By judgment of 16 March 2023 (ref. C-522/21), the CJEU declared invalid Article 18(2) of Commission Regulation (EC) No 1768/95 of 24 July 1995 establishing implementing rules on the agricultural exemption provided for in Article 14(3) of Council Regulation (EC) No 2100/94 on Community plant variety rights, as amended by Commission Regulation (EC) No 2605/98 of 3 December 1998.

Pursuant to the cited provision, in the case of repeated and wilful failure to comply with the obligations pursuant to the fourth subparagraph of Article 14(3) of Regulation [No. 2100/94] in respect of one or more varieties belonging to the same holder, the liability to compensate the holder for further damage pursuant to Article 94 para. 2 of Regulation [No. 2100/94] shall include at least a lump sum calculated on the basis of four times the average amount charged for the licensed production of an analogous quantity of propagating material of protected varieties of the species concerned in the area concerned, subject to compensation for any greater damage. The referring court considers that the decision which it is required to make depends exclusively on the validity of the provision at issue.

This provision was challenged  by a German court in connection with pending proceedings. Following one of the parties, it argued that it was not permissible to “allow the holder to be awarded punitive damages on a lump-sum basis equivalent, in the present case, to quadruple the fee due for licensed production (‘the licence fee’).”

The CJEU upheld the court’s reasoning and invalidated the disputed provision. It emphasised that “the extent of the compensation payable under Article 94 must reflect, as accurately as possible, the actual and certain damage suffered by that holder because of the infringement”. Thus “the amount of the licence fee cannot in itself form the basis for determining that damage”. The Court also added that the provision as it stands limits any discretion available to the court considering the case.

Comment:

The judgment that has been handed down also seems relevant from the perspective of other provisions that may contain similarly shaped sanction fees. The CJEU has indicated that such a standardisation of liability for damages is incompatible with EU law. Thus, the judgment discussed here may constitute an important argument in other cases where a provision assuming the existence of a sanction fee would also be the basis of the judgment.