Tuesday 29 March 2016

The CJEU gives wings to compensation for moral damages

Compensation for moral damages in intellectual property infringement cases has, in the past, had to break through significant barriers and overcome considerable prejudice.  Some of those barriers are due to the very nature of the damages: it is always easier to argue that economic detriment has been suffered (when we are talking about trademarks, designs, patents or intellectual creations) than damage to the intangible or spiritual realm of the author or rightholder. Yet it is sad to think that reservations towards compensation for moral damages might also have come about as a result of a legislative deficiency.  

Directive 2004/48/EC, extending the means of protecting intellectual property rights, slotted moral damages into the context of negative economic consequences of infringement, just another aspect alongside lost profit suffered by the injured party and unfair profit made by the infringer (Art. 13.1 a).  Alternatively, the Directive provided for compensation based on a hypothetical royalty, i.e., the lump sum that would have been due if the infringer had requested the pertinent authorisation (Art. 13.1 b).

This gave the impression that if the plaintiff opted for this alternative criterion for assessing the value of the damages, i.e., the hypothetical royalty, moral damages could not enter into the equation. The Spanish lawmaker had followed this legislative anomaly to the letter, thanks to Act 19/2006, and applied it to all forms of intellectual property: the Trademark Act, the Patent Act, the National Designs Act and the consolidated wording of the Spanish Copyright Act.

It was the Court of Justice, in its judgment of 17 March 2016 in case C-99/15, which ultimately put things in their place. That judgment stemmed from a reference for a preliminary ruling made by the Spanish Supreme Court concerning the regulation of moral damages in copyright. The plaintiff (the director, screenwriter and producer of an audiovisual work) had sued the producer of a documentary that included passages of his work for infringement of his rights. The plaintiff had selected the compensatory criterion of the fee for unauthorised use of his work but also requested 10,000 Euros for moral damages. The Supreme Court wanted to know whether moral damages could additionally be requested in such cases. 

In its judgment, the Court of Justice clarified that a provision of EU law must be interpreted not just in terms of its wording, but also in terms of its context and the objectives that it pursues; that compensation for damages must seek to ensure full compensation for the prejudice actually suffered; and that hypothetical royalties only cover “material” damage. There is therefore nothing to prevent the rightholder from also being able to claim compensation for any “moral” damages suffered.  

This judgment is extremely significant due to its side effects: its clarifying scope extends to trademark, patent and design law. However, if the judgment gives wings to moral damages, we should not try to fly too high. There are rules governing moral damages too, and, just like Icarus, we could end up falling into the sea with our wings burned for flying too close to the sun, and this time a legislative deficiency would not be to blame!    

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