Criminal Court paves the way for larger moral damages awards

In Laboratorio de Especialidades Farmacéuticas Knop Ltda v Laboratorios Maver SA (Case 50.806-PL, August 30 2004), a Chilean Criminal Court has awarded a substantial amount of moral damages in favour of the plaintiff trademark owner following the defendant's fraudulent use of its mark.

Chilean trademark law is governed by the Industrial Property Law (Law 19.039), which sets out a list of infringing acts. Among other things, the law states that the following acts are infringing: (i) the malicious use of an identical or similar trademark already registered in the same class; and (ii) the fraudulent use of a trademark. The law indicates that, if found guilty, the infringer may have to pay a fine to the government. Trademark owners can also request an award of damages if they have been harmed by the infringing act.

In the case at hand, Laboratorio de Especialidades Farmacéuticas Knop Ltda (Knop), a manufacturer of pharmaceuticals, filed a criminal and civil action against Laboratorios Maver SA (Maver). Knop sells a cough mixture under the trademark PALTOMIEL, which is registered for pharmaceutical products in Class 5 of the Nice Classification. It filed the action after it became aware that Maver was selling a cough mixture using similar packaging and colours to those used by Knop for its product. In its claim, it also stated that Maver was selling its syrup under the mark JARABE DE PALTO COMPUESTO CON MIEL and that the mark was set out in such a way that (i) the name palto was above the word 'miel' (meaning honey), and (ii) both words were printed in a larger font, making them stand out.

Knop contended that Paltomiel is its best-selling product and is widely known in the market. Therefore, Maver's adoption of a similar trademark to distinguish the same kind of product amounted to a malicious and fraudulent use of its registered trademark, warranting the payment of damages.

In its decision, the Criminal Court ruled that Maver had used Knop's registered trademark in a malicious and fraudulent manner. Accordingly, it ordered Maver to pay a fine to the government. It also stated that Maver must pay damages to Knop since it was aware and had reasonable grounds for supposing that the PALTOMIEL trademark was registered. Moreover, Maver had imitated the packaging for Knop's product, thereby taking advantage of its reputation and causing confusion among consumers.

Although the court refused to award actual damages or lost profits, it did award approximately $333,333 in moral damages (compensation for acts that caused harm to Knop).

This is one of the largest amounts ever awarded by the courts under the concept of moral damages and, if confirmed on appeal, may serve as a useful precedent since decisions awarding damages in IP cases are rare in Chile.

Carmen Paz Alvarez, Sargent & Krahn, Santiago