L’autore mira ad illustrare che l’uso abusivo dei diritti di proprietà intellettuale crea certamente un danno per il titolare. In questo contesto, l’autore analizza in modo approfondito i criteri e la procedura per la determinazione del danno.

SOMMARIO:

1. Foreword - 2. Criteria for determining damages - 2.2. The choice of criterion for determining damages - 2.3. The procedure for determining damages - 3. Quantification according to the criterion of lost profit - 4. Quantification according to the criterion of the reasonable royalty - 5. Other items of damage - 6. Quantification according to the criterion of retroversion of profits - 7. Conclusions

1. Foreword

Directive no. 2004/48/EC of 29 April 2004, on the enforcement of intellectual property rights, devotes Article 13 to the subject of compensation for damages, which states that “Member States shall ensure that, at the request of the injured party, the competent judicial authorities order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the right holder damages appropriate to the actual prejudice suffered by the latter as a result of the infringement. When the judicial authority sets damages (a) shall take into account all relevant aspects, such as the negative economic consequences, including lost profits suffered by the injured party, the benefits illegally realized by the infringer, and, in appropriate cases, elements other than economic ones, such as the moral prejudice caused to the right holder by the infringement; (b) or, as an alternative to subparagraph (a), it may fix, in appropriate cases, a lump sum based on elements such as, at a minimum, the amount of royalties that would have been due if the infringer had requested authorization to use the intellectual property right in question. 2. In cases where the infringer has been involved in an infringing activity without knowing it or without having reasonable grounds for knowing it, the Member States may provide for the possibility of the judicial authorities ordering the recovery of profits or the payment of damages which may be predetermined”. The Directive was implemented by Legislative Decree no. 140 dated March 16, 2006, which amended art. 125 of the Industrial Property Code (Legislative Decree no. 30 dated February 10, 2005). In particular, the new art. 125 c.p.i., entitled “Compensation for damages and restitution of the profits of the author of the violation”, has the following three paragraphs: “1. The compensation due to the damaged party is liquidated according to the provisions of articles 1223, 1226 and 1227 of the Civil Code, taking into account all the relevant aspects, such as the negative economic consequences, including loss of earnings, of the right holder, the benefits realized by the infringer, and, in appropriate cases, elements other than economic ones, such as the moral prejudice caused to the right holder by the infringement. 2. The judgement which provides for the compensation of damages may settle them in an overall sum established on the basis of the acts of the case and the [continua ..]

2. Criteria for determining damages

2.1. General rules In the presence of the prerequisites set out in Art. 2043 of the Civil Code (wilful misconduct or negligence on the part of the infringer), the damages may be calculated on the basis of the following criteria (wilful misconduct or negligence on the part of the infringer), the sentence of compensation following the infringement must include both the damage arising and the loss of profit, in order to compensate and repair the prejudicial effects suffered by the damaged party. On the other hand, it is the prevailing opinion that the further sanctioning and punitive function (punitive damages) cannot be valued, since the damaged party is precluded from being able to profit from sums exceeding the damage actually suffered, since in this case the compensation would be extraneous to any sanctioning purpose of the author’s conduct. On the other hand, the valorisation of moral damage is admitted, in particular with reference to the violation of the inventor’s moral right; likewise, damage to image can be applied in cases of patent infringement. With particular regard to the quantification of damages and loss of earnings, the general criteria for determination set out in art. 125 IPC are applicable, alternatively, • to the lost profit of the owner; • to the retroversion of the infringer’s profits; • the criterion of fair royalty. The last criterion indicated – that of the just royalty – is commonly recognized as a residual criterion, applicable – that is – when it is not possible or convenient to refer to the other criteria.

