In a decision issued by a majority of votes, the First Chamber of the Mexican Supreme Court analyzed the constitutionality of article 216 bis of the Federal Copyright Law, which sets forth that damages derived from violations to copyrights, in no case shall be set in an amount lower than 40% of the sales price of the original product, or of the original rendering of any service.

A company operating a nightclub alleged that said article is unconstitutional since it violates the principles of legal certainty and proportionality, because its wording makes it impossible to establish which income should be applied to the percentage of compensation. This company alleged that, although there was public performance of musical works in the establishment, beverage and food services were also offered, and the latter should not be considered as part of the quantification of damages. They added that the payment of supplies, administration expenses, and taxes were also not being considered and that, in any case, the compensation should only arise from any profits made by the nightclub.

The Supreme Court considered that article 216 bis is constitutional because said article provides two systems for calculating the indemnification of damages. These two systems are: i) the payment of at least 40% of the sales price of the original product or the original rendering of services, and ii) when said calculation cannot be conducted, the indemnification shall be fixed with the support of expert witnesses. Therefore, the compensation does not have the purpose of punishing, but rather compensating for the damage caused.

Likewise, it considered that the party that suffered the loss profits from the exploitation of its work, could not suffer the losses or payment of liabilities generated by the functioning of the establishment, since estimating otherwise would be averse to the compensatory purpose of the questioned article.

Therefore, in the case of the rendering of services, the Supreme Court has resolved that compensation must be quantified including the total income related to the violation of copyrights. This includes the sale of beverages and food because they converge in the violation of copyrights, since the public performance of musical works is carried out to obtain an additional incentive to the activity usually conducted by the establishment.

This decision caused the recent issuance of an isolated thesis by the First Chamber of the Supreme Court. Although this isolated and controversial criterion does not constitute compulsory case law, it certainly does constitute a criterion that may very be considered in future cases by Mexican courts, in order to complement and clarify some doubts still existing in connection with the quantification of damages derived from copyright violations.

At OLIVARES, we remain attentive to the interpretation of law that our Courts carry out in landmark cases in order to contribute to the strengthening of our legal system.