Calculating damages in IP claims

The Assessment of damages- “the exercise of a sound imagination and the practice of the broad axe”

The aim of damages, in relation to intellectual property rights infringement, is to put the injured party back into the position he would have been in, had there never been an infringement in the first place.

There are three ways to calculate damages in relation to intellectual property rights infringements.

Where the claimant makes and sells a product, the damages should be assessed on the basis of the profits lost by the claimant as a result of the infringement.

Where the claimant grants licenses to others to exploit his invention, damages should be calculated on the basis of the royalties the defendant would have paid, had he acted legally.

Where it is not possible to prove either of the above damages will be assessed by considering what price could the claimant reasonably have been charged for permission to carry out the infringing acts. In other words a hypothetical negotiation takes place between the parties which results in them entering a hypothetical licencing agreement. The hypothetical licence fee will be the amount of damages awarded.

The recent case of 32 Red PLC v (1)WHG (International) Limited (2) WHG Trading Limited (3) William Hill PLC has shed some useful guidance in relation to this third method of calculating damages.

The Court of Appeal found between January and August 2009 the defendants, the William Hill Group, had infringed the claimants “32Red” trade marks through their use of an online gaming website with the domain name 32vegas.com.

The High Court was then tasked with determining how much damages to award under the third principle.

The High Court considered that the below are not to be considered :-

• The Defendant’s financial position
• The personal characteristics of the parties

The below are to be considered

• The circumstance in which the individual parties were placed at the time of the hypothetical negotiation.
• The actual strengths and weaknesses of the parties bargaining positions.
• The availability of non-infringing alternatives.

The impact of rebranding.

References to economic benefits of the licence provide the best starting point in determining what the parties would have agreed.

With the above in mind the Court decided that the duration of the hypothetical licence should be for the period of infringement and not for any extended period during which a defendant may continue to derive benefit. Any additional period in which the Defendant would derive a benefit would be considered by the parties in negotiating the hypothetical licence.

The hypothetical licence would be an exclusive licence and in relation to quality control the hypothetical licence would have permitted the Defendants to use the terms and conditions that were used.

Taking all these factors into account the Court awarded damages of £150,000.

In order to be awarded damages for intellectual property rights infringement there must be an infringement of your intellectual property rights. Briffa can advise on all intellectual property rights infringements and accordingly the calculation of damages for said infringements.