© Springer International Publishing Switzerland 2015Ewoud Hondius and André Janssen (eds.)Disgorgement of ProfitsIus Comparatum – Global Studies in Comparative Law810.1007/978-3-319-18759-4_11
11. Disgorgement of Profits Under Austrian Law
University of Klagenfurt, Universitätsstraße 65-67, 9020 Klagenfurt am Wörthersee, Austria
Although Austrian criminal law contributes to the idea of disgorging unlawfully gained advantages, Austrian law places the main focus of attention on remedies arising under private law. Given that the Austrian Civil Code does not expressly provide a general legal basis for disgorgement damages, claims under the law of unjust enrichment play an important role regarding profit disgorgement. However, at least in special areas of private law an instrument is available that appears to be at least closely related to disgorgement damages.
KeywordsDisgorgementProfitAustriaConfiscationForfeitureUnjust enrichmentDamagesDisgorgement damagesIntellectual property lawCompetition law
works at Stefan Perner’s chair of private law at the University of Klagenfurt.
holds the chair of private law at the University of Klagenfurt.
The idea that unlawful conduct should not pay is very common in Austrian law. It underlies various statutory provisions and also appears in legal literature. In assessing to what extent Austrian law provides for the disgorgement of unlawfully gained advantages criminal and private law mechanisms both have to be considered.
As a start, Austrian criminal law provides regulations aiming at disgorgement of unlawful profits gained in connection with criminal offenses. In the context of the present topic sections 19a and 20 of the Austrian Criminal Code are of special interest.
Section 19a regulates confiscation of items and thereby determines that inter alia items generated through a deliberate crime have to be confiscated. Examples cited in literature constitute goods produced by an environmentally hazardous factory.1 These products may be confiscated by virtue of section 19a which to some extent serves the aim of disgorging unlawfully gained advantages.
Even more relevant is section 20.2 It states that assets received for committing a criminal act or acquired through a criminal act are subject to forfeiture. Other than section 19a, section 20 provides that the asset must already exist at the time the criminal act is committed. In contrast, an item generated through a crime in the meaning of section 19a comes into existence only through the crime.3 Accordingly, the forfeiture under section 20 captures various kinds of unlawfully gained advantages: Examples are proceeds due to trading with arms or illegal narcotics, bribes an office holder received and generally the remuneration the offender received from a third party for executing his offense. The forfeiture does not only lead to disgorgement of the offender’s net profits as his expenses do not reduce the amount subject to forfeiture. Therefore, more than the actual profit has to be given away. This is why forfeiture under section 20 is regarded as a punishment rather than a compensation claim among legal scholars.4 In addition, interests arising from the asset subject to forfeiture and substitutions that replaced the relevant asset (e.g. consideration for the sold stolen good) may be disgorged by virtue of section 20. Plus, also assets belonging to third parties are subject to forfeiture. However, it is questionable whether expenses the offender saved himself due to the offense may be disgorged by way of section 20. Also, for instance the advantage somebody gained due to bribing an office holder is (as against the bribe itself) not subject to forfeiture. Moreover, naturally section 20 as well as section 19a only encompasses criminal acts and thereby does not capture profits due to unlawful but non-criminal conduct.
The aforementioned restrictions of the scope of application show the limited reach of the provisions: Although sections 19a and 20 do aim at profit disgorgement5 and thereby encompass certain important kinds of unlawful advantages, the provisions are everything but comprehensive. Therefore, Austrian criminal law contributes to the idea that unlawful conduct should not pay but does not suffice by itself. Concerning disgorgement of unlawful profits Austrian law places the main focus of attention on remedies arising under private law.
