How are damages awards calculated? Are punitive damages available?
China Ropes & Gray LLP
Under the Patent Law, damages are determined as follows:
- actual losses due to infringement;
- gains of the infringer from infringement (if actual loss is difficult to determine);
- an appropriate multiple of a reasonable royalty fee (if actual loss and gains are difficult to determine); or
- statutory damages of between Rmb10,000 and Rmb1 million (if actual loss, gains and royalty fees are difficult to determine).
In the fourth Patent Law amendment (draft for review), statutory damages are amended to between Rmb100,000 and Rmb5 million.
Punitive damages are not available under the Patent Law, but under the fourth Patent Law amendment (draft for review) enhanced damages of up to three times the damages originally awarded are available for wilful infringement.
For intentional or negligent infringements, the infringer must pay reasonable compensation for use of the invention, as well as damages for any other damage caused by the infringement(s).
For non-intentional and non-negligent infringements, the infringer must pay compensation for the use of the invention if, and to the extent that, this is considered reasonable.
Denmark has no provisions regarding punitive damages. Consequently, the granting of damages for infringements in Denmark is relatively conservative.
Ecuador Paz Horowitz
This is at the discretion of the authority and may be between US$500 and US$100,000.
Finland Backström & Co
- reasonable compensation for the exploitation of the invention; and
- other damages caused to the patent owner.
Reasonable compensation is traditionally calculated as a royalty percentage, while ‘other damages’ mainly include the patent owner’s lost profits. To establish other damages, the plaintiff must present evidence. Reasonable compensation (ie, a royalty) is always available – even if the defendant has not acted negligently. In the case of slight negligence, compensation may be adjusted accordingly. Compensation proceedings for patent infringement will take into account damage that occurred only in the five years before the institution of the proceedings. Punitive damages are not available.
France Casalonga & Associés
Monetary remedies or damages are based on the Civil Code, which prescribes that any act that causes damages must be repaired by the party at fault.
According to the IP Code (as amended in 2007), in order to determine the amount of damages the court must consider:
- the negative economic consequences, including the patentee’s lost profits and other financial losses;
- the infringer’s profits; and
- the moral prejudice, if any.
Alternatively, the court may allocate a lump sum to the patentee – at the patentee’s request – which must be higher than the royalties that would have been due if the alleged infringer had requested a licence.
The statute of limitation dates back five years from the date on which litigation is commenced. Thus, damages start to accrue five years before the date on which an infringement suit commences.
In summary, French courts will assess the damage suffered by patentees, licensees and other possibly injured parties as follows:
- If the patentee or its licensee is exploiting the patent or conducting the patented process in its business it can claim lost profits. These lost profits will be assessed based on the number of lost sales and the profit margin that the patentee or licensee would have made from additional sales.
- If the patentee or its licensee is not exploiting the patent or it would not have sold more products, it can claim lost royalties. Lost royalties will be based on the infringer’s turnover and the ordinary market royalty rate, which will be increased to take into account the fact that the royalty rate was not negotiated.
French courts can also take into account other sources of damage, such as:
- the advantage the infringer gained from the infringement (the ‘springboard effect’); and
- price erosion to compensate for the patentee’s lost profits (when it had had to lower its prices to compete with the infringer).
Punitive damages are not provided for by law. However, in some cases the use of a higher royalty rate and the damages linked to negative economic consequences cumulated with the infringer’s undue profits and moral prejudice may be considered punitive.
Greece Dr. Helen G. Papaconstantinou and Partners Law Firm
Patent owners can request compensation and moral damages. In both cases the plaintiff must prove the infringer’s negligence. Compensation claims are calculated based on the following factors:
- actual loss;
- the defendant’s profits; and
- the licence analogy.
It is difficult to prove the exact amount of damage or enrichment, due to the fact that patent owners can rarely prove the exact number of products that have been distributed and the exact damage that has been caused in this respect. Where there is no possibility of finding sufficient evidence as far as the compensation claim in concerned, patent owners can request the infringer to provide information, including invoices or the number of products that have actually been distributed.
