Tuesday, 12 May 2020

Damages for Noneconomic Harm in Intellectual Property Law, by Thomas F. Cotter. Forthcoming with Hastings Law Journal. A Brief Review.

By Roya Ghafele, OxFirst. Email: info@oxfirst.com

Noneconomic harm, so Professor Cotter, includes (among other things) pain and suffering, emotional harm and distress, and loss of reputation. While it is difficult to quantify such harm, it is not impossible to do so. Particularly, if the plaintiff is a corporation which was confronted with the infringement of its intellectual property rights. In such circumstances one can illustrate loss of earnings caused by the infringement with reference to the firm’s financial statements. Often balance sheets of companies are used for illustrative purposes in such circumstances and the scenario one looks at is how corporate performance was affected by the noneconomic harm.

If however the injured party is not a company, but an individual, the situation is bit more complicated. How can one quantify the emotional distress of a writer who saw her work demolished?

In this article Thomas Cotter is less interested in offering a ‘cooking recipe’ how to calculate damages for such noneconomic harm, but more in discussing the overarching principles guiding damage awards for noneconomic harm.

He starts off by looking at U.S. case law and illustrates at a series of examples how, when and why Courts offered damage awards for noneconomic harm. I personally found it insightful to learn that a city cannot just simply demolish the sculptures of an artist and had to compensate the artist for such wrong doing. I was also interested to learn that a real estate developer cannot just wipe off graffiti art. Such doing, so the Court found, constituted an act of deformation and is contrary to the US copyright act. The Court found it essential ‘…to prevent any intentional distortion, mutilation, or other modification . . . which would be prejudicial to his or her honor or reputation,’. The graffiti artist subsequently received 150 K US Dollars per work. (Castillo v. G&M Realty L.P.)

Across the Atlantic, the IPR Enforcement Directive equally foresees for damages for noneconomic harm, which it describes as ‘moral prejudice.’  ‘Moral prejudice’ can include reputational harm and mental distress. Cotter describes several instances when European Courts have awarded damages under this premise. In particular in ‘Liffers v. Producciones Mandarina SL’, ¶ 17 (CJEU Mar. 17, 2016) it was recognized that moral prejudice, such as damage to the reputation of the author of a work, constitutes . . . a component of the prejudice actually suffered by the rightholder. In Liffers, the Court of Justice of the E.U. ruled that the plaintiff was allowed to obtain a royalty rate, which should be calculated in the form of a hypothetical royalty rate and that Liffers should also be entitled to a compensation for a violation of moral rights.

Factors that may guide the determination of damage awards are the ongoing significance of the infringement to the author and his reputation, the scale of the infringement, the intention of the infringer, the standing of the work and the existence of other means to undo the harm.

According to Cotter, similar considerations would be of relevance for a violation of the general right to personality, as would (under appropriate circumstances) the need to deter future violations.

In this article Cotter discusses however not only noneconomic harm in the context of copyright. He also addresses damage awards for noneconomic harm for patents and trademarks.

The article takes an interesting spin when the legitimacy of IP is not justified under the mainstream utilitarian argument. Rather than argue that IP is needed as an incentive to invest in innovation,’ Cotter argues with reference to Kant that intellectual property rights are justified because they enable IP owners to ‘expand freedom and autonomy’ and hence ‘pursue the ends they set for themselves.’

IP conceptualized as freedom rather than an incentive mechanism inspires to take this research piece to the next step and not only address the question of damage awards for noneconomic harm, but more broadly to study what other governance mechanisms for IP would be afforded if one defined the purpose of IP from a public interest rather than a mere mercantilist perspective.

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