Abbott & Anor v Design & Display Ltd & Anor

In an account of profits for patent infringement, deductible costs are identified by practical substance rather than pedantic categorisation. Costs supporting both infringing and non-infringing businesses may be treated as general overheads and apportioned, provided the defendant supplies evidence supporting that approach.

The defendant bears the evidential burden. Directors’ national insurance contributions and remuneration paid as dividends cannot be deducted where there is no evidence that they reflected the directors’ contribution or market remuneration. An infringer need not prove that the non-infringing business would, in isolation, have generated a gross profit before claiming relevant overheads.

The claimants sought an account of profits following infringement of their patent for slatted display panels. Earlier judgments, including the Court of Appeal’s decision, remitted issues concerning the proportion of sales to be included and the deduction of general overheads.

Following the second account judgment, the parties disputed the remaining calculation. The issues concerned wages and salaries, national insurance contributions, hired and recharged labour, directors’ national insurance contributions, dividends paid to directors, costs, and permission to appeal.

1. Deductible overheads. The governing principles distinguished costs solely associated with infringement from general overheads supporting infringing and non-infringing businesses. The defendant could deduct directly attributable costs and an appropriate proportion of general overheads, subject to the conditions that the overheads would have been incurred without infringement and that infringing sales would not have replaced non-infringing sales. The defendant bore the evidential burden.
2. Wages and related costs. “Overheads” was not a term of art. The question was one of practicalities. Wages of warehousemen, drivers and similar staff could properly be treated as overheads where their work supported both businesses and the evidence supported apportionment. The relevant wages, national insurance contributions on those wages, and hired and recharged labour were therefore deductible.
3. Directors’ remuneration. Directors’ national insurance contributions were not deductible because they arose from remuneration which had not been shown to bear any relation to the directors’ contribution to the business. Dividends paid to other directors were also not deductible. There was no evidence that those payments reflected market remuneration, and the evidential burden rested on the defendant.
4. Opportunity cost and gross profit. Opportunity cost was the profit from a lawful business displaced by infringement. It was not itself claimable, but the question whether overheads supporting that displaced business could be deducted did not require proof that the non-infringing business, considered in isolation, would have generated a gross profit. The relevant overhead criteria were satisfied on the evidence.
5. Costs and permission to appeal. The defendant was treated as the successful party and awarded its costs subject to the applicable caps. The caps were not lifted, despite inaccurate earlier evidence. Appeal costs were payable on the standard basis, with £20,000 paid on account. Permission to appeal was refused because neither proposed ground had a real prospect of success.

The judgment concerned a further stage of the same litigation following remittal from the Court of Appeal.

• Court of Appeal: The Court of Appeal judgment dated 24 February 2016, [2016] EWCA Civ 95, remitted issues concerning the account of profits.
• High Court (IPEC): The court applied the remitted principles, determined the outstanding deductions and costs, and refused permission to appeal.