A recent case, Jack Wills Ltd v House of Fraser (Stores) Ltd on the amount that may be awarded on an account of profits offers welcome guidance on what may be taken into account in assessing deductible overheads and costs.
In January 2014, the High Court held that Jack Wills' pheasant logo ("Mr Wills") which was registered as a UK and Community trade mark for clothing, had been infringed by House of Fraser's 'pigeon' logo. The Judge (Arnold J) concluded that there was a likelihood of confusion between the logos relying on the degree of attention paid by the average consumer, the identity of the goods, the distinctive character of the Mr Wills logo and the similarity between the logos, particularly their conceptual similarity. The Judge also found that House of Fraser had taken an unfair advantage of the reputation of the marks.
Account of Profits
Following the decision, Jack Wills applied for an account of profits. House of Fraser had used the pigeon logo on a selection of its own label Linea brand of menswear between November 2011 and March 2013. It was agreed that the gross profit House of Fraser had made was £591,532.
Jack Wills argued that it was entitled to all of the profits from sales of the infringing goods.
Jack Wills was awarded 41% of the net profits. Why the reduced percentage? The Judge held that two principles should be balanced against Jack Wills' claim. They were that:
The remedy of an account of profits was not to be penal. It was a mechanism by which an infringer was required to pay to the trade mark owner all profits properly attributable to the infringement. A trade mark owner who elected to accept an account of profits in preference to damages was required to take the infringer as it found it. Consequently, it could not argue that if the infringer had been more efficient in the way it sold the infringing goods a greater profit would have been made.
Referring to a recent case (the Court of Appeal decision in Design & Display Ltd v Ooo Abbott and another) the Judge found that an infringing party was entitled to set-off a proportion of its overheads that would have been sustained by conducting non-infringing business. As a result, there were two factual questions to answer:
Could House of Fraser show that the same overheads would have been incurred even if the infringement had not occurred? Could House of Fraser show that the sale of infringing products would have been replaced by sale of non-infringing products, which would have been sustained the same overheads?
In relation to 1. the Judge noted that the acts of infringement had no effect on overheads. In relation to 2. the Judge concluded that the infringing goods had displayed the non-infringing goods of the same type and style as the infringing goods. House of Fraser had sold similar goods before, during and after the period when infringement took place and he also found that web sales and shop sales should be treated the same.
To be deductible the expenditure must be that which was wholly or partly attributable to House of Fraser's trading activities as a whole, incurred during the period when the infringing clothes were sold.
Thoughts on the Decision
Reported cases on an account of profits are rare. Parties often reach an agreement on the amount payable following the trial of the infringement claim therefore the decision, together with the decision in Design & Display Ltd v Ooo Abbott will provide guidance to litigants in this area.
The decisions confirm that when apportioning the overheads an allowance can be permitted unless the overheads would have been incurred even if the infringement had not occurred, and the sale of infringing products would not have been replaced by the sale of non-infringing products. This decision also confirms that it is possible in trade mark cases (as well as patent cases) for there to be apportionment taking into account what proportion of the profit is due to the act of infringement.
However, even with this additional judicial guidance it is unlikely to be straightforward with difficult findings of fact requiring analysis.Posted by: in: Case Law, News, Trade Marks