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A punishment to fit the crime – CJEU allows punitive damages in IP infringement cases

22 February 2017. Published by Ben Mark, Legal Director and Jani Ihalainen, Paralegal

In a recent decision, the Court of Justice of the EU (CJEU) ruled that the EU Enforcement Directive does not preclude the legal provision of punitive damages in infringement cases in EU Member States.

Introduction

Under Article 13 of the Enforcement Directive all Member States have to provide measures and remedies to ensure the effective enforcement of IP rights, including by way of damages for the actual prejudice suffered through the infringement.

In the case the Polish collection society for copyright protected works, Stowarzyszenie Filmowców Polskich, sued a local TV broadcaster, Stowarzyszenie “Oławska Telewizja Kablowa”, for copyright infringement due to their broadcasting of protected works managed by SPF after the termination of a licensing agreement over the same between the parties.

Decision

The CJEU had to decide, in essence, whether Article 13 of the Enforcement Directive precluded Member States from allowing rights holders to seek punitive damages from infringers. In this case, the Polish copyright law allowed for compensation for twice or even three times the amount of loss suffered by the rights holder.

According to the court, even though this type of compensation through punitive damages potentially goes beyond the actual loss suffered by the rights holder, this has always been an inherent risk when setting any lump-sum compensation, albeit not expressly stated as being punitive. While such damages are allowed, recital 26 of the Enforcement Directive does clarify that it does not envision imposing such obligations on Member States. The CJEU emphasises this distinction, as the lack of an obligation does not mean that there is a prohibition of the same for Member States.

The CJEU finally highlighted that even if a hypothetical royalty is paid as damages without any additional, possibly punitive damages, it does not necessarily cover all of the loss suffered by the rights holder, particularly in relation to pursuing the action and any activities prior to the same. This often includes extensive research into the infringing act and the entity infringing those rights, interest accrued on the amount of loss, and even possible prejudice to the rights holder's moral rights under the decision in Liffers.

Comment

The decision reinforces the position in the UK, which allows for punitive (i.e. additional) damages for copyright infringement under Copyright, Designs and Patents Act 1988, s. 97(2). Even though the provisions have not been questioned in the UK before the decision, it does give certainty to those seeking punitive damages in the UK courts.

This decision further allows for the UK government to expand the current legislative framework in intellectual property infringement cases, potentially adding punitive damages to other areas such as trade marks and patents, which currently have no such provisions. This would also aid in the UK's intentions to strengthen its measures against IP infringers, as set out in the Intellectual Property Office's 5 year strategy that seek to introduce more drastic punishments for infringers, and the Government'sIP enforcement 2020 report that aims to review and adjust the existing methods of legal recourse in all IP infringement cases.