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ATK Race S.r.l. (“ATK Race”), the owner of the European patent no. EP 2.345.463 (“EP ‘463”), concerning a heel piece for an alpine ski attachment, brought an infringement action before the Court of Genoa against Fritschi AG Swiss Binfings (“Fritschi”), Nuovi Orizzonti s.a.s. of Rizzo Riccardo & C. (“Nuovi Orizzonti”) and Socrep S.r.l. (“Socrep”), which were, respectively, the manufacturer, the retailer and the supplier of the allegedly infringing product.

In its decision No. 3192/2018, published on 18th December 2018, the Court of Genoa held that the patent was valid and infringed by equivalents.

The Court then examined ATK Race’s claims for reimbursement of damages and loss of profits, disgorgement of profits and non-economic damages.

As to the criteria for the relevant quantification of the profits made by the infringers, ATK Race complained that the Court had deducted from their profits the research and development costs relating to the infringing product. The Court rejected the claimant’s complaint, arguing that where, as in the case at stake, it is not found literal infringement, but only infringement by equivalents in relation to an infringing product which possesses also certain original “creative” features, such costs shall be considered in calculating the unfair profits accrued by the infringer.

Once established the criteria for determining the consequences of the infringement, the Court reminded that the right to the reimbursement of damages arises only in cases of wilful misconduct or negligence.

On that premise, the Court ordered both damage compensation and disgorgement of profits only to Fritschi, especially considering that, unlike the other two defendants, Fritschi, being the manufacturer of the infringing product, certainly knew its constructive characteristics, including the fact that it incorporated the patented invention.

On the contrary, in the Court’s view it could not be proved neither the willful misconduct, nor the negligence of the other two defendants. According to the Court, they were mere intermediaries in the marketing of the infringing product, and they did not have the expertise necessary to understand the inner workings of the product, which in fact externally appeared rather dissimilar to the patented one.

However, ATK Race objected that the disgorgement of profits could nevertheless be ordered to Nuovi Orizzonti and Socrep, since, unlike damage compensation, the restitution of unfair profits does not necessarily require the assessment of the infringer’s subjective element.

The Court acknowledged that the principle invoked by the claimant was in line with many and influential courts’ decisions and doctrinal opinions, which argue that:

i) Article 13 of the Enforcement Directive 2004/48/CE does not necessarily require the negligence of the infringer to order the recovery of profits;
ii) Article 125(3) of the Italian Intellectual Property Code (IPC) provides that the disgorgement of profits can be awarded “in any case”, which, in their view, shall mean “regardless of the infringer’s fault”;
iii) the wording used by our national legislator – i.e., “restituzione degli utili” (disgorgement of profits)- appears to denote by itself the essentially objective restoration function of the institution.

However, the Court ruled the case in stark contrast with the interpretation of Article 125(3) IPC established by prevailing Italian case law and doctrine.

As to the Enforcement Directive, the Court noted that the possibility to award the disgorgement of profits even in the absence of the infringer’s fault is merely an option granted to Member States, and not a mandatory provision.

Besides, Article 125 IPC strictly refers to the criteria for the quantification of the amount that the right holder is entitled to obtain. Thus for the Court it is difficult to see in the aside “in any event” of Article 125(3) IPC a reference to the constitutive elements of the infringing activity, and to the infringer’s subjective element. For the Court, it is much more logical to link the aside of Article 125(3) to Article 125(1) and (2), and thus argue that the disgorgement of profits can be claimed whether it is made an “analytical” quantification pursuant to Article 125(1), or a “global” quantification pursuant to Article 125(2).

The Court also weighed the fact that if the legislator had wanted to introduce such a revolutionary element in our system, by creating a case of strict liability, it would have done it explicitly.

Lastly, according to the Court, the wording “restituzione degli utili” (disgorgement of profits) shall not be regarded as an institution conceptually and normatively distinct from the liquidation of damages, which, pursuant to Article 125(1) IPC, has not a purely compensatory purpose and expressly includes also the profits achieved by the infringer.

Therefore, the Court established the principle that, according to Article 125 IPC, the disgorgement of profits, exactly as the reimbursement of damages, cannot be awarded regardless of the assessment of the infringer’s fault, which, in the case at stake, were not found in respect to the retailer and the distributor.

A copy of the decision (in Italian) can be read here.

Headnote and summary: Luca Giove and Giulia Pasqualetto, Studio Legale Giove