The amount of compensation also depends on the facts of the case. Regrettably, no data regarding the outcome of compensation actions in Greece exists.
Patent owners can also request moral damages, but the amount of compensation is difficult to estimate. Greek courts rarely adjudicate amounts exceeding €45,000 as moral damages.
India Chadha & Chadha Intellectual Property Law Firm
Three types of damage are granted under the Indian patent law regime:
- indirect; or
- punitive or exemplary.
Damages are recoverable from the date of publication of a patent application under Section 11A of the Patents Act 1970. The actual profit or loss made is of no consequence when calculating damages – thus, damages can exceed the actual profits made by an infringer, unlike in the case of account of profits.
Direct damages Direct damages are awarded to put the patentee in the position that it would have been in had the infringement not taken place. Ideally, they are the pecuniary equivalent of the injury caused. Damages calculations are generally based on the normal rate of profit or established and reasonable royalty rates. The court may award interest on damages if it chooses.
Indirect damages In general, indirect damages are not recoverable. However, in special cases, a patent owner may obtain damages based on the value of an “entire infringing device”, even if that device contains multiple features and only one feature is found to be infringing.
Punitive damages Yes, punitive damages are granted as exemplary damages, which are awarded in addition to actual damages. They are intended to act as a deterrent and are considered as a way of punishing the defendant and based on the theory that the interests of society and the individual harmed can be met by imposing additional damages on the defendant.
Three factors guide the decision of whether to award punitive or exemplary damages:
- whether the infringement was wilful or deliberate;
- whether the infringer had a good-faith belief that the patent was invalid; and
- the party’s conduct during the litigation.
Royalty rates are calculated based on the following factors:
- the strength of patent portfolio;
- the ratio of the patent ownership;
- the total royalty rate payable on a particular product; and
- the share of the patent owner.
Israel S Horowitz & Co
Damages aim to put the injured party (ie, the rights holder) in the position that it would have been in had the infringement not occurred. The burden of proof rests with the plaintiff. When awarding damages, the court will consider the infringing act and the plaintiff’s position in consequence of the act, while considering, among other things:
- the direct damages caused to the plaintiff;
- the extent of the infringement;
- the profits that the infringer derived from the infringement; and
- reasonable royalties which the infringer would have had to pay had it been granted a licence to exploit the patent.
In principle, punitive damages are available and may be awarded in successful patent litigation. Further, the courts may order the infringer to pay punitive damages in addition to damages awarded to the plaintiff. Punitive damages may be awarded where an infringement is committed after the patentee or exclusive licensee has warned the infringer of the infringing activity. In such cases, the sum of the punitive damages cannot exceed the scope of damages enumerated above. In practice, the courts do not award punitive damages in infringement suits.
Italy Studio Legale Jacobacci & Associati
Only compensatory damages are available. Damages are calculated as the profit lost by the patentee or the profit made by the infringer, whichever is greater.
If these criteria are unhelpful (eg, if the patentee does not use the patent and the infringer made no profit), the court will calculate damages as a reasonable royalty on the infringer’s revenues generated by the use of the patented invention.
Japan SUGIMURA International Patent & Trademark Attorneys
Damages awards are calculated on the basis of a reasonable royalty or lost profits. Three articles of the Patent Act provide the basis for calculating damages:
- Article 102(1) – lost profits based on the number of infringing products sold, multiplied by the patent owner's profits per unit;
- Article 102(2) – lost profits based on the assumption that the infringer's profits will be the amount of damages awarded; and
- Article 102(3) – reasonable royalty.
Under Article 105(1) of the Patent Act, a patent owner can file a motion with the district court to compel an infringer to produce the documents needed in order to determine damages. Infringers may be liable for damages equivalent to royalty as far back as the date of publication of the patent application in Japan. For this to occur, Article 65 of the Patent Act requires the patent owner to prove that:
- it provided actual notice to the infringer of the pending patent application; or
- the infringer knew of the published patent application, yet continued its infringement.
