On February 4, 2016, the CJEU’s Advocate General Henrik Saugmandsgaard handed down his opinion on the question of whether an infringer’s surcharge should be considered when calculating the damage for infringement of IP rights when applying the calculation method of the reasonable royalty.

In summary, the AG is of the opinion that an infringer surcharge may only be considered to add to the amount of the reasonable compensation. However this must be capped by the amount of the actual damage suffered by the IP right holder. The damage that the right holder actually suffered might not be exceeded.

The factual background of the case relates to Art. 94(1) of Council Regulation (EC) No 2100/94 of 27 July 1994 on Community plant variety rights, but as the methods for calculating damages are the same for all cases of IP right infringement, it can be generalised to all other types of IP rights.

The case was referred to the CJEU by the Düsseldorf Appeals Court with a long list of questions on how to determine the reasonable compensation in case of IP right infringement. We have commented on the referral decision earlier. The main results of the AG’s opinion that has not yet been published in English are as follows:

  • The AG is of the opinion that Art. 94(1) of Council Regulation (EC) No 2100/94 of 27 July 1994 on Community plant variety rights is to be construed such that the amount of reasonable compensation corresponds to the fee which the infringer, taking account of all circumstances of the individual case that reasonable contracting parties would normally have considered, would have had to pay to the holder of the Community plant variety right, had the infringer obtained such holder’s consent to the use of the protected variety. It is up to the national court to determine the said circumstances and to accordingly fix the amount of reasonable compensation. In using such margin of appreciation, the national court may consider, inter alia, the time that has passed since the infringing acts were committed and may therefore add default interest to the amount of reasonable compensation.
  • The AG continues to explain, neither Art. 94(1) of Regulation No 2100/94 nor Art. 13(1) of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights require the national court, when fixing the amount of reasonable compensation, to add a flat-rate surcharge to the amount of the fee agreed in the existing license agreements on the variety protected on the relevant market. However, the aforementioned provisions do not prevent the national court from doing so, if the national court considers this expedient in determining the amount of the fee which the infringer, taking account of all circumstances of the individual case that reasonable contracting parties would normally have considered, would have had to pay, had the infringer obtained the plant variety right holder’s consent to the use of the protected variety. However, such flat-rate surcharge cannot be fixed for any other purposes in the context of Art. 94(1) of the said Regulation.
  • Neither Art. 94(2) of Regulation No 2100/94 nor Art. 13(1) of Directive 2004/48 require the national court to fix the compensation amount covering the plant variety right holder’s entire damage on the basis of the fee agreed in the existing license agreements on the variety protected on the relevant market. However, the aforementioned provisions do not prevent the national court from using such fee as a starting point for calculating such compensation amount and, if the national court considers this expedient, from adjusting such fee to compensate for the actual damage suffered by the plant variety right holder as a result of the infringement.
  • Neither Art. 94(2) of Regulation No 2100/94 nor Art. 13(1) of Directive 2004/48 require the national court to add a flat-rate surcharge to the fee agreed in the existing license agreements on the variety protected on the relevant market if it decides to use such fee as a calculation basis for the compensation amount covering the plant variety right holder’s entire damage. However, the aforementioned provisions do not prevent the national court from doing so, if the national court considers this expedient in compensating the plant variety right holder for the actual damage suffered as a result of the infringement. However, such flat-rate surcharge cannot be fixed for any other purposes.
  • Art. 94(2) of Regulation No 2100/94 is to be construed such that the profits realized by the infringer do not constitute any damage on the plant variety right holder’s part for which the latter might demand compensation, under this provision, in addition to the payment of reasonable compensation under Art. 94(1) of the said Regulation. However, the referring court may consider the amount of such profits in determining the plant variety right holder’s damage and may fix the compensation amount accordingly.
  • Neither Art. 94(2) of Regulation No 2100/94 nor Art. 14 of Directive 2004/48 contradict any national legislation according to which the plant variety right holder is unable to demand compensation for the costs of infringement-related injunction proceedings even if such right holder subsequently prevails in the main proceeding.
  • Neither Art. 94(2) of Regulation No 2100/94 nor Art. 14 of Directive 2004/48 contradict any national legislation according to which the plant variety right holder is unable to demand compensation for time expended for the preparation of an infringement-related action for damages.

In summary, the AG is of the opinion that an infringer surcharge may only be considered to add to the amount of the reasonable compensation. However, this must be capped by the amount of the actual damage suffered by the IP right holder. The damage that the right holder actually suffered might not be exceeded.

A more detailed analysis of the decision will follow here shortly.