“155. A central purpose of intellectual property rights is to encourage and reward creativity and innovation by enabling the owner of the right to enjoy the fruits of its exploitation. That purpose is promoted by allocating profits made from exploiting the right to the owner, including where the right is infringed by commercial use made without the owner’s consent. For this purpose it does not matter whether the infringement is deliberate or innocent. The reason for redirecting the profits to the owner of the right is not to punish or deter wrongdoing. It is to achieve the goals which the right exists to further. As Robert Stevens puts it in a valuable discussion of this subject in The Laws of Restitution (2023) at p 306: ‘The remedy of an account of profits is here the continuation of the reason for the right.’ This explains why, in the words of Kitchin LJ in Hollister Inc v Medik Ostomy Supplies Ltd [2013] Bus LR 428, para 55, the infringer ‘is treated as if he has conducted the infringing business on behalf of the claimant’. 156. Seen from this perspective, ordering an account of profits against an innocent infringer is in fact easier to justify than awarding compensatory damages. Whereas an award of damages may make the infringer worse off than if the infringement had not occurred, an account of profits does not have this effect. The effect is simply to put the infringer back in the same position financially as if no infringement had taken place. It is hard to see how an innocent infringer can legitimately object to such restitution. …”
“The fiduciary duty to account for profits is not to be confused or conflated with the remedy of an account of profits which equity makes available to the owner of (usually) intellectual property which has been infringed, misused or misappropriated by a defendant. In such cases the account of profits is truly just a remedy. It does not depend at all upon the defendant being a fiduciary, and the defendant owes no prior duty to account to the owner of the intellectual property. It is imposed, as the result of an election by the owner, as one of the available remedies, by order of the court.”
“(iii) Certification 435. I have found that the ‘mating’ condition in the 1999 Memorandum was not introduced to require compliance with the insertion test and that the 1999 Memorandum did not require compliance with the remoteness test. But I have also found that the presentation made by KID of the SkyPower System was instrumental in persuading the Study Group to accept that ISPSS systems could use high voltage AC power to supply PEDs and that the only means by which GD (and later Astronics) was able to comply with the ‘mating’ condition was by adopting the insertion feature of the Patent. Finally, I have found that the Patent provided the answer to one single safety requirement which required a lower degree of assurance than hardware features and that Astronics had to satisfy a further twenty four conditions in order to obtain certification. (iv) Airframe manufacturers’ approval 436. I have found that it was necessary for GD to rely on all three inventive features of Claim 1 to obtain Boeing’s approval for the EmPower Classic system and that Astronics would not have obtained approval from Boeing for the EmPower Fusion system if it had not continued to use those inventive features in the 12xx series. However, I have also found that these features were amongst many features which GD had to satisfy before it obtained approval for the EmPower Classic system and the EmPower Fusion system. In particular, I have accepted Mr Brady’s evidence and found that Astronics had to satisfy 36 additional safety tests which were unconnected with those features and that failure to comply with those tests could result in a safety threat. 437. I have also found that it was necessary for Astronics to rely on the insertion and timing features of Claim 1 to obtain approval for the EmPower Fusion system from Airbus and that it would not have obtained approval from Airbus for the 12xx series if it had not done so. But I have also found that the remoteness feature was not a requirement and that the requirement for use of the insertion and timing features was a not a safety critical feature or one which significantly reduced [sic] airplane safety. Finally, I have found that the EmPower Fusion system had to satisfy seven major safety critical requirements and one other minor requirement in order to obtain approval. (v) Essentiality 438. Functional essentiality. Morgan J held that the Primary Components were functionally essential to the EmPower Fusion system and I have also held that they were functionally essential for direct power only sales to the airlines. However, I have also held that the Defendants’ case is made out and that the ability to supply AC power to PEDs was incidental and not essential to the overall function of EmPower systems in providing power to IFE systems. I have also held that the power management functions of the EmPower systems were not trite or commonplace. 439. Commercial essentiality. I have held that both the AC power and the power management functions were equally essential to the commercial exploitation and success of the EmPower Fusion system for direct power only sales to airline customers. But I have held that the provision of AC power to PEDs was not essential to the commercial success of integrated IFE systems in the sense ... that it was the most significant reason for that success in commercial terms. I set out the most significant reasons for that success below. (vi) Revenue 440. I have found that Astronics generated revenue of approximately US$233 million from ISPSS systems during the Relevant Period and that this was 10 times more than the revenue of US$23 million which KID generated from the sale of ISPSS systems during the same period. I have also found that the percentage of power only sales which Astronics made during the Relevant Period represented 22% of its overall sales and that the remaining 78% represented IFE sales. (vii) Commercial Factors 441. I have found that Astronics provided a superior product and a superior service both to the airlines and to the IFE providers during the Relevant Period and that the dominant factor which gave the Astronics SPM [seat power module] or SPB [seat power box] superiority over the KID SkyPower System and other products in the market was weight. I have also found that the superior product and service which Astronics provided to the airlines and IFE providers was not dependent upon exploitation of the Patent but a number of wider commercial factors. I have also found that the failure of the Lufthansa project and KID’s failure to find a satisfactory technical solution to the heat dissipation issue with the KID SPM were significant commercial set-backs for KID and that their failure shut KID out of the market for the supply of SPMs and SPBs during Phase 2 integration [i.e. integration into IFEs]. (viii) Customer motivation 442. Finally, I have found that what motivated the airlines to purchase IFE systems was the quality and variety of the entertainment experience which it provided and that the provision of PED power was not a differentiating factor. But I have also found that it was standard for every IFE package to contain a number of AC power outlets and that Panasonic and other IFE providers would not have sold integrated IFE systems to the airlines unless they included AC power.”
“Mr Bezant also accepted that the differential profits approach is to be preferred and that no apportionment may even be necessary where the profits derived from the infringement can be isolated perfectly. Again, I agree. Where it is clear that either all of the profits made by the infringer from a complex product or a specific proportion of them can be attributed solely to the infringement of the patent, then the Court will adopt a differential profits approach to apportionment. But that is not this case. I have found that the infringement was not the legal or proximate cause of the Defendants’ profits and Lufthansa did not argue that a particular profit stream or proportion of the profits could be attributed solely to the infringement of the Patent. For instance, Lufthansa might have argued that it was entitled to all of the profits on direct, power only sales and a royalty for the profits on the integrated sales. But it chose not to advance a positive case on apportionment at all (as I explain below).”
“590. I agree with Bacon J [at the hearing on1 December 2023 ] that if Lufthansa was going to put forward a positive case either in relation to the methodology which the Court should adopt or in relation to an appropriate comparable or, indeed, in relation to the percentage proportion which the Court should award, then it ought to have done so in the Reply. But it elected not to do so and this was a considered decision. In my judgment, this did not prevent Lufthansa from arguing that it was entitled to 100% of those profits on the basis that it was essential to all of the sales and drove all of the profits or to testing Mr Bezant’s evidence. But it did not entitle Lufthansa to advance an alternative case in relation to a proportion of the profits or alternative comparables. 591. Accordingly, I disallow Mr Ryan’s evidence in relation to the 1998 Teaming Agreement. In my judgment, this extended beyond an expert analysis or commentary on Mr Bezant’s approach and was an attempt to advance a positive case. Moreover, if Lufthansa had intended to rely on the 1998 Teaming Agreement as an alternative to the 2014 Teaming Agreement, Mr Ryan should have given evidence about in Ryan 1 and given Mr Bezant an opportunity to answer it in Ryan 2. It should also have been the subject of discussion between the experts and dealt with in the Joint Statement. 592. Finally, the Lufthansa team submitted that I should reject Mr Bezant’s evidence in relation to the 2014 Teaming Agreement and I address that submission below. However, I do so in the context of Mr Ryan’s evidence in cross-examination. He accepted that it was possible to apportion profits by reference to an implied royalty rate taken from a comparable licence agreement. [Counsel for the Defendants] also pressed him on whether he had any objection in principle to the methods of apportionment which Mr Bezant had adopted and he declined to answer the question. If he had had a reasoned objection to the use of any of those methodologies and, in particular, to either the royalty or licensing approach or the distribution of cost approach, this was the time to make it clear.”
