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Study Question

Submission date: May 5, 2017

Sarah MATHESON, Reporter GeneralJonathan P. OSHA and Anne Marie VERSCHUUR, Deputy Reporters GeneralYusuke INUI, Ari LAAKKONEN and Ralph NACK, Assistants to the Reporter GeneralQuantification of monetary relief

Responsible Reporter: Ari LAAKKONEN

National/Regional Group France

Contributors name(s)

Denis MONEGIER DU SORBIER (chairman), Gérard DOSSMANN (reporter), Alain CLERY, Alexandre JACQUET, Amandine METIER, Anne LAKITS-JOSSE , Anne LAURENT , Charles DE HAAS , Charles-Antoine JOLY , Christian NGUYEN-VAN-YEN , Clotilde TURLEQUE , Coralie DEVERNAY, Thomas CUCHE, Emmanuel GOUGE , Esther HAGEGE, Francesca GIOVANINNI , Frédéric , Gaston VEDEL, Géraldine ARBANT, Frédéric GLAIZE, Guillaume HENRY, Hélène CORRET, Jean-François MERDRIGNAC, Jules FABRE, Marianne GABRIEL, Marie FILLON, Marta MENDES MOREIRA, Pauline DEBRE, Philippe BAU, Pierre MASSOT, Romain VIRET, Sabine AGE, Sarah MADI, Thierry MOLLET-VIEVILLE, Thomas BOUVET, Virginia DE FREITAS, Yves BIZOLLON and Celine RUSTE.

e-Mail contact [email protected]

I. Current law and practice

Please answer all questions in Part I on the basis of your Group's current law.

AIPPI 2017 - Study Question - Quantification of monetary relief

1What rules and methods are applied when quantifying actual loss? In particular, please describe:a) the method used to determine the diversion of sales, i.e the part of the infringing sales that the rightholder would have made but for infringement; b) what level of profit margin is taken into account.

Loss of income and the actual loss suffered by the rightholder form part of the negative economic consequences to be taken into account when assessing damages (Articles L.331-1-3 (copyright and databases), L.521-7 (designs), L.615-7 (patents), L.622-7 (semiconductor topography rights), L.623-28 (plant varieties), L.716-14 (trade marks) and L.722-6 (geographical indications) of the French Intellectual Property Code (hereinafter ‘CPI’)).

Loss of income and actual loss are analysed below.

Loss of income

1What rules and methods are applied when quantifying actual loss? In particular, please describe:a) the method used to determine the diversion of sales, i.e the part of the infringing sales that the rightholder would have made but for infringement; b) what level of profit margin is taken into account.

1

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Loss of income is calculated in two steps:

First, with respect to the infringing turnover, namely the volume of infringement over the period in question (see a) below);

Second, by determining the share of the sales that the intellectual property rightholder, or the licensee, would have made if the infringement had not happened, at a price it would have set in the absence of infringement.

If the rightholder, or the licensee, exploits the intellectual property right, it is necessary to:

show that it would have achieved additional sales (the method of calculation is the diversion rate method – see b) below);

apply a margin rate to the number of sales lost (see c) below).

As regards determining the infringing turnover, the case law often takes into account the quantities of products imported, even if said products have not all been sold. Conversely, some courts deem that the quantities ordered should not be taken into consideration since the rightholder, or the licensee, would not necessarily have succeeded in selling them all.

Regarding calculation of the diversion rate, it is necessary to determine whether or not the rightholder, or the licensee, would have been able, in France, and without additional investment, to achieve the sales made by the infringer.

In this regard, the case law takes the following into account, although not systematically:

the industrial production capacity and the marketing capacity of the rightholder (taking into account the production capacity of the trade mark holder; the whole of the infringing turnover cannot be taken into account since the trade mark holder ‘ only distributes the products claimed in two stores and on its website ’);

the market share of the rightholder on the relevant market, for which:

the diversion rate is very high, as much as 100%, when the market is narrow or when the rightholder holds practically a monopoly;

the diversion rate is low if there are third parties selling competing products on the market;

lack, if any, of one or more substitutable products, regarding which the diversion rate may be 100% when:

the decisive advantage conferred by the invention makes it impossible for third parties to lawfully manufacture such products;

no competitor offers, where a patent is concerned, equivalent and substitutable technology with respect to the protected invention;

the rate for shared customers, for which the diversion rate is 100%, and other customers, for which the diversion rate will be lower;

the specific features of the market, including, for example, customer loyalty to a manufacturer: in this case, the diversion rate will be lower if it is shown that the infringer’s customers would not have diverted to the rightholder;

the sale price of the products concerned may discourage the diversion of sales to the rightholder’s products;

the products in question do not belong to the same market segment, the products in question do not exactly meet the same customer needs;

the particular case of contracts won by tender where the rightholder cannot benefit from the diversion of a contract for which it has not tendered;

the attractiveness and the added value of the intellectual property right in relation to all the elements constituting the product sold:

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the diversion rate will be low if the subject matter of the intellectual property right is not a decisive factor in the purchase made;

the diversion rate will be high if said subject matter contributes to the reliability of the device and constitutes the decisive factor in the choice of the product or makes it possible to obtain an important advantage such as a gain in productivity.

While the method applicable to determining the diversion rate for infringement of patents, copyright, designs and trade marks is in principle similar, it is important to note that in the area of copyright, designs and trade marks, the French courts do not tend to specify the method used to calculate loss of income.

After having determined the number of sales actually lost by the intellectual property rightholder, or the licensee, it is important to determine the margin rate to be applied to those sales.

This is the margin realized on the sale of genuine products (in the case of patents, some decisions emphasized that it was necessary to refer not to the margin of the infringer, but rather to that of the patentee).

It therefore involves calculating, for each of the years of the period in question, the profit margin that the intellectual property rightholder, or the licensee, could have achieved on the sale of a genuine product.

With regard to patents, the French courts have not been definite as to the margin to be taken into account when calculating loss of income: gross margin or net margin:

gross margin, equal to the turnover less direct and variable costs (the amount of which varies according to the volume of business, proportionally or otherwise; for example, for a retailer, this is the sale price of a product sold as is, less the purchase price thereof; said gross margin may vary owing to a change in the sale price, rebates, or supplier conditions);

net margin, which is calculated on the basis of the gross margin minus the direct, but not necessarily variable, costs (fixed costs, i.e. costs for which the amount remains the same regardless of the volume of business): staying with the above example, the salaries of salespersons or technical personnel responsible for processing the goods.

Some decisions have referred to the net margin, or net profit, without always giving a precise definition: in the case of patents, the net margin is sometimes calculated on the basis of the cost price plus the share of general costs, or defined as the sum of the cost price and all the proportional costs related to the manufacture and marketing of the products.

It is also worth mentioning a recent decision of Paris Court of Appeal referring, in the area of copyright and designs, to the ‘ net margin’, pointing out that this ‘is calculated based on the turnover less the costs, including design costs and taxes’.

