Vietnam: Claiming Damages In IPR Lawsuits In Vietnam: Key Considerations & Strategies

1. Intellectual property rights (IPRs) are critical in protecting innovation and creativity, yet enforcing these rights can be challenging, particularly in developing countries like Vietnam. While civil enforcement is commonly used in many countries, statistics on IPR infringement and enforcement in Vietnam reveal that the majority of cases are resolved administratively. But why is this the case? The administrative mechanism is said to be more expeditious, compact, simple, and economical in handling IPR infringements than the lengthy trial, complicated, and costly procedures of the civil mechanism. Each year, thousands of IP infringement cases are handled administratively each year, only a few cases are tried by courts.

2. Despite the benefits of administrative mechanisms, recent trends suggest that Vietnamese courts are handling more cases concerning involving copyright, patent, trademark, and industrial design infringement through civil enforcement mechanisms. In this context, it is crucial to examine the current IPR dispute-resolution situation in Vietnam and explore ways to strengthen civil enforcement to protect IPRs effectively.

3. Based on our research of over 30 IP judgments in Vietnam, it is evident that the scope of lawsuit claims extends beyond merely preventing ongoing infringement and protecting the rights and interests of the plaintiff. Rather, the primary focus of the majority of intellectual property lawsuits is the claim for damages. It is worth noting that plaintiffs typically seek a substantial amount of compensation, ranging from several hundred million to billions of Vietnamese Dong. Below are some illustrative examples.

Some key takeaways

4. The dual goals of rights holders in IP infringement lawsuits: enforcement and compensation

In many if not most cases, a rights holder's decision to sue for infringement is in part motivated to sue to send a message not only to the defendant, but also to others, that he would act to enforce his registered right to stop infringing conduct. Hence, the rights holder's primary goal does not only target the defendant to prevent the latter from continuing to engage in infringing conduct. Apart from preventing infringement and harm to IP rights, another principal purpose of the rights holder when filing a lawsuit is to ask the court to force the defendant to pay a satisfactory damage. A damage is a form of civil liability aimed at forcing the party that causes damages to remedy the consequences by compensating for material and spiritual losses to the aggrieved party.

5. Calculation of damages in IP litigation in Vietnam: bases and methods

How are damages calculated in IP litigation in Vietnam? This question concerns the bases and methods of calculating damages provided under the laws of Vietnam.

The bases and methods of calculating damages caused by IPR infringement in Vietnam are specified in Article 205 of the Law on Intellectual Property and Clause 2, Section 1, Part 8 of Joint Circular No. 02/2008/TTLT-TANDTC -VKSNDTC-BVHTT&DL-BKH&CN-BTP dated 3/4/2008. Damages caused by acts of infringing intellectual property rights include: material loss and damages and spiritual damages. According to Article 205 of the IP Law, the court has two methods to determine the amount of compensation: (i) actual damages and/or (ii) statutory damages.

5.1. "Material Damage" - How to prove it under Vietnam's IP Law

The Vietnam IP Law provides for four distinct categories of material damage that a plaintiff may seek compensation for by petitioning a competent court. These categories include (i) property loss, (ii) decrease in income and profit, (iii) loss of business opportunity, and (iv) reasonable expenses for mitigating and remedying the material damage. It is important to note that all of these forms of material damage are eligible for compensation under the law, and plaintiffs are encouraged to pursue legal action to seek restitution in such cases.

5.2. Property loss - How to prove "property loss" in an IPR infringement in Vietnam

To establish a claim for "property loss" resulting from an intellectual property infringement, a plaintiff must clearly (i) state the in-cash value of the infringed IP objects at the time of the infringement and (ii) provide the bases for determining this value. This can involve a thorough analysis of factors such as the trademark's brand recognition, market demand, and potential for future profits. It is worth noting that in some cases, the value of the infringed IP objects may not be immediately apparent. For example, in cases involving patented technology, it may be necessary to engage an expert to determine the value of the patent based on factors such as its potential for licensing and the cost of developing similar technology. In such cases, the plaintiff may need to provide additional documentation and evidence to support their claim.