2.2. The choice of criterion for determining damages

On the basis of art. 125 c.p.i. the damaged party can choose between two alternatives: 1. either the compensation of the emerging damage, the loss of profit and the other damages with one of the criteria provided: a.  the criterion of lost profit; b.  the criterion of reasonable royalties; c.  or the criterion of equitable assessment; 2. compensatory indemnity calculated with the criterion of the retroversion of the profit achieved by the infringer, if such quantification exceeds the indemnifiable damage. While the injured party may choose – in a discretionary manner – whether or not to avail himself of the criterion of the retroversion of profits, if this is more favourable to him, the choice of the most appropriate criterion for determining damages must be appropriately made on the basis of the Panduit Test, which makes it possible to identify the most appropriate criterion between that based on the criterion of lost profits and the residual criterion of the fair royalty. The c.d. Panduit test is based on a logical sequence of demonstrations, interrelated, whose burden is obviously on the plaintiff, directed to prove that: 1. Demand existed for the patented product during the period of infringement; 2. Acceptable non-infringing substitutes were not available to satisfy demand for the infringer’s products during the damage period; 3. The patent holder had the requisite manufacturing, sales, and marketing capacity to have been able to meet the demand and supply the costumers that purchased the infringing product; 4. The patent holder can compute the profit that it claims to have lost. The volume of sales of the infringer is presumed to be equal to that of the injured party if he proves the existence of the so-called four factors DAMP (demand – acceptable non infringing – manufacturing & marketing – profit). If the Panduit test fails, the quantification of damages must be carried out using the residual criterion of the fair royalty, or – in the alternative – be based on the equitable liquidation of damages pursuant to art. 1226 of the Civil Code.

2.3. The procedure for determining damages

The criteria for quantifying damages are based on the availability of data, of a qualitative and quantitative nature, correlated with • the volumes and margins of the parties in question; • the volumes and margins of competitors; • other information that can be deduced from analyses of the reference market. The acquisition of such data is made possible by recourse to so-called “discovery”, contemplated by art. 121-bis c.p.i., which makes it possible to overcome – even in the case of technical consultancy – the limits of an exploratory investigation. The procedure for determining damages must pursue two main objectives a) that of rationality: that is, it is necessary to proceed with an evaluation in adherence to methods validated by economic doctrine, with the necessary adaptations relative to the specific case; b) that of objectivity: although a physiological degree of subjectivity and discretion is inevitable, the hypotheses and assumptions used in valuation models must be able to be demonstrated and, therefore, be credible.

3. Quantification according to the criterion of lost profit

The quantification of damages for loss of profit is based, normally, on the loss of profits resulting from lost sales by the patent owner, also due to the need for the same to lower the price. A first possibility is to assume that the loss of sales of the injured party is equal to the turnover achieved by the infringer with the sale of the infringing products. This operation is only correct if there are no other producers besides those in dispute (the right holder and the infringer), and if the market is absolutely stable. In fact, these two conditions occur only in very marginal cases, or perhaps never. The market almost always has several operators, and normally encounters more or less wide fluctuations. Moreover, it is necessary (however difficult it may be) to appreciate the correct weight of the presence of products which can be substituted for the product covered by the exclusive right, and therefore to distinguish the variations in the owner’s sales that can be caused by the presence of (different, but) substitutable products, or by changes in the market structure of these other products, or by shifts in demand towards these other products. It is necessary, therefore, to take into account a series of possible distortions – linked to the elasticity of demand – caused by • by the life cycle of the product; • by variations in the level of the owner’s advertising expenditure; • changes in public taste and demand; • fluctuations in the price system of raw materials or components; • the different selling prices charged by the owner before the infringement and those charged subsequently by the infringer; • the relative effects on the quantities sold; • the natural expansion or contraction of the market and the different; • perimeter of the same; • the dynamic positioning in terms of market shares; • the presence of substitute products; • the introduction of new competitive products. Thus, for example, if there are substitute products, the reduction in turnover depends both on the diversion operated by the infringer and on the legitimate competitive activity carried out by third parties. The subtraction of sales commensurate with the turnover achieved by the infringer, must therefore be carefully analyzed and appropriately “normalized”, in order to sterilize the effects exogenous to the infringement. In order to proceed to normalization it is [continua ..]

