The Italian Supreme Court rules on the remedy of disgorgement of profits for Intellectual Property Right holders

Legal background

Article 125 of the IIPC, entitled “Compensation for damages and disgorgement of profits of the infringer” provides that:

1. “Compensation due to the damaged party shall be set according to the provisions of Articles 1223, 1226 and 1227 of the Civil Code, taking into account all of the pertinent aspects, such as the negative economic consequences, including lost profits of the owner of the infringed right, the profits achieved by the infringer, and in the appropriate cases, non-economic elements, such as the moral damage caused to the right owner by the infringement.

2. The decision on the compensation of damages may calculate them in a lump sum to be based on documentation of the case and on the assumptions deriving from them. In such case, the lost profits shall be determined in an amount not lower than the royalties which the infringer should have paid if he had obtained a license by the right owner.

3. In any case, the owner of the infringed right may request the restitution of the profits gained by the infringer, alternatively to the compensation for the lost profits or if they exceed such compensation".

The judgment

The Supreme Court addressed, for the first time, the two following questions:

a. The relationship between the IPR holder’s loss of profits and the disgorgement of the profits

The Supreme Court highlighted the sui generis nature of the disgorgement of profits, as it is both a compensatory remedy and a deterrent. The disgorgement of profits is based on unjust enrichment, where the IPR holder acquires the…