Other decisions have expressly stated that where the patentee demonstrates that it has the capacity to manufacture and sell the infringing goods without increasing its overheads and fixed costs (in particular without having to hire staff or invest in equipment), its lost profit due to lost sales must be calculated on the basis of its gross margin and not its net margin. Similarly, the case law often takes into account the gross margin for trade marks and designs.

It seems that reference to the gross margin is now the rule, whether this be the margin on variable costs or the margin on direct costs.

In practice, margin analysis is undertaken on a case-by-case basis.

The following may thus be taken into account when determining the margin lost:

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any changes in sale prices as a result of the infringement;

the percentage represented by sales of the infringing product (and its accessories), in relation to the rightholder's total turnover;

the distribution of variable/fixed and/or direct/indirect costs;

the phase in the industrial or commercial development of the infringing product, the beginning of a phase being more expensive than the end (in general);

the intensity of competition due to the infringement, which will result in more or less higher levels of costs (in particular marketing).

In addition, the springboard effect, consisting of the competitive advantage illicitly acquired by the infringer by entering the market before the expiry of a patent, is mentioned in the context of question No 4 d) below.

Actual loss

As well as taking into account the loss of income for the rightholder, or the licensee, the French courts also assess the actual loss suffered by the latter in consideration of the following factors:

price erosion, which can lead to a loss of the chance to market the product on satisfactory terms;

detrimental effect on investments made by the patentee in research and development and advertising;

loss of chance;

the impossibility of granting licences due to the commercial problems caused by the infringement or the termination of a licence agreement owing to the infringement?.

Sometimes the case law takes into account the actual loss suffered in respect of moral prejudice. Thus, the infringement of the monopoly may be penalized as compensation for moral prejudice. Conversely, many decisions consider that the infringement amounts to a patrimonial loss.

Note also that ‘the impediment to customer loyalty ’, which deprived the rightholder of the ‘effectiveness’ of its investments, could be taken into account in copyright and design infringement, but in respect of moral prejudice, whereas this type of prejudice appeared to constitute a negative economic consequence.

In addition, compensation for loss of income may take the form of the payment of a compensatory royalty:

when the intellectual property right is not exploited or is only exploited in the form of a licence;

for the part of the infringing turnover not taken into account by the diversion rate.

In this case, the method of calculation is that referred to in question 2 below.

Lastly, it can be observed that some decisions refuse to take account of the negative consequences of infringement, if the profit has already been paid over to the injured party and the rightholder does not show that there has been a decrease in its sales.

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2What rules and methods are applied when quantifying a reasonable royalty? In particular, please describe:a) the royalty base;b) how relevant comparables among licence agreements are defined;c) how a reasonable royalty is quantified in the absence of relevant comparables;d) the nature of the royalty, e.g. lump-sum, percentage of revenues or profit, a mix?

Note that French law does not recognize the concept of a ‘ reasonable’ royalty.

However, the CPI expressly authorizes the use of a calculation based on royalties, referred to as ‘ compensatory’, to set the amount of damages due to an injured party in the event of infringement of an intellectual property right:

copyright and databases: Article L.331-1-3 CPI

designs: Article L.521-7 CPI

patents: Article L.615-7 CPI

semiconductor topography rights: Article L.622-7 CPI

trade marks: Article L.716-14 CPI

All of the above texts, resulting from the transposition of Directive No 2004/48 of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights by French law No 2007-1544 of 29 October 2007, as amended by law 2014-315 of 11 March 2014, introduced the compensatory royalty into French law and provide, in identical terms, that:

‘When setting the damages, the court shall consider separately:

1° The negative economic consequences of the infringement, including the loss of income and the actual loss suffered by the injured party;

2° The moral prejudice caused to the latter; and

3° The profit made by the infringer, including the savings on intellectual, material and promotional investments which it has gained as a result of the infringement.

However, the court may,as an alternative and at the request of the injured party , award alump sum as damages.This amount shall be greater than the amount of the royalties or fees which would have been due if the infringer had requested authorization to use the right it infringed . This sum shall not be exclusive of compensation for the moral prejudice caused to the injured party.’

In the light of the abovementioned texts, recourse to the alternative provided for in paragraph 2 may be proposed only by the injured party, who must submit evidence in support of its claim for compensation.

It should also be noted that these texts set a minimum threshold for the amount of damages to be awarded to the injured party. The court ruling on the merits is therefore free to increase the royalty to take account of the prejudice actually suffered by the injured party.

Thus, by a decision of 6 December 2016, the Court of Cassation ruled that no criterion was excluded in order to assess the negative economic consequences of infringement referred to in paragraph 1 of the aforementioned articles, since the court could take into account the royalty lost by the injured party to compensate the latter for its actual prejudice.

the royalty base;

2What rules and methods are applied when quantifying a reasonable royalty? In particular, please describe:a) the royalty base;b) how relevant comparables among licence agreements are defined;c) how a reasonable royalty is quantified in the absence of relevant comparables;d) the nature of the royalty, e.g. lump-sum, percentage of revenues or profit, a mix?

2

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It is for the injured party to determine, with supporting evidence, the basis to be taken into consideration for the calculation of the royalty.

This basis consists of the amount of the turnover, excluding tax, achieved by the infringer by virtue of the volume of infringing products actually sold. The turnover achieved by a rightholder exploiting the right or the turnover achieved by a licensee of a rightholder who does not exploit the right is not taken into account.

The amount to be taken into consideration is therefore the turnover generated by the product infringing the intellectual property right.

Where the product reproducing the intellectual property right constitutes a part of a product: (i) the court seeks to ascertain whether said part is merely an accessory to a whole or (ii) whether it constitutes a decisive factor in the mind of the consumer for the purchase of the product.

Where the intellectual property right does not apply to the whole of the infringing product but only relates to the accessory of a whole, only the infringing part will be taken into account as the basis for the calculation of the material prejudice, for example by reducing the royalty rate.

Where the intellectual property right does not apply to the whole of the infringing product but is a decisive factor in the mind of the consumer for the purchase of the product, the theory of commercial whole applies. The court thus takes into account the turnover achieved on the whole product, sometimes including accessories and spare parts therefor.

