What is "reasonable compensation" for trade mark infringement?
Recently Advocate General Wathelet issued an opinion in case C-280/15 'Nikolajeva'. His view is that compensation for infringement of an EUTM shouldn't include moral prejudice and there should be a greater degree of harmonisation in the application in Member States.
Ms Nikolajeva, a trade mark proprietor, brought infringement proceedings seeking a declaration of unlawful use and compensation including in respect of mental pain and impact on health.
The Estonian Court referred three questions to the ECJ about the interpretation of Article 9(3) of the European Union Trade Mark Regulation (now Article 9b). The main point of interest in this case concerns the AG's opinion in respect of Article 9b(2) which provides that:
""Reasonable compensation" may be claimed in respect of acts occurring after the date of publication of an EU trade mark application, where those acts would, after publication of the registration of the trade mark, be prohibited by virtue of that publication."
In particular the Court asked the CJEU to confirm what types of compensation this included and whether it extended to non-material harm.
Article 14(1) and 101(2) of the EUTM Regulation allow EU member states limited scope to apply their own national law to EUTM matters. In addition, the IP Enforcement Directive 2004/48/EC provides remedies for infringement of IP rights in the absence of specific legislation. Article 13 of the IP Enforcement Directive sets out the damages which may be awarded and differentiates between intentional and unintentional infringement.
There was also a query as to whether compensation should be available for acts committed prior to the date of publication of a trade mark, as provided for in Estonian national trade mark law.
According to AG Wathelet, the CJEU should rule that, under the EUTM Regulation, reasonable compensation may not be claimed under Article 9(3) in respect of acts occurring prior to the date of publication of an EUTM application. Although Article 14(1) of the EUTM Regulation provides that infringement of an EUTM is governed by the national laws, the effects of the EUTM are governed solely by the EUTM Regulation. The AG considered that the "effects of a trade mark are inseparable from its period of protection". The duration of the rights are "not among the matters to which national law should apply".
The AG concluded that "reasonable compensation" should be interpreted to mean that recovery of profits may only be claimed in respect of acts occurring after the date of publication of an EUTM application, if those acts would later be prohibited by virtue of the registration of the EUTM. However this should exclude moral prejudice. In his view, the phrase "compensation" suggests that the remedy is pecuniary and "reasonable" means it should be equitable and proportionate. Also the "reasonable compensation" must be "less heavy or severe" than for the period after registration. Accordingly, reasonable compensation does not include compensation for moral prejudice and other emotional harm.
According to the AG, Article 9(3) of the EUTM Regulation should be interpreted in accordance with Article 13 of the IP Enforcement Directive. Under this Directive where the infringement is unintentional, only the recovery of profits or damages which may be pre-established may be ordered. He opined that damages which needed to be specified by the national legislature would be inappropriate due to the need for "autonomous and uniform interpretation" but that "recovery of profits" was a uniform and predictable form of compensation which was appropriate to remove the undue benefit obtained by the defendant. Whereas Article 13(1) for intentional infringement includes compensation for moral prejudice, Article 13(2) covering unintentional infringement does not. As such the AG thought this would be "disproportionate when an [EU] trade mark is still in the process of being acquired".
This opinion potentially has far reaching consequences for EUTM owners and what they are able to recover for trade mark infringement. The AG's interpretation of Article 9(2)(b) of the EUTM Regulation is narrower than that currently given in some Member States, which could result in financial recovery during the period from publication of the application of an EUTM being reduced.
It will be interesting to see if the CJEU follows the AG's opinion in this case (as it does in 80% of cases). The Advocate General appears to favour harmonisation across the EU in the assessment of financial compensation for trade mark infringements, which in itself could lead to major changes across the region.
Furthermore this opinion may also increase the pressure for increased harmonisation in relation to recoverable costs in infringement proceedings, which currently vary greatly across different Member States. As judicial guidance in this area is rare, we will keep you posted on how this cases progress.