Brands Bulletin - February 2012

Thursday 2nd February 2012

Registered trade mark infringement and an account of profits - a rare beast indeed

If a defendant is found by an English Court to have infringed a UK or Community registered trade mark then the owner of the trade mark can elect either to claim damages for the loss it has suffered or an account of the profits enjoyed by the defendant as a result of the infringement. The trade mark owner is entitled to choose whichever of the two remedies it prefers and will usually choose the one that it believes will result in it obtaining the largest sum of money.

Most trade mark owners usually elect to claim damages, but every now and again a case comes along where a claimant elects for the defendant to account to him for the profits the defendant made.  This happened in the recent case of Hollister Inc. & Anor v Medik Ostomy Supplies Limited [2011] EWPCC 40.    

In this case, the defendant admitted registered trade mark infringement.  It had engaged in the parallel importing of the trade mark owner's goods.  In particular, it had repackaged and relabelled the trade mark owner's genuine trade marked goods, but had not given the trade mark owner prior notice of this before reselling the said goods, which was a clear breach of EU trade mark law. The trade mark owner elected to pursue an account of the defendant's profits enjoyed as a result of these acts of trade mark infringement.

The judge hearing the case summarised the legal principles that apply to accounts of profits.  In particular, he made clear that the focus is on the profits made by the infringer and not the damage or loss suffered by the trade mark owner.  The Court is asked to determine what profits the defendant made as a result of its wrongful acts.  It is no answer to say that the defendant could have made the same profits by following an alternative, non-infringing course.  Equally, a claimant must take a defendant as he finds him and cannot say that the defendant could and should have generated higher profits.  Further, the claimant is only entitled to net profits, with relevant costs being deducted from gross profits. Costs that relate to both infringing and non-infringing activities are to be apportioned between the two.

The judge then decided on the proportion of the defendant's net profits that should be paid to the trade mark owner, bearing in mind the guidance of existing Community trade mark law.  After taking into consideration:

• the fact that the trade mark owner did not actually suffer any damage of the kind that is relevant as a result of the failure by the defendant to give the trade mark owner prior notice that the defendant had repackaged and relabelled the trade mark owner's genuine trade marked goods, before reselling the said goods;
• the fact that the trade mark owner knew all along that the defendant had repackaged and relabelled the trade mark owner's genuine trade marked goods; and
• the fact that the Court must award a sum that is both an effective remedy and also a sufficient deterrent to ensure that traders do give the required notice

the judge decided to award to the trade mark owner half of the defendant's profits generated as a result of the defendant's acts of trade mark infringement.

The case is a useful reminder that, in some circumstances, a trade mark owner may do better to elect for an account of profits, rather than an inquiry as to damages.  By way of further illustration, in the case of Hotel Cipriani SRL & Ors v Cipriani (Grosvenor Street) Ltd & Ors [2010] EWHC 628 (Ch) the trade mark owner in question elected for an account of the defendant's profits, which resulted in an award to the trade mark owner of in excess of £6.5m.  It is unlikely that an award of damages would have produced such a high figure.     

If you wish to discuss this email, or any other brand or trade mark issue, please contact Carl Steele, Head of Trade Marks, or feel free to contact any of Ashfords' IP Partners.   

Ashfords LLP is Authorised and Regulated by the Solicitors Regulation Authority. The information in this note is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances. Links to other sites and resources provided by third parties are included for your information only. We have no control over the content and accept no responsibility for them.