Putting the Hammer Down - Punitive Damages Greenlit by the CJEU

Damages are a peculiar beast in the world of IP. Too little, and you effectively encourage infringement, or at least mitigate the punch after any successful infringement claims. Too excessive, and you can cause for the balance of power to excessively shift to the rights holder's hands, possibly even encouraging the misuse of those rights in the search of easy monies. Due to this, many jurisdictions elect against excessive, or in other terms, punitive damages, which seek to punish the offender and to discourage others in the process. EU law in itself does not provide for punitive damages as a must for Member States, but does that then mean you cannot introduce them as a Member State? The CJEU answered this question less than a month ago.

The case of Stowarzyszenie “Oławska Telewizja Kablowa” v Stowarzyszenie Filmowców Polskich dealt with the use of TV programming by OTK, a local television broadcaster in Poland, for which SFP, a Polish collection society, managed the rights. The two entities had a licencing agreement in place until the late 1990s; however, OTK kept broadcasting the shows even after the end of the agreement (seeking to set the fees from a third-party body, nonetheless). SFP took OTK to court for, among other things, copyright infringement, seeking twice the amount in damages that they would have gotten from a legitimate licencing arrangement. OTK took the matter forward, particularly on the point of the punitive damages, ultimately ending up with the CJEU.

The CJEU had to answer one question: "...whether Article 13 of Directive 2004/48 [Enforcement Directive] must be interpreted as precluding national legislation... under which the holder of an intellectual property right that has been infringed may choose to demand from the person who has infringed that right either compensation for the damage that he has suffered, taking account of all the appropriate aspects of the particular case, or, without him having to prove the actual loss and the causal link between the event giving rise to the infringement and the loss suffered, payment of a sum corresponding to twice or, in the event of a culpable infringement, three times the appropriate fee which would have been due if permission had been given for the work concerned to be used".

The Enforcement Directive lays down the minimum standard of protection that Member States have to have in place, but does not preclude them from setting higher, more punitive measures to do the same (in particular what was discussed in Hansson). Similarly, the Berne Convention, the Rome Convention and the TRIPS Agreement all allow for wider protection for Member States than prescribed.

Simone considered this to be cruel and unusual punishment

The CJEU therefore concluded that Article 13 does not preclude Member States from enacting provisions that are wider than what is set in the Enforcement Directive.

Even though the compensation offered through more punitive damages is not exactly the amount of loss suffered by the rights holder, it does not mean it cannot be provided for, as that characteristic is inherent in any lump-sum compensation given to rights holders (including as set in Article 13). The CJEU also pointed out that "...the fact that [the Directive] does not entail an obligation on the Member States to provide for ‘punitive’ damages cannot be interpreted as a prohibition on introducing such a measure". This makes sense to this writer, as the lack of a requirement does not necessarily mean the opposite would be true of the very same, leaving the option open to those wishing to implement it.

Finally, the CJEU emphasized that damages awarded, without being punitive, might not cover all of the costs associated with the pursuing of those damages, which possibly includes research into the infringement, other legal fees and even, as decided in Liffers, any moral prejudice suffered by the rights holder. Even if the amount would exceed all losses suffered, including the above, the Court noted that the Member States would still have the capability to regulate any possible abuses of punitive damages in court proceedings.

The decision reached by the CJEU does not in itself change much, but does affirm the capability for Member States to have punitive damage provisions, including ones in the UK. Should they wish to implement such measures in the future is also allowed; however, EU legislation, as it stands, does not impose such an obligation. This decision will delight many rights holders in Member STates with punitive damage provisions, and pushes the law a little in their favour going forward.

Source: IPKat