INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL
B e f o r e :
| OOO ABBOTT
GODFREY VICTOR CHASMER
|- and -
|DESIGN & DISPLAY LIMITED
EUREKA DISPLAY LIMITED
Thomas St Quintin (instructed by Appleyard Lees) for the First Defendant
Hearing dates: 24 July 2017
Crown Copyright ©
(1) The proportion of sales of slatted panels sold together with infringing inserts to be included within the Account of Profits.
(2) The deductions corresponding to general overheads which Design & Display was entitled to make from its profits due to be paid over to Abbott.
The relevant principles governing the discount of overheads
"(1) Costs that were associated solely with the defendant's acts of infringement are to be distinguished from general overheads which supported both the infringing business and the defendant's other, non-infringing, businesses.
(2) The defendant is entitled to deduct the former costs from gross relevant profits.
(3) A proportion of the infringer's general overheads may be deducted from gross relevant profits unless
(a) the overheads would have been incurred anyway even if the infringement had not occurred, and
(b) the sale of infringing products would not have been replaced by the sale of non-infringing products.
(4) The evidential burden rests on the defendant to support a claim that costs specific to the infringement and/or a proportion of general overheads are to be deducted from profits due to the claimant."
(1) Wages and salaries paid by Design & Display to some of its employees, together with consequential national insurance contributions.
(2) Some of the costs of hired and recharged labour.
(3) Directors' national insurance contributions.
(4) Minor dividends paid to the manufacturing director and to the technical sales estimating director as part of their remuneration.
Wages and salaries
"My finding in respect of these labour costs was not disturbed by the Court of Appeal and so they should be directly deducted from the profits from infringement. Abbott has speculated that other costs could also be better characterised as directly attributable costs rather than general overheads, but I am not satisfied of this. I am here just concerned with the general overheads, as required by the Court of Appeal. It should go without saying – though late submissions from the parties suggest that it may need spelling out – the labour costs to be directly deducted from Design & Display's profits cannot also form part of the general overheads."
"…costs such as material costs, packaging, haulage and transport, manufacturing wages and repair to plant."
Administrative expenses included
"…costs such as overhead wages (eg office staff), sales and technical wages, repairs to premises, and office expenses (eg computers)."
"…manufacturing staff for instance warehouse staff, labourers, yardmen, drivers, production staff and management."
Wages and salaries treated as administrative expenses were
"…for office staff including accounts, drawings, wages invoicing, filing, purchasing, estimating sales and business generation necessary to win, take and process orders as well as to support the manufacturing side."
"The cost of sales and administrative expenses are not dependent on the types of insert sold."
NICs and hired and recharged labour
Dividends to directors other than Mr and Mrs Lloyd
Net profit/loss on the infringing business
Costs excluding the appeal
Costs of the Appeal
Permission to appeal
" Thus, issues such as opportunity cost and working to capacity, which were given some prominence in Dart should not be central to the question whether the infringer should be permitted to deduct overheads from his profits. The infringer working to capacity is not a threshold requirement, but nor is it irrelevant. If the infringer is working to capacity the infringing business is likely to have displaced non-infringing business without increasing overheads. Had there been no infringement the business would have had the same overheads, the non-infringing business would not have been displaced and therefore the sale of infringing products would have been 'replaced by' the sale of non-infringing products. Condition (b) would not be satisfied and the allowance for the overheads would be permitted. In other words, working to capacity can be a useful way for an infringer to demonstrate that it is entitled to deduct overheads."
" … It seems to me to be clear that if the infringer would have manufactured or sold non-infringing products had he not infringed and would have incurred overheads in supporting that manufacture or sale, then he ought to be allowed a proportion of his general overheads. The question is not dependent on whether the infringer is or is not working to capacity. The bottom line is whether (a) the overheads would have been incurred anyway even if the infringement had not occurred and (b) the sale of infringing products would not have been replaced by sale of non-infringing products. It is in those circumstances that an allowance for overheads will not be permitted."