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UK – OOO Abbott v. Design & Display / account of profits

24 May 2017

(1) OOO Abbott (2) Godfrey Victor Chasmer v (1) Design & Display Limited (2) Eureka Display Limited, Intellectual Property Enterprise Court, (HHJ Hacon), London, UK, 1 March 2017, Neutral Citation Number: [2017] EWHC 932 (IPEC)

In this judgment, HHJ Hacon determined issues which had been remitted from the Court of Appeal (see here) relating to an account of profits. The account of profits was due as a result of the infringement of OOO Abbotts’s patent (EP (UK) 1 816 931) which claimed a display panel used to display goods in shops.

Following the original trial on liability in 2013 (see here), the Second Defendant reached a settlement with OOO Abbott on damages. However, no settlement was reached with the First Defendant (Design & Display) and the matter therefore proceeded to trial for the assessment of the account of profits. This was heard by HHJ Hacon in 2014 (see here). The resulting Order was appealed and the Court of Appeal remitted two issues back to the IPEC (see here). The present judgment relates to these remitted issues.

Issue 1: What proportion of sales of slatted panels sold together with infringing inserts should be included within Design & Display’s account of profits.

The Judge followed the two step approach set out by the Court of Appeal namely (a) identify the invention; and (b) identify the profits (if any) made by the Defendant from his use of the invention, taking into account convoyed goods and/or products into which the subject matter of the invention is incorporated.

In respect of (a), HHJ Hacon reiterated that for an account of profits it is not appropriate to look just at what is claimed, but instead it is necessary to identify the invention in a narrower sense by reference to the inventive concept. He repeated his finding from his first account of profits judgment that the invention in this case was the composite idea of an insert made of resilient metal of a particular shape and its interaction with the panel slot in a particular way using snap-in means.

For step (b), the Judge held that the Claimants were not entitled to the entire profit from the sales of panels (either pre-assembled, or when the insert and panel are sold separately for subsequent assembly). In determining the appropriate proportion of the profits to which the Claimants were entitled he considered whether the infringing part (i.e. the insert) represented a part which was functionally and/or commercially the most important part of the whole product (i.e. an essential feature).

In his assessment the Judge divided the infringing sales into two categories:

– First, sales to customers for whom the infringing part is an essential feature (this related to sales of panels with incorporated inserts or panels with separate but associated inserts). For these customers (assessed at 10% of infringing sales) the account should include the entire profit made on the sale of the inserts and panels.

– Second, customers for whom the infringing part was not the essential feature (i.e. those who did not specify the infringing inserts but were still sold them; the remaining 90% of infringing sales). For these customers, the Judge considered the proportion of profit that should be apportioned to the invention by reference to the function of each of the primary components (i.e. the insert and the panel). This was assessed at 10% of the profit on the panel and the entire profits on the inserts themselves.

Issue 2: What deductions (if any) for general overheads may the First Defendant, Design & Display, make in its account of profits?

For the second issue the Judge split his assessment into two parts: (a) those costs which were associated only with the infringing acts and (b) general overheads. The former were deductible from the relevant gross profits and a proportion of the latter were deductible if, in the absence of infringement, Design & Display would have incurred the same overheads, and its sale of infringing goods would have been replaced by sales of non-infringing goods. The burden of proof for these factors was on Design & Display.

HHJ Hacon held that a proportion of Design & Display’s general overheads were deductible and that these should be apportioned by reference to the entire business (calculated on a sales revenue basis). Whilst both rent and delivery charges were considered to be general overheads, a lack of evidence on justification of the payment to directors, in this case a husband and wife team whose decisions on payment were a matter of their private whim and control, meant that HHJ Hacon was not willing to allow the apportionment any of these payments by way of general overheads.

A copy of the judgment can be found here.

Headnote: Thomas Hendicott and Rachel Mumby, Bristows LLP