Malaysia Advanz Fidelis Sdn Bhd
On conclusion of the case, the assessment of damages will be calculated and a separate hearing will be held to assess the damages suffered. Damages are typically compensatory and not punitive.
Netherlands Hogan Lovells
Damages are usually assessed in follow-up proceedings. Three alternative methods for calculating damages are available:
- lost profits;
- reasonable royalties; or
- surrender of the infringer's profits.
Under the lost profits calculation method, a patentee can recover the sum that it would have earned had its patent not been infringed. Under the reasonable royalty calculation method, a patentee can recover an amount equal to the licence fee that the infringer would have had to pay if it had negotiated a fair and reasonable licence with the patentee. Under the surrender of the infringer's profits method, the patentee can claim the profits that the infringer made based on the infringement. Punitive damages are not available.
Pakistan PakPat World Intellectual Property Protection Services
Although an amount of damages principally depends on the circumstances of each case, the following factors may be considered when assessing an award for damages:
- Lost profits – where the patentee exploits the invention, the profit which the plaintiff has lost as a result of the competing sales of the infringing goods by the defendant.
- Lost opportunities – opportunities which would have been generated but were lost due to the infringer’s activity.
- Market damage – injury to the reputation and loss of goodwill of the patented rights due to a low-quality product put on the market.
- Royalties – where the patentee exploits the invention through a licence, an award based on the royalties that would have been received.
Punitive damages are not generally available in patent infringement proceedings.
Romania Nestor Nestor Diculescu Kingston Petersen
The legal framework provides the following as guidance for determining damages:
- profits lost by the plaintiff as a result of the infringing product entering the market;
- net profits of the defendant resulting from the sale of the infringing product on the market; and
- the lump sum based on the amount of royalties that would have been paid if the defendant had acquired a licence from the plaintiff for the right of use allegedly infringed.
As a rule, the courts will appoint an expert to calculate the amount of damages to be paid; the expert choses the criteria on which this calculation will be based. It is not possible to obtain punitive damages as under common law, but courts will award moral damages.
Turkey Deriş Patents and Trademarks Agency
Material damages can be claimed for both lost profits and the non-realised income resulting from a patent infringement. This type of damage is regulated under Article 140 of Decree-Law 551 on the Protection of Patent Rights, which reads:
“The damage/prejudice suffered by the proprietor of the patent includes, not only the value of the effective loss, but also includes the income non-realized because of the infringement of the patent right.
The non-realized income shall be calculated in accordance with one of the following evaluation methods, on the option of the proprietor of the patent who has suffered damage/prejudice:
a) According to the income that the proprietor of the patent might have possibly generated if the competition of the infringing party did not exist;
b) According to the income generated by the infringing party from the use of the patent;
c) According to a license fee that would have been paid if the party, infringing the patent right, would have lawfully utilized the patent under a licensing contract.
In calculating the non-realized income, circumstances having effect on the case, such as, in particular the economic value of the patent, the term of protection remaining at the time of infringement, the type/nature and number of licensees granted in respect of the patent shall be taken into consideration.
Where the court is of the opinion that the rights holder of a patent has not fulfilled its obligation to use the patent, in compliance with the provisions of this present Decree-Law, the non-realized income shall be calculated according to subparagraph (c) of paragraph i.e. according to the exemplary license calculation.”
The decree-law does not enable rights holders to request punitive damages.
United Kingdom Powell Gilbert LLP
A successful claimant may choose between:
- damages (to compensate it for any loss it may have suffered as a result of the infringement); and
- an account of profits (to recover any profits made by the defendant as a result of its infringement).
There is no concept of punitive damages for patent infringement in UK patent law. The appropriate level of damages is often determined by considering the level of royalty that would have been paid by a willing licensee in comparable circumstances.
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