“Mr Bezant calculated that Astronics would have paid Lufthansa US$3.4 million under the terms of the 2014 Teaming Agreement. To reach this sum he used the per-unit royalty rate although he did not adjust it upwards for inflation in later years or downwards for the royalty rate payable before it came into effect. He also assumed that Astronics would have paid the same lump sum as KID. He also concluded that this sum implied a royalty percentage of 21% deducting all overheads and a royalty percentage of 13% deducting incremental overheads only. Lufthansa advanced six objections to Mr Bezant’s evidence and I deal with each in turn.”
“597. Lufthansa’s primary submission was that the licensing or royalty approach permitted Astronics to share its profits with Lufthansa whereas the purpose of an account of profits was to require Astronics to disgorge all of its profits. The Lufthansa team placed particular reliance upon [an] extract from Patent Remedies for Complex Products …. They also placed reliance upon Mr Bezant’s acceptance in cross-examination that in the real world a licence involved a profit split between the patentee and the licensee. 598. I reject this submission. Its premise is that Lufthansa was entitled to all of Astronics’ profits from the sale of products which included the infringing EmPower system. But I have rejected this premise in reaching the conclusion that the infringement was not the legal or proximate cause of those profits. Given that the sale of the products generated a single pool of profits, the function of an apportionment is to divide the profits by reference to the relative contribution of the Patent and the other factors which generated the relevant sales (as the experts agreed). The licensing approach enables the Court to place a value on that contribution by looking at comparable transactions in the market in which parties negotiating at arm’s length have placed a value on that contribution.”
“… The point can be illustrated by the tin whistle example much beloved of patent practitioners. Someone invents a new form of tin whistle. With the aid of his patent agent he obtains a patent. Regrettably, but as is now common, the patent ends with claims of ever greater particularity and narrowness. … Claim 1 is for the tin whistle. Claim 10 is for a funnel to which the new tin whistle is connected. Claim 15 is for a battleship with a funnel to which the tin whistle is connected. No doubt none of the subsidiary claims are independently valid over Claim 1 but they are probably not per se invalid. Nor is there any doubt that an injunction or an order for delivery up would be directed to the tin whistle alone rather than the whole battleship. Similarly on an account substance not form counts. What the defendant has to account for is the profit made by exploitation of the invention, i.e. the whistle, not profits made by exploitation of material or activities which are not attributable to the plaintiff’s ingenuity, i.e. the rest of the battleship.”
“I do not propose in taking the account in Chambers, to make the Defendants account for every species of profit during the last six years, but I shall consider how much of the profits are properly attributable to the user of the Plaintiff’s trade mark.”
“When a patentee elects to claim the profits made by the unauthorised use of his machinery, it becomes material to ascertain how much of his invention was actually appropriated, in order to determine what proportion of the net profits realised by the infringer was attributable to its use. It would be unreasonable to give the patentee profits which were not earned by the use of his invention; but the case is altogether different when the patentee of machinery who does not grant licenses claims damages from an infringing manufacturer who competes with him by selling the same class of goods in the same market.”
“… there certainly is a great deal of authority for saying that where only a part of a complex machine is protected by a patent, the infringer cannot be made liable for the aggregate profit derived from the entire machine, as if that were the profit he had made by the use of the patent.”
“The purpose of ordering an account of profits in favour of a successful plaintiff in a passing off case is not to inflict punishment on the defendant. It is to prevent an unjust enrichment of the defendant by compelling him to surrender those profits, or those parts of the profits, actually made by him which were improperly made and nothing beyond this. Before specifying the form of the account, the court therefore should, I think, initially ask itself this question: What categories of the relevant profits or parts of such profits ought to be treated as having been improperly made by the defendants? The facts of many particular cases may justify the conclusion that the whole of the relevant profits should be so treated. The facts of the present case, however, do not in my judgment justify such a conclusion. … To ascertain the profits which have been improperly made by the defendants, it is therefore necessary to ascertain how much of the profits made by the defendants over the relevant period are properly attributable to the use of the name ‘Chicago Pizza Co’. Clearly, profits made by the defendants by the sale of meals to customers who were not confused by this name are not attributable to this use. … An account in this form will, in my judgment, accord with the principles established by cases such as Cartier v. Carlile …, because it will operate to give the plaintiffs that part of the defendants’ profits which is attributable to the defendants’ wrongful acts, no more and no less. The evidence before me indicated that the defendants’ restaurant is a thriving concern and that a considerable part of their profits owes nothing to the plaintiffs or the plaintiffs’ reputation. To order an account in the form sought by the plaintiffs would be tantamount to a decision that Mr. Soll and Mr. Jager, whose personal honesty is not in dispute, should be treated as having conducted the whole of the business of the defendants’ restaurant throughout the relevant period as trustees for the benefit of the plaintiffs, albeit at a reasonable wage for themselves. In my judgment, any such order on the facts of this case would be quite inequitable. … Confronted with [the plaintiffs’] claim, the general intention of the Court in making the order which it has made had been to achieve a fair apportionment, so that neither party will have what justly belongs to the other. What will be required on the inquiry … will not be mathematical exactness but only a reasonable approximation.”
“In the present case, however, the houses have been sold, and in my judgment the question is not whether the plaintiffs are entitled to an account of unrealised profits, but how the profits realised by the sale of the houses should be apportioned between those attributable to the infringing acts of building them and those attributable to other acts of the defendants such as selling them. It will be necessary, for example, to exclude any part of the profits which may be attributable to (i) the purchase, landscaping and sale of the land on which the houses are built; (ii) any increase in value of the houses themselves during the interval, if any, between the completion of the infringing building works and the sale; and (iii) the advertising, marketing and selling of the houses.”
“It may seem hard that the defendants should have no share of the profits obtained by their skill and efforts in building the houses, but these were the infringing acts complained of and the profits made thereby belong in equity to the plaintiffs. The plaintiffs are entitled to be put in the same position as if they had built the houses. Profits, of course, means net profits, and the defendants are entitled to deduct the costs and expenses of building the houses. Such deductions may include just allowances for time and effort, but just allowances do not include profits …. There remains one further problem which cannot be explored on the material before me but which will have to be resolved when the account is taken. The defendants claim that they have done much work, such as installing kitchen equipment, which has nothing to do with the plaintiffs’ … drawings and does not reproduce them in any sense. If so, and if such work can sensibly be distinguished from the admitted infringing acts of constructing the houses, then any part of the profits properly attributable to it ought to be excluded. The plaintiffs are entitled only to the profits attributable to the infringing acts.”
