2018.07.05 EVE-6 Calculation of Damages - IPKEY...Calculation of Damages Case 1: New Balance v Bestseller Case History 01-11-2006 NEW requested that a preservation of evidence against

Erling Vestergaard | Alicante | 4 July 2018

Calculation of DamagesA Highly Disputed Legal Issue

Calculation of Damages

Purpose of Awarding Damages

As a general principle, damages for IPR infringements are intended to accomplish two ends: • Compensation: damage awards should put the right holder in the position he or she would

have been in had the infringement not taken place; and • Deterrence: damage awards should serve to discourage both repeat and would-be infringers


Purpose of Awarding Damages

In most legal systems a wide discretion has been given to the court in assessing damages• Courts often face difficulty in calculating and awarding compensation comprehensively• Beside lost profits, calculation of other negative economic consequences resulting from an

infringement, is difficult• Non-economic harm is almost impossible to assess• The cost of investigation, taking legal action and rectifying infringement is difficult to calculate• It is challenging to award damages when infringers profits has been higher than the loss for the

right holder

Calculation of DamagesIPRED Art. 13(1)• MS shall make an order against infringer who knowingly, or with reasonable grounds to know,

engaged in an infringing activity, to pay the rightholder damages appropriate to the actual prejudice suffered by him as a result of the infringement

When the judicial authorities set the damages:• (a) they shall take into account all appropriate aspects, such as the negative economic

consequences, including lost profits, which the injured party has suffered, any unfair profitsmade by the infringer and, in appropriate cases, elements other than economic factors, suchas the moral prejudice caused to the rightholder by the infringement;

or• (b) as an alternative to (a), they may, in appropriate cases, set the damages as a lump sum on

the basis of elements such as at least the amount of royalties or fees which would have beendue if the infringer had requested authorisation to use the intellectual property right in question


Three distinct typical market situations(1) The claimant and the defendant are competing

- a direct loss can be calculated on basis of 1-1 substitution of lost sales(2) The claimant and the defendant are not competing

- a direct loss cannot be calculated(3) The claimant and the defendant are partly competing

- a direct loss can be calculated on basis of a substitution rate of lost sales of less than 1


Case 1: New Balance v Bestseller



Danish Maritime and Commercial Court Ruling15 April 2010Upheld by the Danish Supreme Court Ruling 30 May 2012



New Balance Athletic Shoe Inc.

Abbreviation: NEW



New Balance Athletic Shoe Inc.

Abbreviation: NEW

• NEW was founded in 1906 in Massachusetts by British immigrant William J. Riley In 1972 the company had 6 employees and produced 30 pairs of shoes daily. After being taken over by chaiman Jim Davis on the day of the Boston Marathon the company started growing rapidly

• At the time of the court case annual worldwide sales exceeded €1.3 billion

• The company was the 9th all-time largest producer of sports shoes



Bestseller A/S

Abbreviation: BEST



Bestseller A/S

Abbreviation: BEST

BEST was founded in Denmark in 1975 by Merete and Troels Poulsen as a mainly clothes producing company targeting young people.

Brands produced by BEST include - Jack and Jones- Limited- Only- Vero Moda

At the time of the court case worldwide sales exceeded €2.6 billion (the double of NEW).


Case 1: New Balance v BestsellerCase History01-11-2006 NEW requested that a preservation of evidence against BEST18-12-2006 NEW requested interlocutory injunction and right of information19-12-2006 Preservation of evidence is carried out at BEST headquarters Court orders right of

information, seizure and interlocutory injunction20-12-2006 BEST claims to have stopped all sales of contested products29-12-2006 NEW claims products are still for sale in retail shops in Denmark31-01-2007 BETS acknowledges the legitimacy of court orders and declares to have stopped all

production and marketing of contested products 13-03-2007 NEW claims some contested products are still for sale in retail shops outside Denmark14-03-2007 BEST declares that all contested products are now removed from all markets30-07-2007 NEW files a lawsuit against BEST claiming damages15-04-2010 Commercial Court rules partly in favor of NEW; the ruling was appealed by BEST30-05-2012 Danish Supreme Court upheld the ruling


