IP Insights: Award of damages before the UPC

Show notes

To take a deeper dive into the Unitary Patent and Unified Patent Court, please visit our dedicated UPC website: https://www.bardehle.com/en/upc-special

Our colleague Rebecca Jeschke recently explained reasons why damages proceedings before the UPC could be attractive. She mentioned the possibility to obtain interim damages, the request that the infringer shall lay open books, and – last but not least – possibly some new ways to determine damages, which will be our topic today. How does the UPC determine damages?

Article 68 of the UPC Agreement deals with the award of damages. Its third paragraph tells the UPC judges how to “set the damages”. Its wording is taken from the Enforcement Directive. It foresees two alternatives: Allternative a: “All appropriate aspects” shall be taken into account, “including lost profits” of the injured party and any unfair profits made by the infringer. Or as an alternative “in appropriate cases”: A lump sum based on elements such as “at least” the royalties which would have been due for a license.

The first alternative does not seem to require any choice between lost profits on the one hand and infringer’s profits on the other hand. Rather, it seems to take into account both to determine “appropriate damages”. To make use of this flexibility, the injured party would have to substantiate both: Infringer’s profit – which it may like to do – but also its lost own profits – which may be more problematic because it would require this party to disclose its own costs.

The alternative “b” would be to “set” the damages as a “lump sum”, wherein the royalties which would have been due for a license form the lower limit. However, that alternative is only opened in “appropriate cases”.

And the Enforcement Directive suggests that “appropriate cases” are cases for which it is “difficult to determine the amount of the actual prejudice suffered”.

But nothing in the law indicates that in the “appropriate damages” in these cases shall be limited to a “reasonable royalty”. Maybe, judges will apply a factor in order to achieve the overarching goals of compensating the injured party for damage suffered and balancing the unfair profits made by the infringer.