The Court of Justice of the European Union (hereinafter “CJEU“) has recently delivered a judgment that redefines the method of compensation for damages resulting from the unauthorized planting of a protected plant variety (Judgment of 16th March 2023, Case C-522/21).
The case examined by the court arose from a claim for damages brought by STV, a grouping of holders of protected plant varieties, against a farmer, who was accused of having planted without authorization a variety of winter barley KWS Meridian, protected under Regulation (EC) No. 2100/94.
In fixing the compensation, the German court that examined the case considered the validity of Article 18.2 of Regulation (EC) No 1768/95 (which implements Regulation (EC) No 2100/94). This article provides that a farmer who has repeatedly and intentionally failed to pay fair remuneration to the holder of the protected plant variety may be liable to pay compensation equivalent to at least “a lump sum calculated on the basis of the quadruple average amount charged for the licensed production”. In view of this situation, the court referred a question to the CJEU for a preliminary ruling on the validity of the aforementioned article.
For the CJEU, the fixing of a lump sum as compensation infringes Article 94.2 of Regulation (EC) No 2100/94, which provides that a person who commits an infringement, whether intentional or negligent, is obliged to compensate the owner for the damage caused and that, in the case of slight negligence, the right to compensation may be reduced accordingly.
The purpose of Article 94.2 is to financially compensate the owner of the plant variety for the advantage unlawfully obtained by the infringer, which can be quantified in the amount of the license fee for the use of the protected plant variety that has not been paid (hereinafter, the “Reasonable Compensation“). Therefore, the right to compensation provided for in Article 94.2 is based on an objective basis, such as the damage actually caused, and thus this article cannot be used to impose a flat-rate surcharge for infringement that does not correspond to that effective damage. In other words, Article 94.2 does not provide for compensation for damages other than non-payment of the license fee.
Moreover, for the CJEU, the burden of proof to demonstrate that the damage suffered is greater than that covered by the Reasonable Compensation lies with the holder of the variety. The amount of the royalty cannot by itself justify a higher compensation, since it is not necessarily related to the damage caused.
The court considers that it is for the judge hearing the case to determine how the damage alleged by the owner must be proved and whether or not a lump sum should be fixed to supplement the reasonable compensation for the purpose of making full reparation for the damage caused. Otherwise, the owner would not be obliged to prove the damage suffered, but only the existence of a repeated and intentional infringement of his rights, which could result in excessive compensation.
In other words, the fixing of a lump sum as compensation would constitute a presumption iuris et de iure of the existence of a damage greater than that derived from the non-payment of the license fee and would limit the judge’s power to fix compensation in accordance with the damage actually suffered by the owner, since the judge could only increase the minimum amount fixed by Article 18.2, but never reduce it, even when it is evident that the damage produced is less than that resulting from applying said article.
For all of these reasons, the CJEU declared Article 18.2 of Regulation (EC) No. 1768/95 null and void.
Joan Lluís Rubio
Vilá Abogados
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31st of March 2023
