Assessment of damages in intellectual property

The assessment of damages in intellectual property refers to the rules and methods by which the court fixes the damages owed to the victim of an infringement of an intellectual property right. It follows a special regime derived from Article 13 of Directive 2004/48/EC and transposed for each right into the French Intellectual Property Code, in particular in Article L. 615-7 for patents. This regime requires several heads of loss to be taken into account separately.

Heads of loss

The court takes into account separately the negative economic consequences of the infringement, including lost profits and the loss suffered by the injured party, non-material damage, and the profits made by the infringer, including the savings in intellectual, material and promotional investment it derived from the infringement. As an alternative, and at the injured party’s request, it may award a lump sum which may not be lower than the royalties that would have been due had authorisation been requested. Lost profits and the reasonable royalty are its two practical pillars.

Assessment method

The assessment starts from the infringing mass, that is the products or acts found to be infringing over the period not time-barred. It then draws on accounting and commercial data, margins, prices, market shares and diversion rates, which the claimant rarely obtains on its own. Courts refuse to compensate the same loss twice, for example lost sales and a royalty on those same sales, but accept the combination of heads of loss relating to distinct bases.

Evidentiary tools

The claimant relies on the right of information, which makes it possible to obtain the quantities sold and the prices charged, on documents seized during a saisie-contrefaçon and, often, on a court-appointed accounting expert. Courts frequently proceed in two stages, first ruling on infringement and awarding an interim payment, then organising the final assessment. Before the Unified Patent Court, Article 68 of the Agreement restates the principles of the Directive, and separate proceedings for the determination of damages may follow the decision on the merits.

Key points

The amount of damages must be prepared as carefully as the proof of infringement. Internal data on margins, production capacity and prices should be gathered from the outset, and information held by the defendant should be requested early. The choice between compensation by separate heads and the lump sum is made in the light of that material, the latter providing a useful floor where lost profits are hard to establish.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats litigates patent disputes before the Paris Judicial Court, the Paris Court of Appeal and the Unified Patent Court. Where the question arises in a real case, the useful moment is almost always before proceedings are issued.

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