Sometimes the courts do not calculate the royalty on the total turnover resulting from the infringing turnover, but seek to ascertain what portion of the sales would actually have been achieved by the injured party.

how relevant comparables among license agreements are defined;

The main factors for comparison taken into consideration by the courts are as follows:

the rate applied by the rightholder to its licensees, whether the latter are its subsidiaries or third party licensees

this reasoning also applies when the injured party is an exclusive licensee, taking into account the rate applied to its sublicensees, if it has the right to sublicense. The reasoning also applies to non-exclusive licensees who have a right to sublicense, it being specified that compensation for prejudice does not come under intellectual property law but civil liability in ordinary law (the new Article 1240 of the French Civil Code).

the rate accepted by the infringer in previous contractual negotiations with the rightholder.

licensing rates generally applied in the industry in question. The following royalty rates were taken into account as a basis for the calculation:

rate of 5% in the metallurgical sector, increased to 7.5% to take account of the compensatory aspect;

rate of 8% in the packaging sector;

rate of 10% in the injection systems sector, increased to 20% to take account of the compensatory aspect;

rate of 3% in the food sector, increased to 6% to take account of the compensatory aspect;

rate of 7.8% in the semiconductor sector, increased to 10% to take account of the compensatory aspect;

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rate of 8% rate for watch designs, increased to 16% to take account of the compensatory aspect.

For copyright, the courts may refer to the prices set by rightholders themselves or by collective management entities.

how a reasonable royalty is quantified in the absence of relevant comparables;

In the absence of information that can provide a basis for comparison, the courts undertake a sovereign assessment of the evidence submitted by the injured party in support of its claim for compensation and may thus set a hypothetical rate. In setting this rate, they may take into account the custom whereby the licensor takes approximately 25% ‘ of the profit expected by the licensee ’.

In the event that the injured party does not provide evidence to calculate the compensatory royalty for material prejudice, the courts may have to refuse any compensation for material prejudice.

the nature of the royalty, e.g. lump-sum, percentage of revenues or profit, a mix?

The royalty is a compensatory royalty. It may be a percentage, i.e. a rate, or a lump sum. In the case of a licensee, whether exclusive or otherwise, the damage will be assessed taking into account any right the licensee may have to sublicense.

3What rules and methods are applied when quantifying the infringer’s profits, as part of quantifying damages? In particular, please describe:a) the method to determine the profits resulting from the infringement, i.e. resulting from the use of the IP right;b) what level of profit margin of the infringer should be taken into consideration.

The infringer’s profits were introduced into the CPI for determining the amount of damages by the law of 29 October 2007, as amended (see 2 above), in the following terms:

‘When setting the damages, the court shall consider the negative economic consequences, including the loss of income, suffered by the injured party, the profit made by the infringer ….’

The law of 11 March 2014, strengthening the fight against infringement, states that:

‘When setting the damages, the court shall consider separately:

1. The negative economic consequences of the infringement, including the loss of income and the actual loss suffered by the injured party;

2. The moral prejudice caused to the latter; and

3. The profit made by the infringer, including the savings on intellectual, material and promotional investments which it has gained as a result of the infringement.’

It is important to note that these provisions benefit both the rightholder and the exclusive licensee where it is admissible to bring infringement proceedings and where the licence is entered in the national register. On the other hand, the doctrine seems to consider that an unregistered licensee who intervenes in the proceedings may obtain compensation for its own loss solely on the basis of the rules of civil liability under ordinary law (Articles L.513-3, L.613-9 and L.714-7 CPI).

3What rules and methods are applied when quantifying the infringer’s profits, as part of quantifying damages? In particular, please describe:a) the method to determine the profits resulting from the infringement, i.e. resulting from the use of the IP right;b) what level of profit margin of the infringer should be taken into consideration.

3

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Taking into account the infringer’s profit to assess the damages reflects the intention of the legislator to provide a deterrent to infringement. It makes it possible to take into consideration the profit made by the infringer, all or part of which may be awarded to the victim of the infringement. However, the text does not appear to grant victims an autonomous right to confiscate the profit made by the infringer.

In accordance with these new provisions, the courts have awarded damages corresponding to the amount of the profit made by the infringer when said profit was greater than the – proven – economic consequences suffered by the injured party.

Likewise, the prejudice suffered by the rightholder has in the past been limited in the absence of any profit made by the infringer, in the case of low turnover, or in the event of a reduction in the profit made by the infringer compared with estimates made owing to problems arising from the use of an infringed product.

The link between the various methods of setting damages, in particular the link between the prejudice suffered and the profit made by the infringer, is not very clear.

The addition of the term ‘separately’ by the law of 11 March 2014 obliges the court to examine all the points set out. This addition thus seems to have put an end to the discrepancies found between judicial authorities regarding any accumulation, in the strict sense, between the negative economic consequences suffered by the victim, the moral prejudice and the profit made by the infringer when setting the damages payable. While some courts accepted the possibility of accumulation, others excluded it based on the principle of full compensation and the rejection by the legislator of the award of punitive damages.

Many decisions have awarded damages for commercial loss suffered solely on the basis of the profit made by the infringer in whole or in part, including for the benefit of the exclusive licensee and in situations in which the patentee did not itself exploit the patent directly.

However, in a judgment of 9 December 2016, Paris Court of Appeal overturned a judgment awarding damages to a non-exploiting rightholder on the sole basis of the profit made by the infringer, clarifying as follows: ‘ that consideration [of the profit] is confined to the part that may exist, once the losses relating to exploitation have been assessed, in order to arrive at full compensation for the loss ’. Thus, for the Court of Appeal, the fact that the profit made by the infringer is taken into account does not exonerate the victim from justifying its actual economic loss. However, in this case the Court appears to have been mindful of the particular circumstances of the case and of the risk that taking into account only the profit made by the infringer would encourage patent trolls.

This position of the Court of Appeal reinforces the interpretation given by some courts that the law does not establish the confiscation of the infringer’s profit for the benefit of the victim of the infringement as an independent method of determining damages, as an alternative to determination of the negative economic consequences and the compensatory royalty.

Thus, the infringer’s profit constitutes an additional tool available to the courts when it comes to assessing and weighing up the loss suffered by the rightholder, or the licensee, as a cursor that may point to an increase or a decrease in the damages.

However, the Court of Cassation has not yet ruled on the issues of:

whether or not the principle that the damages awarded cannot exceed full compensation for the loss should be maintained;

the link between the taking into account of the infringer’s profit and the traditional assessment of the loss.

Lastly, the Court of Cassation has had occasion to mention the principle of the sovereign assessment by the courts to determine the loss suffered as long as, in a reasoned decision, they mention the various aspects of the loss which they have taken into account.

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In particular, please describe :

the method to determine the profits resulting from the infringement, i.e. resulting from the use of the IP right;

This question concerns the difficulty in determining the portion of the profit made by the infringer which is attributable to infringement: for example, in the case of patents, it is not the whole profit that must be considered, but the portion of the profit corresponding to the advantage gained by incorporating the invention into the product deemed to be infringing.

When a patented product is incorporated into a complex product, the courts should not focus on the profit directly related to the exploitation, in particular the sale, of said product, but should apply the concept of ‘ indivisible commercial whole ’ so as to also assess the profit made by the infringer; the courts must determine the added value that the object reproducing the features of the patent brings to the whole.

The theory of the commercial whole applies to the determination of the profit gained overall from the infringement, even if the rightholder does not exploit its right.

