How are damages calculated in patent infringement cases? – Intellectual property
Not only does patent infringement prevent individual innovation, but when it occurs unhindered on a large scale, it also puts entire markets in ownership patterns. If your rights as an inventor are violated in this way, you can bring an action in the appropriate civil court to stop it, preparing to recover the associated monetary losses.
How this compensation is determined depends on several factors. Understanding these ins and outs is essential to ensuring the best and fairest results wherever you or your organization has patent protections.
Basic elements of the calculation
For our purposes in this article, we will take it for granted that the hypothetical cases discussed have been taken to court and concluded in favor of the plaintiff.
Most major jurisdictions, including the United States, the United Kingdom, many member states of the European Union, Japan and China, use the plaintiff’s loss of earnings as a benchmark for the calculation of damages. In certain circumstances, license fees that might otherwise have been earned and / or profits made by the infringer are taken into account.
In most intellectual property (IP) law disputes, the degree of harm caused to the plaintiff is critical in assessing how much damages he should be compensated for. Here, the specificity of the counterfeiting argument is paramount. To receive optimal compensation, you and your legal team should describe and prove the infringement with as much demonstrative evidence of financial and reputational damage as possible. If this sounds like something you need help with and want our team of experts to be by your side:
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The valuation of license fees that could have been earned has become particularly important in disputes relating to the licensing of standard essential patents (SEPs) on fair, reasonable and non-discriminatory terms (FRAND). In such cases, courts have been required to consider issues such as whether a FRAND license would be global and the proportionate importance of the patented technology to SEP. This assessment often involves the analysis of several comparable licenses.
Notable regional differences
You can file infringement complaints in any country where you have legal rights to an infringing invention. Nonetheless, it is essential to remember that the differences in intellectual property laws in each national location can mean that your damages recovered are significantly lower in one country than in another. Likewise, these discrepancies could even lead to your infringement claims being upheld in some countries and denied in others.
International frameworks such as the Accord on Trade-Related Aspects of Intellectual Property Rights (TRIPS) guarantee a minimum standard of protection for infringement of intellectual property rights in all signatory countries, but do not prescribe details beyond that. Therefore, it is imperative to know the disparities between the laws of major nations or regions.
United States: US courts use lost profits and the failure to collect reasonable costs from a licensee to calculate damages. Determining the former depends on proof of notable demand for the infringing invention and on demonstrating that you can manufacture and market the intellectual property as your own product or service. “Improved” (ie punitive) damages may also be awarded for intentional breaches, up to three times the figure obtained after the standard calculation.
In addition, since WesternGeco LLC v. U.S. Supreme Court ION Geophysical Corp of 2018, lost profits in foreign markets for U.S. patented intellectual property may be factored into final damage calculations. (This is not taken into account in many other countries.)
European Union: although infringements of intellectual property rights are covered by Article 13 (1) of the Execution directive (2004/48 / EC), EU member states are largely left alone to determine damages for breach on the basis of national laws. However, some basic measures should be taken into account:
“… negative economic consequences, including loss of profit, that the injured party has suffered, unfair profits made by the infringer and, where applicable, elements other than economic factors, such as moral damage caused to the holder of the right by the infringement. “
This leads to various minor differences between damage calculations in EU countries. For example, in the directive punitive or exemplary damages for patent infringement are discouraged but not expressly prohibited, yet Germany and France prohibit them completely. Thus, in the case of the former country, the foreign punitive damages would likely not be enforceable. Italy, for its part, divides the offense into distinct categories (innocent, negligent, seriously negligent and willful). This leads to widely varying amounts of damage.
United Kingdom: License infringement determinations are straightforward under the Patent Law (“capitalized value of the royalties that the infringer would have paid [via license]”). Restitution for infringement not involving the infringement of a license (for example, of a patent for which the holder was not issuing a license) is calculated using the sales of the infringer, the damage caused to the own sales of the ‘inventor and a “reasonable royalty on the sales of the defendant. “
Damages for infringement should not be punitive under UK law. Nonetheless, there is room for “exemplary damages” where the infringement was intentional, and the infringer believed that he would gain more by breaking the rule than the sum of any restitution paid if caught. (As you can imagine, it’s not easy to prove.)
Japan: Three formulas can determine damages for Japanese infringement:
- Quantity of the counterfeit product sold multiplied by the marginal profit per unit on the claimant’s product
- Total marginal profit realized by the infringer
- The equivalent of the license fees due
Depending on factors such as the seriousness of the infringement, the strength of the applicant’s brand and the presence in the market of competing non-counterfeit products, the amounts achieved by any of these standards may be reduced in final sentences.
China: More often than not, Chinese courts award infringement damages based on standards now familiar to us, namely losses of the patent holder, infringement profits made and estimated lost license income. However, in some cases, China opts for statutory judgments of a fixed amount (no more than CNY 5 million / USD 769,000). This usually happens when it is difficult to determine a fair amount using existing standards.
Limitations and other caveats
All countries have a statute of limitations on how long you can wait before filing a claim once you become aware of a violation. If you don’t make the cut, you can’t deposit. Examples include:
- United States: six years
- European Union: The directive offers neither minimum nor maximum; each country has its own limits. In Germany, it can range from three years to 30 years, but is usually between three and ten years. In France, the limit has been five years since 2014.
- UK: six years
- Japan: three years
- China: two years
The calculation of damages for patent infringement is also relevant in the exceptional case of compulsory licenses. This particular facet of the law has come under scrutiny in light of the recent patent discussion for COVID-19 vaccines. Article 31 of the TRIPS Agreement provides for the use of the subject matter of a patent without the authorization of the patentee in “national emergency or other circumstances of extreme urgency”. In such a case, the right holder will receive “adequate remuneration in the circumstances of each case, taking into account the economic value of the authorization”. However, compulsory licenses have rarely been granted to date.
The burden of proof always lies with the applicant in the event of patent infringement, and a rushed application may fail because it does not provide sufficient proof of the rights infringed. Assistance from Dennemeyer’s intellectual property law departments and patent litigation experts can ensure that your infringement claim is valid in multiple jurisdictions, allowing you to recoup the benefits you rightly deserve from your inventions. patented.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.