Case 1: New Balance v BestsellerCase History01-11-2006 NEW requested that a preservation of evidence against BEST18-12-2006 NEW requested interlocutory injunction and right of information19-12-2006 Preservation of evidence is carried out at BEST headquarters Court orders right of

information, seizure and interlocutory injunction20-12-2006 BEST claims to have stopped all sales of contested products29-12-2006 NEW claims products are still for sale in retail shops in Denmark31-01-2007 BETS acknowledges the legitimacy of court orders and declares to have stopped all

production and marketing of contested products 13-03-2007 NEW claims some contested products are still for sale in retail shops outside Denmark14-03-2007 BEST declares that all contested products are now removed from all markets30-07-2007 NEW files a lawsuit against BEST claiming damages15-04-2010 Commercial Court rules partly in favor of NEW; the ruling was appealed by BEST30-05-2012 Danish Supreme Court upheld the ruling

BEST - produced 13.000 JJ Slick and 21.000 JJ

Stan, in all 34.000, in 2006- sold 7.000 JJ Slick and 12.000 JJ Stan, in all

19.000, in 2006 and 2007- some were destroyed by mistake and

some were in stock at time court ruling- marketed through a website and a brochure

made in 300.000 copies containing infringing trademarks

NEW doubled sales from 2005-2006, but only rose 6 % in 2007

Fragment of BEST website NEW Trademark[Word]:

P.F. FLYERS et.al


NEW claim for damages (in €)Rate of substitution: All products substitutable 1:1

NEW Prices BEST prices- Turnover: 2,000,000 1,000,000- Profit (60% of turnover): 1,200,000 600,000- License fee (10% even if NEW doesn’t license): 200,000 100,000- Market disturbance of market equivalent to license

fees for trademark use on website and brochure 80,000 80,000Damage claim (profit+license fee+market dist) 1,480,000 780,000

BEST objection

• Rate of substitution: Product substitution was less than 1:1• BEST protested against NEW calculation of damages, but could acknowledge a license fee of

5% based on BEST prices: €50,000


NEW claim for damages (in €)Rate of substitution: All products substitutable 1:1

NEW Prices BEST prices- Turnover: 2,000,000 1,000,000- Profit (60% of turnover): 1,200,000 600,000- License fee (10% even if NEW doesn’t license): 200,000 100,000- Market disturbance of market equivalent to license

fees for trademark use on website and brochure 80,000 80,000Damage claim (profit+license fee+market dist) 1,480,000 780,000

BEST objection

• Rate of substitution: Product substitution was less than 1:1• BEST protested against NEW calculation of damages, but could acknowledge a license fee of

5% based on BEST prices: €50,000


Commercial and Maritime Court Ruling (that was uphed in appeal before the Supreme Court)

The court set a lump sum damages based on • BEST turnover• NEW lost profit• BEST unfair profits €300,000 • License fee for trademark use on website and in brochure €100,000

€400,000 The court additionally• declared previous provisional court rulings valid• made a permanent injunction against marketing of the products• ordered destruction of seized goods• ordered BEST to pay all legal costs• ordered the ruling made public


Case 2: Burberry v Tiger





Burberry figurative trademark »BURBERRY CHECK« reg. 2000 covering ladies bags, wallets, leather goods a.o.)

Burberry figurative trademark »BURBERRY CHECK« reg. 1993 covering ladies bags, wallets, leather goods a.o.)

Burberry wordmark: »BURBERRY« (reg 1977) covering ladies bags, wallets, leather goods a.o.)

