Compensation For Infringement Of Intellectual Property Rights

• Published date: 15 September 2021
• Subject Matter: Intellectual Property, Copyright, Patent, Trademark
• Law Firm: Shepherd and Wedderburn LLP
• Author: Mr Ruairidh Leishman

The holder of intellectual property (IP) rights is entitled to a variety of remedies for infringement of those rights. These include, an order for delivery (or destruction) of the offending goods, interdict (injunction) to restrain any further infringement, and damages or an account of profits.

This article focuses on the level of financial compensation available to holders of IP rights once they have established their rights have been infringed. There can be criminal sanctions for infringements of certain IP rights, such as those contained in the Trade Marks Act 1994, which include fines and imprisonment, and orders for forfeiture and confiscation under the proceeds of crime legislation. However, these are beyond the scope of this article.

General principles

The leading case in this area is General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819, in which the court gave guidance on the assessment of damages for the infringement of a patent, saying that:

• the court's aim in awarding damages is to restore the injured party to the same position as they would have been in had they not sustained the wrong (in other words, damages are compensatory and not punitive); and
• the burden of proof rests with the party making the claim, but because the other side is the wrongdoer, damages should be assessed liberally.

How is the claimant's loss assessed?

In the General Tire case, the court set out three measures of assessing loss:

1. if the claimant exploits the patent by manufacturing and selling goods at a profit and the effect of the infringement has been to divert sales to the wrongdoer, the 'measure of damages will ' normally be the profit which would have been realised by the owner of the patent if the sales had been made by him'.
2. if the claimant exploits the patent by granting royalty-bearing licences, 'the measure of the damages he must pay will be the sums which he would have paid by way of royalty if instead of acting illegally, he had acted legally.'
3. if it is not possible to prove there is a normal rate of profit (as in 1), or there is a normal established licence royalty (as in 2), damages are assessed by working out what could reasonably have been charged for permission to carry out the infringing acts Usually, the claimant will produce evidence to guide the court such as expert reports, evidence from analogous trades or any other factor that assists the judge with deciding the loss.

Does this only apply to patents, or can these...