Abbott & Anor v Design & Display Ltd & Anor

In an account of profits for patent infringement, the claimant recovers profits derived from exploitation of the inventive concept, viewed through the infringer’s conduct rather than the claimant’s loss. Where the patented feature forms part of a larger article, the entire profit is recoverable if the feature is functionally or commercially the most significant part, or if the article would not have been made without the infringement. Otherwise, profit must be apportioned. Profits from convoyed goods are recoverable where the infringing sale caused a consequential purchase of compatible or functionally connected goods or services. The infringer bears the evidential burden on apportionment and overhead deductions. General overheads are deductible only where the required counterfactual conditions are established.

The claimants succeeded at trial on infringement of a European patent concerning display panels and resilient metal inserts. Following an account of profits, the Court of Appeal allowed an appeal against the first assessment order in [2016] EWCA Civ 95 and remitted two issues to the Intellectual Property Enterprise Court: the proportion of panel sales to be included and the deductions available for general overheads.

The present judgment determined those remitted issues in relation to Design & Display. The central questions were how to identify the relevant invention, whether profits on whole panels and associated sales were recoverable, and whether general overheads, directors’ payments, rent and delivery charges could be deducted.

1. Applicable principles. The account concerned profits derived from exploitation of the patented inventive concept, not loss suffered by the claimants. The invention had to be identified as the inventive concept rather than simply by reference to the full wording of the claims. The court adopted the Court of Appeal’s causation-based approach, drawing on Dart Industries Inc v Decor Corp Pty Ltd [1994] FSR 567, Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443 and Hollister Inc v Medik Ostomy Supplies Ltd [2012] EWCA Civ 1419.
2. Where the protected feature was part of a larger article, the entire profit was recoverable if either the feature was functionally and/or commercially the most significant part of the whole, or the article would not have been produced without the infringement. The two criteria were alternatives. Neither was binary: where the feature was essential only for some purchasers, or infringement increased rather than wholly caused production, partial apportionment was appropriate.
3. Convoyed goods required a causative link between the infringing sale and the consequential sale. There had to be perceived compatibility, functional interaction or a comparable connection, and the infringing purchase had to be the principal purchasing decision. The approach in Alfrank Designs Ltd v Exclusive (UK) Ltd [2015] EWHC 1372 (IPEC) was applied in this context.
4. The inventive concept was the composite idea of a resilient-metal insert having a particular shape and interacting with the panel slot by snap-in means. For 10% of incorporated-panel sales the insert and slot were the essential feature. For 10% of separate but associated panel sales, the inserts drove the panel sales. The claimants therefore received the whole profit on those proportions, plus the whole profit on the relevant inserts and 10% of panel profit for the remaining sales.
5. General overheads could be deducted where the defendant established that the same overheads would have been incurred without infringement and that infringing sales would have been replaced by non-infringing sales. Working to capacity was not a threshold requirement, although it could assist the evidential case. The defendant bore the evidential burden. Sales revenue was accepted as the least unsatisfactory basis for apportionment, following Jack Wills Ltd v House of Fraser (Stores) Ltd [2016] EWHC 626 (Ch).
6. Labour costs solely attributable to cutting slots were directly deductible. Directors’ payments were not deductible as overheads because Design & Display had not reasonably justified them or their proportionality to the infringing business. Fair rent was deductible. Delivery charges were treated as general overheads because separate attribution would have been disproportionately costly. The parties were directed to calculate the amount payable in accordance with these principles.

1. Court of Appeal: In [2016] EWCA Civ 95, the appeal against the earlier account assessment was allowed and the account was remitted to the Intellectual Property Enterprise Court on the proportion of panel sales and deductible general overheads.
2. High Court (Intellectual Property Enterprise Court): The remitted issues were determined and the parties were directed to calculate any sum payable in accordance with the judgment.