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In the event of a trademark infringement, the proprietor may seek statutory damages equal to the license fee (royalties) or other appropriate consideration that would be due for the trademark license.
What is an appropriate license fee is usually computed as a percentage applied to some basis of assessment, such as the price of infringer’s product, infringer’s revenue or net income (taxable profit), or even annual turnover. In this way, the proprietor can claim damages at, say, 5% of infringer’s revenue from unlawful use of the trademark.
Apparently, an appropriate license fee for statutory purposes would be that which the proprietor applies to other licensees or which the proprietor would have agreed to apply to the infringer if they had entered into a license.
The problem is that the law provides no algorithm or guidance to compute appropriate consideration in such cases. The courts have stepped in and, in accordance with the current line of authority, proprietor’s license fee rate is just one of several factors affecting the judicial quantification of what are appropriate royalties. Other factors relevant for quantifying such statutory damages include:
- the market level of royalties in the given industry (Supreme Court judgment of 9 June 2017, III CSK 216/16 – link; judgment of Białystok Court of Appeal of 26 April 2013, case no. I ACa 785/11 – link; judgment of Katowice Court of Appeal of 14 June 2017, I ACa 517/16 – link; judgment of Białystok Court of Appeal of 11 February 2015, case no. I ACa 962/14 – link);
- proprietor’s market share (Supreme Court judgment of 9 June 2017, III CSK 216/16 – link; judgment of Lublin Court of Appeal of 23 April 2014, case no. I ACa 658/12 – link);
- trademark’s recognition among consumers (Supreme Court judgment of 9 June 2017, III CSK 216/16 – link; Judgment of Kraków Court of Appeal of 13 July 2016, case no. I ACa 354/16 – link; judgment of Kraków Court of Appeal of 22 December 2015, I ACa 1249/15 – link; judgment of Kraków Court of Appeal of 13 July 2016, I ACa 354/16 – link);
- trademark’s reputation (Supreme Court judgment of 9 June 2017, III CSK 216/16 – link; judgment of Gdańsk Court of Appeal of 27 May, case no. I ACa 341/09 link);
- infringer’s recognition, reputation and footprint (Judgment of Kraków Court of Appeal of 22 December 2015, I ACa 1249/15 – link; judgment of Gdańsk Court of Appeal z 27 May 2009, case no. I ACa 341/09 – link);
- link between infringer’s sales and his use of the trademark (Judgment of Kraków Court of Appeal of 22 December 2015, I ACa 1249/15 – link);
- similarity between the infringer’s sign and the trademark (Supreme Court judgment of 9 June 2017, III CSK 216/16 – link).
The Supreme Court held as follows: “If these factors speak against the proprietor, the base-case average rate of the license fee may have to be reduced, even materially, depending on the circumstances of the case and the overall assessment of the factors involved.” (Judgment of 9 June 2017, III CSK 216/16 – link) For practical purposes, the awarded rate of license fee will in each case depend on the specific circumstances, judicial discretion and, in many cases, on the competence of experts appointed by the court for quantification purposes.
Be that as it may, courts apparently tend to award rates of between 0.1% and 8%. Rates of 10% or above are allowed only in exceptional cases, e.g. for well-known trademarks enjoying high recognition and backed by multi-million brand advertising budgets (see judgment of Warsaw Court of Appeal of 26 February 2013, I ACa 1001/12, in a case of unlawful use of REXONA trademark; link).
Pursuing statutory damages may appear simpler than seeking damages in tort since the proprietor does not need to prove the amount of their loss. On the other hand, the amount ultimately awarded may be markedly different from what was expected because the court is not bound to apply the proprietor’s license fee rates.
* All the linked information and documents are only available in Polish.
About the author
Absolwentka prawa, entuzjastka prawa własności intelektualnej, które – jej zdaniem – nie pozwala na nudę i rutynę, ponieważ każdy problem wymaga kreatywnego i indywidualnego podejścia. Sprawy, z którymi spotyka się na co dzień, łączą w sobie aspekty na pozór odległych od siebie dziedzin prawa, techniki i nauki, a to z kolei pozwala na ciągły rozwój zawodowy. Agata lubi wyzwania – dlatego lubi IP. Szczególnie interesuje się problematyką ochrony tajemnicy przedsiębiorstwa oraz znakami towarowymi.