License analogy as the basis for calculating damages after copyright infringement: Regularly in the case of copyright infringement, someone wants to calculate damages using the so-called license analogy. The idea behind this license analogy in German law is that the infringer of a right should not be in a better position than the lawful user – and is then treated as if a proper license had been concluded, which of course must be remunerated. But how is this license measured?
In everyday life, I often encounter laypersons, but also lawyers, who obviously do not know the details of the license analogy. Rather, they tend to confuse the calculation of damages with the schematic application of some remuneration guidelines. However, this is not how it works. In the following, some explanations on the application of the license analogy in copyright law.
The license analogy in copyright law
Even if the schematic application of remuneration guidelines is particularly simple and also quickly very attractive for the infringed party, this approach fails to recognize that the license analogy is based on the idea that a fictitious contract is to be taken as a basis, which is oriented to what an objective licensor would have agreed with an objective licensee for this case (constant case law of the Federal Court of Justice, in this respect I ZR 6/06, I ZR 59/88 and I ZR 106/73).
This is because, according to the method of calculating the license analogy in accordance with Section 97 (2) sentence 3 UrhG, the infringed party may, after a copyright infringement, apply what reasonable contracting parties would have agreed upon, given knowledge of the current factual situation (see, in summary, BGH MDR 1990, 968). Sufficient evidence of one’s own licensing practice must be provided if this is to be taken into account.
It must not be forgotten that the interest of the infringer must also be taken into account in this purely objective consideration, at least indirectly in the question of what an objective third party would agree. The ultimate criterion is always the objective value (BGH, I ZR 6/06):
When calculating the amount of damages to be paid by way of license analogy, it must be asked what reasonable contracting parties would have agreed as remuneration for the acts of use performed by the infringer. The objective value of the right of use is to be determined. It is irrelevant whether and to what extent the infringer himself would have been willing to pay remuneration for his acts of use (…) In connection with the unauthorized use of a photograph on the Internet, the intensity of the use, in particular its duration, and the quality of the photograph will be relevant (…)….) If this is objectively connected with an increase in the economic value of the use of the image, the effort required for the creation of the photograph will also have to be taken into account (…) Significant importance is attached to the rightholder’s own licensing practice enforced on the market at the time of the act of infringement.BGH, I ZR 187/17
The Regional Court of Cologne (14 O 88/14) summarizes the license analogy:
Pursuant to Section 97 (2) sentence 3 UrhG, the claim for damages can be calculated on the basis of the amount that the infringed party would have had to pay as reasonable remuneration if he had obtained permission to use the infringed right. In this context, the calculation of the relevant objective value of the right of use shall be based on what reasonably thinking contracting parties would have agreed upon as remuneration for the acts of use performed by the infringer (cf. BGH GRUR 1990, 1008, 1009 – Lizenzanalogie; GRUR 2006, 136 Rn. 23,26 – Pressefotos; OLG Brandenburg, GRUR-RR 2009, 413 – MFM-Bildhonorartabellen; OLG Braunschweig GRUR-RR 2012, 920, 922; OLG Köln, Urt. v. 01.03.2013 – 6 U 168/12).
This depends on the entire essential circumstances of the individual case (cf. BGH loc. cit. marginal no. 26). The amount of the license fee to be paid must be determined by the trial judge in accordance with Section 287 of the German Code of Civil Procedure (ZPO), taking into account the particular circumstances of the individual case and according to his own free conviction (see BGH judgment of April 29, 2010 – I ZR 68/08 – Restwertbörse I). However, it is not decisive whether the infringed party itself would have been willing to pay remuneration for its acts of use (cf. BGH NJW-RR 1995, 1320, 1321; OLG Braunschweig loc.cit.) and what value the infringed party subsequently attaches to the act of use.
Furthermore, insofar as the party seeking damages provides evidence that it actually concluded license agreements in the period in question in accordance with a remuneration model offered by it, it is irrelevant whether the listed license rates and other conditions are generally customary and reasonable. The very fact that license agreements are concluded in this way justifies the conclusion that reasonable contracting parties would have agreed on a corresponding remuneration if the license had been granted contractually (BGH GRUR 1987, 36 (37) – Liedtextwiedergabe II; BGH GRUR 2009, 660 (663) marginal no. 32 – Reseller contract; OLG Karlsruhe, GRUR-RR 2014, 55 – Schadensberechnung, cited in juris marginal no. 63).
Recourse to remuneration tables in the case of license analogy
There are tables that attempt to summarize remuneration customary in the industry. These remuneration tables, which are often used, are orientation values – but they do not help to check what would have been agreed in the individual case. The court involved is free in its assessment of the evidence and estimates the amount of the remuneration in accordance with §287 ZPO (BGH, I ZR 132/60; Münchener Anwaltshandbuch, Medien- und Urheberrecht, §34, Rn.102). In this case, there is always the risk for both sides that the judge will deviate considerably from their own ideas – and that they will be “stuck” with the costs of the proceedings.
In the end, the concrete form of use, frequency, type of media used and the economic interest of the parties involved must be taken into account (BGH, I ZR 132/60). Especially the latter, the directly achieved pecuniary advantage, is a criterion to be particularly taken into account and can lead to a considerable reduction of the payment in case of a small financial advantage (BGH, I ZR 125/10).
Conclusion on the license analogy in copyright law
As a result, I would like to summarize: Simply adding up some fanciful figures from remuneration tables is not a calculation based on the license analogy. Besides, it would require neither relevant experience nor legal training if it were that simple. Lawyers who issue warnings are well advised to protect themselves and not to demand fantasy figures that are certainly impressive to their own clients: The rude awakening threatens quickly.
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