6 Key Features of Liability for Non-contractual Damages Compensation in Vietnam due to Infringement of Intellectual Property Rights Compared to Liability for Non-contractual Damages in the Civil Code

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General Concept of Liability for Non-contractual Damages

Compensation for non-contractual damages originates from the constitutional principle saying that human rights, civil and political rights are respected, protected and ensured under the Constitution and laws. This constitutional principle is again reaffirmed in Article 2 of the 2015 Civil Code stating that civil rights are recognized, respected, protected and guaranteed under the Constitution and laws that can only be limited in accordance with the law in case of necessity for reasons of national defense and security[1].

Civil rights can be established by many different bases, including the establishment based on the result or fruit of labor, production, and business, or of the creation of an intellectual property object, or establish based on the incident damaged by illegal acts caused by others[2]. Therefore, compensation for non-contractual damages is one of the legal sanctions that protect civil rights from being infringed upon, in particular, the party claiming damages and the party being requested for compensation is not bound by any contractual relationship.

When civil rights are violated, individuals and legal entities have the right to use legal methods that are recognized by law to ensure that civil rights are respected and protected. One of the violations of civil rights protection is to claim damage according to the principle of full compensation for damages unless otherwise agreed by the parties or provided for by law. The bases for giving a rise liability of compensation for non-contractual damage are deemed established when other subjects committed acts of infringing upon lives, health, honor, dignity, prestige, property rights and legitimate interests against others having civil rights and have caused physical and/or mental damages.

According to Resolution No. 03/2006/NQ-HDTP of the Council of Justices of the Supreme People's Court, the claimant must prove all four factors:

(a) There must be damage occurred (may be physical damage or/and mental damage)

(b) It must be illegal act.

(c) There must be a causal relationship between damage happened and unlawful acts. Damage must be the inevitable result of illegal acts and vice versa illegal acts are the cause of damage.

(d) There must be intentional or unintentional errors of the person causing the damage.

6 Key Features of Liability for Non-contractual Damages Compensation in Vietnam due to Infringement of Intellectual Property Rights

As mentioned above, because the creation of an object of intellectual property right also gives rise to civil rights, the subject of civil rights to the subject matter of intellectual property rights must also be protected by legal instruments, particularly, by exercising the right to claim damages outside the contract when such intellectual property rights are violated.

However, due to the peculiar nature of intellectual property, ie. different from other types of tangible assets in that intellectual property rights exist in intangible form, making those rights become a right in personam[3] rather than a right in rem, meaning the right to possession (one of three constituent elements of ownership rights: possession, use and disposition) is almost non-existent in intellectual property rights per se (eg. invention, industrial design, geographical indication, trademark, copyright, related rights, etc.), then it is necessary for the liability for recovering non-contractual damages related to infringement of intellectual property rights to be separately prescribed in the Law on Intellectual property at Articles 202 to 205 to match that particular characteristic.

The Vietnamese IP Law identifies the damage caused by an infringement of intellectual property rights similar to the rule of determining damages of general liability for damages as defined in the 2015 Civil Code as stated above, in particular includes: (a) physical damage (loss of assets, decrease in income, profit, loss of business opportunities, reasonable costs to prevent and remedy of damages), and (b) mental damage (loss of honor, dignity, prestige, reputation and other mental losses caused to the author of literary, artistic and scientific works; performer, authors of inventions, industrial designs, layout designs, plant varieties).

In order to help you quickly identify the legal characteristics of the regime for claiming non-contractual damage compensation related to infringement of intellectual property rights, we summarize below 6 key legal aspects:

1. The infringement of any intellectual property rights that are protected by Vietnam may lead to the formation of a right to claim damages. Thus, the scope of objects of intellectual property rights as a basis for claiming damages is very wide, potentially including exclusive rights based on the grant of protection titles such as patents for inventions, utility solutions and industrial designs; certificates of integrated circuit layout design, of plant varieties, of trademarks, of geographical indications; and exclusive rights based on not having to register, namely right to well-known trademark, trade names, business secrets (trade secrets), anti-unfair competition, copyright and related rights (neighboring rights).

2. The factor of above-mentioned damage caused associated with the liability for non-contractual damage compensation mentioned above shall be clearly demonstrated to have included the actual physical or mental loss caused directly by the infringement, whereby the actual loss is accepted merely when three grounds are proved:

(a)        Material or spiritual benefits are real and belong to the right holder;

(b)        The right holder can achieve the benefit (a) as said above

(c)        There is a decrease in or loss of benefits of the right holder after the act of infringement occurred in comparison with the ability to gain such benefits without infringement and infringement is the direct cause of the reduced or lost that.

3. The burden of proof in terms of the actual loss and its extent of damage lays on the claimant, wherein it is worth noting that the extent of damage must be determined in conformity with the infringing element against a particular intellectual property right. Evidences of damage provided may include the expert opinions on actual loss, and/or a table listing out types of damages in which the basis for determining and calculating the damage shall be made correspondingly. While proving that one’s no-fault statement shall belong to the party who is required to pay damages.

4. Regarding compensation for material damages, the claimant (plaintiff) has the right to choose one of the following three methods to ask the court to force the at-fault party (defendant) to pay compensation in cash:

(a)        Gross material damage is calculated in monetary amount plus profit that the defendant has obtained due to an infringement of intellectual property rights, if the plaintiff's reduced profits have not been accounted for in the gross material damage.

(b)        Price of transfer (license) of the right to use an intellectual property object with an assumption that the defendant is licensed by the plaintiff to use that IP right under a license contract of which the extent corresponds to the infringing act committed.

(c)        Where it is impossible to determine the level of compensation for material damage under the points (a) and (b) above, the amount of compensation shall be decided by the court, depending on the extent of damage, not to be more than VND 500 million (roughly US$22,000).

5. As far as the claim for mental compensation is concerned, the plaintiff may also ask the court to force the defendant to compensate for mental loss within the limit of VND 5 million to VND 50 million (US$220 - 2,200), depending on the extent of mental damage proved and acceptable to the court.     

6. In case of claiming for reimbursement of reasonable costs paid for prevention and remedy of damages, the court can grant that the defendant has to pay the attorney's fees and other costs such as seeking expert opinion and other expenses such as temporary seizure, preservation and storage, expenses for implementing temporary emergency measures, reforming notices on mass media, expenses for remedying and preventing infringement.

Should you have any query, please get in touch with us at vinh@bross.vn or 84-903 287 057

 Bross & Partners, a renowned and qualified Patent, Design, Trademark and Copyright agent of Vietnam, constantly ranked and recommended by the Managing Intellectual Property (MIP), World Trademark Review (WTR), Legal 500 Asia Pacific, AsiaLaw Profiles, Asia IP and Asian Legal Business, is providing clients all over the world with the reliable, affordable contentious and non-contentious IP services including enforcement, anti-counterfeiting,  litigation regarding trademark, trade name, industrial design, patent, copyright and domain name.