Counterfeiting and quantification of a damage: even if the conduct is not culpable, the retroversion of profits is applied

With order published on July 18th 2023 (n. 20800/2023) the Italian Supreme Court of Cassation retraces the calculation criteria to be applied in the quantification of a damage compensable by the infringer, even when the activity of counterfeiting is not culpable.

The case

The Court examined an issue concerning the amount of compensation to be recognized to the owner of the right on a trademark infringed by two companies.

In brief, the owner of the trademark licensed it to a first company which – infringing the time and territorial limits of the license – sublicensed it to a second company, completely unaware of the limits imposed by the first license.

In the first two stages of the proceeding, both licensee companies were sentenced to ­the compensation of the damage due to the unlawful use of the trademark and, for both, such damage was quantified by applying the criterion of retroversion of profits.

The judgement before the Supreme Court focused mainly on the cross-appeal brought by the sublicensee company. The latter claimed in fact that – not being culpable of counterfeiting – only a restitutive criterion could apply in the determination of the compensable amount and not a compensatory one.

The irrelevance of the subjective element in the determination of the compensatory quantum

By commenting on the appeal of the not-culpable company, the Court stated that, pursuant to art. 125 of the Intellectual Property Code, the owner of the infringed private property can ask for the restitution of the profits earned by the author of the infringement, without having to prove its intent or fault.

Therefore, the infringer, despite having acted in absence of the subjective element, must return the profits earned through the infringement to the owner of the rights.

Moreover, retracing previous case-law orientation on the matter, the Court recalled that the mechanism of the damage quantification provided for in art. 125 of the Intellectual Property Code has a composite character, because it is a restitutive type of remedy inspired by compensatory, dissuasive and deterrent logics.

In fact, the mentioned law states that “in any case” the owner of the infringed right may ask for the restitution of the profits earned by the author of the infringement, in alternative to compensation of lost profit or in the measure in which they surpass the compensation for lost profit. In this way, beside the missed earning, the owner of the right can ask for the restitution of the benefits that s/he would not get even in absence of the infringement because, being less equipped or less efficient than the unfair and illegitimate competitor, s/he could not have been able to operate on the market in the same way.

The law aims to prevent the counterfeiter from gaining profits from his own wrongdoing and from planning profitable counterfeiting activities: if the owner of the infringed right were to be recognized only the right to compensation for the loss of earning, some operators could anyway organize a beneficial counterfeiting activity taking into account their obligation to compensate the owner of the missed earning because they could count on the profit constituted by the difference between the loss of earnings (to compensate) and its own greatest profit (which they could retain).

On the basis of such considerations, the Court did not accept the argumentations of the not culpable company, restating that the measure of the restitution of the profits is independent from the culpable or malicious conduct of the counterfeiter.


Ilaria Feriti