Account Of Profits In Patent Infringement Cases

Whilst regaining control over intellectual property is often the core concern for a rights holder, the compensation payable for the infringement of those rights will usually also be of significant interest.

On the face of it, the position is straightforward. Usually, a choice may be made between either:

Notwithstanding what appears to be a straightforward choice, the practical application of the principles that apply when assessing quantum can often be fraught with difficulty, as exemplified by the recent case of Abbott and another v Design & Display Ltd [2017] EWHC 932 (IPEC).

Abbott and another v Design & Display Ltd

Background

The case related to the infringement of a patent for snap-inserts for use with retail display panels: following a 2013 finding that the patent was both valid and infringed, the focus turned to the quantum element of the case. The Claimant elected for an account of the infringers’ profits and the question for the Court was how those profits were to be assessed.

Following an appeal of the first instance decision to the Court of Appeal, the case was remitted back to the Intellectual Property Enterprise Court.

In so doing, the Court had to identify not only the invention but also the profits made by the Defendant from its sales of the panels attributable to the infringement. In assessing the latter issue, the Court also had to take into account not only convoyed goods (that is, products sold by the infringer associated with the subject matter of the patent e.g. goods that do not infringe the patent but would not have been sold, but for the infringement) but also products into which the subject matter of the invention was incorporated.

The Invention

In this case, the Court identified the invention as a metal insert of a particular shape that interacts with the panel into which it is inserted so as to ‘snap in.’ As such, the invention comprised only part of the panels that were sold.

Profits

In some instances, the panels were sold with the infringing inserts incorporated (“incorporated inserts”). In others, the panels were sold together with inserts sold by length, such inserts to be divided into individual inserts by the end user (“separate inserts).

In the case of panels with incorporated inserts, the Court held that the Claimant was not entitled to the entirety of the profit from the sale of those panels: on the evidence the Court found that 10% of the customers who purchased those panels considered the invention protected by the patent to be an essential feature of the entire product. Consequently, the defendant was to pay the entire profit on such panels for 10% of its sales.

Further, the Court found that 10% of sales of panels, sold separately to the inserts but compatible with the same, were driven by the sales of the separate inserts. As such, the Claimant was entitled to the profit on 10% of the Defendant’s sales of separate inserts and separate but associated panels.

This then left both the remaining 90% of panels sold with incorporated inserts and the 90% of panels with separate inserts: whilst the Court held that the entirety of the profit made on those panel sales was not attributable to the infringement (purchasers not having specified the infringing inserts), the Defendant had still made infringing sales on which a profit was made.

The question was, what percentage of those profits should be payable to the Claimant?

In answering that question, the Court separated the profit made on the inserts from the profit made on the panels and held that the Claimant was entitled to the entirety of the profit on the inserts, but 10% of the profit made on the panel.

Comment

The case demonstrates the complexities that a Claimant may face when seeking an account of the Defendant’s profits: it may seem unfair for the payment to be made to the Claimant to be reduced in this way. After all, the Claimant’s patent was infringed.

However, the case underlines the purpose of financial relief within infringement proceedings. The purpose is to ensure that the Defendant is not enriched as a consequence of its wrongful actions but the approach is not a punitive one. To the extent that the Defendant’s business infringes, the Defendant is to be regarded as if it carried on that business on behalf of the Claimant. The separation of profits attributable to that infringement and those which are not is justifiable.

However, what is troubling about the case is that there is still no certainty as to how the Court will assess percentages of profits attributable to the infringement. It may be that the evidence adduced in the case sheds light on how the repeated figure of 10% was reached; however, that evidence is not recited in the judgment and the percentage is given each time by the Judge as an estimate. As such, there remains an inherent uncertainty as to how the principles set out, in this case, will be applied in the future.