A plaintiff may use various ways to provide compelling evidence on the in-cash value of the infringed IP objects at the time of the infringement. These include utilizing historical sales data, comparing the object's value to industry standards, engaging an expert to provide testimony and evidence on the object's value, considering the cost of development of the IP object, and analyzing the object's potential future profits. By using historical sales data, the plaintiff can provide evidence of the object's value based on purchase price, sales, and appreciation or depreciation in value. The plaintiff can also use industry standards to establish a market value by comparing the value of the infringed IP object with other similar objects in the industry. Another way is to engage an expert to provide a comprehensive analysis of the object's value, who can be an industry specialist, financial analyst, or valuation expert. Additionally, the plaintiff can determine the object's value based on the cost of development, including research and development, manufacturing costs, and marketing expenses. Finally, the plaintiff can analyze the object's potential for future revenue, licensing opportunities, and market demand to establish its value.

This is particularly important in cases of trademark infringement, where the plaintiff must demonstrate the value of the trademark at the time of the infringement and the methods used to arrive at this valuation. In summary, establishing the value of the infringed IP objects is essential in proving a claim for property loss in IP litigation.

5.3. Decrease in income and profit - How to prove "decrease in income and profit" in an IPR infringement in Vietnam

To determine the extent of a plaintiff's reduced incomes or profits resulting from an intellectual property infringement, it is necessary to establish whether they earned incomes or profits before the infringement. Such incomes or profits may include (i) those earned directly from the use and exploitation of IP objects, (ii) those from the lease of infringed IP objects, and (iii) those from the licensing of IP objects.

Once the plaintiff's incomes or profits have been determined, the level of decrease can be evaluated based on the criteria specified in Clause 2, Article 18 of Decree No. 105/2006/ND-CP. These criteria include (i) directly comparing actual income and profits before and after the infringement, (ii) comparing the yields or volumes of products, goods, or services before and after the infringement, and (iii) comparing the actual sales price of the products, goods, or services on the market before and after the infringement.

To determine the extent to which a plaintiff's incomes or profits have been reduced, it is necessary to determine whether a plaintiff can earn incomes or profits prior to the commission of infringements.

In order to indicate that a plaintiff's income and profit has decreased, the following points are also statutorily accepted:

• If a plaintiff earns less income or profit after an infringement than before, the difference between the amounts is the actual decrease in income or profit.
• After determining the plaintiff's income or profit, it is essential to identify objective factors that may affect their increase or decrease but are unrelated to the IPR infringement to ensure an accurate determination of the actual income or profit decrease.
• If an IPR infringement occurs and the damage assessment reveals that the plaintiff's income or profit after the infringement does not decrease compared to before, but is still less than what they should have earned in the absence of the infringement, it is still considered a case of income or profit decrease.

5.4. Loss of business opportunity - How to prove "loss of business opportunity" in an IPR infringement in Vietnam

A business opportunity refers to a circumstance that is advantageous or a possibility to directly use or exploit, lease, license, or assign intellectual property objects for profit by the IPR holders to other parties.

To request a court to compel a defendant to pay for damages resulting from a loss of business opportunity, a plaintiff must present evidence proving a loss of business opportunity in one of the following four cases:

• The actual possibility of directly using or exploiting intellectual property objects in business. Specifically, under certain conditions, a right holder may be able to directly use or exploit an IP object in business (on the market for profit).

• The actual possibility of leasing IP objects (original cinematographic works or computer programs or copies thereof) to other individuals or organizations. More specifically, a right holder can lease an IP object to another party and has actually negotiated and agreed upon principal terms of a lease contract for the object. Under normal circumstances, the contract will be signed and performed if there is no infringement by a third party.

• The actual possibility of licensing or assigning IP objects to other individuals or organizations. More specifically, a right holder receives an order after making negotiations and reaching an agreement with a partner on principal terms of a contract. The contract will be signed and performed if there is no infringement by a third party.

