Importance of Examination by Accounting Experts in Suits for Damages for Violation of Industrial Property Rights

For years there has been a healthy understanding that evidence of actual damages in suits for violation of industrial property rights is not required. This is not only because such damages are difficult to prove, but also because, despite the competitor’s unfair conduct, the owner of the violated rights does not always suffer loss of profits.

In other words, the holder of the violated right is not always able to establish the causal connection between, for example, the loss of profits and the violating acts. In spite of the competitor’s unfair practices, the trademark owner may not actually record losses.

Without effective evidence of damages and the causal connection, many judges acknowledged that acts of unfair competition had been committed and ordered the violating parties to cease such practices, but stopped short of condemning them to pay damages, arguing that damages were not proven during the suit.

Given this difficulty, the understanding prevailed that the occurrence of violation itself is grounds for paying damages, the value of which is assessed in the award calculation phase. The courts no longer required evidence of damages in the prejudgment phase in order to condemn the offender to pay damages. The offender was ordered to pay damages, but the amount was assessed in another phase of the suit, when the award calculation was upheld in court.

Unquestionably this represented enormous progress, but it still left us somewhat frustrated, having to wait for the amount of damages to be established.

Recently, however, our expectations for complete client satisfaction were met in a suit the Firm handled. In it, we filed for damages from a competitor for violating trademark rights and practicing unfair competition. Compensation for material and moral damages.

In this case specifically, due to the circumstances, and particularly to the fact that the client’s accounting records made it possible, we produced expert accounting evidence. With it we expected to be able to establish a figure corresponding to the facts concerning both the client’s and competitor’s manufacture and sale of the products involved.

With the expert evidence based on information from the records of both parties, it was possible to establish accurate values for damages for undue use of the trademark and for the practice of unfair competition. This allowed the judge to condemn the offender to pay an appropriate amount for material and moral damages.

This decision was naturally appealed by the defeated party, but it was unquestionably a notable precedent that opens up a new possibility in trademark violation suits where damages are claimed. It demonstrates that it is possible, based on the documentation of product sales figures, to establish a fair award for damages.