Original Burberry Products



Non-original purse sold in a chain of low price retail shops, Tiger

Number of purses sold: 17.000Price: 3 €Turnover: 51.000€Profit: 16.500€Period of sale: April 2004 to February 2005Price per corresponding original purse: 300€



Commercial and Maritime Court Ruling

• Probably a loss of profit and loss of position in the market, but Burberry had not substantiated the loss. An assessment of the compensation should therefore be made based on an cautious estimate

• Correspondingly, Burberry had not given sufficient information concerning the normal or usual fees or royalties. The fees should likewise be estimated with caution

• Based on information concerning the buyers of Burberry and infringing products, the marketing relations and other circumstances Burberry’s restitution was set to 20.000€



Defendants position before the Supreme Court:• Burberry had incurred no loss• Defendant found that 5,100€, corresponding to 0.3€ (10%) per sold purse was reasonable

Burberrys position before the Supreme Court:• The calculation of fees: Between 5% and 25% of Burberry’s price of 300€ multiplied by 17,000

(255,000€ -1,275,000€). Final claim limited to 150,000€• Further, compensation for loss of profit and loss of position in the market



Supreme Court Ruling:• No loss of sales substantiated• Burberry was entitled to damages as a lump sum on the basis of royalties/fees• The sale had caused a disturbance of Burberry’s position in the market, which entitles

Burberry to damages for that• Total damages of 15,000€ (close to the profit of 16,500€) to Burberry covering the lump sum

for royaltees/fees and compensation for disturbance of position in the market


Case 3: Architect Case





Danish Supreme Court ruling U.2011.955H, 6. January 2011• Constructor A were given in 2004 by an architect company B a Conceptual Design Sketch

Project for houses for a price of 25.000 EURO pr. house. This included architectual guidance a.o. through the complete building proces.

• A refused the offer, but acted anyway and build 144 houses on the basis of B's sketch. The houses were part of a larger apartment projects totaling 300 holiday homes. In a newspaper article published in connection with the construction of the houses another architect was listed. Construction price pr. house was around 100.000 EURO.



Danish Supreme Court ruling U.2011.955H, 6. January 2011

B’s claims• B demanded payment of fees, compensation for lost profit and moral prejudice.

A’s protest• A acknowledged to have violated the copyright of the sketches, but claimed that the maximum

amount to be paid was the originally proposed contract sum of 25.000 EUROs pr. house.



Danish Supreme Court ruling U.2011.955H, 6. January 2011

High court ruling• The High Court found that A should pay 250.000 EUROs for pecuniary losses and 5.000

EURO for moral prejudice• The payment of 250.000 EUROs followed a recommendation from a board of architectural

specialists about what a normal license fee would be for sketches for houses of the sort in question. The specialists noted that the sketches were not complete and therefore could not result in full fees

The Supreme Court upheld the ruling


Case 4: DIVX Case


Case 4: DIVX Case


Case 4: DIVX Case

Danish High Court Ruling Ruling 30 september 2004, U 2005.60 V

Facts• A ran a website where connection was made between people that shared movies on DIVX

format. On the website itself subtitles to the movies could be downloaded• The website had 2.700 registrered users• A had actively promoted the website service and had himself presented 60 movies and 240

subtitles to the users


Case 4: DIVX Case


High Court Ruling concerning movies• DIVX format has lower quality than legally available formats• estimated that 20% of the registrered users of the website had downloaded movies, 20% of

2.700 is 540 persons.• estimated that each of the 540 persons had downloaded 10 movies, 5.400 movies in all• a new movie was normally sold for 20 EUROs and the set a reasonable fee to 10 EURO pr.

Movie• fees were set to 54.000 EURO• to cover other losses total damages were set to 108.000 EURO


Case 4: DIVX Case


High Court Ruling concerning subtitles• subtitles are remunerated per movieproduction, not in accordance to number of copies sold• estimated that 20% of the registrered users of the website had downloaded subtitles, 20% of

2.700 is 540 persons• estimated that each of the 540 persons had downloaded 1 subtitle, 540 subtitles in all• set fees to 1 EURO pr. subtitle.Other losses were set to ½ EURO pr. subtitle. Total damages

for subtitles were set to 810 EURO


Case 4: DIVX Case


High Court Ruling • Total damages 108.000 EURO plus 108 EURO = 108.108 EURO• A had a personal low income and had received no economic gain from the website• Damages were in accordance with a general Danish legal principle reduced to 30.000 EURO

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2018.07.05 EVE-6 Calculation of Damages - IPKEY...Calculation of Damages Case 1: New Balance v Bestseller Case History 01-11-2006 NEW requested that a preservation of evidence against