Design & Display Ltd v OOO Abbott and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison,Lord Justice Tomlinson,Sir Terence Etherton |
| Judgment Date | 24 February 2016 |
| Neutral Citation | [2016] EWCA Civ 98 |
| Docket Number | Case No: A3/2014/3443 |
| Court | Court of Appeal (Civil Division) |
| Date | 24 February 2016 |
[2016] EWCA Civ 98
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT
HIS HONOUR JUDGE HACON
CC12P01174
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Terence Etherton
(CHANCELLOR OF THE HIGH COURT)
Lord Justice Tomlinson
and
Lord Justice Lewison
Case No: A3/2014/3443
Thomas St Quintin (instructed by Appleyard Lees Solicitors) for the Appellant
Hugo Cuddigan QC and Chris Aikens (instructed by Gordons Partnership LLP) for the Respondents
Hearing date: 16/02/2016
Introduction and background
The issues raised on this appeal concern the taking of an account of profits in a case of infringement of intellectual property rights; in this case patent infringement. In this case the patent is European Patent (UK) No 1 816 931 ("the patent").
In his judgment dated 30 May 2013 Birss J held that the patent was valid and infringed. The claimants elected for an account of profits, rather than damages; and the account was taken by HHJ Hacon in the Intellectual Property Enterprise Court ("IPEC"). The hearing lasted only one day, and that included live evidence, although no expert accounting evidence was adduced. It is from Judge Hacon's judgment ( [2014] EWHC 2924 (IPEC)) that this appeal is brought.
In his judgment on liability ( [2013] EWPCC 27) Birss J described the background to the invention:
"[4] The case concerns display panels used in shops. Shopfitters often use a wooden wall called a slatwall as a panel on which to construct displays. Today the slatwall is made of MDF and has horizontal slots. Back plates or other shelf fixings can be fitted into the slots in order to secure display accessories such as shelves, brackets and hangers. The merchandise is displayed from the display accessories. The fittings are inserted into the jaws of the mouth of the slot and hooked into the top of an internal chamber of the slot lying behind its mouth.
[5] The slots are made by a computer controlled router moving across the width of the panel. A router makes a T shaped slot and leaves visible machined surfaces within the slot having machined away the decorative veneer that generally covers the face of the MDF. Also the edges of the veneer around the mouth of the slot are susceptible to damage as display accessories are hooked in and removed.
[6] For these reasons it became standard practice to provide inserts for slots, as protection against damage and to hide the machined surfaces. To an extent the inserts also strengthen the panel. The accessories are then fitted into the inserts rather than being fitted directly into the bare slots.
[7] The inserts are made by extrusion. By 2004 the standard inserts used were of two kinds: "slide-in" or "snap-in". As the name suggests slide-in inserts were slid into place from the edge of the slat wall. They were made of aluminium. They could be T-shaped, corresponding to the T shaped cross-section of the slot or else they could be L-shaped, using only the top arm of the slot. A problem with slide-in inserts was that if the edge of the slatwall was not accessible, for example at a corner, there is no room to slide the insert into place. Snap-in inserts solve this problem by being inserted from the front with a spring action. Because they needed to be compressible, they were made of PVC instead of aluminium.
[8] The invention in this case is a snap-in insert made from a resilient metal like aluminium."
Claim 1 of the patent claimed:
"1. A display panel (10) having an outer face (11), at least one elongate slot (12) of re-entrant shape extending across the panel and having a mouth in the plane of the outer face,
and an elongate insert (19) having substantial rigidity in the lengthwise direction thereof and adapted to be received in the slot,
which insert is resiliently deformable
and has a base portion (20) from one side of which extends an arcuate leg (21), and from the other side of the base portion there extends an angled leg (22) having a substantially planar first part (27) lying generally parallel to the part of the arcuate leg near the base portion and a substantially planar second part (28) turned outwardly with respect to the first part,
an outwardly-directed abutment (30) being formed along the free edge region (29) of the second part and extending along the length of the insert (19),
characterised in that the insert is made of a resilient metal,
in that a first rib (25) upstands from the free edge (23) of the arcuate leg (21), a second rib (26) extends parallel to the first rib and is disposed further from the free edge of the arcuate leg than the first rib so that a channel (24) is defined by the first and the second ribs, said channel extending along the length of the insert (19) and being directed outwardly with respect to the curvature of the free edge region (23) of the arcuate leg (21),
and further in that the spacing between said channel (24) and said abutment (30) is slightly greater than the width of the mouth of the re—entrant slot (12) whereby the insert (19) may be entered into the slot (12) from the outer face (11) of the panel (10) with the base portion (20) leading into a re-entrant part of the slot until the abutment (30) engages the corner region (32) between the outer face (11) of the panel (10) and one side of the slot, and the channel (24) is engaged with the corner region (33) between the outer face of the panel and the other side of the slot."
Birss J found that the defendant Design & Display had infringed the patent, but he did not describe their activities in any detail: it was unnecessary for him to do so. Judge Hacon described those activities as follows:
"[5] Design & Display manufactures and sells retail equipment, including display panels for use in shops. … [Its] primary business was as a joiner for shopfitters, making bespoke items of shop furniture, … called 'equipment'. This equipment included displays, some of which had slatted panels (sometimes referred to as slatboards or slatwalls) sold both in standard sizes and as custom-sized panels. These were the panels with horizontal slots into which the aluminium inserts could be introduced – in the case of the infringing inserts, introduced by a snap-in process. Shelves or hangars for displaying the goods could then by located into the inserts.
[6] In the relevant period Design & Display sold the slatted panels in two ways. First, it sold the panels with inserts separately for subsequent assembly by the customer. At the trial these were referred to as 'unincorporated' panels and inserts. Secondly, Design & Display sold pre-assembled displays of which the panels with inserts were part. These were referred to as 'incorporated' panels and inserts. In addition, some unincorporated inserts were sold without slatted panels.
[7] Design & Display did not itself make the inserts but purchased them from an aluminium extruder in the form of lengths which were cut into sections to make the individual inserts. The panels were purchased in the form of plain MDF panels into which the slots were machined by Design & Display."
The first main question raised by the appeal is whether Design & Display are liable for the whole of the profits made on the sale of panels sold together with infringing inserts. The second main question is whether Design & Display are entitled to set off any part of their general overheads against the gross profit for which they are accountable.
Profits on sale of incorporated panels
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. It is clear, then, that an account of profits looks at the facts through the lens of what the infringer has done; and what the patentee might have suffered by way of loss in the real world is irrelevant.
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 International Corp v BP Chemicals Ltd [1999] RPC 203 at [51]:
"Someone invents a new form of tin whistle. With the aid of his patent agent he obtains a patent. Regrettably, but as is now...
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