• Other business opportunities that are directly lost due to an infringement, including opportunities for business entities to negotiate with partners, conduct business, or enter into cooperation in investment, marketing, advertisement, or trade promotion through international exhibitions or displays. These opportunities are lost because their intellectual property objects are appropriated by others.

In order to claim for compensations for loss in business opportunities, a court shall ask a plaintiff to clearly state and prove his/her lost business opportunities, which case they fall into and their in-cash value for consideration and decision.

In a case involving the unauthorized use of video lectures that was adjudicated in 2020 under appellate procedures at the People's High Court in Ho Chi Minh City, the plaintiff established the loss of business opportunity by providing documents demonstrating that a third party negotiated with the plaintiff for the purchase of 50 video lectures for 3,000,000 VND * 50 videos = 150,000,000 VND. Due to the defendant's infringement, the plaintiff was forced to halt negotiations with the partner.

However, after reviewing the plaintiff's submitted evidence, the Court of Appeal dismissed the plaintiff's claim for damages for loss of business opportunity. The court determined that the plaintiff's emails/documents did not establish that the two parties would enter into a 150-video sales contract or that this sales contract would not be performed due to infringement from the defendant.

Therefore, in order to request the court to determine the loss of a business opportunity, the plaintiff must provide documents/evidence clearly demonstrating that (i) that business opportunity is real, determined through specific agreements on prices for the exploitation and use of IP objects, clearly stating that the two parties will enter into an agreement and (ii) that business opportunity is lost or cannot be realized due to the infringement.

5.5. Reasonable expenses for prevention and remedy of damage:

Reasonable expenses for prevention and remedy of damage refer to costs incurred by the plaintiff to prevent or remedy damage caused by an act of infringement. Such expenses include temporary custody, maintenance, storage of infringing goods, costs of implementing provisional urgent measures, reasonable expenses for hire of assessment service, prevention and remedy of consequences of acts of infringement, and costs of notification and correction in the mass media relating to acts of infringement.

In a case involving the Vietnam Center for the Protection of Music Copyright (VCPMC) and unauthorized use of 34 musical works, the plaintiff requested VND 10,000,000 in travel expenses and human resources used in the lawsuit. However, the court determined that these expenses did not qualify as reasonable expenses for prevention and remedy of damage, as required by law. Consequently, the court dismissed the plaintiff's claim for compensation.

To prove "reasonable expenses for prevention and remedy of damage" in an intellectual property infringement case, the plaintiff should present evidence that demonstrates the expenses were directly related to preventing or remedying the damage caused by the infringement. This evidence may include invoices, receipts, or other documentation showing the cost of temporary custody, maintenance, or storage of infringing goods, as well as the costs of implementing provisional urgent measures, such as injunctions or restraining orders. Additionally, documentation of the cost of hiring an assessment service to evaluate the damage caused by the infringement can be presented. The plaintiff may also provide invoices, receipts, or other documentation showing the cost of preventing or remedying the consequences of the infringement, such as removing infringing content from the internet or repairing damage to a brand's reputation. Finally, the cost of notifying and correcting the infringement in mass media can be documented as well.

5.6. Spiritual damage - How to prove it under Vietnam's IP Law

Spiritual damage is caused by infringements of moral rights of authors of literary, artistic or scientific works; performers or authors of inventions, industrial designs or layout designs; harms to authors honor or dignity, or decrease in or loss of authors credit (prestige), reputation or confidence due to misunderstanding, etc., and compensations therefor must be paid.

In 2020, a case involving unauthorized use of video lectures was adjudicated under appellate procedures at the People's High Court in Ho Chi Minh City. The plaintiff petitioned the court to force the defendant to pay VND15,000,000 in compensation for spiritual damage. The plaintiff argued that they had to spend significant time and effort to find and prevent the infringement once it was discovered. However, the court rejected the claim for compensation for spiritual damage, citing Point 2.2, Section I, Part B of Joint Circular No. 02/2008/TTLT-TANDTC-VKSNDTC-BVH&DL-BKH&CN-BTP which stipulates that "Courts shall decide on compensations for spiritual damage when plaintiffs prove that infringements of intellectual property rights have caused spiritual damage to them. If plaintiffs cannot prove their spiritual damage, courts will not accept their claims".

