The Federal Civil and Commercial Court, Circuit III, has recently issued a decision in the case “Basic Trademark S.A. and other v. Ka Argentina S.A.”, which claimed the cease of the unauthorized use of the trademark “KAPPA” and the corresponding compensation for the damages generated.
The District court recognized the unauthorized use of the trademark rights of the plaintiffs, Basic Trademark S.A. and BasicNet S.p.a., and ordered the cease of the use of the trademark and its design, as well as of the homonymous trademark, in the manufacture, commercialization and other related acts. Furthermore, the Court ordered the destruction of the seized products and held the defendants KA Argentina S.A. and Arturo Alacahan, jointly and severally liable for the payment of AR$ 1,500,000 (approximately U$D 1,225 at the current exchange rate) as compensation for damages. However, this decision was appealed by both parties respectively.
The defeated parties challenged the following aspects of the decision: they claimed that the date stipulated in the settlement agreement as a limit to the commercialization of KAPPA products (December 31, 2013) was subject to the prior distribution of the goods that had already been purchased from authorized suppliers. They also challenged the quantification of the damage as excessive, described the interest rate applied as arbitrary, and requested a different destination for the seized merchandise. On the other hand, the plaintiffs considered the amount recognized as damages to be insufficient.
The Court of Appeals modified the District’s court ruling with respect to the amount set for damages. In this sense, the Court emphasized that the co-defendants could not ignore the terms and conditions established in the settlement agreement between the parties. According to the agreement, it was agreed that KA Argentina S.A. must stop selling Kappa brand products no later than September 30, 2013, allowing the continuation of sales in its stores until December 31, 2013; this term was not respected.
Among the arguments reiterated by the Court of Appeals, it was emphasized that the mere infringement of a trademark right, standing alone, is not enough to justify a claim for damages; rather, the existence of actual damage is a necessary element for establishing liability. The Court further acknowledged the challenges in drawing a direct link between the unauthorized use of a third party’s trademark and measurable financial loss—a difficulty that has prompted courts to accept presumption of damage in certain cases, aimed at ensuring that unlawful conduct does not go effectively unpunished.
Finally, the Court endorsed the prudential criterion in the determination of the compensation, in view of the lack of accurate accounting records by the plaintiff with respect to the operations carried out with the Kappa trademark between September 2013 and August 2014. Considering that the uncontested accounting expert report only offered indications of the damage, and that sales for AR$7,283,608 (U$D 5,946) were accredited between January and June 2014, the Court awarded damages in the amount for AR$2,500,000 (U$D 2,041), reflecting the harm caused by the defendants.
This decision of the Court of Appeals reaffirms that the mere infringement of a registered trademark is not sufficient to justify a compensation claim, but it is required to prove a particular damage as an assumption of liability.
