Transposition of Enforcement Directive: New Rules on Damages and Procedure

After long debates and almost two years behind schedule, the government has finally enacted amendments to the Code of Copyright and Related Rights and the Industrial Property Code to transpose the EU Enforcement of IP Rights Directive (2004/48/EC). The changes were implemented by Law 16/2008 on April 1 2008.

The goal of the directive is to provide for effective, proportionate and dissuasive measures, procedures and remedies to ensure the enforcement of IP rights, including industrial property rights. The difficulties typically encountered in enforcing such rights in Portugal have included:

• a shortage of human resources for investigating and pursuing claims - this, combined with relatively lenient penalties for infringers, led to the risk of infringement being considered relatively low;
• a lack of specific training by magistrates, who do not particularly appreciate the damage caused by infringements of industrial property rights; and
• an award system based largely on actual damages, which the plaintiff must prove in order to be compensated - this results in very low sums being recovered and acts as a disincentive to pursue claims judicially.

The new law does not address the first two issues. However, it includes provisions regarding the calculation of damages and creates procedural rules for the collection of evidence and the ordering of interim measures.

In determining damage awards, magistrates are now directed to take into account:

• the infringer's profits;
• the injured party's lost profits and damages; and
• the costs incurred in enforcing the injured party's industrial property rights.

If the court is unable to determine the exact amount of the damages suffered, it may grant equitable compensation to a minimum value equivalent to the fees that would have been due had the infringer sought authorization from the owner of the industrial property rights, plus the costs incurred in protecting those rights (eg, investigating and taking steps to end the infringement).

Despite the scope of the new provisions on awarding damages, it will remain difficult to quantify the extent of damages suffered by an injured party. Therefore, courts will likely tend to resort to determining equitable compensation. This is not a new feature in the Portuguese legal system: the Civil Code already provides for compensation to be calculated ex aequo et bono (ie, according to what is deemed fair and right) when the amount of damages cannot be established with certainty. However, the new law establishes a minimum level for such equitable compensation, which may increase the effectiveness of judicial claims and thus make industrial property rights owners more likely to file them.

As far as the procedural rules are concerned, the law adds new sections to both codes on issues such as:

• gathering evidence;
• granting interim measures; and
• ordering periodic penalty payments to force the cessation of infringing actions.

Although the rules on interim measures appear to facilitate the pursuit of claims, it was previously possible to request ad hoc interim measures, the rules for which will likely continue to apply. It is unclear from the new provisions whether the conditions to be met in order for a court to grant interim measures will be less stringent than in other cases: the petitioner will still have to establish, albeit to a reduced standard of proof, the existence of its right and the danger of deferring a decision until the issue has been considered substantively.

The real innovation in the amendments is the right of parties to ask the court to order a periodic penalty payment (ie, a fine for each day of continued infringement), which previously applied only in limited and particular cases and which may act as a powerful deterrent.

In general, the transposition of the directive seems to combine sound measures with restatements of measures previously available to industrial property rights owners, which may generate confusion, particularly with regard to the relationship between the procedural rules in the new law and the relevant parts of the Code of Civil Procedure. Moreover, the new statute fails to address other vital issues in enforcing industrial property rights, including the need to train magistrates in the specifics of industrial property rights and to make the policing and prosecution of violations more effective.

For further information on this topic please contact Guilherme Mata da Silva at Abreu Advogados by telephone (+351 21 7231800) or by fax (+ 351 21 7231899) or by email (guilherme.m.silva@abreuadvogados.com).