Sunday, 2 March 2014

Is proof of damages required in Spain if patentee opts for equivalent royalty?

Colm Ahern
PatLit is delighted to host the following item from Spain, written by Colm Ahern (of Elzaburu, Madrid). Writes Colm:
Article 13 of the Enforcement Directive 2004/48 rather confusingly seems to equate equivalent royalty with damages, whereas in many continental legal systems it might fit more easily into the category of unjust enrichment i.e. the infringer has obtained something to which he has no legitimate right. The reference to damages, which has been transposed in Article 66 of the Patents Act has caused particular problems in Spain where case law has traditionally held that damages must be “real and effective” and strictly limited to those that are proven. Should the patentee then have to prove damages if he opts for equivalent royalty which, after all, has nothing to do with any actual damage he has suffered? This has led to some rather confusing and contradictory case law and the development of the doctrine of “ex re ipsa” which seeks to somehow fit equivalent royalty into the traditional picture by saying that there is no need to prove the existence of damage if by the nature of the thing under analysis (res), the existence of damage is clear (from the thing itself). However it would have been much better to acknowledge that as equivalent royalty cannot really be equated with the continental law concept of damages, as then the question of proving damages does not even arise.

This is exactly what the Madrid Appeal Court has done in Judgment no. 25/2014 of 24 January 2014 in appeal no. 578/2012. The ruling sets out that the purpose of equivalent royalty is not to compensate a loss suffered by the patentee, but rather the illegitimate invasion of his exclusive right. The Court does not say that it is necessary to show that the existence of a loss is self-evident (ex re ipsa) but rather that there is no need to prove or even consider any such loss. This comes as good news to patentees who up to now ran the risk that a court might find that the loss was not as self evident as they claimed e.g. when the patentee himself is not exploiting the patent in Spain and has made no preparations to do so either directly or through the granting of licenses. Even better, the Court gives clear guidance on what type of equivalent license terms can be sought including an up front payment, a fixed minimum monthly royalty and variable royalty based on sales. This is good news for patent litigators in Spain where judges traditionally tend to be guarded in their damages awards. 
This blogger has long been concerned at the relative lack of consistency in the assessment of damages in IP infringement proceedings, as well as being baffled by the paucity of references to the Court of Justice for preliminary rulings on how the Enforcement Directive should be interpreted.  This decision is therefore of particular interest to him.  Do readers from other countries have any thoughts?

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