5.7. "Actual loss" - How a plaintiff proves

To determine the amount of actual damages in an intellectual property infringement case, the plaintiff must establish the "actual losses" they have sustained and a causal link between the infringement and the damage caused. This means that the damage must result from an act that constitutes the cause of the violation or infringement to the plaintiff based on the following criteria:

• The total material damage, including "the profit obtained by the defendant" as a result of the act of IPR infringement, plus any reduced profit amount of the plaintiff that has not yet been included in such total material damage;
• The price of licensing an IP object, assuming the defendant was licensed by the plaintiff to use that object under a license contract within a scope corresponding to the act of infringement committed;
• Other material losses calculated by the intellectual property right holder in accordance with provisions of law.

For example, if a company's patented product was infringed upon, they may seek compensation for the total material damage caused, which could include lost sales and revenue, as well as the profits gained by the infringing party. Alternatively, they may seek compensation based on the price of licensing the patented product to the infringing party. The plaintiff may also seek compensation for other material losses, such as damage to their brand reputation.

While there are both specific and general regulations, establishing damage as a basis for compensation is not always straightforward. Due to the unique nature of intellectual property, there are numerous instances in which plaintiffs fail to establish damages or to fully determine the extent of "actual loss". For example, if the defendant continues to refuse to provide sales invoices despite the court's request, there is no way to determine the "profit earned by the defendant" under the formula: [Total turnovers of defendants are calculated on the basis of all invoices and vouchers on the sale or use by defendants of works infringing upon intellectual property rights of plaintiffs].

How can evidence of "the profits obtained by the defendant" be collated when the defendant is the holder thereof? The experience of a number of recent IP cases in Vietnam demonstrates that, in addition to in-depth investigation efforts, the right holder's preferred method of collecting evidence of infringement, including evidence establishing "the profits obtained by the defendant" to claim damages is to file a petition to handle the infringement under administrative procedures before filing a lawsuit in court. Administrative agencies such as the police and market management authorities are entitled to arrest infringing goods, immediately interrogate the infringers, and seize relevant books and accounting records if detected at the time of inspection/raid. This approach sometimes proves to be quite effective in establishing evidence of violation as the basis for asking the court in order to petition the court to compel the defendant to accept damages.

5.8. Statutory compensation for damage: Article 205.1 (d) of the IP Law provides that "Where it is impossible to determine the amount of damages for material damage on the bases stipulated in sub-clause (a) and (b) of this clause, such amount of damages shall be set by the court depending on the extent of loss but must not exceed five hundred million (500,000,000) dong". This provision on "statutory compensation" is detailed under the Joint Circular: 02/2008/TTLT-TANDTC-VKSNDTC-BVHTT&DL-BKH&CN-BTP stipulating that "The plaintiff shall prove that the determination of the level of compensation for the material damage in this case is impossible or the market for lawful goods is not enough to determine the plaintiff's damage based on the decrease in the sale turnover of the infringed goods after the infringement is committed, and request the court to apply the law-specified compensation level".

As a matter of practice, this statutory compensation mechanism is rarely accepted by the Court. In M Corp. (US) vs. Company H1, the plaintiff asked the court to force the defendant to pay a statutory damage of VND 500 million, however, this claim was rejected by the court, stating that "The plaintiff failed to establish specific damage, and thus the request to compel the defendant to pay the amount of VND 500 million is not accepted".

