The Italian Supreme Court and the damages’ equitable assessment in a case of inventor’s rights breach

24 Mar 2023 | Newsletter

Chiara GaidoChiara Gaido IP Lawyer, Italy

In a lengthy patent litigation concerning the inventor’s rights breach, the Italian Supreme Court affirmed that, while making their damages’ assessment on an equitable basis, Courts must indicate the criteria they have followed to determine said damages’ amount. Specifically, the Italian Supreme Court ruled that, when it comes to inventor’s rights infringement, damages should be determined by considering the margin profits that has been realized by the infringer in violation of such rights, deducting the costs from the total revenue.

The case at issue started in 1992 and was finally settled in January 19, 2023 with the Italian Supreme Court  order  No. 1692. Object of the dispute was the ownership of the exclusive rights pertaining to a patent for the production of zeolites and the calculation of the related damages. The rule of law established by the Italian Supreme Court is the following: “in case of inventor’s rights breach, the damages assessment on an equitable basis  has to be made by taking into account the profits realized by the infringer (i.e. the margin profit deduct the costs from the total revenue realized). In this case, the “fair royalty” or “virtual royalty” criteria  should be considered only as the lowest limit of the damages assessed when it is not able  per se  to completely restore the intellectual property rights’ owner from the suffered prejudice and when the latter has provided additional and different criteria to be considered in order to be fully recovered.

The Italian Supreme Court based its reasoning upon two previous Italian Supreme decisions (i.e. No. 5956/2022 and No. 12009/2022) according to which the general principle also applicable in cases of Intellectual Property Rights’ infringements is that, on one hand, the damages’ assessment on an equitable basis is allowed only when the plaintiff provided some sort of evidence with regards to the existence of said damages. In fact, in case of potential or hypothetical damages, such assessment could not be invoked under the Italian Law. Secondly, the actual calculation of said damages must be either complex and/or impossible. Therefore, if these two requirements are met, the Court can determine the amount of damages on an equitable basis.

Furthermore, in the case at issue, the Italian Supreme Court affirmed that, in any case, if a court decides to assess damages on an equitable basis, said court must specify which criteria or logical reasoning  she followed in order to avoid any possible arbitrary decisions that could be considered not being subject to any specific control. Specifically, in case of inventor’s rights infringement, the damages’ assessment on an equitable basis should be determined by the margin profit deducted the costs sustained by the infringer and the fair royalty criteria should be only considered as the lowest criteria in the liquidation of said damages.