Moreover, Paris Court of Appeal dismissed an approach based on the profit made by the infringer after finding that the sign infringed had not been affixed to the products sold but to commercial media on which the sign was associated with the infringer’s own trade mark, which was better known; thus, the court rejected any link between the profit made by the infringer and the sign infringed.

what level of profit margin of the infringer should be taken into consideration.

Paris Court of Appeal has in the past defined the profit made by the infringer as ‘ the difference between the turnover and the costs and expenses borne by the infringer ’. It stated, with regard to the savings on investments referred to by the law, that said savings ‘ tend to reduce those costs and are therefore included in the amount of profit made since they are a source of gain for the infringer, who has wrongly avoided investing’.

The level of profit taken into consideration is very close to the level of the rightholder’s margin used to determine the latter’s loss of income (see question 1 i) c) above).

The courts determine this level of margin based on the evidence provided by the parties, and the decisions make little reference to the breakdown of the costs taken into account.

Nevertheless, most decisions relating to the profit made by the infringer take account of the gross margin achieved by the infringer or a part of the difference between the purchase price and the sale price of the product.

The operating result is also a point of reference, as is the margin on variable costs.

The price differential between a product covered by the intellectual property right and a product not covered by that right was taken into account, in the case of a trade mark, in respect of the profit attributable to the infringement.

In the area of copyright, the whole turnover achieved by the infringer was awarded, as were all the royalties received as a result of exploitation of the photographs in dispute on the basis of Article L.331-1-3 CPI.

The concept of net profit is not reliable because it is too favourable to the infringer. However, it cannot be ruled out in situations in which the

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infringing activity represents a very significant part of the infringer’s total activity, justifying the taking into account of fixed costs or even indirect costs in order to assess the level of the infringer’s profit which is attributable to the infringement, in particular where sales from the infringing activity are significant in relation to the infringer’s total turnover.

4.aWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty in relation to convoyed goods.

To answer this question, the term ‘convoyed goods’ is defined as referring to unprotected products marketed with the protected product, for example accessories, spare parts, or products or services offered in direct connection with the product.

The unprotected product/service may relate directly to the protected product/service because:

it has features that require the customer to purchase it at the same time as the protected product;

it is an extra in the same range as the protected product/service whereby the existence of the protected product/service is indispensable;

it is part of a commercial ‘package’ with the protected product/service whereby the existence of the protected product/service is essential;

it is part of a sales promotion with the protected product/service whereby the existence of the protected product/service is essential.

There is no established rule under French law for the calculation of the loss of income and actual loss in this case.

The reasoning followed by the courts consists in interpreting what the rightholder’s economic situation would have been if the infringement had not taken place.

Paris Court of Appeal states that ‘ the loss of income corresponds to the profit [that the rightholder] would have made from the acts of exploitation carried out by these different infringers if [the rightholder it]self had carried them out ’.

In this case, the courts use the theory of the ‘commercial whole’ to determine what the infringer has been able to market as a result of the infringement and what the rightholder, or the licensee, has lost as a result of the infringement.

In the case of, for example, an infringing Internet access service in the hotel sector, this service was found to be distinct and separable from and not a decisive factor in the rental of the hotel room.

Similarly, account must be taken of the fact that sometimes ‘ accessory products are not necessarily purchased, during the lifetime of the appliance, from the manufacturer ’ and that the purchaser of an infringing appliance may obtain spare parts from the rightholder, or the licensee.

In their assessment, the courts consider the commercial aspect of the relationship between the patented part and the non-patented part. The fact that the protected product is physically separable from the whole does not undermine the ‘ commercial whole’.

However, these linked sales can only be taken into account if the rightholder itself would have been able to achieve them.

4.aWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty in relation to convoyed goods.

4.a

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4.bWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty where the infringing product forms part of a larger assembly.

This is an assessment of the rightholder’s loss of income and actual loss, or the royalty to be awarded to it when the infringing product forms part of a larger assembly.

Under French law, there is no mandatory rule of assessment in this case.

As in the previous question, the case law applies the ‘commercial whole’ theory to the various elements of a product that are sold together.

The courts’ method of assessment is the same as for the previous question, namely, to determine what the economic situation would have been if the infringement had not taken place and what sales would actually have been lost.

Where the protected product is simply part of a more general assembly, the assessment of the loss (loss of income and actual loss or royalty) is generally calculated on the basis of the assembly and then weighted in light of the facts of the case and the role of the intellectual property right in the marketing of the product (e.g. weighting where the copyrighted creation is a pattern but the infringing product is a bag made from a fabric which reproduces the protected pattern).

Such weighting is rarely the result of a mathematical calculation, but may take into consideration various criteria such as the interchangeability of the protected product or whether or not it is a decisive factor in the act of purchase.

For example, in one case, Paris Court of Appeal applied a 20% diversion rate in view of the particular features of the spare parts market in top of the line chromatography.

In another case, Paris District Court had to determine whether the infringing turnover included domestic appliances without the steam cooking cover protected by the patent.

4.bWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty where the infringing product forms part of a larger assembly.

4.b

4.cWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty where the IP rights found infringed are routinely licensed together with other IP rights as a portfolio?

We are not aware of any French decisions on this subject. Therefore, there are no specific rules or methods for assessing loss of income and actual loss, or a compensatory royalty, in such a case.

However, a reasoning similar to that of the indivisible commercial whole (see answer to question 4 (a) above) could be applied to the case in which the infringed intellectual property right is usually licensed as part of a portfolio of rights, and not on its own.

It is also important to note that the practice of 'tying', or making the granting of a licence over an intellectual property right conditional upon the taking of a licence over one or more other intellectual property rights, may, under certain circumstances, be penalized under competition law (EU General Court, 17 September 2007, Microsoft v Commission, Case T-201/04), in particular in the case of essential patents (see, for example, the investigation undertaken by the Federal Trade Commission (FTC) against Qualcomm regarding licence offers tying essential patents to non-essential patents).

4.cWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty where the IP rights found infringed are routinely licensed together with other IP rights as a portfolio?

4.c

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4.dWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty when the damage suffered by the rightholder is related to competing goods which do not implement the infringed IP rights?

The question is how to assess the loss suffered by the intellectual property rightholder, or the licensee, when its product, which competes with the infringing product, does not implement the infringed intellectual property rights but other intellectual property rights, or no intellectual property rights.

The intellectual property rightholder, or the licensee, should be able to cite the ‘ negative economic consequences ’ resulting from infringement in similar cases and demonstrate that, in the absence of infringement, in view of the technology and the market in question, it would have been able to sell its product.

In accordance with the ordinary law of liability, however, this means demonstrating a causal link between the acts of infringement and the negative economic consequences relating to the rightholder’s equivalent or competing product.

The mere fact that equivalent or competing products were open to competition because they were not covered by the infringed intellectual property right or any other right should not, as a matter of principle, rule out any causal link.