When an Austrian private lawyer discusses profit disgorgement, the law of unjust enrichment comes to his mind first. The fundamental principle underlying this branch of law is that nobody is allowed to enrich oneself at another’s expense without legal cause; enrichment gained in violation of this principle must be disgorged.6 Therefore, disgorgement of unlawfully gained advantages through the law of unjust enrichment is a typical legal consequence for illegalities.7
Austria’s law of unjust enrichment is split into two categories of claims: Firstly, claims that aim at undoing willful benefits the claimant provided for the plaintiff without legal cause and secondly, all other kinds of unjust enrichment.8
Given that in typical cases where disgorgement damages are discussed (e.g. infringements of competition law, ip-law or personal rights by mass media) the claimant did not provide a direct benefit for the plaintiff, the latter category is of special interest in this context. The elementary provision here (and of the law of unjust enrichment on the whole) is section 1041 of the Austrian Civil Code of 1811.9 Its relatively broad interpretation leads to the following understanding of the provision: Whenever a legal interest allocated to a person by the legal order is used by somebody else in a way that contradicts the right of the entitled person, the enriched person has to disgorge the advantages gained by the unlawful usage.10
As examples for cases that create disgorgement claims in virtue of section 1041 are cited: Selling another’s property, grazing of one’s cattle at another’s land, infringement of another’s hunting right, using another’s trademark for own goods, building on another’s land while mistaking it for one’s own land, infringing the privilege as to one’s own image by publishing photos of a famous dancer, making use of a competitor’s business secret that was found out unlawfully and outcompeting competitors by providing wrong information.11
Therefore, section 1041 serves as the legal basis for disgorgement claims in many cases. However, section 1041 is not all-embracing;12 it is held that claims in unjust enrichment would not encompass profits gained by destruction of another’s property because destruction would not constitute “usage” in the meaning of section 1041. Accordingly, whenever an entrepreneur destroys a competitor’s machine and thereby is able to increase his profit, the competitor could not demand this profit by a claim under the law of unjust enrichment. Also, when an entrepreneur hurts his competitor physically or in cases where a media company considerably increases its profits by publishing a faked interview with a celebrity13, the law of unjust enrichment would – according to that opinion – not take effect.14 It is also held that profits due to the obstruction of competitors would not trigger a claim in virtue of section 1041.15 Accordingly, not every unlawful advantage may be disgorged by way of a claim in unjust enrichment; the law of unjust enrichment leaves gaps that could imaginably be filled by the law of damages.
Starting Point: The Civil Code
The Austrian law of damages is mainly governed by the Austrian Civil Code of 1811 and especially by its sections 1293 et seqq. These sections do not contain any provisions that expressly establish a general legal basis for disgorgement damages. For a plaintiff who claims damages under Austrian law the Civil Code offers (at the most16) only two ways of calculating the extent of his damages: They may be assessed either abstractly or concretely, which means that the plaintiff may either claim the current market price of e.g. his destroyed good (abstract calculation) or the difference between his actual wealth and his hypothetical wealth he would have without the damaging event (concrete calculation).17 There is no indication for a third kind of calculation in the Civil Code. Therefore, the Civil Code does not (at least expressly) offer the possibility to demand by claim for damages the advantages gained by the wrongdoer through his unlawful conduct. That is the situation in the Austrian Civil Code of 1811. However, there are special areas of private law where the statutory situation seems to be quite different.
Intellectual Property Law (Ip-Law)
Remedies Available Under Ip-Law
Austrian ip-law is governed by several statutory acts. Depending on the kind of ip-right infringed following statutes may for example be applicable: The Protection of Trademarks Act of 1970 if trademark rights are held to be violated, the Copyright Act in case of copyrights being infringed and the Patent Act concerning patent right violations. However, although it seems that every ip-right is subject to different, special rules and has its own statutory act, in terms of potential remedies the difference is insignificantly small. All statutes in question give recourse to the same identical remedies.18
Besides the right to forbearance and the right to abatement, statutory ip-law especially provides different rights to claim money.19 At first, it enables plaintiffs to claim an appropriate license fee. This right is held to be a claim belonging to the law of unjust enrichment rather than to the law of damages. Accordingly, the claim is independent from fault.20 Although this remedy obviously already aims at disgorging an unlawful advantage from the wrongdoer (namely the saved license fee)21