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25 January 2016
On May 31 2013 changes were made to the Patents Act regarding damages in patent infringement cases where the infringement was found to be wilful or negligent. The changes came into force on July 1 2013. Corresponding changes were also made to the Trademark Act, the Industrial Design Act and the Marketing Control Act. The changes strengthened the position of patent owners with respect to damages. The changes include the possibility of seeking damages:
For an infringement made in good faith, damages can be based on a fair licensing fee or profits, but only to the extent that such damages are not unreasonable.
Prior to these changes, a patent owner had the option of receiving only damages equal to a fair licensing fee for the infringing use or damages for harm caused by the infringement. These options remain after the changes, with some adjustments.
The new rules have introduced the possibility of seeking:
The plaintiff can choose the most favourable option, provided that it is applicable.
As provisions have been in force for approximately two and a half years, it is worth taking a closer look at the extent to which the courts have been willing to grant damages under the new rules.
A review of court decisions issued after the new rules came into force reveals that they have been cited by plaintiffs seeking damages, but have not been used often when the courts have awarded damages. Further, double damages for wilful or grossly negligent patent infringement have never been awarded.
In the TCO decision (LG-2013-162132), the Gulating Court of Second Instance (based in Bergen in Western Norway) found that the infringer was liable to pay damages equal to profits made from the infringement since the new rules came into force.
The plaintiff had also requested damages for infringements prior to the new rules coming into force, arguing that the changes to the Patents Act were merely a codification of statutes sanctioned by custom, albeit uncodified. The court did not find in favour of the plaintiff on this point, citing a Supreme Court decision in which damages based on profits were denied in a case involving competition clauses.
With regard to the Patents Act, the court found that the criteria for damages based on profits made from infringement had been fulfilled. The alleged infringer had not presented a good-faith defence and the subjective criterion of negligence was found to have been fulfilled. Further, the alleged infringer's subjective guilt was clearly related to objective criteria – primarily, the existence of a valid patent and acts that infringed that patent. The court also found that there was a factual and legal relationship between the infringement and profits that the infringer had made.
The court stated that damages should be based on net profits made from the infringement (ie, profits from the infringement minus related costs). The damages awarded were calculated as an estimate of the infringer's savings on its development costs. After considering the relevant facts, the court awarded Nkr12 million in damages, which is a substantial award for a Norwegian patent case.
The decision was appealed to the Supreme Court, but later settled out of court.
The principle of awarding damages based on profits made from a patent infringement was also applied in Calanus v NAG, heard before the Oslo District Court (TOSLO-2014-93272). NAG attempted to include legal costs as part of the related costs deducted when determining its net profit from the patent infringement. Unsurprisingly, the court found this unreasonable and stated that it would provide NAG with cover of its legal costs independently of the legal standards used to decide such matters.
Second defendant Cathay Import's role as a contributory infringer and the fact that it made no profit from the infringement were of greater interest. The issue was whether Cathay Import was responsible for all profits associated with the infringement or whether its responsibility could be limited to its own profits. The court discussed uncodified principles relating to contributory actions that result in losses for an infringed party. According to these principles, all contributors to a patent infringement are equally responsible for damages. The court also stated that competence should be considered. The responsibility of a company that has been involved only in the development of an infringing product, but not its sale, should be limited to those sales closely linked to the contributory acts. Otherwise, responsibility could extend to parties that received no benefit from the infringing acts.
However, the court did not find such a limitation relevant for Cathay Import. All infringing sales had occurred within a year of Cathay Import's transfer of the project to NAG. The court found that the extent of contributory responsibility was not unreasonable and Cathay Import was thus responsible for an estimated profit of Nkr3.665 million.
It is clear from the few decisions to have applied the new rules that the courts are willing to award damages based on an estimate of profits made from patent infringements. As a result, the wilful or negligent infringement of a patent in Norway on the assumption that the disadvantages are no worse than the costs of obtaining a licence has become a substantially riskier proposition. Together with a general increase in IP awareness and the continuing increase in IP rights following Norway's accession to the European Patent Convention and the London Agreement, the new rules for determining damages in infringement cases provide another reason to monitor IP rights diligently and to manage potential obstacles to a company's freedom to operate carefully and professionally.
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