5.7.4 Award of damages
For negligent or intentional infringement, the patentee or its exclusive licensee is entitled to damages. Nonexclusive licensees may only claim damages from the patent owner or exclusive licensee if such an entitlement has been assigned. The German courts take a strict approach such that anyone engaging in commercial activities is expected to be aware of all relevant patents and patent applications in their business sector and must seek professional legal advice when in doubt. This strict liability is also true for directors, who have an influence upon the infringing activity.
It is a particularity of German proceedings that, initially, the determination of the amount of damages is not part of the infringement proceedings. Rather, the courts find that the claimant is entitled to damages on the merits and leaves the details to be determined in follow-up proceedings, which rarely occur in practice because most parties – after infringement has been found and the claimant has enforced its judgment and forced the defendant to open its books – find a way to settle this dispute without the support of the courts.
The amount of damages may be calculated in three different ways. The claimant has a free choice between all three methods until a specific damage claim has been brought or a final and binding court decision has been rendered:
- The claimant may request the profits of the infringer that directly resulted from the infringement and are causally linked to it (infringer’s profits).
- The claimant is entitled to ask for compensation for its lost profits (lost profits).
- The claimant may calculate the damages on the basis of a license fee that would have been paid by a reasonable licensee (license analogy).
In most cases, damages are calculated by way of a license analogy. This method is the easiest for collecting damages because the claimant is usually in a position to establish the amount of a reasonable license fee by making reference to other license contracts with third parties or established license rates in the industry sector, which are deemed to be paid by a hypothetical licensee.
In contrast, enforcing a judgment granting damages calculated via one of the other two methods against an unwilling counterpart can be a cumbersome procedure. Using the infringer’s profits method, it may be difficult to determine the causal share of the infringement on the profits, the core question being how significant the patented technology was for the customer’s decision to buy the infringing products or pay for the use of the respective procedure. Furthermore, where the patented feature only forms part of a larger system being sold, the calculation will need to take this into due account by making a corresponding deduction. As part of the damages, side-by-side sales will need to be taken into account (e.g., where such products are not patented themselves but are sold with the patented product or subsequent to the sale of the patented product as a replacement part). The infringer may then deduct only the overheads that can clearly be attributed to the manufacture and distribution of the attacked embodiment infringing upon the patent. Thus, the true general costs of production and distribution may not be taken into account.163
Where the claimant seeks to enforce the amount of lost profits as damages, it is difficult to provide evidence for the actual damage incurred (such as a specific lost order that would have been placed with the claimant instead of the defendant). If no such specific transaction was lost, the claimant will need to argue on an abstract basis and convince the court that certain transactions and sales would have taken place in the course of its usual business.
It is important to note that exemplary or punitive damages are not available under German law of torts.