How is compensation for copyright infringement determined in the Netherlands?

A dispute about copyright infringement goes beyond establishing that the copyrights of the copyright holder have been infringed. The next step is of course that the infringer must compensate the damage suffered on the part of the copyright holder. But how is such compensation assessed? Attorney Hidde Reitsma explains this subject by a recent judgement.

Legal relationship between disputing parties

Siemens is the developer of the software program ‘NX’, which is used for ‘3D modelling’. This NX Software consists of various modules that can be purchased separately. Siemens had commenced substantive proceedings against four parties that were jointly referred to as ‘ATG’. A commercial relationship already existed between Siemens and ATG, in which ATG purchased modules from the NX Software and had acquired the relevant licenses (= user rights). In 2013, they had discussed the licensing of one of the modules, namely the NX3 module. Eventually, ATG abandoned it.

Infringement of copyrights on NX Software established

Siemens had installed a security mechanism in the NX Software that signals the presence of illegal copies. Early 2017, Siemens received a notification from ATG’s corporate network that an illegal copy had been detected. Shortly afterwards, Siemens imposed a prejudgment garnishment on all infringing items and seizure of evidence against ATG. Illegal copies of versions 9 and 10 of the NX Software were found on the seized data carrier.

Infringing action acknowledged

ATG acknowledged the infringing action. It turned out that one of its employees had installed a hacked version of the NX Software package on their computer in 2015. ATG indicated that this employee was only interested in the NX3 module and had only used it for a total of 20 hours. As an employer, ATG has strict liability for damage caused by its employees to third parties.

Quarrel about level of compensation

ATG offered to pay in compensation once the license fee for the NX3 module and twice an annual maintenance fee and then to double this total amount. This amounted to approximately €54,000. However, Siemens claimed a license fee for the entire NX Software package, as the illegal copy provided access to all modules. According to Siemens, as two versions had been found, the compensation payable should amount to twice the license fee for the entire NX Software package, an amount of approximately €454,000. Also, there would be reputational damage and costs incurred in determining the damage.

Dutch guiding principle of actual damage

The Dutch court stated that, in general, the guiding principle of compensation law is compensation of the actual damage suffered or to be suffered. This is a specific calculation of the damage that entails a comparison between the situation as it actually is and as it would have been if the event giving rise to the damage had not occurred. If its extent cannot be accurately determined, it has to be estimated. As a specific calculation is often complicated in cases of copyright infringement, the court may also determine a fixed amount in damages. These are abstract damages.

Determination of compensation for copyright infringement

When determining damages in cases of copyright infringement, all the circumstances of the case should be taken into account, such as the loss of income incurred by the rightsholders, the unlawful profit made by the infringer, and the non-material damage caused by the infringer. Alternatively, the amount of compensation can also be derived from elements such as the amount of the royalties or fees that would have been due if the infringer had requested permission.

Compensation and reputational damage

In this case, the Dutch court deemed that the damages claimed by Siemens ignored the guiding principle of the loss estimate, namely that the actual damage should be compensated. Siemens was therefore awarded compensation of once the license fee and twice a maintenance fee for a total of approximately €30,000. There did not appear to be a causal link to be able to establish reputational damage. However, costs for determining the damage and payment of the costs of the action, including the attachment costs, were awarded, which ultimately amounted in total to the amount previously proposed by ATG to Siemens.