Calculation of the infringer's profit in the context of claims for damages against patent infringers

In its judgment of 14 November 2023 (X ZR 30/21), the Federal Court of Justice (FCJ) again addressed questions about calculating infringer's profits in the context of claims for damages against patent infringers. The FCJ ruled that profits from leasing agreements and some additional transactions can be included as damage positions in calculating the infringer's profit. This also applies to profits that only led to (additional) damages after the patent expired.

Background

The case concerned the infringement of a European patent for upholstery converting machines. The defendant sold the machines, including through leasing, and the paper needed to use the machines.

The Regional Court upheld the action in respect of two of the four types of machines sold by the defendant. It ordered the defendant to provide information and provide accounts regarding the conclusion of the leasing agreements and the supply of consumables.

The Court of Appeal confirmed the claim awarded at first instance. This was also not limited to sales transactions before the patent in suit expired, if – like in this case – the distribution during the period of validity of the patent in suit was causal for subsequent transactions and there was a possibility that these transactions could actually be included in calculating the infringer's profit.

The FCJ’s decision

According to the FCJ, the patent proprietor's claim for damages can also cover profits that the infringer has made by concluding leasing agreements for patent-infringing machines and by supplying consumables.

For the leasing agreements, this follows from Section 9 No. 1 of the German Patent Act. In contrast, delivering consumables as additional transactions are not acts of use under Sections 9, 10 of the German Patent Act. But they were covered by the claim. This follows from the principle that all profits that are causally related to the patent infringement must be taken into account for the calculation. The function of the claim for restitution of profits lies in the absorption of pecuniary advantages that the infringer has achieved due to a market opportunity that was only accessible if the property right had been infringed. On this basis, it would appear unfair to leave the infringer with a profit based on unauthorized use. The financial disadvantage suffered by the right holder as a result of the loss of the market opportunity must be compensated in full. Accordingly, the infringer's profit includes not only pecuniary advantages gained from the sale of the infringing items, but also subsequent profits from additional transactions. The required sufficient connection exists if the additional service could not have been provided without marketing the infringing item.

In the opinion of the FCJ, the claim for damages can also relate to profits that were only made after the patent protection had expired. In accordance with the limited period of validity of the patent, the obligation to pay damages generally relates to acts of infringement before the patent has expired. The infringer is not liable indefinitely, but only within the term of the patent. But this does not preclude the inclusion of acts of use that occur during the term of the patent but only lead to damage after the patent has expired. The claim for surrendering the infringer's profits should cover all profits that are causally related to patent-infringing acts. In this context, it’s irrelevant that the right holder is no longer entitled to a prohibition right after the patent has expired, as the profit is the result of an unlawful act carried out during the term of protection. The only decisive and sufficient factor is that the profit was made possible by the patent infringement.

The FCJ emphasizes that the claim for information and accounting with regard to additional transactions is already given if there is the mere possibility that the profits from additional transactions are included in the calculation of the infringer's profits. This applies to transactions which, due to their content, the circumstances or other indications, do not appear to be remotely related to an unlawful act of use. According to the FCJ, this was the case in this instance because the defendant would not have been able to sell the consumables to the same extent without selling the machines.

Conclusion

In its ruling, the FCJ clarified that the infringer's profit can also include profits from additional transactions that only led to damage after the patent expired. It seems unfair not to fully skim off benefits that are causally attributable to the patent infringement, even if they’re actually only achieved by the infringer after the patent protection has expired. Patentees are now advised to consider focusing their claims on the extended claim for damages and to take into account any additional transactions such as spare parts, maintenance contracts or consumables in relation to the requests for information.

Whether the causal link required by the FCJ actually exists in different arrangements that are conceivable in practice is a question of the individual case. And future decision-making practice will show where the boundaries are to be drawn here. It’s conceivable that the required causal link is interrupted in the event of a possible change to a patent-free embodiment by the infringer (workaround), so that any additional transactions linked to this would no longer give rise to a liability for damages. This should lead to the question of possible workarounds and their early implementation becoming more relevant in practice.