OOO Abbott & Anor v Design & Display Ltd & Anor

In an account of profits for patent infringement, the defendant is accountable only for profits legally caused by the infringement. The court must assess the business as it was actually conducted, disregarding hypothetical non-infringing alternatives. The scope of recovery is guided by the inventive concept, but may extend beyond articles precisely embodying it to a whole product or convoyed goods where causation and foreseeability are established. Both causation and remoteness must be considered, together with proportionality. A defendant may deduct direct infringement costs, increased overheads caused by the infringement, and apportioned overheads attributable to a displaced alternative business, but bears the evidential burden. A defence under section 62(1) of the Patents Act 1977 should generally be pleaded by the case management conference in the substantive proceedings.

The claimants sought an account of profits following Birss J’s finding that their European patent was valid and infringed by the defendants: [2013] EWPCC 27. The second defendant settled, leaving the account against Design & Display Ltd.

The court determined the quantities and prices of infringing aluminium inserts, whether profits from panels sold with incorporated inserts were attributable to the infringement, the appropriate deductions from gross profits, and whether Design & Display could rely on section 62(1) of the Patents Act 1977. The central questions concerned the scope of recoverable profits, allowable overheads, and the timing and evidential requirements of the statutory defence.

1. Scope of the account. An account is confined to profits caused, in the legal sense, by the infringing acts. The parties must take the defendant’s business as it was conducted. The claimant cannot contend that higher profits should have been made, and the defendant cannot reduce the account by showing that equivalent profits could have been obtained through a non-infringing alternative. Both causation and remoteness limit recovery, with proportionality also relevant.
2. Inventive concept and incorporated panels. The patent claims are not themselves a necessary guide to the scope of the account. The inventive concept is relevant. Here it comprised the resilient metal insert, its shape, and its interaction with the panel slot. The sale of infringing inserts caused, and made foreseeable, the sale of panels into which they were incorporated. The profits on those panels were therefore within the account, even where customers were indifferent to the precise insert used.
3. Costs. Direct costs solely attributable to infringement were deductible. General overheads could be deducted only to the extent increased by the infringement, or where the infringing business displaced an alternative business while the defendant operated at maximum capacity. Design & Display failed to prove either ground. Labour costs of £7,018 for cutting panel slots were directly attributable and were allowed.
4. Section 62(1). A defence based on lack of knowledge or reasonable grounds for supposing that the patent existed should generally be raised by the case management conference in the substantive proceedings. Design & Display raised it too late and showed no exceptional reason for permission. In any event, it failed to establish the necessary lack of knowledge or reasonable grounds.
5. The account proceeded on the bases identified, with the parties left to calculate the sums due.

First-instance account of profits following the infringement judgment of Birss J: [2013] EWPCC 27.