“An account of profits is confined to profits actually made, its purpose being not to punish the defendant but to prevent its unjust enrichment. The ordinary requirement of the principles of unjust enrichment that regard be paid to matters of substance rather than technical form is applicable. … Just as in a reference on a claim for damages issues of fact relating to causality and remoteness may properly be explored, so may they be likewise on an accounting of profits. The issue of apportionment is at bottom a question of fact bearing on the relationship between the profits earned and the appropriation of the plaintiff’s invention. It may be possible for Imperial to show that some part of the profits made on the infringing sales are not profits ‘arising from’ the infringement in that they are not caused by but simply made on the occasion of such infringement. … But there is more. Form must not be allowed to triumph over substance. While motor oil containing the dispersant additive was properly claimed in the patent … and while that claim was properly found to have been infringed, the reality is that Lubrizol did not invent motor oil and that Imperial’s motor oils contain other additives than the one here in issue. The terms of the judgment … make it plain that it is the presence of the additive … claimed in the … patent which caused Imperial’s motor oils to infringe. Thus, it is possible that such oils have achieved their market share and attendant profits for reasons other than the presence of Lubrizol’s patented additive. A finding that Imperial’s motor oils infringed the Lubrizol patent does not necessarily amount to a finding that all the profits from the sales of such motor oils are profits arising from the infringement. That is an issue of fact to be decided on the reference.”
“The remedy of an account of profits is an equitable one. Its purpose is not to punish the defendant but simply to have him surrender the actual profits he has made at the plaintiff’s expense. But if some part of Imperial’s profit on the infringing sales can be shown to have been due not to the appropriation of the Lubrizol invention but to some other factor where is the equity? We were told that Lubrizol contends that Imperial’s motor oil infringes another of its patents and has sued in respect thereof. May the same profits be claimed a second time? And if not by Lubrizol what of some third party patentee who likewise claims infringement? And even if no other patents were involved, to allow Lubrizol to take profits which Imperial succeeds in showing were solely attributable to some non-infringing feature of its motor oil would be to judicially sanction Lubrizol’s unjust enrichment at Imperial’s expense.”
“Although the infringer cannot avoid paying over profits by relying on possible non-infringing alternatives, the patentee … cannot recover profits which were not earned by use of his invention. I have already referred to a case where the defendant has two businesses, one infringing and the other not. But the same approach should apply where only part of a product or process infringes. Profits attributable to the non-infringing parts were not caused by or attributable to the use of the invention even if the use of the invention was the occasion for the generation of those profits. For example imagine a case in which there is a 3-stage process for making a product. The profits achieved by making and selling the product are attributable to each of the three stages. Assume also that each stage is protected by a separate patent. There is only one profits ‘pot’ which has to be divided amongst the three stages. Where each stage is as expensive to run and as important to the characteristics of the final product as the other stages it may be that one third of the profits should be attributed to each of them. If this is so, then that attribution applies whether the three patents are owned by the same or different proprietors. It must also apply even when one or more of the patents expires or even if one or other patent has not been applied for. The existence or expiry of patent protection does not alter which stages make what profit. In such a case it is necessary to apportion the total profits actually made among the stages or parts which generated it.”
“Sometimes the court may come to the conclusion that all the profits are attributable to the act of infringement.That is what Pennycuick J. did in Peter Pan [v Silhouette]. There the whole of the defendant’s brassieres were made by misuse of the plaintiff’s confidential information. Without it brassieres to that design would not have existed. No apportionment was appropriate. Similarly, the court may come to the conclusion, as a matter of fact, that the invention was the essential ingredient in the creation of the defendant's whole product or process. If so, it may be appropriate not to apportion. See Dart Industries v. Decor Corp .”
“The principles are well settled and summarised by Millett J in Potton v Yorkclose[1990] FSR 11 at 14 to 16. First, the purpose is to deprive the defendants of the profits which they have improperly made by the wrongful acts committed in breach of the claimants’ rights and to transfer those profits to the claimants. … Fourthly, where a single head of profit is attributable to a number of causes, some of them infringing and some not, it is necessary and appropriate for the court to conduct an apportionment so as to work out on a broad-brush basis what proportion of the profit was due to the act of infringement.”
“7.Section 61(1)(d) of the Patents Act 1977 entitles a patentee to claim against an infringer an account of the profits ‘derived by him from the infringement’. An account of profits is confined to profits actually made, its purpose being not to punish the defendant but to prevent his unjust enrichment. The underlying theory is that the infringer is treated as having carried on his business (to the extent that it infringes) on behalf of the patentee. The broad principle is that the patentee is entitled to profits that have been earned by the use of his invention. If the patentee does not recover those profits, the infringer will have been unjustly enriched. So the purpose of the account is to quantify the extent to which the infringer would be unjustly enriched if he were to retain the profits derived by him from the infringement. That requires the fact finder first to identify the patentee’s invention and second to decide what (if any) profits the infringer derived from the use of that invention. The second of these questions may give rise to difficulty where the infringer sells products associated with the subject matter of the patent (often called ‘convoyed goods’) or products into which the subject matter of the patent is incorporated. The court must determine what profit has been earned, in a legal sense, by the infringer’s wrongful acts. … 8. The first question requires the identification of the invention. It is common ground that, for the purpose of assessing damages or taking an account of profits, the scope of the invention is not necessarily co-terminous with the scope of the claims.Laddie J explained the reason for this in Celanese … v BP … at [51] [citing the passage set out in paragraph 78 above].”
“36. Let me revert to the example given by the Full Court in Dart … v Decor …. A manufacturer sells a car which includes a patented brake. If the car did not have brakes, the manufacturer could not have sold it, but it did not have to have that particular brake. In those circumstances the Full Court clearly thought that it would be unjust to charge the manufacturer with the whole profit made on the car; and I agree with them. In my judgment the legal error that the judge made was to ask whether the sale of the panel plus insert would have happened separately rather than to ask himself how much of the profit on the sale was derived from the infringement. In a case in which the infringement does not ‘drive’ the sale it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement. In particular it does not follow from the fact that the customer wanted a slat wall that incorporated an insert that the customer wanted a slat wall that incorporated the infringing insert. [Counsel for the claimants] argued that the infringing inserts and the slot were the ‘very essence’ of the incorporated and unincorporated panels. But the judge made no such finding, and his observations at [32] suggest the contrary. In addition I do not consider that the judge was correct at [31] in saying that ‘because the sales went together, the sale of inserts caused … the sale of the panels…’ The mere fact that the two went together is not, in my judgment, sufficient to establish that the whole of the profit earned on the composite item was derived from the invention. One might just as well say that the sale of the panel caused the sale of the insert. As the judge himself recognised the customer specifies panels, and on the hypothesis that he was considering at [31] the customer is indifferent about the inserts (provided that some form of insert is included). On the judge’s approach, because the sale of the patented brake went with the sale of the car, the whole of the profit on the car would be included in the account. If the judge had found on the facts that the infringing insert was ‘the essential ingredient in the creation of the defendant’s whole product’ (i.e. the incorporated panel), then he would have been justified, on the facts, in declining to apportion the profit. But I cannot see that he made that finding. 37. In my judgment therefore in cases simply falling within the factual hypothesis discussed at [31] the judge should have apportioned the overall profit. The question of apportionment will therefore have to be returned to IPEC, although the judge would not be precluded from finding as a fact that the infringing insert was the ‘essential ingredient’ of the incorporated panel.”
“[The statement of the Court of Appeal quoted in paragraph 89 above] means only this, that the defendants could have manufactured the product in question by other means, but were able to manufacture more economically by making use of a particular appliance which they were not entitled to use. The position there seems to be wholly different from that in the present case where the manufacture of the article in question of itself involved the use of the confidential information and the defendants could not have manufactured that article at all without the use of the confidential information. ”
“[Dart] cannot gainsay that it is only entitled to the profits obtained by the infringement. If, for example, a patented brake is wrongfully used in the construction of a motor car, the patentee is not entitled to the entire profits earned by sales of the motor car. He must accept an appropriate apportionment. But the question is how that principle shall be applied to a situation where the patent relates to the essential feature of a single item … it seems to us that it was open to the judge to find, and he correctly found, that what characterised the infringing product was the press button lid, without which this particular container would never have been produced at all.”