Thus, for example, a causal link could be acknowledged to exist, in the case of patents or software, if the following were demonstrated:

a decrease in sales of the equivalent or competing product,

correlated with sales of infringing products; and or;

that in the absence of infringement, some or all of the infringer's customer base would have turned to the rightholder’s equivalent or competing product; and/or

that the infringer has gained a competitive advantage in the relevant market (springboard effect); and/or

that the sale of the infringing products has led to price erosion in the relevant market.

In principle, there is nothing to prevent the negative economic consequences, the profit made by the infringer and the lost royalties being taken into account.

4.dWhat rules and methods are applied, both when quantifying actual loss and quantifying a reasonable royalty when the damage suffered by the rightholder is related to competing goods which do not implement the infringed IP rights?

4.d

5Are any of the rules and methods addressed in your answers to 1) to 4) above different when considering the damage suffered by the rightholder or by its licensee?

This has been dealt with in each of the above questions.

5Are any of the rules and methods addressed in your answers to 1) to 4) above different when considering the damage suffered by the rightholder or by its licensee?

5

6.aWhat kinds and types of evidence are accepted for proving the quantum of actual loss.

In France, the onus is on the plaintiff to prove its loss. There is no restriction on the evidence. Any type of evidence likely to convince the courts is therefore accepted.

6.aWhat kinds and types of evidence are accepted for proving the quantum of actual loss.

6.a

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As regards evidence of the quantum of loss of income and actual loss, the plaintiff must prove the number of infringing products sold by the infringer which it would have sold in the latter’s place if the infringement had not taken place, and its margin.

There are therefore two types of situation:

a situation in which the plaintiff quantifies and seeks compensation for its loss at the same time as the infringement is found;

a situation in which the assessment of the loss is the subject of an expert appraisal and a separate procedure before the court.

In the first case, the plaintiff may submit any publicly available evidence as well as any evidence it has acquired as part of the infringement seizure or a request for disclosure (see next question).

These typically include purchase orders, invoices and other accounting records seized or disclosed.

The courts assess the evidence at their disposal.

In the second case, in addition to the documents obtained through an infringement seizure or the exercise of the right to information, the plaintiff has documents which the court has ordered the defendant to disclose in the interlocutory decision. These are usually statements from a chartered accountant setting out the number of products sold, the turnover and the infringer’s margin.

Examples – patents:

For example, the court found that the infringer had fulfilled its obligations to disclose information relating to the sale and importation of goods by providing a table drawn up by its chartered accountant and showing, for each model of infringing product and per year:

the number of imported products

the purchase price

the quantities sold

the sale price

the turnover thus achieved

the margin achieved

the quantities of products burned in the accidental fire which destroyed the infringer’s warehouse during the period of infringement.

In another case after holding that the defendant infringed the LUCAS patent, the court ordered the following documents to be disclosed in order to determine the extent of the loss suffered:

the quantities of infringing products produced, marketed, delivered, ordered and stored up to the date of the judgment;

the turnover generated by the sale of these products;

the profit made on the sales of these products and the margin on variable costs, with details of the costs taken into consideration or disregarded for the calculation of the latter being specified;

the names and addresses of the recipients of said products.

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The court added that these documents or information had to be certified by an approved auditor or chartered accountant.

Examples – trade marks, regarding the determination of actual loss:

documents showing price reductions

letters of refusal to contract from potential licensees or purchasers due to the presence of the infringer on the market

letters of complaint from legitimate licensees of the rightholder

investments not recovered as a result of the infringement: marketing studies, prior art searches, costs involved in obtaining the right, product referencing fees, infringement detection fees paid to monitoring agencies, advertising budget over the last five years, increase in this budget to offset the effects of the infringement on sales.

Examples – trade marks, regarding the determination of loss of income:

proof of the number and unit price of genuine items and the resulting infringing items,

statements from auditors comparing turnover before and after the infringement,

claims or cancellation of orders by customers or resellers.

Image impairment can also be measured by qualitative and quantitative marketing studies to establish the reasonable certainty of the loss.

Examples – designs:

statement from the rightholder’s chartered accountant as evidence of the number of copies of the model sold and the gross margin excluding tax on these sales;

statement from the auditor as evidence of the number of parts sold and the corresponding turnover, share of royalties paid by the licensee infringer to the licensor infringer;

table summarizing advertising expenditure on the infringed model, quantities sold, turnover achieved, expenditure on trend forecasting, infringement verification and seizure reports as evidence of the duration of the infringement and the number of products in stock;

statement from the infringer’s internal audit and control manager regarding the sales figures;

statement from the infringer’s auditor on the number of infringing products sold and the turnover generated by these sales

Examples – copyright:

sales invoices, a summary table prepared by a chartered accountant presenting the turnover and the net result over the period of infringement;

a quote for the manufacture and assembly of the stand in dispute and a statement from a chartered accountant as evidence of the application of a margin rate;

information provided at the time of seizure on the number of copies sold, statement from the auditor, statement from the managing director (which must take the form laid down by Article 202 of the French Code of Civil Procedure), report verifying the destruction of the stock of infringing goods.

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It should be mentioned that the courts are increasingly encouraging the use of private expertise, particularly in the field of patents.

6.bWhat kinds and types of evidence are accepted for proving the quantum of reasonable royalties.

As regards the compensatory royalty to which the rightholder should be entitled, it is possible to prove this royalty rate by reference to:

Examples – patents:

a settlement reached between the patentee and another infringer

licence agreements concluded by said company in the past with third parties for the same type of product and in the same territory

licence agreements concluded in the same field of activity

Examples – trade mark:

the royalty rate provided for in a licence agreement relating to the infringed trade mark

Examples – copyright:

hits on the website on which the unauthorized reproductions appeared, in order to establish a fixed remuneration per reproduction;

French Professional Photographers’ Union guidance rates.

In practice, all these elements are important for determining the loss but are not, in most cases, sufficient to establish a direct link between the element itself and the loss strictly related to that element:

for example, a statement as evidence of a fall in prices does not explain the many reasons for which prices have fallen, and in particular the fall strictly related to the infringement;

for example, price erosion of an infringed product is not necessarily linked to the marketing of an infringing product but may also be linked to the marketing of other products which are a priori not infringing or not identified as such, but have features very similar to those of the infringed product, resulting in identical or almost identical use.

6.bWhat kinds and types of evidence are accepted for proving the quantum of reasonable royalties.

6.b

6For example, is expert accounting evidence on past licensing practices accepted?

It should be mentioned that the courts are increasingly encouraging the use of private expertise, particularly in the field of patents.

6For example, is expert accounting evidence on past licensing practices accepted?

6

7What mechanisms (e.g. discovery) are available to the rightholder to assist with proving the quantum of actual loss or reasonable royalties?

7What mechanisms (e.g. discovery) are available to the rightholder to assist with proving the quantum of actual loss or reasonable royalties?

7

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The first mechanism for obtaining proof is the infringement seizure.

