Case number: C04153414 (C-0375-15/11)
Court: The Collegium of Civil Cases of Riga Regional Court
Parties: SIA „VT EAST” v. Vaiņode Minicipality Council, SIA „WS”, SIA „Liepājas Celtnieks”, SIA „SK JUMTS”
Date: 12 March 2015
IP RIGHT(S) Designs
Arts. 8(1), 8(2), 12(1), 12(2), 48(1), 48(2), 481 Latvian Law on Designs (2004), Arts. 1635, 1640, 1644, 1645, 1770-1776, 1779, 1786 Latvian Civil Law, Arts. 93(1), 25017(1) Latvian Civil Procedure Law.
The claimant owns a design – a stand for green plants. Stands for green plants produced according to the design are erected in Liepāja, Square of Roses.
The claimant had found out that there were three flower stands, analogic to the claimant’s design but off-grade counterfeit, erected in Vaiņode. Vaiņode Minicipality Council is the contracting authority who had ordered improvement of the area where the counterfeit stands were erected. SIA „Liepājas Celtnieks” did the improvement works and ordered SIA „SK JUMTS” to produce the flower stands according to the sketch it had submitted. SIA „SK JUMTS” produced the stands.
The claimant brought a claim to the court regarding the above-mentioned design infringement, requesting a final injunction (to forbid the use of the three stands for green plants), real damages and moral damages from SIA „Liepājas Celtnieks” and SIA „SK JUMTS”, and moral damages from Vaiņode Minicipality Council.
Moral damages 450 EUR: 300 EUR from SIA „Liepājas Celtnieks” + 150 EUR from SIA „SK JUMTS”.
The case concerns the issue of liability and guilt – which persons are liable for the design infringement. The Court held that this issue had to be considered according to the Civil Law rules. The Court found both SIA „Liepājas Celtnieks” (as the buyer who ordered the stands) and SIA „SK JUMTS” (as the producer of the stands) guilty and liable for the infringement, because they had been grossly negligent. Both defendants are professionals and must know that products protected as design can be produced and used in the field. Therefore these two defendants are liable for damages resulting from the infringement.
Vaiņode Municipality Council (as the contracting authority who had ordered improvement of the area) is not liable for the infringement, because it had not acted illegitimately. Vaiņode Municipality Council as a buyer and SIA „Liepājas Celtnieks” as a contractor had concluded a contract regarding the improvement of the area, and there was a clause in the contract according to which the contractor had to perform the works in compliance with the law. Therefore Vaiņode Minicipality Council had grounds to rely on the contractor performing in accordance with the law. Vaiņode Minicipality Council is not liable for damages resulting from the infringement, as there is no guilt in its actions.
However, the Court held that the permanent injunction – a prohibition to use the three stands – was to be applied regardless of guilt, so the Court directed it towards all three defendants.
Regarding material (real) damages the Court pointed to the claimant’s duty to prove the existence of actual loss and its amount. The Court dismissed the claim for real damages as the claimant had not fulfilled this duty.
The claimant had requested material damages based on the value of the stands indicated in the invoice – as the defendants’ profits gained as a result of the infringement. Firstly, the Court held that the value indicated in the invoice was not to be regarded as the defendants’ profits. Profit is the positive difference between the income and the expense. Therefore the expense incurred by the defendants were to be taken into account, but it had not been done by the claimant. Secondly, the Court found no motivation in the claim regarding the issue how exactly the presumed defendants’ profits could be used for calculation of the claimant’s real damages (a loss of its actual property or its anticipated profits). A right-holder may claim only his actual loss and may not request an account of an infringer’s profits that are not directly linked with the actual loss born by the right-holder. [See this issue in more detail in the summary of the case No C04375909 (PAC-0070/2013).]
Regarding immaterial (moral) damages the Court explained that such damages can be in a form of damage to a company’s reputation. If people associate off-grade counterfeit products with a design owner, this can harm the design owner’s reputation and may entitle him to moral damages.
The Court pointed out the functions of the compensation for a moral damage – justice, prevention and satisfaction, and the prerequisites for apportionment of moral damages – the duration of the infringement, the graveness of the infringement, the nature of the infringement, the consequences of the infringement and the level of the infringer’s guilt. In the design infringement cases it is important to determine the amount of people who could have associated the counterfeit products with the design owner, because it shows the amount of loss of his reputation.
This is the only design infringement case during the past few years that has been seen on the merits, and where the Court has found an infringement and has explained the prerequisites for granting damages.
The case shows a trait characteristic to Latvia that sums of awarded damages are usually rather small. The reason is the small market and the small number of people who can come across infringing goods. There are only 1840 inhabitants in Vaiņode where the counterfeit stands were erected, and it not well geographically positioned – it is not crossed by transit routes or popular tourism routes.