Damages for Noneconomic Harm in Intellectual Property Law

FREE Webinar                               June 23, 2020 15:00 PM- 16:00 PM British Standard Time Damages for Noneconomic Harm in Intellectual Property Law By Professor Thomas Cotter

This talk offers a comprehensive analysis of awards of “non-economic” damages for reputational and emotional harm in intellectual property (IP) law. It discusses, among other matters, the Second Circuit’s recent decision in Castillo v. G&M Realty LP, affirming a $6.75 million award of statutory damages for the infringement of artists’ moral rights in graffiti art; the European Union’s Intellectual Property Rights Enforcement Directive and its 2016 Liffers decision, which appear to require member states to award, where warranted, non-economic (“moral prejudice”) damages across the full range of IP cases; and some recent arguments in favor of awarding damages for emotional harm in, even, patent infringement actions. Courts should recognize reputational harm as a potentially cognizable injury throughout all of the branches of IP law, but damages for emotional harm should be limited to right of publicity and moral rights matters.

About the Speaker

Professor Thomas F. Cotter joined the University of Minnesota Law School faculty in 2006. From 1987-89, Professor Cotter clerked for the Honorable Lawrence W. Pierce, United States Court of Appeals for the Second Circuit. He practiced law at Cravath, Swaine & Moore in New York City from 1988-90, and at Jenner & Block in Chicago from 1990-94. From 1994-2005, he taught at the University of Florida College of Law, where he held a University of Florida Research Foundation Professorship and directed the school’s Intellectual Property Law Program.

From 2005 to 2006, he was a Professor of Law at Washington and Lee University School of Law. In 2007, he was named to a two-year Solly Robins Distinguished Research Fellowship at the University of Minnesota Law School, and in 2008 was named to the Briggs and Morgan Chair in Law (now Taft Stettinius & Hollister).

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European TM dilution and economic analysis

An email circular released today by Deloitte and authored by Elizabeth Gutteridge reviews the economic consequences of last week's European Court of Justice ruling in Intel v CPM (for details of the decision see here and here). This was the ruling in which the ECJ ruled that Intel could not automatically prevent third parties applying identical or similar trade marks to dissimilar goods (in this case INTELMARK for telemarketing services): Intel could only succeed in its trade mark dilution claim by furnishing evidence of injury or serious risk of injury to its mark. According to the court, in order to prove dilution, the mark owner must show evidence of a change, or serious likelihood of a change, in the economic behaviour of the average consumer of the goods or services for which its mark is registered. In terms of the economic implications of this ruling, the circular states (with good cause):

"As a result, clients and their legal teams will be faced with a series of potential evidentiary and analytical challenges .... Mark owners wanting to demonstrate dilution will need the support of robust financial and economic analysis. Consideration may need to be given to the following:

• Market analysis to define the competitive markets within which each party operates;

• Assessment of the hypothetical economic behaviour that would have occurred absent the third party’s use of the mark, compared with the actual position;

• Sales data analysis to understand the extent of market penetration of both marks and

• Identification and isolation of the impact of third party use on brand values".

The cost and effort that will go into this are awesome, particularly in the case of Community trade marks where the characteristics of the parties' respective markets may differ substantially between EU Member States (for example, beers and lagers in Northern/Southern Europe) and where the claimant's mark is not used alone but in combination with one or more additional trade marks (impact assessment for dilution of the Coca-Cola word mark and the distinctive curvy bottle would demand different parameters).

On the facts of INTEL/INTELMARK the assessment of the impact of changes in consumer behaviour is even more complex because Intel's mark attracts consumers on three levels: makers of computers that contain its microprocessors, retailers that choose to stock it and the purchasers of the ultimate product. There are other costs too, particularly the establishment costs of hours spent in non-profit-generating discussions with lawyers, economists, market survey consultants and business experts. Would it be too much to guess that the situations in which the cost to the trade mark owner of bringing a dilution claim will not exceed the benefit of that uncertain course of acton must be few and far between.

Patent stacking -- the truth at last ...

The Journal of Competition Law and Economics (JCLE), published three times a year by Oxford University Press, carries occasional articles that are of great interest to aficionados of intellectual property. This issue features an article by Harvard Professor Einer Elhauge, "Do patent holdup and royalty stacking lead to systematically excessive royalties?". According to the abstract:

"Some recent literature has concluded that patent remedies result in systematically excessive royalties because of holdup and stacking problems. This article shows that this literature is mistaken. The royalty rates predicted by the holdup models are often (plausibly most of the time) below the true optimal rate. Further, those predicted royalty rates are overstated because of incorrect assumptions about constant demand, one-shot bargaining, and informational symmetry. Although this literature concludes that overcompensation problems are exacerbated by doctrines measuring damages using past negotiated royalties, in fact such doctrines exacerbate undercompensation problems. Undercompensation problems are further increased to the extent that juries cannot measure damages with perfect accuracy, a problem that persists even if damages are just as likely to be overestimated as underestimated. Nor do the royalty rates predicted by the holdup model apply if there is competition in the downstream product market or upstream market for inventions. Royalty stacking does not lead to royalties that exceed the optimal rate, contrary to this literature, but in fact tends to produce royalties that are at or below the optimal rate".

The article is not an easy read for lawyers on account of the algebra, but the conclusions are clear enough -- and in many respects extremely encouraging.