Articles L.332-1 (copyright), L.521-4 (designs), L.615-5 (patents) and L.716-7 (trade marks) CPI provide that the rightholder may seize any document relating to the allegedly infringing works, subject matter, products or methods.

Thus, as a first step, the plaintiff may seize and have at its disposal the accounting data relating to the number of infringing products and the profit achieved by the defendant, obtained at the time of seizure of the infringing goods. These documents will enable it to determine with a degree of accuracy the infringing turnover and the profit made by the infringer. In the field of copyright, the Court of Cassation even stated that it was possible to carry out an infringement seizure simply to obtain accounting documents. This solution has since been enshrined in the law of 11 March 2014.

The second mechanism available to the rightholder is the right of information.

In the course of the proceedings, the plaintiff may submit a request for further information to the pre-trial judge. Articles L.521-5 (designs), L.615-5-2 (patents), L.716-7-1 (trade marks) CPI provide for a right of information, initially intended to enable the plaintiff to find out the origin or distribution networks of infringing goods or services, but also used to ascertain the extent of the loss.

ii. Another specific mode of proof was instituted by the law of 11 March 2014 and is defined in Articles L.332-1-1 (copyright), L.521-4-1 (designs), L.615-5-1-1 (patents), L.623-27-1-1 (plant varieties) and L.716-7-1-A (trade marks) CPI. According to these texts, ‘the court may, on its own initiative or at the request of any person having standing to bring infringement proceedings, order all legally admissible investigative measures, even if an infringement seizure has not been ordered beforehand under the terms of the article [providing for infringement seizure for each intellectual property right]. ’

It appears that this mode of proof has been used very little to date.

The final mechanism available to the rightholder is the court decision.

In the ruling on infringement, the court may order the infringer to disclose any information relating to the importation and sale of infringing goods, possibly subject to a penalty.

The court may also provide for the appointment of an expert to collect all the elements necessary for the determination of loss and to draw up a report in an adversarial manner.

8How, if at all, does the quantification of damages for indirect/contributory infringement differ from the quantification of damages for direct infringement?

Under French law, there is no difference in the quantification of damages between direct infringement, on the one hand, and indirect or contributory infringement, on the other.

If it is only an indirect infringer who contributed to the infringement who is prosecuted, the method for quantification of damages will be identical to that which would have been used if only a direct infringer had been prosecuted. When both a direct infringer and an indirect infringer are prosecuted, the same method is applied and they may be found guilty in solidum.

8How, if at all, does the quantification of damages for indirect/contributory infringement differ from the quantification of damages for direct infringement?

8

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On the other hand, under French law, the law (Article L.613-4 CPI for patents) and the case law (copyright, trade mark) establish the principle that in order to be found guilty, an indirect infringer must have acted knowingly.

9Are forward-looking damages (e.g. damage in relation to an irreversible loss of market share) available

c) or not at all?

Please explain your answer

NB: When considering this question, ‘ forward-looking damages ’ have been understood as meaning future damages.

Under French law, there is no relationship between injunctive and compensatory measures. They are independent of one another and may be imposed separately or cumulatively.

In civil cases, the courts are bound by the claims of the parties, so that in order to impose an injunction and/or award damages, this must have been requested by the plaintiff in the infringement proceedings.

The court will impose an injunction if this has been requested and if it finds that an act of infringement has occurred.

The court will likewise order the infringer to pay the damages claimed if it finds the existence of a prejudice, without restriction as to the quantum thereof.

Concerning compensation for future prejudice, under French liability law, the prejudice must fulfil three criteria so as to be reparable: it must be direct, current and certain.

However, as long as the prejudice is direct and certain, it is considered by the case law to be reparable, even if it is only a future prejudice. It must be distinguished from merely hypothetical prejudice, which is not reparable.

A future prejudice may thus be compensated, as long as at the time of judgment, the certainty of this future prejudice is demonstrated.

In intellectual property law, prejudice resulting from acts of infringement may be the result of both loss of income and the depreciation of the intellectual property right.

Depreciation/banalization of intellectual property rights (patents, trade marks, designs, copyright) deprives the rightholder of some of the attractive power of its products and services and, consequently, market share.

Since injunctions subject to penalty are normally ordered against the infringer when the infringement is found, the future loss of income of the plaintiff to the infringement proceedings is generally confined to the prejudice linked to the time it takes to recover its market share once the infringement ceases.

9Are forward-looking damages (e.g. damage in relation to an irreversible loss of market share) available

9

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10Is the bad faith of the infringer taken into account in the assessment of the damage?

No

Please Explain

Bad faith is not a criterion taken into account in the strict sense by the courts when assessing the amount of damages.

It does not appear in French texts on the assessment of prejudice.

However, in practice, some courts appear to take account of the bad faith of the infringer, penalizing the latter more severely, but without explicitly saying so.

It appears that, as drafted, the texts allow for the infringer’s bad faith to be taken into account.

To be specific, the extent to which:

‘savings on intellectual, material and promotional investments (...) resulting from the infringement’

are taken into consideration will necessarily be greater in the case where an infringer had knowledge of the earlier product and deliberately sought to copy it in order to be able to compete with it quickly, than in the case where it did its own research without being aware of the competing product.

1. If so how, is bad faith defined?

As it is not a criterion of assessment as such, bad faith is not clearly defined by the courts.

There is also no definition of bad faith in Directive 2004/48/EC, or in the CPI.

1. Is it possible to infringe IP rights in good faith?

Good faith is irrelevant when it comes to assessing infringement. This is a principle of conventional and ancient French law.

There are, however, three exceptions to this rule, in which it must be established that the alleged infringer was aware of the infringement of the rightholder’s, or the licensee’s, right. Thus:

in patent law, for non-manufacturers/importers (Article L.615-1, third paragraph, CPI);

in patent law, for third parties providing the means of implementing the invention (Article L613-4 CPI);

in cases where the patent application and/or the application for registration of a trade mark or design has not yet been published (Articles L.615-4, L.716-2 and L.521-1 CPI).

Apart from these exceptions, it is possible to be found guilty of infringement under civil law, even if the infringement was in good faith.

10Is the bad faith of the infringer taken into account in the assessment of the damage?

10

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II. Policy considerations and proposals for improvements of your Group's current law


In practice, it appears that there are cases in which an infringer may legitimately believe that it is not infringing the rights of third parties:

either simply because it is not aware of the right (e.g. European Union trade marks not exploited in France);

or if it is aware of the right but believes that it is not committing infringement under the legislation in force (no likelihood of confusion between the signs at issue; the two designs in question do not have the same overall visual impression for an informed observer; its product does not infringe any of the claims of an earlier patent).

11How do courts take into account the damage suffered between the date of the infringing acts and the date of the award of damages?

In France, it is a matter of principle that the assessment of prejudice should be carried out on the day of judgment.

