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Overheads Not Ignored in Claim for Profits

One of the ways by which a business can obtain recompense for the breach of its intellectual property (IP) rights is to make the infringing organisation account to it for any profit that they have made.

This sounds all well and good, but it can be particularly difficult to ascertain what the 'correct' amount of profit is – particularly where the IP infringed is only part of the product which has been sold.

In a recent case, a company that manufactures shop fittings found that its patent was infringed by a competitor's design that used an essentially identical panel 'insert' system for its shop fitting display product.

Once the breach of patent was established, the argument turned to how much of the profit on the infringing company's sales could be claimed by the company whose patent had been infringed. In the first hearing, the judge concluded that 'the fact that it was a modest section makes no difference. The sale of that section of the panel both caused the sale of the panel as whole and the latter sale was a foreseeable consequence of the former.' He therefore awarded the claimant company all of the profits made on the sales of products which infringed its IP.

The infringing company appealed, successfully arguing that a proportion of its overhead costs should be deducted in arriving at the 'true' profit it earned on the sales of the infringing products.

The claim was remitted to the lower court to decide the appropriate reduction.

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