However, in two previous cases, Y Thien Company vs. Nha Quan Company for infringement of industrial design rights, Binh Duong Court awarded VND 400 million in damages given that the plaintiff and the court do not have adequate conditions to determine damages despite taking appropriate measures. Similarly, in Thanh Dong Company vs. Ngoc Thanh Production Facility for infringement of industrial property rights for the invention "automatic scrolling canvas", the Thanh Hoa province's first instance court determined that the plaintiff was entitled to VND 200 million in damages based on the plaintiff's claims. Although actual physical and spiritual losses cannot be established, the court has reason to believe that the defendant's repeated and systematic infringement of the plaintiff's IP rights has harmed the plaintiff's business income, deprived the plaintiff of business opportunities related to the transfer of the right to use inventions and industrial designs, and harmed the plaintiff's reputation and image.

In general, while it is impossible to determine the precise amount of damage, in order to determine the amount of statutory compensation, the court must determine that there was actual damage, taking the following factors into account: (i) Damages; (ii) Acts of industrial property rights infringement; and (iii) the causal relationship between the act of infringing upon industrial property rights and the damage caused. Thus, the existence of actual damage must still be considered a mandatory factor giving rise to liability, based on which, the court considers determining statutory compensation.

5.9. Legal fee recoverable in an IP infringement lawsuit in Vietnam: In the IP cases we reviewed, we find that most courts accept the cost that the plaintiff pays to hire a lawyer to be calculated as the material damage of the plaintiff. Typically, in Kim Dong Pharmaceutical Co., Ltd. v. CVS Company, the court of first instance accepted the plaintiff's claim, ordering the defendant to pay a record amount of attorneys' fees totaling VND 630 million.

6. Expert witness/Intellectual Property Assessment in Vietnam:

Intellectual property assessment refers to the provision of expert opinions or evidence on matters relating to the enforcement of IP rights, including IPR infringement, determining the value of IP rights and determination of the damage caused by IP infringement. In Vietnam, IP assessment is typically carried out at the request of one or more IPR disputing parties or upon request of an enforcement agency (e.g. court, inspection, market management, customs, police, and people's committees at all levels) to assist in the process of resolving and handling IP rights infringement.

The Vietnam Intellectual Property Science Institute ("VIPRI") under the Ministry of Science and Technology is responsible for providing industrial property assessment services. Upon request, VIPRI issues an "Assessment Conclusion" document that includes comparisons, analysis, and conclusions on the possibility of infringement of industrial property rights. While VIPRI's Assessment Conclusion serves as evidence submitted by the plaintiff and may be considered by the court during the proceedings, the court is not legally bound by it. During court proceedings, if deemed necessary, the court may use prescribed procedures, such as soliciting expertise or seeking expert witnesses from another agency, to collate documents and evidence.

In complex IP cases, especially those involving technical elements in patent or industrial design disputes in Vietnam, VIPRI's Assessment Conclusions in recent years have effectively supported the process of considering and settling IP cases by civil measures in Vietnam.

Experience shows that most of the plaintiffs will win in IPR infringement disputes if they have previously acquired a favorable Assessment Conclusion from VIPRI. We therefore recommend that right holders proactively request an Assessment Conclusion from VIPRI, even though it is not a statutory requirement. This can help consolidate allegations of IPR infringement and assess the possibility of bringing a lawsuit.

The bottom line

Despite the challenges posed by more complex procedures and a longer trial period compared to administrative measures, as well as the absence of a specialist IP court or specialized judge, there has been a notable increase in the number of IPR cases heard by Vietnamese courts in recent years. Our observations indicate that Vietnamese courts have demonstrated their ability to satisfactorily resolve a significant number of complex IP-related cases, which is an encouraging sign of great progress and effort from the courts. This development reflects the increasing confidence of rights holders in Vietnam's judicial system and their growing awareness of the value of their IP rights. The trend towards civil lawsuits in the protection of IP rights in Vietnam is becoming more prevalent. Such lawsuits maximize the benefits that only civil remedies can provide to rights holders and help to improve the adjudication capacity of the Vietnamese court system, thereby increasing the effectiveness of IPR protection in Vietnam.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.