Even when an Israeli court finds patent infringement, calculating the monetary relief is rarely straightforward. An infringer may have sold thousands of products that the patentee lacked capacity to supply. The patent owner’s sales may have declined although the infringer earned little profit. In other cases, the patented invention concerns one component of a complex, expensive product. Each scenario raises different questions of causation and valuation.
Section 183 of the Israeli Patents Law, 5727-1967, provides the principal framework. The court may consider the patentee’s direct loss, the extent of infringement, the infringer’s profits and a reasonable royalty for the unauthorized exploitation. These are relevant factors and possible valuation approaches, not amounts automatically added together. For international patent owners and foreign litigation counsel, selecting an evidentially supportable method is often as important as proving infringement itself.
Injunctions and Damages Are Different Patent Remedies
Section 183(a) provides for relief by injunction and compensation. An injunction addresses ongoing or threatened unauthorized exploitation. Damages primarily address the financial consequences of past infringement.
A patentee confronting continued manufacturing or importation may place greater value on stopping those acts than on an immediate monetary award. Where commercial exploitation has ceased or the patent has expired, retrospective financial relief may become the central issue.
Preliminary injunctions involve distinct requirements, including prima facie entitlement, urgency, the balance of convenience and financial security. Patent registration alone does not guarantee interim relief. See Preliminary Injunctions in Patent Cases in Israel. Whether the product or process infringes should likewise be addressed through a separate claim analysis, explained in Patent Infringement Litigation in Israel.
How Does Section 183 Calculate Patent Damages?
Section 183(b) instructs the court to examine the infringing act and the claimant’s position as a consequence. It permits consideration, among other matters, of the direct damage to the patentee, the extent of infringement, profits derived by the infringer and reasonable royalties that would have been payable for a licence covering the infringing exploitation.
Section 183 permits different methods of valuation. The claim should identify the financial consequence being measured and the records supporting that calculation.
Where the invention concerns a mechanism inside an industrial machine, valuation turns on the mechanism’s commercial contribution, available alternatives and the features that drove customer demand.
Lost Sales and Lost Profits of the Patent Proprietor
A patentee who competes with the alleged infringer may assert that unauthorized sales displaced sales it would otherwise have made, forced price reductions or caused other identifiable commercial harm. The next question is how many of those sales the patentee would have captured and at what profit margin.
Some purchasers may have chosen a different lawful substitute; some may not have purchased at all; and the patentee may not have possessed the necessary production or distribution capacity. Lost-profit analysis therefore requires reasonable counterfactual evidence: price, unit margin, market demand, capacity, relevant competitors and non-infringing alternatives.
The defendant’s turnover is not the patentee’s lost profit. Where infringement allegedly caused price erosion or a later reduction in sales, the claimant must also distinguish that effect from other market developments. Historical sales, forecasts, customer communications and records of manufacturing capacity may be needed.
Infringer’s Profits and an Order for Accounts
Under Section 183(b)(3), profits generated by infringement may be relevant to the compensation assessment. Section 183(d) permits the court, where compensation is claimed, to order the defendant to provide accounts concerning the extent of infringement.
Accounts can reveal quantities manufactured and sold, receipts, returns, costs and margins that are mainly within the defendant’s control. The calculation must distinguish turnover from profit and assess the contribution of the patented feature to the product’s earnings.
Financial analysis may be needed to distinguish ordinary expenses and lawful sources of value from the exploitation of the claimed invention. The court is not bound to adopt an accounting figure mechanically and may determine compensation on the evidence and the circumstances as a whole.
The distinction between an award reflecting the proprietor’s loss and one measured by the infringer’s gain is discussed in the Israeli Rotenberg v. Elgo litigation. Pleading alternative legal measurements is not permission to recover twice for the same commercial injury.
Reasonable Royalties as a Basis for Compensation
Section 183(b)(4) refers to royalties that the infringer would reasonably have paid for an authorized licence covering exploitation to the extent of the infringement. This can serve as a valuation approach even where the proprietor would not, as a matter of business policy, have agreed to license that competitor.
Existing licence agreements may provide evidence, but comparability matters. Exclusivity, territory and the share of product value contributed by the patented component determine how useful an existing licence is as a benchmark.
The hypothetical rate depends on the period, territory, sales volume, substitutes, technical contribution and market conditions.
Estimating Damage When Precise Proof Is Difficult
Infringement may be clear while the precise financial loss remains uncertain. Sales information may be incomplete, customer choices cannot be reconstructed with certainty, or a patented component’s contribution to the whole product may be difficult to isolate.
In suitable circumstances an Israeli court may make a reasoned estimate from a sufficient evidentiary foundation. Estimation does not dispense with the claimant’s duty to present reasonably available data and demonstrate why the harm is attributable to infringement.
There is an important difference between a loss established in principle but difficult to quantify and a financial claim for which no adequate supporting basis has been offered. Israeli judgments discussed in Yonatan Drori, Patent Law (Hebrew, 2023), Chapter 20, address that distinction, including the Twitoplast and Tabig Israel disputes.
Israeli patent damages are assessed under Section 183 without a per-infringement statutory tariff. It would therefore be incorrect to import the no-proof statutory award applicable to some other intellectual property causes of action.
Punitive Damages for Infringement After Warning
Section 183(c) allows the court, at its discretion, to award punitive damages where infringement occurred after the patentee or exclusive licensee warned the infringer about it. The additional punitive award cannot exceed the amount of compensation awarded under Section 183(b).
The application for punitive damages should identify the warning, establish service and document the infringing acts that continued afterward. The court then determines whether an additional award is justified under Section 183(c).
Situations Where the Court May Limit or Withhold Damages
Sections 184–186 address special circumstances affecting the availability of compensation. Section 184 concerns partial invalidity, including the relevance of bad faith or lack of clarity in the original claims. Section 185 addresses claims amended after infringement, while Section 186 concerns certain periods connected with delayed renewal-fee payments.
These provisions do not mean that any amended patent becomes unenforceable or every identified defect extinguishes compensation. The court must examine the relevant statutory conditions, original and revised claims and timing of the alleged exploitation.
Where patent validity itself is disputed, its determination can materially affect infringement damages. See Challenging Patent Validity in Israel.
Documents Needed to Prove or Defend a Patent Damages Claim
The claimant should collect sales histories, margins, pricing decisions, capacity records, licensing agreements and information about available non-infringing substitutes. Expert economic evidence may be useful, particularly for complex products or allegations of price erosion.
The defendant should identify what it actually sold, the expenses attributable to those sales, other features influencing demand and the economic relevance of any lawful substitutes. It may also be necessary to distinguish profits generated outside Israel from exploitation within the scope of the Israeli right.
When critical records are held by the defendant, targeted discovery or an accounting order may help determine the scale of infringement and its economic consequences. Collecting these records early improves the reliability of the valuation.
The governing law is principally Section 183 and Sections 184–186 of the Israeli Patents Law. For a wider discussion of remedies see Yonatan Drori, Patent Law (Hebrew, 2023), Chapter 20, and Monetary Remedies in Intellectual Property Proceedings (Hebrew). See also Patent Litigation in Israel for representation of foreign patent owners and counsel.