Thus, the damages required to compensate for the prejudice must be calculated on the value of the loss on the date of the judgment which establishes the claim for compensation, meaning it is necessary to update the amount of the compensation in order to take account in particular of:

compensatory interest arising from any erosion of financial resources over the period in question so that the amount awarded corresponds to compensation which is appropriate on the day on which it is awarded. Several indices may be used as a reference for ensuring claims are up to date, including the legal rate, the INSEE index or any other relevant rate depending on the field of activity concerned. Other financial damages may be claimed as long as the victim can demonstrate their relevance;

the occurrence of further acts of infringement during the period of the proceedings.

However, it is necessary for the plaintiff to request that the claim be updated, since the court does not have any power to act of its own accord on this point.

The burden of proving the exacerbation of the prejudice naturally rests on the plaintiff, and its claims for compensation may theoretically be updated up until the date of closure of the proceedings (subject to the principle of adversarial proceedings).

11How do courts take into account the damage suffered between the date of the infringing acts and the date of the award of damages?

11

12Are there aspects of these laws that could be improved?

The French Group does not believe that there is any need to amend the texts in force.

However, it does take the view that the application of these texts by the courts should be more explicit and should therefore be covered by a more detailed statement of reasons regarding the method of calculation or the line of reasoning followed, in particular as regards how account is taken of the profit made by the infringer and the consequences thereof.

Thus, a better understanding of the case law would allow the parties to have a better appreciation of the financial stakes.

12Are there aspects of these laws that could be improved?

12

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13.aIf the Court determines a reasonable royalty by reference to a hypothetical negotiation, should the Court’s assessment of the hypothetical negotiation be under an assumption that all the IP rights in suit are valid and infringed?

No

Please Explain

13.aIf the Court determines a reasonable royalty by reference to a hypothetical negotiation, should the Court’s assessment of the hypothetical negotiation be under an assumption that all the IP rights in suit are valid and infringed?

13.a

13.bIf the Court determines a reasonable royalty by reference to a hypothetical negotiation, should the Court first be required to find that all the IP rights in suit are valid and infringed?

Yes

Please Explain

As a preliminary point, the French Group notes that the French courts only set damages after having ruled on the validity (when challenged by the defendant) and the infringement of the rights invoked.

Consequently, when they determine a royalty rate, it is (almost) always in a situation where the rights have been found to be valid and infringed, with the exception of interim proceedings (interim relief or interim injunction with an application for relief) in which the courts can only note an obvious lack of invalidity of the right and the likelihood that it has been infringed.

Therefore, the French Group would answer this question by stating that it is not really applicable to French law.

13.bIf the Court determines a reasonable royalty by reference to a hypothetical negotiation, should the Court first be required to find that all the IP rights in suit are valid and infringed?

13.b

14If the Court does not determine a reasonable royalty by reference to a hypothetical negotiation, what factors and what evidence should be relevant in that determination?

The evidence should be unrestricted and without limitation; thus, any element likely to convince the court should be relevant.

14If the Court does not determine a reasonable royalty by reference to a hypothetical negotiation, what factors and what evidence should be relevant in that determination?

14

15Should the quantification of damages depend on whether injunctive relief is granted, e.g. should forward-looking damages for a loss of market share be available if an injunction is also being granted or only if an injunction is not granted?

The question is whether it is desirable for the methods of assessing prejudice to differ depending on whether or not an injunction is ordered.

In short, there are two parts to the question posed:

state whether the French Group advocates that it be possible for an injunction not to be ordered by a court which has found in favour of infringement;

if so, should the absence of an injunction affect the assessment of the prejudice suffered by the plaintiff to the infringement proceedings?

The French Group answers this question in several ways:

15Should the quantification of damages depend on whether injunctive relief is granted, e.g. should forward-looking damages for a loss of market share be available if an injunction is also being granted or only if an injunction is not granted?

15

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III. Proposals for harmonisation


1. The methods for assessing the suffered by the victim of acts of infringement must remain independent of whether or not an injunction is imposed. The sanctions have different purposes:

the purpose of the injunction is to put an end to the infringement of a property right, like expulsion. The court will order the injunctive relief requested if it finds that infringement has occurred.

the purpose of damages is to compensate the plaintiff to the infringement proceedings for the prejudice it has suffered.

There is therefore no reason why the quantification of damages should vary depending on whether or not an injunction is imposed, or should be dependent on such a measure. This is the current positive law in France.

1. If it is accepted that it is possible that the courts may not systematically order an injunction which has been requested by the plaintiff to the infringement proceedings, then it is certain that the plaintiff to the infringement proceedings must be compensated for the forced future exploitation of its right by the infringer.

However, under positive law as it currently stands, the courts cannot order the infringer to pay damages corresponding to a royalty for forced future exploitation, after the court decision, of the intellectual property right by the infringer.

In this case, the concept under French law of future prejudice is insufficient to order the infringer to pay future royalties. The payability of said future royalties is not certain, since it depends on whether or not the infringer continues to exploit the intellectual property right, and to what extent. French positive law would therefore need to be amended.

On the other hand, if it is accepted that methods for assessing prejudice should differ depending on whether or not an injunction is imposed, there are two hypothetical cases:

the plaintiff to the infringement proceedings has not sought an injunction and accordingly requests the application of special assessment rules, such as the award of a royalty;

the court, owing to the particular circumstances of the case, decides not to impose an injunction and accordingly applies a special assessment method. The absence of an injunction may thus cause the patentee to lose market share. This loss would be offset by future (forward-looking) damages equivalent to the price of a compulsory licence.

The law would have to establish the necessary conditions for the courts to have the power to refuse to impose a requested injunction, even in the case where infringement is found.

However, the French Group is not in favour of such a system, since licences must continue to be contracts that are freely negotiated between the parties.

16Is harmonisation of the quantification of damages desirable?If yes, please respond to the following questions without regard to your Group's current law.Even if no, please address the following questions to the extent your Group considers your Group's current law could be improved.

Yes

Please Explain

16Is harmonisation of the quantification of damages desirable?If yes, please respond to the following questions without regard to your Group's current law.Even if no, please address the following questions to the extent your Group considers your Group's current law could be improved.

16

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The French Group would like to see harmonization with the aim of at least compensating for the whole prejudice, and, if any, depriving infringement of a lucrative potential.

17Please propose the principles your Group considers should be applied when quantifying actual loss

The French Group believes that the loss of income and actual loss suffered by the intellectual property rightholder correspond:

as a minimum, to a lost royalty, of a compensatory nature, calculated on the whole infringing turnover; or

to the margin lost on the sales that the rightholder missed out on because those sales were achieved by the infringer at its expense;

with a combination of the two (compensatory royalty/lost margin) possible when the rightholder did not have the opportunity or the capacity to absorb the entire infringing turnover.

with a supplement corresponding, in addition to the loss of income and actual loss as determined above, to the definitive and irreversible loss of value of the assets concerned by the infringement

The intellectual property rightholder must also be compensated for actual loss suffered as a result of the infringement, for the whole period during which the infringement affects its capacity to generate the level of profit that it could have achieved in the absence of said infringement

The intellectual property rightholder must also be compensated for actual loss suffered as a result of the infringement.

