Introduction
Damages

Legal costs


Introduction

On January 3 2013 Section 10 of the Barcelona Court of Appeal upheld an appeal filed by a private prosecutor against a judgment issued by Barcelona Trial Court No 28 (for further details please see "Barcelona court rejects 'right to use' defence"). At first instance, the defendant was convicted as the perpetrator of a crime against IP rights, but was acquitted of having to pay compensation to the rights holder for damages and legal costs.

The accused was alleged to have commissioned the production of 450 handbags emblazoned with a sign which imitated the private prosecutor's well-known trademark, and their subsequent import from China for sale in Spain.

Damages

In the writ of appeal it was argued that any infringement of IP rights automatically causes damage to the rights holder. This is based on certain Supreme Court Civil Chamber case law, which holds that the obligation to pay compensation in case of IP infringements occurs ex re ipsa – that is, as a necessary consequence of the offence itself. In such cases, the obligation to indemnify is considered to arise automatically; no evidence of the existence of damages is required from the infringed rights holder.

This is due to the following two reasons:

  • The intangible nature of the value on which a distinctive sign relies – this intangible value defines a mark and protects the origin of the goods and services to which it is affixed. According to the principle of ius prohibendi, the owner of a mark has the right to prohibit its unauthorised use. This intangible aspect of a sign is damaged automatically by any infringement. In other words, it is impossible to infringe an exclusive right without causing damage to the rights holder.
  • The difficulty in gathering evidence probatio diabolica (achieving an impossible proof) regarding the damage effectively caused to the rights holder – in many cases, this strict requirement renders the injured party defenceless. Moreover, if such rigour in demanding evidence were taken to its extreme, in the case of IP rights, this would mean, de facto, providing the offender with a free licence.

This premise was fully accepted by the court of appeal in its judgment: "The damage occurs automatically when the crime committed is found without any further evidence, from the moment that it is inherent in the act itself."

In the first instance judgment, the trial court had based its decision not to order the payment of damages for civil liability on the grounds that the infringing goods had been seized and thus were prevented from being sold; therefore, the rights holder had suffered no financial loss.

This thesis is unacceptable because from the moment that a wholesaler purchases goods from a manufacturer, there exists a commercial transaction, which represents the first step in the supply chain. It is at this initial stage of the trade chain that rights holders make most of their profits.

If rights holders are excluded at this initial stage, they automatically suffer financial loss, as the infringer has failed to pay the rights holder the amount that it would have had to pay had the two parties been engaged in a lawful transaction. The market should not be confused with the end consumer. Failure to sentence the infringer to pay damages rewards it with an unfair gain, as it has taken advantage of another party's property without having to give anything in exchange.

In line with the appeal, the appeal court stated that:

"The lack of availability to the public...in any way rule out in advance the damage to the owner of the intellectual property right. To assert otherwise...would be the consecration of parallel pathways to the legitimately protected by that right, which would be systematically violated. That is why...it cannot be understood that the fact of the seizure by customs involves the absence of any loss or profit, from the moment in which the first link in the marketing chain has already occurred, due to the fact that the manufacturer who lacks the licence for the manufacture of such goods has sold them to the importer."

With this judgment, the appeal court has consolidated in the criminal jurisdiction the jurisprudence adopted by certain judgments of the Civil Chamber of the Supreme Court and certain civil sections of other appeal courts (including the Barcelona Court of Appeal).

Legal costs

As the accused had been sentenced as the perpetrator of the crime with which it was charged, the trial court should have sentenced it to pay the private prosecutor's legal costs.

According to Supreme Court doctrine, as a rule, the conviction to pay legal costs includes those costs incurred by a private prosecutor. Excluding a private prosecutor's legal costs as victim and injured party is possible only when its performance in proceedings has been inept, superfluous or disruptive (eg, it maintained a completely different position from that of the public prosecutor or that accepted by the judgment, or it exercised clearly unfeasible claims).

In line with the arguments of the appeal, the court of appeal considered that the private prosecutor's performance in the case at hand had been neither inept or superfluous; nor had it been disturbing, since it had held the same position as that of the public prosecutor and that accepted by the first instance court which, having agreed on the legal description of the facts, had sentenced the defendant for the crime of which it had been accused by both the public and private prosecutor.

For further information on this topic please contact Jordi Camó at Grau & Angulo by telephone (+34 93 202 34 56), fax (+34 93 240 53 83) or email (j.camo@gba-ip.com).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.