Managing directors, beware personal liability for IP rights infringement

If a managing director is found liable for damage, the compensation that he or she is required to pay from private funds can mount up – especially in the case of IP rights infringement. The consequences can be serious because, in addition to paying damages, the managing director may be ordered to pay all legal costs. However, under Dutch law it is rare for a managing director to be held personally responsible for an IP rights infringement. For this to happen, a case of personal liability must be made against him or her, which is hard to prove.

Recent case
Neverthless, in a recent case a managing director was successfully prosecuted for personal liability in the Netherlands. He had used cash to buy a batch of toy hamsters outside the regular market. The managing director was accused of infringement and asked to provide details about the origin, number and purchasers of the toy hamsters. He failed to do so.

According to the Dutch court, counterfeit goods are often involved when goods are bought for cash outside the regular market. Further, by refusing to provide details, the managing director made it impossible to prevent further infringement. Partly for this reason, a case of personal liability could be made against him

Under Dutch law, 'personal liability' is a vague and wide-ranging term. However, thanks to previous cases in which managing directors were held personally liable, the term has become slightly clearer. For example, previously a managing director was held liable because he knew that the goods infringed IP rights, but had done nothing to prevent the infringement. Thus, he could be prosecuted for personal liability.

Comment
The risk of buying and trading goods that infringe IP rights lies not always solely with the company, but sometimes also with the managing director. Rights holders should be aware that they can hold both the managing director and the company liable. In the event of bankruptcy – which occurred in the case at hand – the losses could at least be claimed from the director’s private funds.