IP rights – including rights to a trademark – enable rights holders to exploit certain intangible assets exclusively. In the event of misappropriation or trademark infringement, the trademark owner subject to the infringement will suffer damage due to the fact that a third party is using a similar or identical trademark without its consent.
Trademark owners can suffer the following damages when their rights are infringed:
- financial loss derived from the number of products that they were deprived from commercialising;
- harm to the reputation or prestige of the trademark when consumers think that the purchased product or service featuring the infringing trademark is lawful and associate the low-quality product or service with the trademark owner's product or service;
- loss of business due to the infringement of the trademark owner's exclusivity right; and
- other costs generated by the infringement (eg, ads informing the public of the infringement).
In this regard, the courts must adopt broad criteria when repairing damages, even when it is difficult to prove the effect of the damages concretely.
Ensuring the cessation of the infringing activity is as important as obtaining full compensation for the damages caused. Therefore, the criteria established by law and applied by the courts should result in damages that discourage the violation of IP rights.
The August 16 2016 decision of Division I of the Federal Court of Appeals in Civil and Commercial Matters in HI v Ditoys SA provides a good example of real repair of damages following a trademark infringement. In its decision, the court upheld the first-instance judgment, which had sustained the complaint brought against Ditoys SA and ordered it to cease manufacturing, publicising or selling products identified as 'transformable' or 'transformer' and pay compensation, following the provision of evidence illustrating the defendant's imitative intention.
The first-instance court understood that it was difficult to prove the loss accurately based on the reduction in the plaintiff's income, as this depended on multiple factors, and in this sense argued that the party which acts improperly must undertake the risk of the uncertainty generated by their action, otherwise there would be a thread of impunity around trademark infringements.
Finally, the first-instance court stated that:
"Once the existence of infringement has been proven, experience, case-law and doctrine affirm that the trademark owner suffers damage. Undoubtedly, difficulties are encountered when it comes to proving the damage caused in the field of industrial property. Thus, it would be correct to start from presumed damages."
In its decision, the court of appeals confirmed that the repair of damages is consistent with the law, sustained the plaintiff's request and significantly increased the compensation amount.
For further information on this topic please contact Daniel R Zuccherino at Obligado & Cia by telephone (+54 11 4114 1100) or email ([email protected]). The Obligado & Cia website can be accessed at www.obligado.com.