UKIPO consultation: Statutory damages for IP infringement?

Quick read

The UK Intellectual Property Office (UKIPO) is consulting on the current IP enforcement framework.

While relatively general in scope, the consultation covers one specific (and important) question about the possible introduction of statutory damages for IP infringement.

If introduced, this could have a significant impact on the IP enforcement landscape in the UK. Responses to the consultation should be made using the proposed response form and submitted via email by 11:45am on 2 November 2020.

What's being proposed?

The UKIPO has identified three key areas for review:

the cost of legal challenges
the accessibility and effectiveness of the judicial process, and
potential improvements to the Small Claims Track of the Intellectual Property Enterprise Court (including extending the latter so that it covers registered designs).

It's clear that the UKIPO is particularly concerned about the utility of the current system for small rightsholders. Included within the section on "suggested remedies" is a question about the possible introduction of statutory damages for IP infringement (including copyright, trade mark and design infringement).

How will this affect rightsholders?

At present, claimants have two options for claiming compensation for IP infringement:

damages (the level of loss suffered by the claimant as a result of the infringement, often calculated as a notional licence fee), or
an account of profits (the level of profits enjoyed by the defendant as a result of the infringement).

Both can be complex to calculate. Where there is "knowing" infringement, the Enforcement Directive provides a different approach, which seemingly merges these two options and allows non-economic factors (such as the moral prejudice caused to the rightholder by the infringement) to be taken into account.

Interestingly, the UKIPO's consultation does not mention the Enforcement Directive. This might suggest a desire on the part of the UK (also reflected in the UK's proposed Free Trade Agreement with the EU) to move away from the Enforcement Directive's approach once the Brexit transition period is over.

The introduction of statutory damages would give claimants another option and one which would mean that they do not necessarily need to provide details of their loss. This is because statutory damages are usually awarded per individual infringement (sometimes with a set maximum amount that can be awarded).

Depending on how the scale of statutory damages is set, this can lead to relatively large pay-outs. This is particularly so for online copyright infringement which often involves a large number of individual infringements. It can also result in increased numbers of claims as claimants have a better understanding of the likely level of potential damages they can seek and do not need to prove loss. However, for the same reasons, it can also make claims easier to resolve without the need for litigation (albeit, often at a higher cost).

Despite the risk of increased pay-outs, it should be noted that the consultation does not mention the system of statutory damages for willful infringement in the USA. Rather, it refers only to the systems in other common law jurisdictions such as Canada, Israel, Malaysia and Singapore. It therefore does not seem to extend to the types of statutory additional damages which often lead to very significant pay-outs in the USA.

While legislation is unlikely for some time, this is clearly an important consultation.