Infringement of IP right automatically means that rights holder has suffered damages

On January 3 2013 Section 10 of the Barcelona Court of Appeal upheld an appeal filed by a private prosecutor against a judgment issued by the Trial Court Number 28 of Barcelona. Although the trial court had convicted the defendant of a crime against intellectual property, it had neither ordered the latter to pay compensation for the damage that his conduct had caused to the owner of the infringed trademark, nor to pay the legal costs.

The defendant had commissioned the production of 450 handbags bearing a sign which imitated the famous trademarks of the private prosecutor, and subsequently imported the bags from China to sell them in Spain.

In the writ of appeal, it was argued that any infringement of an IP right automatically means that the rights holder has suffered damages. This principle is based on certain case law of the Civil Chamber of the Supreme Court holding that, in case of infringement of an IP right, the defendant must pay compensation ex re ipsa, when it is an automatic consequence of the offence itself. In such cases, the obligation to pay compensation is considered to arise automatically - the rights holder does not need to provide evidence of the existence of damages. This is mainly due to two reasons:

1. The first reason is the ius prohibendi which protects the distinctive function of the product or the commercial origin of the service. This intangible aspect of the sign is necessarily damaged by any infringement. In other words, it is not possible to infringe an exclusive right without causing damage to its owner.
2. The second reason, which is practical and procedural, is due to the difficulty of gathering evidence of the damage effectively caused to the rights holder. The requirements are so rigorous that, in many cases, the injured party would be defenceless. Moreover, if those requirements were applied to the extreme, this would mean, in the case of IP rights, that the offender would be provided with a free licence.

This premise was fully accepted by the Barcelona Court of Appeal in the present case: when an IP crime is committed, the court will automatically find that damage has occurred, without the need to provide further evidence, as long as it is inherent in the act itself.

On the other hand, the Trial Court Number 28 of Barcelona had based its decision not to order the payment of civil liability on the finding that, because the infringing goods had been seized and not sold, the owner of the infringed trademarks had not suffered any financial loss.

This proposition was not acceptable because, as soon as a wholesaler purchases goods from a manufacturer, a commercial transaction has taken place within the first link of the trade chain - and it is precisely within this first link that trademark holders make most of their profits.

From the moment that a trademark owner is replaced within this first link, there is a financial loss, as the trademark owner has not obtained the amount that the infringer would have had to pay in the case of a lawful acquisition. The failure to sentence an infringer to pay damages would mean rewarding the latter for taking advantage of someone else's property without paying compensation in exchange.

In line with the arguments put forward on appeal, the Barcelona Court of Appeal stated as follows:

“The fact that the goods have not been made available to the public (...) does not in any way mean that the owner of the intellectual property right has not suffered damages. To assert otherwise (...) would amount to the consecration of pathways running parallel to those legitimately protected by that right, which would be systematically violated. This is why (...) the fact that the goods have been seized by Customs cannot result in the absence of any loss for the trademark owner when the first step of the marketing chain has already taken place, as a manufacturer who lacks the licence to manufacture the goods has sold them to the importer.”

With this judgment, the Barcelona Court of Appeal has helped to consolidate the jurisprudence followed by certain decisions of the Civil Chamber of the Supreme Court and certain civil sections of other courts of appeal (including the Barcelona court).

With regard to the legal costs, as the defendant had been found to be the perpetrator of the crime of which the trademark holder was accusing him, the Court of Appeal found that the trial court should have sentenced him to pay the private prosecutor's legal costs.

According to the Supreme Court's doctrine, an order to pay the legal costs includes, as a rule, those incurred by the private prosecutor. It is possible to exclude the private prosecutor's legal costs only when the latter’s conduct during the proceedings has been superfluous or seriously disruptive, or if it has put forward clearly unachievable claims. In the present case, the Barcelona Court of Appeal considered that the conduct of the private prosecutor had not been superfluous or disruptive.

Jordi Camó, Grau & Angulo, Barcelona