Jul 18, 2024 | Recovering losses from Infringer
1 If the owner of the intellectual property (plaintiff) is successful against an infringer in its lawsuit in Hong Kong, the plaintiff will obtain the following orders from the Court:-
Permanent Injunctions;
Delivery up orders;
Disclosure orders;
Damages orders; and
Order for legal costs.
2 The above orders for damages and legal costs allow the plaintiff to recover damages and legal costs from the infringer (defendant) after litigation. As the name of the order suggests, the former will enable the plaintiff to quantify and recover damages, such as the loss suffered by infringement. This article will explain the procedures for recovering damages and how to calculate the quantum of the damages.
3 Unless the cause of action of the lawsuit involves copyright infringement, the Court will issue the following damages order after ruling in favour of the plaintiff:-
“The Plaintiff be at liberty to elect between an inquiry as to damages and an account of profits in respect of the defendant’s infringement within 21 days of the defendant’s full compliance with the disclosure order”
4 If the lawsuit involves copyright infringement and the plaintiff can prove that the defendant knowingly committed infringement, the Court may tend to grant an “additional damages” order to the plaintiff as follows:-
“The Plaintiff be entitled to additional damages under Section 108 of the Copyright Ordinance, Cap. 528, and the quantum to be determined by the Court in the damages assessment proceedings”
5 It is difficult to quantify damages that have not occurred. Even so, the Court will accept the plaintiff’s application, but the plaintiff will need to provide evidence. Speaking to experience, some of the factors that the Court will consider when calculating damages are:-
The number of infringing products sold by the defendant;
The plaintiff’s profit per product sold;
The plaintiff’s loss of customers due to the defendant’s infringing activities;
The time and costs spent by the plaintiff on the case; and
The severity of the infringing acts of the Defendant.
6 To start the process of recovering damages, settlement may first be reached by negotiations with the defendant and/or its legal representatives. If unsuccessful, the plaintiff should initiate separate court proceedings by means of an Originating Summons for damages assessment proceedings. Generally speaking, the process for recovering damages through the Court are divided into the following 3 stages:-
Pleadings stage – the plaintiff and the defendant will file into Court their respective Points of Claim and Points of Defence;
Evidence stage – the plaintiff and the defendant will submit their evidence to the Court to support their complaint and defense respectively; and
Hearing stage.
7 Under normal circumstances (no additional applications by either party), the damages assessment proceedings may be completed within one and a half years.
8 Because the defendant loses in the main lawsuit, the Court will order to the defendant to pay the plaintiff’s legal costs. Therefore, the plaintiff’s legal costs for the damages assessment proceedings will also be paid for by the defendant.
9 In some cases, the damages assessment proceedings will require the assistance of an independent expert. The Court will accept independent expert evidence, but the plaintiff should ensure the following:-
The independent expert has experience and relevant academic qualifications in the subject matter; and
The independent expert will give his/her opinion in an independent capacity.
10 In practice, after the plaintiff and the defendant exchange evidence, they will usually settle based on the evidence in hand. There are many cases that settlement is reached during the exchange of evidence. For the defendant, early settlement will avoid further legal costs from being incurred on both sides. For the plaintiff, unless he is satisfied with only an injunction against the defendant, the plaintiff should continue to claim for damages against the defendant, because the costs (generally speaking) will also be paid for by the defendant, and initiating damages assessment proceedings to recover damages from the defendant is an effective way to sanction the defendant for his infringing acts.