“In estimating the profits for which Hornby Street was liable to account, the question should therefore have been asked whether it is likely that any, and if so what proportion, of the sales of goods bearing the offending signs which were in fact made would have been made if the signs had not been used. …”
“101. It is settled law that the inventor is only entitled to that portion of the infringer’s profit which is causally attributable to the invention: Lubrizol Corp. v. Imperial Oil Ltd., [1997] 2 F.C. 3 (C.A.); Celanese International Corp. v. BP Chemicals Ltd., [1999] R.P.C. 203 (Pat. Ct.), at para. 37. This is consistent with the general law on awarding non-punitive remedies: …. 102. The preferred means of calculating an accounting of profits is what has been termed the value-based or ‘differential profit’ approach, where profits are allocated according to the value contributed to the defendant’s wares by the patent: N. Siebrasse, ‘A Remedial Benefit-Based Approach to the Innocent User Problem in the Patenting of Higher Life Forms’ (2004), 20 C.I.P.R. 79. A comparison is to be made between the defendant’s profit attributable to the invention and his profit had he used the best non-infringing option: …”
“Step 1: Calculate the actual profits earned by selling the infringing product — i.e., revenue minus (full or differential) costs. Step 2: Determine whether there is a non-infringing option that can help isolate the profits causally attributable to the invention from the portion of the infringer’s profits not causally attributable to the invention — i.e., differential profits. It is at this step that judges should apply the principles of causation. Causation ‘need not be determined by scientific precision: it is “essentially a practical question of fact which can best be answered by ordinary common sense”’ …. Step 3: If there is a non-infringing option, subtract the profits the infringer could have made had it used the non-infringing option from its actual profits, to determine the amount to be disgorged.”
“[58] In sum, a non-infringing option is any product that helps courts isolate the profits causally attributable to the invention from the profits which arose at the same time the infringing product was used or sold, but which are not causally attributable to the invention. [59] A non-infringing option is not, as Nova and [Coté J, who dissented] contend, an infringer’s ‘most profitable’ alternative sales product that it ‘would have’ and ‘could have’ sold had it not infringed. This approach is flawed for two reasons.”
“Whether there is a non-infringing option that can assist courts in isolating the profits causally attributable to the invention is a question of fact. There are no strict rules around this factual exercise. Despite [Coté J’s] assertions that I hold otherwise, the non-infringing option need not be a strict market substitute for the patented product. The onus is on the infringer to adduce sufficient evidence to satisfy the court that the profits from its infringing product arose by virtue of features other than the patentee’s invention and that there is a non-infringing option that can help the courts isolate this value …. Typically, non˗infringing options will be most relevant when a patent covers only part of the product sold. In those situations, the profits generated by the sale of the infringing product may be attributable to inventive and non-inventive features of the product. But non-infringing options may also be relevant when the entire product sold is patented. Ultimately, ‘the question is whether the patent contributes the whole value of the thing that was sold, or merely a part’, ‘not whether the patent is the whole thing that was sold, or merely a part’ (N. Siebrasse, ‘A Remedial Benefit-Based Approach to the Innocent-User Problem in the Patenting of Higher Life Forms’ (2004), 20 C.I.P.R. 79, at p. 109 (emphasis in original)).”
“[69] First, the … judge found that customers only purchased Nova’s infringing plastics because they contained the features captured by Dow’s patent, i.e., Nova sold the unique, patented thin and durable plastics covered by Dow’s patent. Dow’s invention had created a distinct market and Nova could only service that market because it sold infringing plastics. The two companies were the only companies serving the distinct market created by the patented plastics …. [70] Second, Nova did not establish that there were relevant non-infringing options that would help the court isolate the profits causally attributable to Dow’s invention from profits attributable to non-inventive features of the infringing product. As explained earlier, the existence of an appropriate non-infringing option is a question of fact. Nova bore the evidentiary onus to establish this fact. It failed to discharge this onus. Before the … judge, Nova conceded that there were no non-infringing options available for the purpose of applying the differential profits approach …”
“… Mr. Rivett was unable to establish that he ‘could have’ planted regular soybean seeds, as they were not available for purchase in his locale …. Despite this unavailability, under the reading of Schmeiser adopted in these reasons and by the Federal Court in Rivett, it was appropriate to consider regular soybean seeds as a relevant non-infringing option. Considering what profits Mr. Rivett would have earned with regular soybean seeds allowed the courts to isolate the ‘portion of the infringer’s profit which [was] causally attributable to the invention’ (the patented genes that made the plants glyphosate herbicide˗resistant) from the profits attributable to non-patented features of the sold product (the soybean seed itself), as per the instructions in Schmeiser (para. 101).”
“When an accounting of profits is ordered, the infringer is required to disgorge those profits made by the infringer as a result of the infringement. But the patentee is not necessarily entitled to the entirety of the infringer’s profits. For example, in Gordon Form Lathe Co. v. Ford Motor Co. the patent in issue was for a lathe for turning automobile camshafts. Though Ford Motor Co. was found to have infringed the patent, the patentee was clearly not entitled to the entire profits made by Ford on each car sold which had a camshaft ground with an infringing lathe. How then are the profits to be apportioned between the infringer and the patentee? It is uncontroversial that an apportionment is sometimes necessary. It is also universally acknowledged that the governing principle is that the patentee is only entitled to that portion of the infringer’s profit which is causally attributable to the infringement. This is simply a reflection in patent law of the fundamental legal principle that a causal link between the wrong and the award is an essential element in the assessment any non-punitive compensation. The controversy is in the approach to be used in implementing the causation requirement in an accounting. Precisely what rule should be used in apportioning profits?”
“… the differential profit approach to an accounting is simply a more specialized statement of this general principle. It says that the defendant’s profit caused by the infringement is the difference between the profit which the defendant in fact made and the profit which the defendant would have made but for the infringement, on the supposition that but for the infringement the defendant would have used the next best non-infringing method.”
“Thus the question is not whether the patent is the whole thing which was sold, or merely a part; the question is whether the patent contributes the whole value of the thing which was sold, or merely a part. The confusion of these two questions is understandable as it is not infrequently the case that when the patented item is the whole physical thing, the patent also contributes the entire value. But it is important to recognize the true rule, since there are some cases in which the patented item is the whole thing yet not the whole value; and conversely there are other cases in which it is only a part of the thing, and yet represents the whole value.”
“Apportionment will generally be unnecessary when the Differential Profits approach is used, because the plaintiff is only entitled to the difference between the profits actually earned by the defendant and those that would have been earned with the most likely non-infringing alternative. This gives a conceptually precise test for determining what profits are attributable to the infringement; the plaintiff is entitled only to the value or profits causally attributable to the infringement using a ‘but for’ test. Put another way, a value-based apportionment is embedded in the Differential Profits approach. … Fundamentally, apportionment should not be led by the form of the claim, but should look to the value of the invention itself. [The decision in Imperial Oil] … is entirely consistent with the Differential Profits approach; notwithstanding that the whole product was patented, the key issue is the extent to which the infringing motor oil was more valuable than a non-infringing motor oil.”