The same principles apply to the exclusive licensee.

17Please propose the principles your Group considers should be applied when quantifying actual loss

17

18Please propose the principles your Group considers should be applied when quantifying reasonable royalties

The French Group is of the opinion that the royalty used as a basis for the calculation of the lump sum in Article 2(2) of Directive 2004/48 (and, where applicable, of the compensatory royalty for the sales that the rightholder was unable to achieve, under paragraph 1 – 1) of the Directive) should be determined on the basis of elements to be supplied by the rightholder relating, in order, to point (b), then point (c), and then point (a).

18Please propose the principles your Group considers should be applied when quantifying reasonable royalties

18

18.aExplaining in particular the relevance, if any, of a hypothetical negotiation and whether the hypothetical negotiation should be under the assumption that the IP rights being negotiated were or were not found valid and infringed;

As regards subparagraph (a), which should only be used in the alternative, the situation of hypothetical negotiation should not be interpreted as leaving the infringer with no option other than to accept a licence on economically unreasonable terms. On the other hand, this situation should not be assessed as if the rightholder had made a commitment to grant a licence and could not use its right to obtain a ban on the sales of the infringer. In this regard, it does not seem desirable that the royalty rate resulting from a situation of hypothetical negotiation, on the basis of which the lump sum is calculated, should be subsequently enforceable against the rightholder in its future contractual relations with the defendant.

18.aExplaining in particular the relevance, if any, of a hypothetical negotiation and whether the hypothetical negotiation should be under the assumption that the IP rights being negotiated were or were not found valid and infringed;

18.a

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The French Group believes that, in any event, the ' reasonable' royalty must be increased when it is used for compensatory purposes.

18.bExplaining in particular the relevance, if any, of prior licensing practices or prior going rates for licensing the IP rights in suit

As regards point (b), the courts should, in particular, assess the circumstances in which prior going royalty rates could be revised upwards or downwards, taking into account changes in market conditions and in the respective positions of the rightholder, established licensees and the infringer, for example the fact that an early licensee may have benefited from a lower royalty rate than later licensees should expect to pay.

18.bExplaining in particular the relevance, if any, of prior licensing practices or prior going rates for licensing the IP rights in suit

18.b

18.cExplaining in particular the relevance, if any, of prior licensing practices or prior going rates for licensing other IP rights of third parties that may or may not be similar to the IP rights in suit

As regards subparagraph (c), the courts must in particular assess what, in the quality of the right which is the subject of the dispute, in particular the degree of difficulty in circumventing the latter, may justify a lower or higher rate.

18.cExplaining in particular the relevance, if any, of prior licensing practices or prior going rates for licensing other IP rights of third parties that may or may not be similar to the IP rights in suit

18.c

19.aPlease propose, in relation to actual loss and reasonable royalties how convoyed goods should be dealt with

The French Group considers that loss of income and actual loss with respect to convoyed goods and services must be assessed in the light of the circumstances of the case, taking into account the following factors in particular:

does the rightholder sell the protected product on its own or with accessories, or with commercially linked products/services (see question 4 a) above: range, package, sales promotion)?

does the infringer sell the infringing product alone or with accessories, or with commercially linked products/services (see question 4 a) above)?

whether or not the accessory is essential (see question 4 a) above).

19.aPlease propose, in relation to actual loss and reasonable royalties how convoyed goods should be dealt with

19.a

19.bPlease propose, in relation to actual loss and reasonable royalties how competing goods of the rightholder, not making use of the patent, should be dealt with

The French Group believes that loss of income and actual loss suffered in connection with equivalent or competing products of the rightholder which do not implement the infringed intellectual property rights should be taken into account in the assessment of the prejudice caused by the infringement, provided that a causal link between the acts of infringement and the loss of income and the actual loss suffered in connection with the equivalent or competing product is demonstrated.

In this respect, the French Group considers that the mere fact that it is an equivalent or competing product is not sufficient to demonstrate the existence of a causal link.

On the other hand, a causal link may be acknowledged to exist where it is demonstrated, taking into account the relevant market, that the sale of the infringing goods is directly linked to an economic loss suffered by the rightholder, or the licensee, on the sale of the equivalent or competing product.

19.bPlease propose, in relation to actual loss and reasonable royalties how competing goods of the rightholder, not making use of the patent, should be dealt with

19.b

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Please enter the name of your nominee for Study Committee representative for this Question (see Rule 12.8, Regulations of AIPPI). Study Committee leadership is chosen from amongst the nominated Study Committee representatives. Thus, persons not nominated as a Study Committee representative cannot be in the Study Committee leadership.Denis MONEGIER DU SORBIER


19.cPlease propose, in relation to actual loss and reasonable royalties how damages should be determined when the infringing product forms part of a larger assembly

The French Group considers that, in the case of infringing products forming part of a larger assembly, loss of income and actual loss must be assessed, using as a guideline what the economic situation of the rightholder would have been if the infringement had not occurred, and what its lost sales would have been.

This assessment should be based on the assembly to which the protected product belongs, weighted in consideration of the facts of the case and the influence of the intellectual property right in the marketing of the product.

The following could be taken into account in particular:

the role of the invention in the marketed product, and its ability to create value (generate current and future turnover and profit);

the existence of substitutable products with similar functions/uses;

how decisive the invention is in the product marketed (competitive advantage, barrier to entry, contribution to the creation of value compared to other key assets).

19.cPlease propose, in relation to actual loss and reasonable royalties how damages should be determined when the infringing product forms part of a larger assembly

19.c

20Please propose principles your Group considers should be applied when quantifying the damages for indirect/contributory infringement in circumstances where there is no direct infringement of the IP rights in suit.

The French Group does not believe that the method for assessing the prejudice should be any different to that applied in the case of direct infringement.

If the patentee, or the licensee, suffers a prejudice, it should be compensated in accordance with the above principles.

20Please propose principles your Group considers should be applied when quantifying the damages for indirect/contributory infringement in circumstances where there is no direct infringement of the IP rights in suit.

20

21Please comment on any additional issues concerning any aspect of quantification of damages you consider relevant to this Study Question.

The French Group believes that damages should be determined by taking into account the profit made by the infringer in order to deprive infringement of a lucrative potential, if any,without said profit necessarily constituting an independent mode of compensation as is the case in other countries.

21Please comment on any additional issues concerning any aspect of quantification of damages you consider relevant to this Study Question.

21

Please indicate which industry sector views are included in part "III. Proposals of harmonization" on this form:

All industry sectors

Please indicate which industry sector views are included in part "III. Proposals of harmonization" on this form:

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