Supreme Court provides guidance on how to claim damages

Estonia
The Supreme Court of Estonia has issued its decision in an infringement action filed by Estonian company AS Tallegg against another Estonian company, AS Maag Grupp (Case 3-2-1-123-11, December 7 2011).
 
Tallegg, a poultry farming company, had been using the trademark PEREMUNA (‘family egg’ in English) since 1998 to designate its goods (“eggs”). It filed an application for the registration of the mark only in January 2005.
 
Maag imported eggs and distributed these under the mark RANNAMÕISA PEREMUNAD. In February 2005 Tallegg sent a cease and desist letter to Maag; however, in response, Maag filed a trademark application for RANNAMÕISA PEREMUNAD through one of its subsidiaries. The application has not yet matured to registration.
 
Following the registration of Tallegg’s trademark in December 2008, and due to Maag’s refusal to terminate the infringement, in January 2009 Tallegg filed a court action for infringement, seeking damages. The court granted a preliminary injunction and ordered Maag to re-package all its goods.
 
As a defence, Maag filed a counterclaim for invalidation of the PEREMUNA mark, claiming that it was descriptive and was commonly used to designate medium-sized eggs.
 
The counter-action was unsuccessful and, in December 2010, the Harju County Court confirmed that Maag had infringed Tallegg’s mark. It also awarded damages to Tallegg based on two elements:
  • the legal costs in the amount of approximately €825 incurred by Tallegg to try to reach settlement and terminate the infringement; and
  • an account of Maag’s profits in the amount of approximately €26,300 based on bad-faith infringement and unjust enrichment.
The legal costs were based on the invoices billed to Tallegg by its attorney for sending the cease and desist letters, and the account for profits was based on calculations which Maag had been ordered to disclose to the court.  
 
The sale of infringing goods by Maag amounted to approximately €390,000, with a purchase price of approximately €363700; the net profit was thus €26,300. The court refused to deduct Maag’s general expenses from the net profits, as they were not directly related to the marketing of the infringing goods.  
 
Maag appealed, but the Appellate Tallinn District Court dismissed the appeal in April 2011. Maag filed a cassation appeal to the Supreme Court of Estonia, which granted leave to appeal and agreed to rule on the matter.
 
In December 2011 the Supreme Court confirmed the previous decisions and re-affirmed the following:
  • The PEREMUNA mark is not descriptive, nor is it commonly used to describe the size of eggs.
  • Where an account of profits is claimed, the infringer must disclose all the profits earned. Only direct expenses may be deducted from the net profits. General operational expenses cannot be deducted, otherwise the defendant would be allowed to cover these expenses on account of the profits earned as a result of the infringement.
  • The infringement had been carried out in bad faith (providing grounds for a claim to the infringer’s profits) in light of the following elements:
    o   The cease and desist letters sent to Maag;
    o   The responses sent by Maag to Tallegg;
    o   Tallegg’s use of its trademark dated back to 1998, while Maag started using its mark in 2005; and
    o   The Patent Office had cited Tallegg’s trademark registration during the ex officio examination of Maag’s trademark application.
  • The costs incurred by Tallegg in attempting to settle the case before the infringement action was filed qualified as damages and should be paid by the infringer.  
In separate proceedings, the court will determine the amount of legal fees that Maag must pay to Tallegg.
 
Almar Sehver, AAA Legal Services, Tallinn

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