“… if I am correct in arguing … that, for purpose of calculating the defendant’s profit attributable to the infringement, apportionment and consideration of the next-best noninfringing alternative are really two sides of the same coin, there should be no need in future cases to determine what portion of the profits earned from the sale of infringing items are properly allocable to the presence of the infringing feature, as Canadian courts have sometimes done in other cases.138 If the presence of the infringing feature caused the infringer to earn ten sales that it otherwise would not have earned, the proper measure of the benefit derived from the use of the patent is the profit earned on the ten additional sales. Similarly, if the infringer would have made the same number of sales at the same prices, but at higher production costs, the benefit derived from the use of the patent is the cost saving. No other apportionment would appear to be necessary to restore the defendant to the position it would have occupied, but for the infringement.139”
“(2) It is necessary for the patentee to prove that the infringer was unable to develop, produce or supply a Non-Infringing Alternative but this is not sufficient by itself to establish that the infringement was a proximate cause: see [116]. (3) Where the infringement relates to a single component of a complex product and the infringer has to meet performance standards not only in relation to that component but the other components or the product as a whole, the patentee must demonstrate that the performance of the infringing component was the real driver of the sales in issue: see [116]. (4) In order to determine whether the infringement is a proximate cause of the relevant losses, it is not enough simply to consider the counterfactual in which the infringer did not make the infringing supplies although this may be a useful cross-check: see [117].”
“In a case in which the infringement does not ‘drive’ the sale it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement.”
“I am satisfied … that [Astronics’] power management function systems drove the sales of the EmPower Fusion system just as much as the infringement of the Patent during the Relevant Period.”
“… The Defendants have always pleaded that the Components were not functionally essential to the EmPower Systems and that its power management systems were ‘independent of and unconnected with the inventive concept’ of the Patent: see the Points of Defence, ¶23(a). Moreover, this was the first pleaded factor upon which the Defendants relied in support of their case for apportionment and, in my judgment, they were entitled to argue both that the Patent was not an essential feature of the EmPower System and that their own invention was of equal (if not greater) commercial significance as Lufthansa’s invention. What they were not entitled to do was to advance an argument or call evidence to prove that the GD AES Patents were ‘gateway’ or ‘barrier’ patents which would have operated in the same way as the Patent to prevent competitors entering the market.”
“A better guide is likely to be provided by ordinary accounting principles whereby, in the absence of some special reason to the contrary, the profits of a single project are attributed to different parts or aspects of the project in the same proportions as the costs and expenses are attributed to them.”
“The problem with [the distribution by costs] approach is that it over simplifies the position, because it assumes that each cost item is equally profitable in terms of a return on investment. So some form of weighting is necessary.”
“… the Defendants will say that the appropriate measure of the profits to which Lufthansa is entitled is to be assessed by reference to the payment provisions of the 2014 Teaming Agreement …”
“Preamble Responding to a permanently increasing market demand for PC Power Outlets in aircraft seats, several companies have introduced in-seat power supply systems to the market. On account of safety regulations issued by the airworthiness authorities (FAA, JAA) these in-seat power supply systems apply only a low 15 VDC output voltage into the seat outlets. KID is one of the suppliers of a 15 VDC system (hereinafter referred to as ‘Classic System’). LHT has developed a technical concept for a 110 VAC in-seat power-supply system (hereinafter referred to as ‘Advanced System’).This concept is concentrated mainly upon solutions regarding the necessary safety aspects in order to comply with the safety regulations of the airworthiness authorities, thus facilitating a system certification. Article 1Scope KID will, under its own sole responsibility, introduce the Advanced System to the market. The parties agree that this responsibility comprises the development, the manufacturing, the marketing and after-sales support for, the said system. LHT will participate in the revenues resulting from such activities of KID. The parties agree that this applies only to the Advanced System. KID will be free to merchandise the Classic System freely without any participation or interference by LHT. … The initial introduction of the 110 VAC system to the market will be realized as follows: [DLH] intends to supply its Long Range Fleet of airplanes with said Advanced Systems. The details and delivery schedule of such order … will be subject to a separate agreement between the parties [i.e. the 1998 Purchase Agreement] …. Article 2Team Work In order to arrive at best possible marketing results LHT will render the following support to KID applying its best efforts and to the extent reasonably feasible. LHT will render with best efforts to the extent reasonably feasible and at its own cost in actively supporting and cooperating with KID in acquiring the certification for said systems …. Article 3System Installation KID undertakes to recommend LHT to any potential buyer as partner for the installation of the systems into the respective aircraft. In principle within this context LHT may offer the following services: - complete installation of the systems including certification (STC) and complete documentation (full turn key package), - installation kits, - certification support. In such a case LHT will place an offer for such service in its own name, but after consultation with KID, adapted to the individual requirements of the buyer. The placement of the offer and the negotiations resulting therefrom (to be conducted together with KID) will be performed with the express aim to arrive at a commercially attractive over-all offer. In case a potential buyer abstains from choosing the offer of LHT, KID will be free to cooperate with other partners in this respect. LHT will inform KID in due time, if LHT sees no possibility to perform the installation as asked for by the buyer. Article 4 Promotion In principle KID will take charge of promotion campaigns at its own costs. However, LHT is also entitled to promotion activities, in which case KID will provide LHT with existing advertising material such as brochures free of charge. Promotion Campaigns conducted by both Parties will be coordinated in advance, especially in respect of contents and costs. Article 5Commercial Conditions The participation of LHT in the returns of the sales of the Advanced Systems will be based upon the following principles: LHT will receive a fixed amount per system (OEM series) sold, spares excluded. …. Article 6Patents/Intellectual Property Rights The Parties agree that LHT remains the owner of the intellectual property rights concerning the Advanced System, for which LHT grants to KID an exclusive user’s right in return for the payment of royalties as stated above for as long as this Agreement is in force. After termination of this Teaming Agreement, KID shall be granted a non-exclusive user’s right in return for the payment of royalties as stated above, enabling KID to fulfil any obligations it has entered into with Customers up to the time of such termination.”
“The principle of good faith is a broad principle, which in general terms means that parties cannot argue for an interpretation that would be contrary to their behaviour when entering into the agreement. It seeks to ensure that the spirit of the agreement is upheld. In accordance with this principle, an interpretation is to be sought which takes appropriate account of the legitimate interests of both parties and meets the requirements of fair commercial practice.”
“Customary practice is the practice prevailing in the circles concerned at the time the agreement was made.”
“Proceedings for infringement by exclusive licensee (1) Subject to the provisions of this section, the holder of an exclusive licence under a patent shall have the same right as the proprietor of the patent to bring proceedings in respect of any infringement of the patent committed after the date of the licence; and references to the proprietor of the patent in the provisions of this Act relating to infringement shall be construed accordingly. (2) In awarding damages or granting any other relief in any such proceedings the court or the comptroller shall take into consideration any loss suffered or likely to be suffered by the exclusive licensee as such as a result of the infringement, or, as the case may be, the profits derived from the infringement, so far as it constitutes an infringement of the rights of the exclusive licensee as such. (3) In any proceedings taken by an exclusive licensee by virtue of this section the proprietor of the patent shall be made a party to the proceedings, but if made a defendant or defender shall not be liable for any costs or expenses unless he enters an appearance and takes part in the proceedings.”
“…as is apparent from section 67(2), and confirmed by paragraphs 129-134 of the Final Report of the Departmental Committee on the Patents and Designs Acts chaired by Kenneth Swan QC (Cmd 7206, September 1947) which led to the introduction of the predecessor provision into the 1949 Act, the purpose of section 67 is to enable an exclusive licensee to recover its own losses (or its share of the infringer’s profits) in the event of infringement.”
