19 June, 2016
Patents – infringement – account of profits
— Design & Display Ltd v Ooo Abbott and another [2016] EWCA Civ 95, (England, Court of Appeal, 24 February 2016)
Facts
Design & Display Ltd (“Appellant”) is the manufacturer and seller of retail equipment, including display panels for use in shops. Some of these panels have horizontal slots into which aluminium inserts could be introduced. Such inserts, as used and sold by the Appellant, were found by the court at first instance to have infringed Ooo Abbott’s and Godfrey Victor Chasmers’ (“Respondents”) patent, European Patent (UK) No 1,816,931 (“Patent”). The Respondents elected for an account of profits rather than damages, with the account taken by the Intellectual Property Enterprise Court (“IPEC”).
In the judgment of the IPEC, it was held that the inventive concept of the Patent was embodied in the insert. Therefore, the inventive concept was partly embodied in the manner in which the inserts and the slotted panel interacted together, and thus in the panels sold together with the inserts by the Appellant.
On the point of causation, the IPEC held that the sale of the infringing inserts caused the sale of the Appellant’s panels, since the sale of the infringing inserts accompanied the sale of the panels. The IPEC also held that the sale of the Appellant’s panels was a foreseeable result of the sale of the infringing inserts, and as such concluded that the Appellant was liable to account for the whole of its profits derived from the sale of its panels.
The present application is an appeal against the above finding, with the Appellant contending, inter alia, that they are not liable for the whole of the profits derived from the sale of panels together with the infringing inserts.
Decision
In addressing this issue, the Court referred to Section 61(1)(d) of the Patents Act 1977 (the “Act”) under which a patentee was entitled for an account of profits derived from an infringement. The Court elaborated on the principles to apply when taking the accounts, as follows:
1. An account of profits is confined to the profits actually made, its purpose being not to punish the defendant but to prevent his unjust enrichment.
Such an account did not include any losses suffered due to the infringement.
The underlying theory is that the infringer is treated as having carried on his business (to the extent that it infringes) on behalf of the patentee.
The broad principle is that the patentee is entitled to profits that have been earned by the use of his invention. If the patentee does not recover those profits, the infringer will have been unjustly enriched. So the purpose of the account is to quantify the extent to which the infringer would be unjustly enriched if he were to retain the profits derived by him from the infringement.
The Court’s discussion on deriving the account of profits is set out below.
Identification of the Invention
It was common ground that the scope of the invention for an account of profits was not the same as the scope of the claims. Thus, the Court upheld the previous decision, and affirmed that the IPEC was correct in identifying the shape, material and interaction of the infringing insert with the Appellant’s panels as the inventive concept of the Patent for the purposes of assessing the account of profits.
Causation
It is established law that an assessment of damages or account of profits proceeds on the common principle of legal causation. However, a distinction had to be drawn between the question of whether an infringement had caused a loss (in the legal sense) and the question of whether the infringer had derived a profit from the infringement.
With regard to the question of the extent of profit to which the patentee was entitled, the Court highlighted that, as a matter of law, the incorporation of an infringing article in a product did not, by itself, entitle the patentee to the whole of the profits derived from a product. In such cases, the distinction lay in whether the infringement was an ‘essential ingredient’ without which the product would not have existed at all. Conversely, a product which did not absolutely require the claimant’s invention would justify only a partial apportionment of the profits. As such, profits attributable to the non-infringing parts of a product would not be caused by or attributable to the use of the invention even if the use of the invention was the occasion for the generation of those profits.
Here, the Court found that the IPEC’s finding on the relationship between the infringing inserts and the Appellant’s panels was incorrect, since the sale of the infringing inserts together with the Appellant’s panels was not, on its own, sufficient to establish that the Respondents’ inventive concept was an ‘essential ingredient’ without which such profits would not have accrued to the Appellant. As such, the question of apportionment was returned to IPEC, with the judge not precluded against the finding that the infringing insert was the ‘essential ingredient’ of the Appellant’s slotted panels as a matter of fact.
Comments
Section 67(1)(d) of the Singapore Patents Act (the “Singapore Act”) on the proceedings for infringement of patent is based on Section 61(1)(d) of the Act, and is materially similar to the latter in wording and effect. In both cases, claimants may not opt for an award of damages and an account of profits at the same time.
This case highlights some of the difficulties surrounding the apportionment and calculation of the account of profits. This problem will be particularly acute in cases where the actual invention only relates to a part of the product sold.
A copy of the decision may be accessed at:
http://www.bailii.org/ew/cases/EWCA/Civ/2016/95.html
For further information, please contact:
Jeffrey Lim, Partner, WongPartnership
jeffrey.lim@wongpartnership.com
