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Monday, 4 January 2016

AG opines on Liffers case regarding recovery for both pecuniary loss and moral prejudice

Former Guest Kat Valentina Torelli has well-summarized the recent opinion of the Advocate General in the Liffers case regarding recovery for both pecuniary loss and moral prejudice. Valentina writes as follows:
"On 19 November, Advocate General Melchior Wathelet gave his opinion following the request for a preliminary ruling referred by the Spanish Supreme Court to the Court of Justice of the European Union in case C-99/15, regarding pecuniary loss and moral prejudice, pursuant to Article 13(1) of Directive 2004/48 on the enforcement of intellectual property rights, as implemented in Article 140 of the Spanish Intellectual Property Act (TRLPI)
The Spanish Supreme Court asked whether a person whose IP rights have been infringed will be in compliance with the Directive if he seeks relief both on the basis of a royalty rate corresponding to the royalty rate that the infringer would have paid if he had obtained a licence to legitimately exploit the IP right, as well as the quantum of damages due to the moral prejudice suffered. As Kat readers may remember, this reference for a preliminary ruling arose in the course of an action brought by the director, screenwriter and producer Mr Mr Christian Liffers, alleging infringement of his IP rights in the audiovisual work, 'Dos patrias, Cuba y la noche', by Producciones Mandarina SL and the TV network Telecinco, owned by Mediaset EspaƱa ComunicaciĆ³n, S.A.. The IPKat has previously reported this action here. 
In the audiovisual work, Mr Liffers relates the intimate and personal stories of homosexual and transsexual inhabitants of the Spanish city of La Habana. Producciones Mandarina used portions of the work without Mr. Liffers' consent to create a documentary on child prostitution in Cuba. The documentary was broadcast by Telecinco, gaining a 13.4% viewers' share.

As noted, Mr. Liffers claimed damages both based on a reasonable royalty rate as well as moral prejudice. The reasonable royalty was claimed on the basis of the tariffs fixed by the Collective Society for Audiovisual Producers (EGEDA), while compensation for the moral prejudice suffered was requested a lump sum amount. 
However, based on a claimed literal reading of Article 13.1 of Directive 48/2004 and Article 140 of TRLPI, compensation for moral prejudice suffered may be awarded only in the context of determining compensation with respect to the loss of earnings by the aggrieved right holder and unfair profits obtained by the infringer. On that basis, the Court of Appeal of Madrid denied relief for violation of moral prejudice. Mr. Liffers appealed to the Spanish Supreme Court, claiming that relief for moral prejudice may be awarded respective of the basis relied upon for the calculation of damages for infringement. 
The Advocate General adopted Mr. Liffers' position and stated that a proper interpretation of Article 13.1 of Directive 48/2004 does not prevent a person whose IP rights have been infringed from claiming compensation for violation of moral prejudice suffered in addition to the payment of a reasonable royalty. The Advocate General based his conclusion on three factors. 
First, the Advocate General considered the formulation of Article 13.1 in its various linguistic versions. He pointed out that this provision requires that compensation for damages and moral prejudice can be determined in the alternative on the basis of either loss of earnings by the rights holder or unfair profits by the infringer, or at least in 'the amount of royalties or fees which would have been due if the infringer had requested authorisation to use the intellectual property right in question'. Therefore, payment of a reasonable royalty does not preclude taking other factors into account, such as moral prejudice, in compensating the IP rights holder for damages incurred due to the infringement. 
Second, the Advocate General, in construing criteria for relief set out in Article 13.1 of Directive 48/2004, also took into account Recital 26 of the Directive, which allows compensation for the right holder based on the actual prejudice incurred as a result of the infringement. The Advocate General stated that:

- "The moral prejudice is part of the actual damage suffered by the IP holder when his/her reputation has been violated.

- However, the moral prejudice must be proved properly and cannot turn to be a way to infer punitive damages."

Third, the Advocate General referred to Recital 10 of Directive 48/2004, which states that 'the objective of this Directive is to approximate legislative systems so as to ensure a high, equivalent and homogeneous level of protection in the internal market'. Not enabling the rights holder to claim moral prejudice when he seeks compensation based on a reasonable royalty runs counter to the Directive’s objective mentioned above, especially since proof of loss of earnings or the unfair profits can be difficult. Limiting the rights holder to a claim for relief based on solely on a reasonable royalty would have less deterrent value and mean that the rights holder would not be able to receive full compensation for the injury incurred. 
We now await the decision of the Court of Justice on the interpretation of Article 13.1 and the scope of monetary relief available under this Article."

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