European Patent Infringement Damages & Unique Characteristics

Hoffman Clark’s experience includes navigating unique characteristics of damages analysis in the European Union (“EU”) – ranging from varying languages, laws, and market conditions to broader lost profits, price erosion, and loss of first mover advantage damages. We were recently retained by counsel in the EU to quantify damages in a European patent infringement proceeding filed in the EU between a USA-based corporation (“Claimant”) and an international group of companies whose operations include facilities located in the EU (“Defendant”). Claimant alleged that Defendant infringed a European patent validated in several European countries by making, having made, using, selling, offering for sale, and/or importing, without authority, products that are covered by one or more claims of the asserted patent. Both Claimant and Defendant are global market leaders and the products at issue are sold throughout the world. Damages analysis and the preparation of a damages report in a European patent infringement proceeding has distinctive features not found in the USA.

The EU Landscape

The EU is a major world trading power that operates as a single market with 28 European country members that together cover much of the continent. The EU is based on the rule of law: everything that it does is founded on treaties, voluntarily, and democratically agreed by all member countries. These binding agreements set out the EU’s goals in its many areas of activity. The EU’s economy, measured in terms of the goods and services it produces (GDP), is larger than the USA’s. About two-thirds of EU countries’ total trade is done with other EU countries.

Damage Periods

The period of time that damages may be available for patent infringement in an EU member country differs from the time period available in the USA. Damages in the EU may be available for time periods before the asserted patent issues, as well as after the patent issues. For example, damages may be available when the infringing product is sold, after the infringer becomes aware of patentee’s patent application, but before the patent issues. This difference may have a significant impact on damages when the time period from patent application to patent issuance is long.

Market Conditions

The assessment of the relevant market, demand, and noninfringing substitutes for the patented product in the EU likely involves products that are manufactured, sold, and used in multiple countries. Markets function differently in the EU and assessing these issues involves analyzing information that may be available only in one of several European languages. Therefore, a working knowledge of the language is helpful. German, for example, is the most widely spoken language in Europe and is the official language of Germany, the most populous European nation, as well as Austria, Switzerland, Luxembourg, and Liechtenstein, and the native language of a significant portion of other parts of Europe. Hoffman Clark’s German language familiarity supports research and quantification of damages in the EU.

Lost Profits Damages

The euro (“€” or “EUR”) is the official currency of the Eurozone, an economic and monetary union of 18 EU member states that have adopted the euro as their common currency and sole legal tender. The euro is also used in several additional European countries. Lost profits damages calculations for sales in the EU may require quantification in EUR as well as in the currency of an external party. Damages calculations in the EU rely on the application of solid economic principles and unlike in the US, may be less focused on case law.

Price Erosion Damages

Price erosion damages arise when the presence of an infringing product creates price competition that effectively reduces the selling price of infringing products and/or the patentee’s selling price for the patentee’s products. The price erosion principal is the same in the EU as in the USA and requires proof the patentee would have made all the sales at exceeding prices at the time of the sale. For sales in the Eurozone, the pricing analysis considers prices in EUR and for sales made in the USA, the pricing analysis considers prices in USD. The interaction of the exchange rates over time is factored into the calculation of damages.

Loss of First Mover Damages

Another aspect of damages that may be available in the EU is the benefit of being first to market. There are a number of possible benefits related to gaining a head-start in the market. These benefits include a higher sales base, higher growth rate, larger customer base, and increased market share. Loss of first mover advantage damages may arise when the patentee would have captured the infringer’s customers, thereby enabling a greater customer base and increased market share. The loss of first mover damages may be based on the amount of time required for the patentee to revitalize its position in the market.