The hypothetical license fee method may be used to quantify infringer’s unfair benefits while the related restitution claim may be valid even if the infringement did not bring the defendant any actual business profit, says Supreme Court in its judgment of 9 June 2017 in case III CSK 216/16.
The case involved an infringement of Mixełko word trade mark applied to spreads. The infringer was a dairy products manufacturer supplying a fat mixture called Miksełko łaciate. The trade mark’s proprietor sued the infringer for restitution of the latter’s unfair benefits which the proprietor quantified at nearly PLN 3.5 million using the hypothetical license fee method, i.e. using the fee which the proprietor considered would have been appropriate if he had contractually licensed the other party to use the mark.
The trial court and the appellate court denied the claim on the basis that the benefits of a trade mark infringement are to be taken to mean profit (revenue less expenses), and not the amount of foregone license fees. The appellate court additionally held that a proprietor’s restitution claim for unpaid license fees could succeed only if his trade mark would or could have actually been licensed in the specific market circumstances. But in the case at hand there were no prospects for a license, as can be seen by the fact that the plaintiff had repeatedly made efforts to have the defendant enter into a license contract with him, but without success.
According to the Supreme Court, “the lower courts erred in concluding that infringer’s economic benefit is nothing more than his business profit from the infringement. (…) Predating upon proprietor’s trade mark rights by using the marks for one’s own business generates an economic benefit, whether or not use of the mark was necessary for the infringer or the infringer would have been interested in being contractually licensed to use the mark. This understanding of the benefit is unaffected by whether or not the use of somebody else’s sign has brought the infringer any positive business effects, including in particular any business profit.”
The court further held that “the fact that, in an effort to improve the position of holders of such exclusive rights, the law considers the hypothetical license fee method appropriate for quantification of statutory damages does not prevent the use and usefulness of this method in quantifying infringer’s benefit of using somebody else’s registered trade mark.” This method is applicable regardless of any probability that the particular parties would, in the particular circumstances, have entered into a license contract. Allowing its application only if some degree of such probability existed would unreasonably privilege infringers who simply refuse to buy licenses.
Importantly, the Supreme Court held that the nature of restitution claim for unfair benefits is the same under the Industrial Property Law Act and the Copyrights Act. Accordingly, you can use the hypothetical license fee method not only in trade mark infringement cases but also where unjust benefits are obtained due to infringement of other industrial property rights or of copyrights.
Check what we refer to:
- The Industrial Property Law Act of 30 June 2000 (as consolidated in Journal of Laws of 2017, item 776);
- The Copyright and Related Rights Act of 4 February 1994 (as consolidated in Journal of Laws of 2017, item 880);
- Supreme Court judgment of 9 June 2017, case no. III CSK 216/16.;
- Article entitled “Statutory damages equal to license fee – guidance from Polish courts”.