“the profits derived from the infringement, so far as it constitutes an infringement of the rights of the exclusive licensee as such”
“82. The potential for double recovery arises in respect of the [Mannheim III] (which has loosely been referred to as the ‘indirect damages’ claim but which includes claims for shipments to Germany both directly and indirectly). In those proceedings Lufthansa’s cases are broad enough to catch the following: (a) Profits made by Astronics in respect of Primary Components shipped to third parties in the UK (such as Safran) which are then shipped to Germany (after, for example, having been incorporated into seats). This scenario arises where the seats are for linefit on Airbus aircraft - the majority of Airbus final assembly lines being in France and Germany. (b) Profits made in respect of FAL components shipped directly to Germany where they are included within the scope of the English Account by virtue of being installed in the same aircraft as a UK-delivered Primary Component. (c) Profits, said to be payable by Astronics, but made by Panasonic in respect of Primary Components shipped to the UK (which parts are then shipped by others to Germany). 83. Whether and precisely how double recovery arises depends on whether and precisely how each of the allegations above is pursued by Lufthansa and the findings made in the foreign proceedings. However, take the following examples: (a) A Primary Component is shipped to the UK by Astronics. Astronics contends that the Judgment proceeds on the basis that, in effect, Astronics receives payment and makes its entire profit in respect of that part upon supply in the UK . That same part is shipped by a third party (assume a seat maker) to Germany. Astronics received no further payment for that part upon its delivery to Germany (and so no further profit). In that scenario there is only one transaction that caused profits to be generated for Astronics, namely the shipment to the UK and all of Astronics' profits in respect of that part were in play in this Account. It is clear from Lufthansa’s second letter of14 March 2025 … that Lufthansa nonetheless intends to claim in Germany in respect of the same transaction, for example by arguing that the 87% that this Court has not attributed to the infringement are somehow available in Germany and are not ‘the same profits’ in respect of which a determination has been made in this Account. If that is the case, the Defendants wish to argue that recovery of such profits would be re-litigating an issue that has already been decided by this court and amounts to double recovery. (b) FAL components shipped directly to Germany where they are installed in the same aircraft as a UK-delivered Primary Component. Again, the UK award covers FAL components relative to the number of Primary Components shipped to the UK. A proportion of such FAL components will have been installed in Germany. (c) Profits made by Panasonic upon shipment to the UK. Panasonic makes no further profits when such parts are shipped to Germany having been incorporated into a se[at]. Nonetheless, in Germany Lufthansa is arguing that Astronics is liable for such profits.” (a) Profits made by Astronics in respect of Primary Components shipped to third parties in the UK (such as Safran) which are then shipped to Germany (after, for example, having been incorporated into seats). This scenario arises where the seats are for linefit on Airbus aircraft - the majority of Airbus final assembly lines being in France and Germany. (b) Profits made in respect of FAL components shipped directly to Germany where they are included within the scope of the English Account by virtue of being installed in the same aircraft as a UK-delivered Primary Component. (c) Profits, said to be payable by Astronics, but made by Panasonic in respect of Primary Components shipped to the UK (which parts are then shipped by others to Germany). (a) A Primary Component is shipped to the UK by Astronics. Astronics contends that the Judgment proceeds on the basis that, in effect, Astronics receives payment and makes its entire profit in respect of that part upon supply in the UK . That same part is shipped by a third party (assume a seat maker) to Germany. Astronics received no further payment for that part upon its delivery to Germany (and so no further profit). In that scenario there is only one transaction that caused profits to be generated for Astronics, namely the shipment to the UK and all of Astronics' profits in respect of that part were in play in this Account. It is clear from Lufthansa’s second letter of14 March 2025 … that Lufthansa nonetheless intends to claim in Germany in respect of the same transaction, for example by arguing that the 87% that this Court has not attributed to the infringement are somehow available in Germany and are not ‘the same profits’ in respect of which a determination has been made in this Account. If that is the case, the Defendants wish to argue that recovery of such profits would be re-litigating an issue that has already been decided by this court and amounts to double recovery. (b) FAL components shipped directly to Germany where they are installed in the same aircraft as a UK-delivered Primary Component. Again, the UK award covers FAL components relative to the number of Primary Components shipped to the UK. A proportion of such FAL components will have been installed in Germany. (c) Profits made by Panasonic upon shipment to the UK. Panasonic makes no further profits when such parts are shipped to Germany having been incorporated into a se[at]. Nonetheless, in Germany Lufthansa is arguing that Astronics is liable for such profits.”
“(1) There was no evidence that the French or German claims would be resolved in the near future and it could be years before a final award of profits is made. I might have been prepared to stay any final Order and grant permission to apply if those claims were likely to be determined in a matter of weeks or months but that was not the position. In my judgment, the Court should be very wary of granting an open-ended permission to apply to vary or set aside an Order which a party might seek to exercise years later. (2) Furthermore, I am not prepared to grant a stay of execution of any final Order pending the determination of the French and German claims. [Counsel for the Defendants] attempted to meet this point by stating that the Defendants were willing to comply with the Order and pay over the funds and that Lufthansa would only be required to pay them back if the Defendants sought permission to apply and were successful in setting aside or varying the Order. In my judgment, this is unsatisfactory. No party who has the benefit of a final judgment should be required to live with the uncertainty that they might be ordered to repay the fruits of the judgment. The fact that Lufthansa is a multi-national corporation with the ability to raise and repay the funds should not, in my judgment, make a difference. (3) [Counsel for the Defendants] did not challenge [Lufthansa’s] evidence in relation to the defence of performance under German law or argue that they would not be able to deduct the profits which they are ordered to pay by the English Court either as costs of manufacturing the infringing articles or as a matter of general principle. I am not satisfied, therefore, that there is a real risk that the German Courts (or, for that matter, the French Courts) would permit double recovery or that Lufthansa’s assurance in the Reply does not give the Defendants adequate protection. (4) But even if there is a risk that the French or German Courts would permit double recovery, I have reached the conclusion that this should be a matter for determination by them and not by the English Courts. For example I have held that the Defendants are liable to pay 13% of the profits in issue. It is possible, say, that the French Courts may award a further 15% of those profits and the German Courts a further 25%. It does not appear to me to be self-evident that each award should be set off against the others so that the Defendants pay a total of 25% of the profits. The French Court might take the view that profits awarded by the English Court should be set off against its own award but the German Court might take the view that the awards should be cumulative. Much may depend on the evidence and the principles of law which the Court must award [sic]. In my judgment, those are matters for each national court applying its own law. (5) Finally, even if I were persuaded that this is a matter for the English Court, it is entirely unclear what the scope of any further issue between the parties will be. Again, it is unsatisfactory for the Court to be asked to give permission to apply without the Defendants formulating precisely what issue they should be permitted to bring back before the Court. If I make a provisional award of profits and give the Defendants permission to apply, I fully expect the parties to treat this as an invitation to re-open the Order which I have made and to raise a raft of issues about the effect of the French and German decisions. It is time to bring this litigation to an end (at least at first instance).”
“… it is a very widely accepted principle that the timing of a payment of money should be economically neutral. As the judge noted, Messrs Bezant and Meyer [two expert forensic accountants] agreed that the economically correct approach was to convert past royalties to present value using a relevant interest rate to reflect the time value of money.”
“… The obvious and usual order a court makes to do justice when determining what money is due is the award of interest, thereby adjusting the value of the award to reflect the time value of money (and inflation) and so ensuring that the claimant has not been unjustly prejudiced by being kept from their money and the defendant does not benefit through doing so. ….”
“… the essence of interest is that it is a payment which becomes due because the creditor has not had his money at the due date. It may be regarded either as representing the profit he might have made if he had had the use of the money, or conversely the loss he suffered because he had not that use. The general idea is that he is entitled to compensation for the deprivation.”
