When calculating appropriate damages on the basis of profits made by a patent infringer, it generally has to be taken into account whether the customers of the patent infringer were aware of the technical features or at least of the advantages of the patented invention. These factors may influence the extent to which the use of the infringed patent-in-suit caused the profits made by the infringer with infringing products.
In the event of infringement of an intellectual property right, the right holder is entitled to claim damages from the infringer calculated on the basis of three alternative methods, namely license analogy, infringer’s profits and lost profits of the right holder. The right holder is entitled to choose the calculation method he prefers and which will result in the highest amount of damages.
According to the established case law, the damages which may be claimed on the basis of infringer’s profits are limited to the amount of the profits which is attributable to – generally meaning caused by – the infringement of the intellectual property right. With respect to patent infringement, the percentage share of the infringer’s profits which is causally attributable to the use of the patented invention is depending on the relevance and importance of the technical features provided by the use of the patent-insuit for the decision of the relevant customer to purchase the infringing product – as compared to the relevance and importance of other factors which may influence the purchasing decision of the relevant customers. Such factors may be for example the value of non-infringing features, the price advantage of the infringing products, the pre-existing business relationship between the infringer and his customers, infringer’s customer services, infringer’s company image and renowned trademarks, etc.
It rests with the infringement court to estimate which share of the profit is caused by the use of the invention of the patent-in-suit. The estimation of this causality factor is a case-by-case decision depending on the specific circumstances of each individual case. In general, infringement courts assume that a considerable part of the profits are attributable to factors other than the use of the patented technology.
In the case at hand, the Dusseldorf District Court and the Dusseldorf Appeal Court ruled that 10% of the profits made by the infringer with infringing cable locks and its holders are attributable to the use of the patent-in-suit. With the present decision, the Federal Supreme Court rejected the appeal of the patentee, who claimed damages in the amount of 40% of infringer’s profits, and confirmed that the legal considerations of the first and second instance courts with respect to the estimation of the causality factor were correct:
According to the usual approach, the first and second instance courts assessed the importance of the technical teaching of the patent-in-suit for the purchasing decision by analyzing whether the invention concerns an entirely new object or only an improvement of details of a well-known object. In this regard, a comparison of the patented invention to the relevant prior art allows the courts to evaluate the importance of the improvement provided by the patent-in-suit.
Further, the first and second instance courts considered whether and to what extent technical features and advantages of the teaching of the patent-in-suit were specifically advertised by the infringer with respect to the infringing embodiments. If specific technical details and the corresponding advantages of the patented invention were known to the customers of the infringing products, this may have influenced their purchasing decision. The courts outlined that the customers may have been aware of the patented features of the infringing products and the corresponding technical and economic advantages because of a specific packaging of the infringing products or direct or indirect advertisement by the infringer. In general, whether specific technical details and the corresponding advantages of the patented invention are known to the customers of the infringing products is a factor that regularly allows the courts to evaluate the extent to which the market chances of the infringer’s products were influenced by the use of the patented invention.
Additionally, the Federal Supreme Court emphasized that there are many other reasons and factors which influence a product’s success than the knowledge of specific technical features by the customers, especially if the infringing products are sold to private end consumers.
With respect to the specific circumstances of the case at hand, the first and second instance courts found that the patent-in-suit only improved some details of well-known cable locks and its holders. Further, the patented features of the infringing embodiments and the corresponding technical and economic advantages were not perceptible for the relevant customers, neither in view of the specific packaging nor regarding the advertisement of the infringing product. These factual considerations led the Federal Supreme Court to the conclusion that it was correct to assume a causality factor of 10% and, thus, to determine 10% of infringer’s profits as appropriate damages for the patentee.
The present decision takes into account the ruling in the decision “Flaschenträger/bottle carrier” of the Federal Supreme Court as of July 24, 2012, in which case the causality factor was estimated to be 50% of infringer’s profits (Case X ZR 51/11, previously reported in BARDEHLE PAGENBERG IP Report 2013/I, under paragraph 2).
However, in the present, the Federal Supreme Court went further by clarifying that the perception of the customers and the advertisement of technical features and advantages related to the patented invention are factors which should be generally and regularly considered by the courts within their overall estimation of the causality of the patented invention, because these factors may influence the customer’s decision to buy infringing products and, thus, the profits made by the infringers.
Nevertheless, it has to be kept in mind that the customers’ awareness of the patented technical features and its advantages is only one of a number of relevant factors for the estimation of causality. In practice, the courts take into account many other factors which may influence an infringing product’s success on the market. As a result, the courts’ estimation of the appropriate damages based on the actual profits of the infringer is a case-by-case decision which is rarely predictable.