Is the owner of pirated software requested to provide evidence of the actual economic damage based on the hypothetical royalty that the infringer should have paid in the event that it had licensed the software? Otherwise, is it enough to prove the facts of the damage caused, regardless these might be obvious, in order for the claimant to be granted with compensation?
These questions arise as a result of the lawsuit filed in the Commercial Court of Alicante on infringement of intellectual property rights due to the software offer issued by a renowned brand of satellite navigation maps. However, the Court dismissed the claim for damages based on the criterion of hypothetical royalty. Hypothetical royalty refers to those royalties to be paid by the offender of intellectual property rights in the event that the owner had previously granted a license to such offender.
The Commercial Court of Alicante rejected to grant compensation for damages because it was not proved the basis for the estimation of such compensation.
The software owner appealed the judgment based on an interpretation of Section 140 of the Copyright Act which enables to claim that in those cases when the offense is proven, it is not necessary to prove the actual damage in order for the defendant to be granted with compensation.
The Court of Appeal states in the first place, that the general rule is that the damage and compensation must be proved. In that sense, the criterion "res ipsa loquitur" does not obviate the need for evidence, but it leads to create a presumption of the existence of damage. These are cases in which the existence of damage is inferred from the offense itself, hence the term "ex re ipsa", i.e. "speak the thing itself" as it applies to a situation so clear that it does not need to be proven.
In this case, the judgment continues, the Court of First Instance recognized that the number of illegal downloads of programs of the claimant on the websites of the defendant exceeded 82,482.
The Court of Appeal applies the hypothetical royalty in that respect, it does not depend on the prior finding that the injured previously granted a license to third parties. It is a fiction, a method intended for estimating the compensation.
Based on the number of downloads and on the software price, a royalty must be fixed for the purpose of achieving the profit that the holder of such rights would have received for the use of its software by a third party.
The claimant alleged that the percentage would be 11% of the sales price of the software owner.
The judgment concluded that setting a royalty considering downloads as licensing criteria is an acceptable criterion for determining the compensation that the software owner would have received from the infringer if this had authorized the use of its intellectual property rights.
Therefore, the Court set at € 5,109,759.9 the amount for damages, thus estimating the appeal, possibly one of the higher awards granted in Spain for an offense of this kind.