“The Chancery courts, again differing from the common law courts, had regularly awarded simple interest as ancillary relief in respect of equitable remedies, such as specific performance, rescission and the taking of an account. Chancery courts had further regularly awarded interest, including not only simple interest but also compound interest, when they thought that justice so demanded, that is to say in cases where money had been obtained and retained by fraud, or where it had been withheld or misapplied by a trustee or anyone else in a fiduciary position.”
“The cases cited apply only where there are accounts regularly stated between the parties, in which case there is an implied contract on the part of the debtor to pay; and all contracts to pay, undoubtedly, give a right to interest from the time when the principal ought to be paid. But this is not so here. It is true, the sum claimed does, in fact, appear to be due, on balance, at the close of the account; but there was no settlement or acknowledgment by the debtor, which raises a contract to pay, and which is the only ground upon which interest is given.”
“The rule in equity seems to have been firmly established by this time (see Boddam v. Riley (1785) 2 Bro.C.C. 2 ) that interest would not be awarded on taking an account except upon an account stated, the ground being that only when an account was stated could it be said that there was a contract to pay.”
“Under these circumstances the case is assimilated to a simple contract debt, which does not carry interest; it is compared also to the case of mesne profits, improperly received by a trespasser; in which cases, it is clear, the Courts of law and Equity are not in the habit of charging the party with interest. What analogy do those cases bear to the present? The main point here does not exist in those cases, viz., a sum due from a trustee to a cestui que trust. The mesne profits are received by an adverse holder, by a trespasser, where there is no privity between the one and the other; but here, the profits are received under an implied contract by the mortgagee to account; that is not like the case of a trespasser receiving mesne profits. This mortgagee received the rents as trustee—he received them to pay himself first, and afterwards to account to the mortgagor; he has therefore made himself liable to account.”
“Courts of Equity give interest in many cases where there is no express contract. In this very case the mortgagee himself is allowed interest which he was not entitled to by contract, I mean, the interest upon lasting improvements, &c. Why is he entitled to it? Because a Court of Equity considers itself competent in this relation between mortgagor and mortgagee to go beyond the contract – to consider what is just and equitable between parties, standing in that relation; and because when the trustee in possession has been expending his own money to improve the estate of the cestui que trust, it is not justice to say, you shall be repaid the very money laid out, without any allowance for the same, with interest. What interest? Where is there any contract? The interest is ten per cent. on one mortgage, and eight per cent. on another. Is he to have that? No; six per cent. Why? Because it is equitable that being an expenditure on the spot, by a trustee, he shall have the current interest of the country, just the same as if he had lent so much money. This, I say, is strong proof to shew you are not to restrict a Court of Equity by the narrow principles applying to simple contract debts, or mesne profits, but that the Court looks at the question as applying to mortgagee and mortgagor, and gives either party interest, as justice requires …”
“Subject to rules of court, in proceedings (whenever instituted) before the High Court for the recovery of a debt or damages there may be included in any sum for which judgment is given simple interest, at such rate as the court thinks fit or as rules of court may provide, on all or any part of the debt or damages in respect of which judgment is given, or payment is made before judgment, for all or any part of the period between the date when the cause of action arose and— (a) in the case of any sum paid before judgment, the date of the payment; and (b) in the case of the sum for which judgment is given, the date of the judgment.”
“In my opinion the words ‘any debt or damages’, in the context in which they occur, are very wide, so that they cover any sum of money which is recoverable by one party from another, either at common law or in equity or under a statute of the kind here concerned. In this connection I adhere to the view with regard to the scope of section 3(1) which I expressed in The Aldora [1975] Q.B. 748, 751. I hold, therefore, that Robert Goff J. had power to order the payment of interest on the principal sums awarded by him.”
“I do not think that a claim for salvage is a proceeding for the recovery of damages, and the question is accordingly reduced to this, whether it is a proceeding for the recovery of a debt. As to this it is to be observed that the words used are ‘any debt,’ indicating that the net is being spread as widely as possible. Those words are, as it seems to me, apt to cover sums, whether liquidated or unliquidated, which a person is obliged to pay either under a contract, express or implied, or under a statute.”
“[Robert Goff J] chose June 14, 1974 [as the date from which interest was to run], because until then the defendant did not know that the plaintiffs were going to make a claim against him and before then it had not been made clear that they would or could. The judge’s choice of this date was made in the exercise of his judicial discretion. We can see no reason for saying he exercised his discretion wrongly. The defendant’s submission [that interest should run from the date of judgment because there was no debt until that date] could not be supported. His liability to pay the plaintiffs a just sum arose on7 December 1971 [the date when Libya expropriated BP’s concession]. From then onwards he was indebted to the plaintiffs but the amount of his indebtedness could not be known until the judge had assessed it.”
“Interest is awarded to compensate claimants for being kept out of money which ought to have been paid to them rather than as compensation for damage done or to deprive defendants of profit they may have made from the use of the money.”
“(2) …. The court will consider the position of persons with the claimants’ general attributes, but will not have regard to claimants’ particular attributes or any special position in which they may have been. (3) In relation to commercial claimants the general presumption will be that they would have borrowed less and so the court will have regard to the rate at which persons with the general attributes of the claimant could have borrowed. This is likely to be a percentage over base rate and may be higher for small businesses than for first class borrowers.”
“There are some contexts … when the existence of a clear default rule is important, even if there is much which can be said for both competing options. I am satisfied that the default interest rate for US$ awards in the Commercial Court going forward should be US Prime, irrespective of whether the claimant has a US place of operations or not and irrespective of whether the claim is a maritime claim or not.”
“We have at all times to bear in mind that fluctuations in the relevant currency between the date of breach and the date of judgment are not taken into account. … Delay between the date of breach and the date of judgment is compensated for by an award of interest (as indeed is delay in the satisfaction of the judgment). But, as I have said, no account is taken of fluctuations in the relevant currency as against other currencies between the date of breach and the date of judgment. … The proper approach is to identify, in accordance with established principle, the appropriate currency in which the award of damages is to be made, and to award an appropriate sum by way of damages in that currency, and also of interest in that currency to compensate for the delay between the date of breach and the date of judgment.”
“… I do not know any form of account which is more difficult to work out, or may be more difficult to work out than an account of profits. …The litigation is enormous, the expense is great and the time consumed is out of all proportion to the advantage ultimately obtained… I believe that in almost every case people get tired of it and get disgusted.”
“… the general intention of the Court in making the order which it has made had been to achieve a fair apportionment so that neither party will have that which justly belongs to another.”
“… a non-infringing option helps courts isolate the profits causally attributable to the invention from the profits which arose at the same time the infringing product was used or sold, but which are not causally attributable to the invention. For example, when a company sells a product with a component that infringes a patent, courts need to determine the profit generated by (1) the patented invention and (2) the rest of the non-patented product. To generate these sums, courts should compare the profits generated from the sale of the infringing product with the patented feature — i.e., the actual profits — with the profits the infringer would have made on the sale of a similar product without the patented feature — i.e., the non-infringing option.”
“Non-infringing options can also help courts determine when some, but not all, of the infringer’s profits are causally attributable to the invention.”
“In sum, a non-infringing option is any product that helps courts isolate the profits causally attributable to the invention from the profits which arose at the same time the infringing product was used or sold, but which are not causally attributable to the invention.”
“Step 1: Calculate the actual profits earned by selling the infringing product — i.e., revenue minus (full or differential) costs. Step 2: Determine whether there is a non-infringing option that can help isolate the profits causally attributable to the invention from the portion of the infringer’s profits not causally attributable to the invention — i.e., differential profits. It is at this step that judges should apply the principles of causation. Causation “need not be determined by scientific precision: it is ‘essentially a practical question of fact which can best be answered by ordinary common sense’” … Step 3: If there is a non-infringing option, subtract the profits the infringer could have made had it used the non-infringing option from its actual profits, to determine the amount to be disgorged.” (Emphasis added)
“[33] To reiterate, under an accounting of profits, the patentee is entitled to the benefits obtained by infringers as a result of the infringement of the patent, properly construed and understood, no more, no less. The key words are “as a result” and “infringement of the patent, properly construed and understood”
“In calculating an account of profits, the defendant may not deduct the opportunity cost, that is, the profit forgone on the alternative products.”
