The better way to a compensation of damages: Infringer´s profit or license analogy

Dipl.-Ing. Josef Bockhorni

Dipl.-Ing. Josef Bockhorni

In Germany the compensation of damages in case of infringement proceedings based on patents and the like is preferably calculated via the infringer’s profit and less via the license analogy which can be handled easier. The reason for that is that the Federal Court of Justice determined in its fundamental decision “Gemeinkostenanteil” (GRUR 2001/ 329) and “Steckverbindergehäuse” (GRUR 2007, 431), that the infringer may only deduct the so-called overhead share to a very limited extent from the turnover he made with the infringing objects. As, in simple terms, the profit consists of the turnover minus the associated costs, it is clear that the infringer’s profit is the higher the less costs the infringer can deduct from his turnover. According to the aforementioned decisions, costs can only be deducted to the extent that they can directly be assigned to the infringing objects. Costs which generally arise in administration, distribution and marketing are costs which can generally not be assigned in isolation to the infringing objects and can therefore not be deducted from the turnover.

This decreased deductibility of overhead share (also called “business-as-usual costs”) led to the fact that in the past, an optimum of compensation of damages for the holder of property rights is generally achievable via the infringer’s profit, whereas the calculated compensation of damages could often definitely exceed the actual profit made by the infringer.

Therefore, in the last few years, the infringement courts in Germany put more attention to the causal link and revised down the infringer’s profit by means of the so-called causation proportion in order to account more for the actual conditions of the relevant case. With this causation proportion determined by the infringement courts depending on the infringement matter, a regulation regarding the infringer’s profit was reached which enables a more exact and fairer calculation of the infringer’s profit. The Federal Court of Justice has now confirmed this jurisdiction of the instance courts with its decision “Flaschenträger” (GRUR 2012, 1226). In this specific case, the Federal Court of Justice decided that a causation proportion of 50 % was appropriate so that the principally calculated infringer’s profit is reduced by 50% according to the decision on the overhead share and determined as a compensation of damages. The interesting thing about this decision is the circumstance that the Federal Court of Justice also responded to the licence analogy as a control system of the infringer’s profit and here principally assumes that the infringer’s profit must be in an appropriate proportion to the compensation of damages, which would have to be paid according to the licence analogy.

In this respect, the Chairman of the 10th senate of the Federal Court of Justice pointed out in an only recently published article that it does not seem abstruse that a doubling of the licence fee compared with the licence fee usually agreed on in the contract can be justified for calculation of damages. Accordingly, a licence fee as it would usually be agreed on in a respective contract is considered to be misguided. These contemplations are principally a continuation of the decisions by the Federal Court of Justice “Zerkleinerungsvorrichtung” (Federal Court of Justice, GRUR 2008, 93) according to which the three different methods for calculating the compensation of damage (infringer’s profit, licence analogy, lost profit) are only alternatives of a principally consistently assessed damage similar to the physical principle of communicating tubes which in the end level out to one and the same level.

Conclusion:

In future, with regard to the calculation of damages, one will be able to take the way of licence analogy with a doubled licence fee, considering that the infringer’s profit is in any case reduced accordingly due to the causation proportion. As the statement by the Federal Court of Justice is also obeyed and noticed in neighbouring countries, in particular in Austria and in Switzerland, one can assume that a calculation of damages with a doubled licence fee will also be enforceable in other countries.

 

Author: Dipl.-Ing. Josef Bockhorni (Patent Attorney), Update 1/2013
Patent Attorneys and Lawyers Bockhorni & Kollegen
Munich/ Germany
www.patguard.de

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