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Thursday, 17 March 2016

BREAKING: CJEU says that victim of IP infringement can also seek compensation for moral prejudice suffered

Can the victim of an IP infringement who claims compensation for his material damage also claim compensation for the moral prejudice suffered?

This morning, by issuing its decision in Liffers, C-99/15, the Court of Justice of the European Union (CJEU) responded in the affirmative to this question. 

As IPKat readers may remember, the CJEU conclusion is in line with the Opinion of Advocate General Wathelet [here] in the same case. 


This reference for a preliminary ruling from the Spanish Supreme Court concerned the correct interpretation of Article 13(1) of the Enforcement Directive.

This provision mandates upon Member States to "ensure that the competent judicial authorities, on application of the injured party, order the infringer who knowingly, or with reasonable grounds to know, engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him/her as a result of the infringement." More specifically, 

"When the judicial authorities set the damages:
they shall take into account all appropriate aspects, such as the negative economic consequences, including lost profits, which the injured party has suffered, any unfair profits made by the infringer and, in appropriate cases, elements other than economic factors, such as the moral prejudice caused to the rightholder by the infringement;

as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on the basis of elements such as at least 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."

The request of the Spanish Supreme Court was made in the context of proceedings for copyright infringement that Christian Liffers had brought against Mandarina and Mediaset. 

The former is the director, scriptwriter and producer of Dos patrias, Cuba y la noche, a documentary depicting the personal and intimate stories of a number of homosexual or transsexual inhabitants of Havana (Cuba).

Mandarina produced an audiovisual documentary on child prostitution in Cuba, which portrays criminal activities recorded using a hidden camera. Certain passages of the work Dos patrias, Cuba y la noche were included in that documentary without any authorisation from Liffers. That documentary was broadcast by the Spanish television channel Telecinco (owned by Mediaset).

Liffers sued Mandarina and Mediaset before the Commercial Court No 6, Madrid. Among other things, he requested the court to order the defendants to pay him EUR 6 740 for the infringement of his rights of exploitation, together with an additional sum of EUR 10 000 as compensation for the moral prejudice which he claimed to have suffered. The latter sum had been determined by reference to the amount of royalties or fees that would have been due to him if Mandarina and Mediaset had requested his authorisation to use his work. 

Liffers was partly successful in his action and on appeal the Madrid Provincial Court reduced the compensation for material damage and set completely aside the compensation to the moral prejudice.

The case eventually reached the Supreme Court, which stayed the proceedings and referred the following question to the CJEU:

"May Article 13(1) of [the Enforcement Directive] be interpreted as meaning that the party injured by an intellectual property infringement who claims damages for pecuniary loss based on the amount of royalties or fees that would be due if the infringer had requested authorisation to use the intellectual property right in question cannot also claim damages for the moral prejudice suffered?”

Today's decision  

The CJEU began its analysis by recalling that when interpreting a provision of EU law it is necessary to consider not only its wording but also the context in which it occurs and the objectives pursued by the rules of which it is part.

This said, the Court considered the wording of heading (b) of the second subparagraph of Article 13(1) and noted that:

"although that provision does not mention moral prejudice as an element which the judicial authorities must take into consideration when setting the amount of damages to be paid to the rightholder, it also does not exclude that type of harm from being taken into account. By providing for the possibility of setting the damages as a lump sum on the basis of, ‘at least’, the elements referred to therein, that provision allows other elements to be included in that amount, such as, where appropriate, compensation for any moral prejudice caused to the rightholder." [para 15]

Thankfully at least the CJEU is not
This conclusion is confirmed further by an analysis of the context in which that provision features.

First, the first subparagraph of Article 13(1) provides that the competent judicial authorities must order the infringer to pay the injured rightholder damages that are ‘appropriate to the actual prejudice suffered by him as a result of the infringement’. Moral prejudice, such as damage to the reputation of the author of a work, constitutes, provided that it is proven, a component of the prejudice actually suffered by the rightholder. Consequently, where the rightholder in question has suffered moral prejudice, the actual wording of heading (b) of the second subparagraph of Article 13(1), read in conjunction with the first subparagraph of Article 13(1) of that directive, precludes the calculation of the amount of damages to be paid to that rightholder from being based exclusively on the amount of hypothetical royalties.

Secondly, the application, by the competent judicial authorities, of the lump sum calculation method provided for under heading (b) of the second subparagraph of Article 13(1)  is permitted as an alternative only ‘in appropriate cases’, as Recital 26 in the preamble thereof further clarifies.

Finally, the objective of the Enforcement Directive is to ensure, inter alia, a high, equivalent and homogeneous level of IP protection in the internal market that takes into account the specific aspects of each given case and is based on a method of calculating damages that addresses those specific aspects.

In light of the foregoing, the Court concluded that Article 13(1) must be interpreted as establishing the principle that the calculation of the amount of damages to be paid to the holder of the intellectual property right must seek to ensure that the latter is compensated in full for the ‘actual prejudice suffered’ by him, which also includes any moral prejudice.

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