Compensation for IP infringement

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The courts have considered that compensation for IP infringement should be measured on the basis of how the wrongful party benefited from misusing the information in question. However, a party to a claim can lose out on the amount awarded in a claim on the basis of the pleadings made – this can mean large financial payment opportunities can be missed. The award can be less than the legal fees. In this case, giving only a pyrrhic victory.

The Case

Force India Formula One Team Ltd v Aerolab SRL and another [2013] EWCA Civ 780

Force India had contracted the services of Aerolab to design a test model car. The defendants created a confidential computer aided design file under the agreement. The claimants later repudiated the contract and because of this the defendants downed tools and began work for a rival formula 1 competitor. Aerolab used the file that it had used under the agreement with Force India for its new client.

The court found that Aerolab had breached a confidentiality clause of exclusivity, as Aerolab had agreed to use the information exclusively for Force India. But, as Force India’s claim only concerned the measure of damages awarded at first instance, the Court of Appeal held that damages were only equal to the savings that Aerolab had made by using the information as a short– cut in the design for their new clients. Much to Force India’s dismay they found that the Court was not prepared to award damages based on their contract or the loss of competitive edge that breach of exclusivity caused.

The Take Away

Confidential information can be protected through contract either expressly or implicitly. Alternatively, where there are no contractual obligations the courts will assess confidentiality on an equitable basis. But with commercial agreements business people should be getting a contract properly drafted for their required purpose, as to get the court to imply unwritten obligations post-event will be a tough order. For a related case study please click here.

The measure of damages for misuse of information is based on the benefit gained by the wrongdoer and not the loss to the holder of the information.

The pleadings can have a huge impact on the damages ordered. Force India did not plead a breach of exclusivity clause and thus missed out on the opportunity to gain damages from this breach.
Those using information gained from one client to another should use extra caution to make sure that this is not prohibited because if you are hit with a claim, even if you win, considerable costs and time will be involved. Force India shows that winnings may not equal the legal costs.

The timing off when the refusal of the claimants to perform the contract occurs can have crucial consequences for whether or not a confidentiality clause has been breached. In the discussed case the repudiation by the claimants had been decided not to have been accepted by the defendants until a later date than first thought. Hence, this specific clause of confidentiality was still running when the defendant started work for their new clients.

Get sound legal advice in the types of claims available and how you will plead in Court, as well as how this could play out before commencing an action.