Bei Yu Industrial Co v Nuby (UK) LLP & Anor

An account of profits aims to identify and transfer the defendant’s actual profit from infringement. The court does not substitute a hypothetical profit. Direct costs and increased overheads solely attributable to the infringement may be deducted in full. A proportion of general overheads may be deducted where the defendant proves that the overhead would have been incurred anyway and that non-infringing sales would not have replaced the infringing sales. Apportionment is a broad-brush exercise, and different methods may be used for different overheads.

The claimant’s registered Community design and corresponding UK re-registered design had been infringed by the first defendant’s importation and sale of a baby bath. Liability had been admitted under a consent order, and the claimant elected an account of profits against the first defendant. The trial concerned profit, allowable direct costs, general overheads, apportionment and interest.

1. Account of profits. The remedy required identification and transfer of the defendant’s actual profit from the infringement. The court did not substitute a hypothetical profit that the defendant could or ought to have made.
2. Allowable expenses. Direct costs associated solely with the infringing acts, including purchasing and importing costs and increased overheads specifically related to those acts, were deductible in full. The defendant bore the evidential burden of establishing that claimed expenses were allowable.
3. General overheads. A deduction was available in principle because, on the balance of probabilities, the defendant would have sold a different non-infringing product and incurred the same overheads. The defendant’s sourcing evidence, the availability of alternatives and its later supply of a different bath supported that finding.
4. Apportionment. Apportionment was necessarily broad brush and required selection of the least unrealistic outcome. The sales-revenue method was appropriate for most overheads, while a one-in-280 method was more realistic for website, telephone and IT, and stationery and office equipment costs. Certain unrelated consultancy costs, development and design salary costs for 2019–2021, and a bad-debt write-off were not deductible. Improper payments were deductible where they had in fact reduced profits.
5. Interest and order. Interest was awarded at Bank of England base rate only. The claimant had not established a sufficient basis for a borrowing-based rate. The defendant was ordered to account for its profits in accordance with the findings.