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Profits from Patent Infringement – Court of Appeal Guidance

Intellectual property laws are tough on infringers, who can expect to face substantial compensation bills or to be stripped of all the profits that they make from their wrongdoing. However, in one case, the Court of Appeal came to the aid of a company which argued that it had been too harshly dealt with.

Company A was found to have infringed company B’s patent in a particular design of snap-on metal insert used in shop displays. Rather than claiming damages for any loss that it might have suffered, company B elected for an account to be taken of profits made by company A from its acts of infringement.

A judge found that company A’s unlawful profits should be calculated by reference to the sale not just of the inserts but also of the MDF boards to which they attached. He also imposed tight restrictions on the extent to which company A could set off its overheads in manufacturing the infringing inserts against its unlawful profit.

In ruling on company A’s challenge to those decisions, the Court noted that profits made from patent infringement can rarely be calculated with mathematical precision but that the burden of proof lies upon wrongdoers.

However, in allowing the appeal, the Court noted that, in many instances, inserts were sold separately from boards and found that an apportionment exercise was therefore required. The judge’s reasoning also did not support his conclusion that the same overheads would have been incurred in the sale of non-infringing inserts. In those circumstances, the matter was returned to the Intellectual Property and Enterprise Court for reconsideration.