“In a litigious world of unlimited time and resources, the best approach for determining the profit derived from the infringement might be to estimate the profit of the product after allowing a proportion of the overheads and then deduct the opportunity cost of producing the infringing product. This would show the true gain of the infringer from producing or distributing the infringing product instead of the next best alternative. Another but less exact method of determining the profit and preventing the unjust enrichment of the infringer might be to determine what was the best alternative open to the infringer, determine what gross revenue would have been obtained from that alternative, and deduct that sum from the gross revenue obtained from the infringing product. Another suggested method is that there should be a deduction for that part of the overhead which would have been absorbed in producing or selling the alternative to the extent that it was used in producing or selling the infringing product. But to adopt any of these methods would make an often complex subject more complex than it already is. Very likely, it would increase the prospect of contested litigation over the taking of the account and the cost and length of the hearing while the parties and their witnesses investigated and debated the hypothetical. Depending on which method was used, the person taking the accounts would have to estimate one or more of the following figures: the gross revenue from the alternative, the direct costs of the alternative and the proportion of overhead attributable to the alternative. Lindley L.J., who knew more about accounts of profits than most lawyers, once said that he did “not know any form of account which [was] more difficult to work out, or may be more difficult to work out than an account of profits”
“[Although the infringer cannot avoid paying over profits by relying on possible non-infringing alternatives], the patentee, as noted above, cannot recover profits which were not earned by use of his invention. I have already referred to a case where the defendant has two businesses, one infringing and the other not. But the same approach should apply where only part of a product or process infringes. Profits attributable to the non-infringing parts were not caused by or attributable to the use of the invention even if the use of the invention was the occasion for the generation of those profits.”
“Let me revert to the example given by the Full Court in Dart Industries v Decor Corp[1994] FSR 567 . A manufacturer sells a car which includes a patented brake. If the car did not have brakes, the manufacturer could not have sold it, but it did not have to have that particular brake. In those circumstances the Full Court clearly thought that it would be unjust to charge the manufacturer with the whole profit made on the car; and I agree with them. In my judgment the legal error that the judge made was to ask whether the sale of the panel plus insert would have happened separately rather than to ask himself how much of the profit on the sale was derived from the infringement. In a case in which the infringement does not “drive” the sale it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement. In particular it does not follow from the fact that the customer wanted a slat wall that incorporated an insert that the customer wanted a slat wall that incorporated the infringing insert. Mr Cuddigan argued that the infringing inserts and the slot were the “very essence” of the incorporated and unincorporated panels. But the judge made no such finding, and his observations at [32] suggest the contrary. In addition I do not consider that the judge was correct at [31] in saying that “because the sales went together, the sale of inserts caused … the sale of the panels…”
“… where a single head of profit is attributable to a number of causes, some of them infringing and some not, it is necessary and appropriate for the court to conduct an apportionment so as to work out on a broad-brush basis what proportion of the profit was due to the act of infringement.”
“… where the wrong consists in misuse of intellectual property, the court’s task is likewise to decide what profits made by the defendant may fairly be attributed to the defendant’s wrongful act, but the court will more readily engage in an apportionment between profits attributable to the infringement of the claimant’s intellectual property and profits which should be attributed to other, non-infringing elements of the defendant’s activities…”
“In such cases the appropriate method of valuation, as it seems to me, is to assess the amount of profit made by the wrongdoer which is fairly attributable to its wrongful use of the claimant’s property (or other wrongful act). As the law currently stands, there are two routes by which this can in principle be achieved. One is to order an account of profits and to apportion the profits made by the defendant between profits which should be attributed to its wrongful act and profits which should be attributed to other factors. The other route is to order payment of a percentage of the defendant’s profits as licence fee damages… It may be that, as the law of remedies in this area develops further, these two different methods of awarding a percentage of profits made by a wrongdoer will be harmonised into a single measure. For the time being, however, they remain doctrinally distinct.”
“… the fact that an infringing act creates an opportunity to make a non-infringing sale does not mean that the former is legally a cause of the latter: it is necessary to consider whether the infringing act is a sufficiently significant driver of the non-infringing sale that it may be regarded as a proximate cause.”
“It is probable, given the judge’s findings as to JM’s requirements and Neo’s inability to satisfy them with a non-infringing alternative, that the performance of the cerium oxide component was necessary for JM to obtain favourable decisions from the car makers, but it does not follow that it was sufficient. It is also probable that each of the other components had to satisfy performance requirements of their own. Moreover, it is clear that the whole catalyst system will have had to satisfy the overall performance requirements laid down by the car makers based upon the Euro 6 standard. This was the real driver of the sales in issue.”
“It is a tool for distinguishing between loss flowing from the fact that, due to the defendant’s negligence, the information was wrong (loss which falls within the scope of the defendant’s duty) and loss flowing from the decision to enter into the transaction at all (loss which would not have been sustained but for the negligence). The counterfactual test may be a useful cross-check, but it can be problematic and has the potential to confuse. Accordingly, it should not replace the decision that needs to be made as to the scope of the duty. As discussed above, the issue in the present case is not as to the scope of the duty, but whether the infringing acts were a proximate cause of the losses claimed.”
“I have held that Astronics’ ability to satisfy all of the requirements of the regulatory authorities and the airframe manufacturers drove the sales of all of the EmPower systems by analogy with Neo. I have also held that the superior quality of its product and services and KID’s failure to compete drove the sales of the EmPower Fusion system in the integrated market during the Relevant Period. In my judgment, either finding might have justified the conclusion that the infringement of the Patent was not the proximate cause of the profits in issue. But I make it clear that in reaching this conclusion I have carried out an evaluative exercise in which I assessed the cumulative effect of all of the factors which I have set out above. In doing so, I have adopted the same course as Bacon J in Neo and followed the guidance of Arnold LJ in the Court of Appeal.”
“The experts were agreed that the first step is to identify the gross profits (being revenue less direct costs) made on the Defendants’ relevant sales. They were also agreed that the second step was to deduct the overheads and tax attributable to the relevant sales. They also stated that they had both performed their calculations on the basis that overheads (excluding tax) are deductible where: (1) they were incremental to the relevant sales; or (2) those overheads could have been used to support sales of an alternative non-infringing product. Finally, they were also agreed that, where applicable as a matter of law, the final step was to apportion the Defendants’ net profits to the infringement and that the aim of this apportionment was to recognise the relative contribution of the Patent as opposed to other factors in generating the profits that relate to the relevant sales…”
“In principle, the Teaming Agreements can be used to estimate the appropriate apportionment of [Astronics’] net profit between infringing acts and its other activities. Specifically, one can assume that the royalties agreed between Lufthansa and KID reflect expectations as to the Patent’s value when used in power supply systems… On this basis, the royalties in the Teaming Agreements can be used as a proxy for the share of profits attributable to the patent on the basis that a licence allocates – via the agreed royalty – the share of the expected additional profits that arise from the use of the IP between the holder and the user of the IP.”
“Somebody has used the right, albeit without permission, and they’ve used their other resources and they have made some profit. So it’s not a licensing negotiation, it’s using the learnings and the outcome of a licensing negotiation and an actual contract to inform an apportionment in an account.”