The Preamble of the Directive 2004/48/EC on enforcement of intellectual property rights (further on referred to as "Directive") states that "the protection of intellectual property is an essential element for the success of the internal market. The protection of intellectual property is important not only for promoting innovation and creativity, but also for developing employment and improving competitiveness."1 Therefore, the need to enforce the intellectual property rights is relevant not only for the holders of such rights, but for the establishment of the single effective internal market of the European Union as well. Furthermore, the appropriate enforcement of intellectual property rights protects not only the interests of the intellectual property right holders but the interests of the society in general as well.
This article will shortly assess the application of damages in the field of intellectual property as one of the effective means in the enforcement of intellectual property rights. It will include the related practical questions in the Republic of Lithuania as well as their compliance with the Directive.
National laws of the Republic of Lithuania regulating Intellectual property matters are enacted in accordance to the relevant provisions of European Community legal acts and TRIPS. However, recent changes effected not only general laws regulating legal civil matters but specific laws regulating intellectual property legal matters as well, taken into account the recent membership of the European Union (since May 1, 2004). One of these changes was intended to make the enforcement procedures implemented in the Lithuanian laws equivalent and in compliance to the ones proposed in the Directive.
One of the essential means of the enforcement of legal rights is damages and their reimbursement. The Preamble of the Directive states that the aim of reimbursement of damages "… is not to introduce an obligation to provide for punitive damages but to allow for compensation based on an objective criterion"2.
The institute of damages in Lithuania is implemented in the Civil Code of the Republic of Lithuania and the Law on Trademarks of the Republic of Lithuania. The latter is being proposed to certain amendments in relation to the enforcement of intellectual property and the Directive.
According to the Laws of Lithuania, there exists a mixed type of remuneration of damages. The following types of damages exist in Lithuania – losses, compensation and non-economic damages.
Each type of damages should be examined in more detail. There are several types of losses implemented in the laws of Lithuania. Direct losses according to the laws are the loss or injury to the persons’ property and his/her expenses. Indirect losses are unobtained income, which person would have received in case the infringement did not occur. In Lithuania the wider concept of profit is used than in the Directive, which indicates the lost profit. However, in practice the lost profit is evaluated. The main issue in evaluation is that this profit is actual and not pre-established. Reasonable expenses for the prevention or reduction of damages; reasonable expenses for the establishment of civil liability and evaluation of damages; reasonable expenses for recovery of damages outside the court are also listed as type of losses in Lithuanian laws.
In the case No. 3k-3-166/2004 dated 08/03/2004 of the Supreme Court of the Republic of Lithuania in determination of the defendant’s liability and amount of losses the importance was drawn to the plaintiff’s expenses on advertising of the production marked with specified trademark and to the proportion of the volume of defendant’s produced and sold goods and the volume of plaintiff’s at the same time produced and sold goods.
Accordingly, the regulation of losses in Lithuania is in conformity with their regulation in the Directive.
Another type of damages is compensation. It is the reimbursement of inflicted damages, as it was provided in the consultation of the Supreme Court of Lithuanian on February 22, 2002. The Supreme Court of Lithuanian in its later decision in the case No. 3k-3-132/2003 dated January 29, 2003, constituted plaintiff’s right of choice to require either the reimbursement of damages or compensation. Such right is implemented in the Law on Trademarks of the Republic of Lithuania. The plaintiff is not required to motivate his/her choice.
The calculation of compensation is based on the lawful sale-price. It is the market retail price which is the ultimate price of the good including taxes multiplied by the number of products sold. The lawful sale-price has to be indicated by the plaintiff, whereas defendant may argue that the stated sale-price is unlawful.
Compensation may be increased by 200% or by 300% if the infringer has committed the infringement deliberately. Such regulation was given by the Supreme Court of Lithuania in its consultation.
As a conclusion it has to be stated that the way of calculation of compensation is not in total conformity with the Directive because such calculation determines that the compensation is more of a punitive nature rather than a compensatory one. It should be calculated according to royalties or fees which would have been due if the infringer has requested authorization to use the intellectual property right. However, taken into account the proposed amendments to the Law on Trademarks, such increase of compensation will be declined and in case of deliberate and intentional infringement the request on double compensation may be filed.
Non-economic damage is another type of damages, which is implemented in the provisions of the Civil Code. Accordingly, its concept is defined as personal physical pain, spiritual experience, discomfort, spiritual shock, emotional depression, humiliation, depravation of reputation, reduction of communication and the like. The remuneration of non-economic damages is also implemented in the Civil Code which states that it is reimbursed only in accordance with laws. Therefore, such type of damages is reimbursed in case of infringement of the trademark’s holder rights, according to the Law on Trademarks. Furthermore, the Civil Code implements that the Court in deciding the amount of non-economic damages is evaluating its consequences, the guilt of the person who committed the damages, his/her material estate, the amount of inflicted material damages and other related to the case circumstances.
In order to settle the reimbursement of damages, the Lithuanian laws determine several conditions that have to be met:
- Illegal acts;
- Causal link between illegal acts and their damages;
It has to be stated that the criteria of fault in Lithuanian law is based on the standard of action of cautious, attentive and reasonable person. According to Lithuanian laws, the fault is presumed and it may be qualified as intentional or negligent. It is presumed that the person is guilty in case he was not careful and cautious as it was necessary to be in the certain circumstances.
The Supreme Court of Lithuania in the decision of case No. 3k-3-774/2003 dated September 8, 2003, stated that in order to decide the particular adjudged amount of the compensation, it is necessary to follow the norms regulating the civil liability. This means that all of the above-mentioned conditions must be applied.
In Lithuania the principle of absolute remuneration of damages is applied, however, the court may reduce the amount of damages taking into consideration all relevant circumstances (such as parties’ financial status, nature or liability and the said.)
By concluding, the conditions of application of damages are in conformity with the Directive. However, the Directive (Article 13.2) establishes that Member States may lay down a liability for persons not knowingly engaging in an infringing activity (without a fault). In Lithuania such provision is not implemented. Fault is an obligatory condition for the application of liability; therefore this is an essential condition for application of the institute of remuneration of damages in the enforcement of intellectual property. However, taken into account the proposed amendments to the Law on Trademarks, the intellectual property right holders may request compensation even in cases when the infringer was acting without fault that is not knowing of the infringement.
Taking into account the fact that the proposal on the amendments of the Law on Trademarks in relation to the enforcement of intellectual property, namely the Directive 2004/48/EC, is provided for consideration, the appropriate amendments will be commenced to the relevant laws in the nearest future and the legal practice of the courts will have to change accordingly.
1. Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights, Official Journal of the European Union L 157 of 30 April 2004), Preamble (1).
2. Ibid, Preamble (26).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.