AG's opinion on period of compensation for trademark violation

Former Guest Kat Valentina Torelli continues to share her insights with Kat readers on a variety of topics. This time, she discusses the

interesting opinion of Advocate General Wathelet on the interrelationship between EU legislation and national infringement law in case C-280/15 'Nikolajeva'.

"Anyone engaged in trademark IP litigation in the EU knows how tricky it can be in harmonizing EU legislation with national laws, especially when the matter is an infringement proceeding. An especially illustrative example is the recent opinion of AG Wathelet in case C-280/15 'Nikolajeva’ as part of the reference to the Court of Justice of the European Union (EJEU) for a preliminary ruling lodged by the Harju District Court of Estonia. The dispute before the Harju District Court stemmed from a complaint brought by Ms Nikolajeva against the company OÜ Multi Protect, alleging unlawful use by MultiProtect of the EUTM 'HolzProf' as a "hidden keyword" on a website accessible through the internet.

Ms. Nikolajeva sought monetary compensation both for damages and prejudice on account of from unjust enrichment. Regarding the latter, the amount sought was calculated on the basis of the licence fee that she had granted the company OÜ Holz Prof for the use of the mark 'HolzProf'. Ms. Nikolajeva also claimed compensation on the ground that the infringement had caused her mental pain. The Harju District Court decided to stay the proceedings to seek clarification from the CJEU regarding the following three questions:

Is a Community trade mark court required to issue the order provided for in Article 102(1) if the applicant does not seek such an order in his claims and the parties do not allege that the defendant has infringed or threatened to infringe a Community trade mark after a specific date in the past, or does failure to make an application to that effect and to refer to this fact represent a ‘special reason’ within the meaning of the first sentence of this provision?

Is Article9(3) to be interpreted as meaning that the proprietor of a Community trade mark may demand only reasonable compensation from a third party on the basis of the second sentence of Article 9(3) for use of a sign identical with the trade mark in the period from the publication of the application for registration of the trade mark until the publication of the registration of the trade mark, but not compensation for the fair market value of what has been gained as a result of the infringement and for damage, and that there is also no right to reasonable compensation for the period prior to publication of the application for registration of the trade mark?

What type of costs and other forms of compensation are included in reasonable compensation under Article 9(3), second sentence, and can this also encompass in certain circumstances (and if so, in which circumstances) compensation for non-material harm caused to the proprietor of the trade mark?

As requested by the CJEU, AG Wathelet gave his opinion only on the second and third questions. AG Wathelet chose to examine these two questions together.

The period of protection of the EUTM 'HolzProf'

In order to understand AG Wathelet's opinion, it is worth noting the timeline of the application for registration of the HolzProf mark:

Relying on Article 8(2) of the Estonian law on trade marks (kaubamärgiseadus), which provides that—

“the legal protection of a registered trade mark begins on the date of filing of the application for registration … and continues in existence for ten years from the date of registration”,

Ms. Nikolajeva contended that Multi Protect had infringed her trade mark during three distinct periods of time: (I) between the filing of the application and the publication date; (II) between publication and the date of registration; and (III) the period since registration of the mark (being a bit more than one year)."

AG Wathelet, based on his construction of Articles 9(1) and (3), 14(1) and 101(2) of Regulation no. 207/2009, was of the view the mark did not enjoy protection for the period between the filing date and the date of publication. Although Article 14(1) refers to the provisions of national trademark law in matters of infringement, the effects of registration and the period of protection are inherently linked to each other and both fall within the exclusive scope of Articles 9(1) and (3) of the EUTM Regulation. The rights conferred by an EUTM and its period of protection are not among those matters left to the national laws, pursuant to Article 101(2) of the EUTM Regulation.

Accordingly, a EUTM can be enforced only from the registration date of the mark [Article 9(1)], although the right to reasonable compensation, should an infringement be found, will apply to acts occurring from the date of publication of the EUTM application [Article 9(3)]. Therefore, AG Wathelet rejected Ms. Nikolajeva's claim of infringement for the first alleged period because Article 8(2) of the Estonian law on trade marks [according to which “the legal protection of a registered trade mark begins on the date of filing of the application for registration … and continues in existence for ten years from the date of registration”], did not apply.

'Reasonable compensation'

AG Wathelet stated that in all EU legislation concerning trade marks, patents and plant varieties, reasonable compensation is intended to compensate a rights holder for infringement for the period during which the right is still inchoate, namely between the date of publication of the application and the date of final grant. However, no definition of reasonable compensation is provided by any of these respective laws. AG Wathelet construed the meaning of “reasonable compensation” by first offering an interpretation of Article 13 of Directive no. 48/2004 (the Enforcement Directive), whereby reasonable compensation, in providing pecuniary redress, must strike a balance between the interests of the trade mark holder and the trade mark user.

Taking into account the distinction between intentional and unintentional infringement under Article 13 and the different types of compensation that may be awarded for each, AG Wathelet suggested that harmonized criteria for the determination of the reasonable compensation is needed. These criteria should be based on Article 13(2), which provides that recovery of profits should lead to “uniform and predictable pecuniary compensation which takes account of the specific circumstances of each case” and is proportional with the infringer's unfair profits.

AG Wathelet concluded that reasonable recovery of profits does not include compensation for moral prejudice and other emotional harm, such as mental pain, given that such “compensation would be disproportionate when a EU trade mark is still in the process of being acquired”.