
In Geratherm Medical AG vs. Gima S.p.A. (Court of Milan, docket n. R.G. 74260/2012, Geratherm Medical AG) (“Geratherm”) filed suit against Gima S.p.A. (“Gima”) for unfair competition and the alleged infringement of two European patents, EP 0657023 and EP 1477786, of which Geratherm is the owner and exclusive licensee, respectively. EP ‘023 covers a specific type of clinical thermometer, while EP ‘786 is entitled “Use of metallic gallium alloys as an expansion liquid in thermometers”.
Taking a step back, prior to the proceedings on the merits, Geratherm had filed an action for interlocutory measures against Gima for infringement of EP ‘786 before the same court. Gima successfully defended itself, asserting that its products were produced by a Chinese company pursuant to a license agreement between the Chinese company and the inventor and former owner of the patent, who was an ex-employee of Geratherm. Considering these facts, the Court of Milan denied interlocutory relief which led to Geratherm proceeding with the action on the merits.
In the action on the merits, Geratherm alleged that the license from the former owner of EP ‘786 to the Chinese producer of the Gima products was invalid, and that Gima further infringed EP ‘023 and engaged in acts of unfair competition.
Gima responded disputing Geratherm’s claims in full, raising a counterclaim against Geratherm for engaging in acts of unfair competition and requesting damages. Indeed, it alleged that Geratherm engaged in numerous disparaging acts aimed at driving customers away from Gima both in Italy and abroad. To support this claim, Gima sought to demonstrate that Geratherm interfered with its commercial activities by writing and sending numerous offensive letters to its customers. Gima also provided evidence of denigrating conduct by Geratherm at a trade fair in which both parties participated.
During the proceedings on the merits, the Court found that the license agreement between Gima’s Chinese producer and the former owner of EP ‘786 was valid, that Gima’s products did not infringe EP ‘023, and that Gima engaged in no acts of unfair competition.
Considering Gima’s counterclaim for unfair competition, the Court carefully reviewed the evidence provided (e.g. letters and evidence of Geratherm’s conduct at the trade fair). With respect to the letters, the Court noted that they did not simply inform the customers of the pending legal actions in a neutral manner, but instead were quite explicit in their description of the allegedly infringing conduct carried out by Gima and the Chinese producer. Further, Geratherm also informed Gima’s customers that Gima’s products did not conform to European safety standards and that use of the products constituted serious health risks.
First, the Court set aside Geratherm’s objection to the Court’s jurisdiction with respect to letters sent to foreign clients, since the potential harm suffered by Gima as a result of Geratherm’s actions would occur in Italy. The Court assessed the accusations set forth by Geratherm in these letters in light of the evidence it produced during the course of the action, and found that Geratherm did not meet its burden of proof to establish any of the disparaging claims set forth in the letters. It therefore concluded that, considering the gravity of the allegations, the widespread diffusion of Geratherm’s contact with Gima’s customers, Geratherm’s subjective intent to disparage its competitor notwithstanding its awareness of the prior license to produce the product, and the overall revenue of the two companies involved, Gima was entitled to compensation for damages in the amount of €200,000.
This award is surely generous, though the grounds provided by the court are clear. The most interesting aspect of this decision is, in fact, certain factors that were not taken into account: namely, Gima did not produce any evidence of actual harm to its reputation. Gima did not demonstrate that it lost any clients, nor did it suffer a decrease in the number of orders or cancellation of existing orders, as a result of Geratherm’s actions. Therefore, in considering the award of €200,000, it appears that this level of damages is intended to compensate a reputational harm that is not susceptible to a precise monetary determination. This means that, if Gima had been able to prove that it actually lost revenues, such losses would have been added to the damages ultimately awarded by the Court.
It suffices to say that the Court of Milan found Geratherm’s actions to be so atrocious that damage to Gima’s reputation is presumed, even if it was not demonstrated in a concrete manner. Therefore, clients would be well advised to be prudent when tempted to contact a competitor’s customers – both in and outside of the Italian territory – when the client believes the competitor may be infringing its IP rights in Italy.