4. Quantification according to the criterion of the reasonable royalty

The royalty criterion can only be used if the Panduit test is not passed: in fact, in the event that even one of the DAMP conditions is not met, damages are to be determined on the basis of the equitable criterion pursuant to art. 1226 of the Italian Civil Code, with the possibility for the judge to settle a global sum in the minimum amount equal to the royalty. In order to avoid the risk that damages may be underestimated, the amount of royalties must be be determined not in the amount that the licensor (right holder) and the licensee could have agreed upon if they had tried to reach an agreement under normal conditions, but in the amount that they could (theoretically) have agreed upon when the infringement had already been ascertained. In fact, the owner of the right, after organizing the company and the business, bearing the costs of research and advertising, structuring on his own the production and marketing of the protected product, trusting therefore in the future revenues that will be generated by the patent, would not have granted the license on the same conditions that he would have negotiated before organizing the exploitation on his own. On the other hand, the imposition of a royalty on the sales of the infringer always underestimates the damage, because (all other conditions being equal) the profit of those who produce and sell directly is always greater (and, in general, not by much) than the profit of those who grant licenses: the difference between the two amounts is represented by the licensee’s profit. This is the reason why a “reasonable” royalty must necessarily be higher than a “normal” royalty, because the parties are not consenting or willing to consent. And, since the payment of royalties is generally made on a periodic basis (quarterly, semiannually, annually) and it can be assumed that they will be paid up to the date of the injunction, to be paid (theoretically) at least at the end of each year, the value of the individual royalties must be capitalized up to the date of actual payment. Therefore, it is necessary to start from the “basic” royalty, which is the consideration for the use of the right that a party wishing to grant a license would have obtained from a party wishing to obtain it. The search for the “basic” royalty must tend to be carried out with reference to the product and the case in question, taking into account the intrinsic marginality of the [continua ..]

5. Other items of damage

First of all, other items of loss of profit can be highlighted: • the owner may suffer a reduction in sales of products or services other than those directly covered by his intellectual property right, but which he markets together with the former; • the owner of the infringed right may be forced by the infringement to reduce the price of his product, thus suffering damages even with respect to the sales that he has already made (continues to realize); • the loss of future profits which may be caused by the very fact of the infringement, or by the poor quality of the infringer’s product. In addition to the loss of profit, the injured party may also claim further compensation by way of emergent damage, consisting of any loss of economic values that already existed in his assets before the infringement occurred: ○ the expenses thwarted by the infringement; ○ the increases in specific expenses that the owner suffers (for example, increases in advertising and marketing expenses to react to the infringement); ○ the existence of new additional costs (e.g., the costs of monitoring the market in order to detect the infringement in its initial stage, and the costs of warning); ○ the costs incurred in responding to the infringement, which can be traced back to the costs incurred in obtaining evidence; ○ legal expenses; ○ the cost of internal employees employed in the response; ○ the documented advertising investments. In addition, the infringer will be able, thanks to the infringing activity carried out, to make a more rapid and legitimate entry into the market when the exclusive right expires. There is, then, undoubtedly a loss of value of the protected right, also in terms of the possibility of its profitable placement on the market.

6. Quantification according to the criterion of retroversion of profits

The owner can, in any case, ask for the restitution of the profits made by the author of the violation, regardless of whether he acted in good faith or not: in fact, the norm sets this criterion “as an alternative to the compensation for loss of profit or in the measure in which they exceed such compensation”. From this it can be deduced (but not only for literal considerations) that the restitution of profits can coexist with compensation, but only for the part that exceeds the amount paid as loss of earnings, even if the amount thus paid is higher than the actual damage. The criterion of the retroversion of profits would seem not to be, in fact, so rigidly alternative to that of loss of earnings or the just royalty. Also in this case, the profit of the infringer coincides with the proceeds net of the only incremental variable costs relating to counterfeit products, therefore, fixed production costs, amortizations, variable costs that are not incremental, variable general, administrative, commercial costs, as well as variable production costs (including personnel costs), which the company would have sustained in any case even in the absence of counterfeit production, must be excluded. Since the amount determined by this method may be higher than the actual loss incurred by the owner, and since the profits made by the counterfeiter also depend very much on the structure of the latter, it is advisable to be very cautious in the relative assumption. It could happen, in fact, that the counterfeiter is considerably larger than the damaged proprietor. In this hypothesis, obviously, also the structural costs of the counterfeiter can assume an incremental nature, with the need to value also the components (goodwill and different productive capacity) able to allow such a greater sales potential; the surplus value deriving from the productive and professional capacities of the counterfeiter do not fall, in fact, within the object of the general action of enrichment, representing costs to be deducted for the determination of the profits of the counterfeiter. Moreover, where the chain of interposed subjects is articulated, the consolidated gross marginality of the entire chain must be taken into consideration. Furthermore, even if the infringer is a more efficient economic operator than the owner of the intellectual property right, the difference between the owner’s loss of earnings and his own greater profit would also benefit the injured [continua ..]

7. Conclusions