Does The Winner Take It All?…

Why It Pays To Understand Just What Your Brand Is Worth

One of the most frequently asked questions in any dispute is ‘what damages will I recover’? In the first instance for most IP matters, the Court makes a decision on liability, i.e. has the brand been copied and have the trade marks been infringed? The amount due in damages is usually saved for a second and subsequent hearing. There’s very good reason for this and that is that damages calculations in IP matters can be very complicated.

In most disputes the general rule is that the winner is restored to their pre-action position. So if there is a contract claim for £5,000, and the Claimant wins, they will recover £5,000 plus some interest and a proportion of their legal costs. Similarly in personal injuries, there are generally agreed scales for loss of limbs or amenities. In these cases the damages are much easier to calculate from the start of an action, thereby making a cost benefit analysis much more straight forward.

Where a trade mark has been infringed, or goods and services have been passed off, and other types of IP disputes, the winner can normally choose one of two options when it comes to the damages they can recover. These are either an inquiry as to damages or an account of profits. An inquiry as to damages will lead to a figure which restores the winner to their pre-action basis. So if the brand is licensed out at 5% of net cost of the product, then damages are relatively easy to calculate, and will be awarded according to accepted industry rates.

Problems arise when the brand is not available to third parties under licence or where the infringer has affected the brand value by devaluing it. For example, this could arise where a branded item is sold off in a discount store, and the perceived brand value from a consumer perspective is damaged. However, the opportunity to ask the losing party for an account of profits is not automatic. The Court won’t allow the winner to opt for an account of profits instead of an inquiry in certain circumstances such as where the claimant has delayed taking proceedings or where there has been “innocent infringement.”  So the vexed question is…

What Is an Account of Profits and How Do I Recover it For My Brand?

Well what it is not is an account of the profits the winner would have made if the trade mark had not been copied. The principle behind an account of profits is that the infringer is deprived of profits he made BECAUSE of his infringing activities. In simple terms, it has nothing to do with what the winner could have made if infringing goods were not on the market. Many people find that confusing, but the difference in financial terms is significant. However, in any calculation of the profit the loser IS allowed to seek a reduction of what they pay the winner in profits. For example, the loser is allowed to deduct various costs from the profit figure and include things such as a proportion of their overheads and manufacturing costs in making the copied items.

The important issue to bear in mind with most IP cases is that damages are often intangible and difficult to assess. For example, where an infringer enters the market, a rights owner may be deprived of the right to access a key market or client. Also their perceived brand value in the minds of the public may be considerably diminished. In the worst case scenario a competitor may inadvertently be spring boarded ahead of the rights owner by using copied technology for which they’ve invested no R&D or effort. This is why IP disputes require expertise, early resolution and why it pays to take the issue seriously as soon as it comes to your attention.

If you would like any advice about branding or disputes, give one of our team a call for a no obligation chat on 0113 4032102 or email us!

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