License analogy: No cause of action under Swiss commercial law

License analogy: No cause of action under Swiss commercial law

In April 2019, the Commercial Court of the Canton of Zurich (Zurich Commercial Court) uploaded to its website a new judgment dated 25 October 2018 (case number: HG160279-O), which illustrates once more how important it is under Swiss commercial law to dedicate sufficient attention to the proof of damages.

As I have written in my doctoral thesis of 2017 on loss of profit claims, published in the Editions Weblaw, “a Swiss commercial litigator will have a tendency to first determine whether the relevant party sustained a damage in the legal sense, because without such damage (assuming that the dispute is governed by Swiss law) further efforts in relation to an action for damages are not useful” (para. 363). The above-mentioned judgment is a further illustration of this point.

In the matter that led to the Zurich Commercial Court judgment at issue, the claimant, the German sales entity of a US-software producer, sued a Swiss bank that uses the relevant software. The claimant sued the Swiss bank for damages in an amount of CHF 3.7m. Although the judgment HG160279-O does not contain specific explanations regarding how the claimant argued its damages claim, it transpires from the judgment that the claimant asserted some kind of damages claim related to the use of protected software by the bank.

Interestingly, in the proceedings, the claimant had apparently taken the position that it was not necessary to substantiate its damages claim, simply referring in this regard to the concept of the so-called license analogy. In this regard, the Zurich Commercial Court included in the judgment the following quote from the claimant’s rejoinder (judgment HG160279-O, at page 3):

Daher ist das Bestreiten der Beklagten in Bezug auf den Schadenseintritt unerheblich. Es brauchen nicht einmal Tatsachen glaubhaft gemacht werden, die einen Schadenseintritt nach Art. 42 Abs. 2 OR wahrscheinlich vermuten lassen. Auch eine tatsächliche Vermögenseinbusse ist hier nicht erforderlich.”

Therefore, the defendant’s denial of the occurrence of a financial damage is irrelevant. It is not even necessary to substantiate facts which, pursuant to Art. 42(2) of the Swiss Code of Obligations, prima facie suggest the occurrence of a financial damage. Nor is an actual loss necessary in this context.” (tentative English translation)

Referring to the Swiss Federal Tribunal precedent 132 III 379, which I discuss in my doctoral thesis at paras. 229 et seq., the Zurich Commercial Court refused the claimant’s position and, based on this point alone, rejected its entire CHF 3.7m claim.

Among other considerations, the Zurich Commercial Court confirmed that under Swiss commercial law, concepts such as the above-mentioned license analogy are only to be understood as possible methods to quantify lost profits, but not as constituting themselves the causes of actions, i.e., the legal grounds for damages claims (judgment HG160279-O, at page 3). Consequently, even if a copyright infringement has been proven, a claimant cannot, under Swiss commercial law, limit himself or herself to simply refer to, for instance, the concept of license analogy, but still has to make the occurrence of an actual financial loss sufficiently plausible pursuant to Art. 42(2) of the Swiss Code of Obligations.

Philipp H. Haberbeck, Zurich; first published on LinkedIn on 11 April 2019 (www.haberbeck.ch)

The information contained in this post is for general informational purposes only and is not intended to constitute legal advice. Readers of this post should not take any actions or decisions without seeking specific legal advice.

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