Trademarks and moral damage according to the Supreme Court
Reputation is an essential aspect for any company and/or trademark. Companies invest heavily in caring for their reputation, as this has an impact on the proper functioning of the brand. Therefore, engaging in unlawful practices that affect the reputation of a consolidated brand in the market has serious consequences.
What is moral damage?
Moral and reputational damage is a key element when it comes to increasing compensation for damages caused by third parties. However, proving and justifying the moral damage caused is an issue that causes lawyers a lot of headaches.
The Trademark Act and Article 55.2 c) of the Law on the Legal Protection of Industrial Design state that “in the case of non-pecuniary damage, compensation shall be payable, even if the existence of economic loss is not proven“.
In this sense, it would seem that, although moral damage must be proven, it is not necessary for there to be economic damage in order for moral damage to be considered to exist.
However, although the impairment of economic interests is always easier to sustain (when we are talking about trademarks, designs, patents or intellectual creations) as it is an injury to the immaterial or spiritual sphere of the author, it is much more difficult to prove.
Judgment of the Supreme Court of 13 July 2023
In this judgment, the Supreme Court analyses the consequences of sales of counterfeits and quantifies the possible compensation for reputational damage affecting the reputation of protected trademarks.
The Court states that “in cases where it is difficult, if not impossible, to translate the infringement into direct pecuniary damage, calculated in terms of opportunity costs or loss of profit, the existence of reputational damage of a non-material nature, as recognised by the case law of the Court of Justice of the European Union (Liffers and others), cannot be excluded“.
The CJEU establishes that the greater the prestige of a trade mark, the greater the level of protection that this sign deserves to obtain from the courts, and therefore the likelihood of confusion of the specific product on which the protected identical or confusingly similar sign is unlawfully used must be dissociated.
In accordance with the provisions of Article 13 of Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004, it requires States to ensure “that the competent judicial authorities shall, at the request of the injured party, order the infringer who knowingly, or with reasonable grounds to know, participated in an infringing activity, to pay the right holder compensation appropriate to the actual damages suffered as a result of the infringement”.
When the judicial authorities fix the damages: they shall take into account all relevant aspects, such as the negative economic consequences, including loss of profits, suffered by the injured party, any illegitimate profits made by the infringer and, where appropriate, elements other than economic factors, such as the non-material damage caused by the infringement to the right holder.
In this regard, the judgment states that on the basis of the sales values which, in the proven marketing context, could have been achieved by the various bags seized by taking advantage of the confusingly similar signs of the marks, the amount of compensation for non-material damage is set at 25% of the total value to be determined. This is a reasonable criterion which quantifies the non-material damage to a greater extent.
At Letslaw by RSM we are experts in trademark law. If you have any questions, we are at your disposal.