Court of Appeal, Düsseldorf (Germany), order dated 16 October 2014 (file no. I-15 U 21/14)
Currently, most EU member states, including Germany, do not recognize lump sum supplemental damages aiming to punish and deter the infringer. In October 2014 the Court of Appeal of Düsseldorf made a reference for a preliminary ruling to the Court of Justice of the European Union (CJEU) regarding the interpretation of the Community plant variety Regulation ((EC) No 2100/94 of 27 July 1994) and the IP Enforcement Directive (Directive 2004/48/EC on the enforcement of intellectual property rights). The key question referred is whether the owner of an intellectual property right can claim supplemental (punitive) damages from the infringer in the form of a certain lump sum or an increase of the usual recoverable market-based license fee. When made, the CJEU’s ruling will not only affect Community plant variety rights, but all sorts of intellectual property rights.
The plaintiff is the owner of a Community plant variety right for a species of Cape daisy. Between 2002 and 2009 the defendant is claimed to have produced and distributed a species of Cape daisy. The plaintiff claimed an infringement of its right and ultimately filed an action for damages against the defendant. The plaintiff not only claims payment of the usual recoverable market-based licence fee, but also further costs, including supplemental damages. It argues that a supplemental damages claim is justified considering that the species of Cape daisy covered by its Community plant variety right has a unique selling proposition (blooming the whole summer). Moreover, the Cape daisies had already been successfully marketed, meaning the defendant had saved the costs of a market launch. An increase of the licence fee was also claimed to be justified, because:
- of the duration and intensity of the alleged infringements,
- it had been extremely difficult for the plaintiff to detect the claimed infringements,
- compared to a valid licensee, the plaintiff had to bear the inflation risk,
- the plaintiff had not been able to plan on revenues,
- the defendant had taken the plaintiff’s freedom to decide whether he allows a third party to use the plant variety or not.
Questions referred to CJEU for preliminary ruling
The Düsseldorf Court of Appeal stayed the proceedings and referred several questions to the CJEU, in particular revolving around the question whether the right holder can generally claim a certain lump sum of supplemental damages from the infringer alongside the usual recoverable market-based licence fee and/or whether certain considerations and circumstances of the case can lead to an increase of this license fee.
In its reference, the Düsseldorf Court of Appeal takes the view that neither the Community plant variety Regulation nor the IP Enforcement Directive requires the provision of a certain lump sum of supplemental damages. It stated that, although Art. 3 of the IP Enforcement Directive requires that the measures and remedies provided by the member states to ensure enforcement of intellectual property rights shall be effective, proportionate and dissuasive, recital 26 of the Directive makes it clear that the Directive does not aim to introduce an obligation to provide for punitive damages, but to allow for compensation based on an objective criterion.
The court, however, states its opinion that certain considerations and circumstances of the case can lead to an increase of the usual recoverable market-based licence fee. This could for example apply to the fact that the right holder has to bear the inflation risk if prosecution extends over a considerable time period and that the right holder cannot plan on the revenues resulting from infringements.
Should the CJEU decide that a right holder can claim supplemental damages from an infringer in the form of a certain lump sum or – under certain circumstances – an increase of the usual recoverable market-based license fee, this would have a considerable impact on the amount of damage claims for infringements of all sorts of intellectual property rights including for example patents, designs, trademarks and copyrights.