Trademark infringement and quantification of damages

Industrial property law

The Italian Court of Cassation, in Order No. 20800/2023 of 18/07/2023 (No. 20800/2023), clarified the value to be attributed to the subjective element in the quantification of the damages compensable by the infringer. The absence of guilt was held by the Court to be irrelevant to the calculation.

The case concerned the breach of a trademark licence agreement. The trademark owner had granted a territorial licence to a company. In breach of the territorial and temporal restrictions of the licence, the licensee sub-licensed the trademark to another company. The trademark owner sued the two companies to establish infringement and to recover damages.

In the judgment, the Court clarified that under Art. 125 of the Industrial Property Code (IPC), it confirmed its previous position according to which the proprietor of a patent right who complains of its infringement has the right to claim, instead of compensation for loss of profits, the restitution (so-called "retroversion") of the profits made by the infringer, with a specific request pursuant to Art. 125 IPC, without it being necessary to specifically allege and prove that the infringer acted with fault or malice (Court of Cassation, no. 21832/21). Consequently, even if the infringer has committed the infringement unknowingly, he must in any case return to the right holder the profits made as a result of the infringement.

The Court used this case to recall that, where a person commits an infringement knowingly or with reasonable grounds for knowing, the holder of the infringed right may obtain compensation for the damage caused and for the loss of profits (or, alternatively, the recovery of the profits made by the infringer); where, however, the infringer lacks the subjective element, the holder of the right may, in any event, recover the profits. Paragraph 3 of Art. 125 of the IPC provides that "in any event" the holder of the infringed right may, as an alternative to compensation for loss of profits, claim restitution of the profits made by the infringer by reason of and as a result of the infringement. The damages must therefore be calculated by taking into account the profits made by the infringement, i.e. the profit margin obtained by deducting the costs incurred from the total revenue.

The purpose of Art. 125 of the IPC is thus to prevent the infringer from profiting from his wrongdoing and to prevent the planning of profitable counterfeiting activities.

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