Wednesday 4 June 2008

Account of Profits decision - HEFTY

Decisions on Account of Profits are quite rare and so it is interesting to note Kate Duckworth's (Baldwins) report in World Trade Mark Report that the Auckland High Court (In Intellectual Property Development Corporation Pty Ltd (IPDC) v Primary Distributors New Zealand (CIV-2006-404-4695, April 24 2008)) has allowed in part a claim for an account of profits for the unlawful sale of products bearing the trademark HEFTY. Primary Distributors admitted to an infringement of the HEFTY mark but but objected to the account of profits remedy sought by IPDC. Primary Distributors claimed that as IPDC had known that it was selling HEFTY marked goods and had let it do so, it was not entitled to an account of profits. The court agreed that a plaintiff cannot permit a defendant to make profits over a period of years and subsequently expect to claim those profits. Primary Distributors went on to argue that acquiescence, waiver and laches prevented IPDC from claiming an account of profits at all. The court ruled that IPDC's actions were a mere delay and not assent; therefore, acquiescence was not made out. The court also held that the delay was not long enough to amount to laches and that IPDC had not waived its rights. The court left it to the parties to calculate the account of profits, with leave to return to court if they could not resolve the issue between themselves.

This case arose in quite specific circumstances and involves a legitimate licensee (Primary Distributors) continuing to sell licensed products notwithstanding termination of the licence, in circumstances where the licensor went bankrupt and the rights were subsequently sold on (notwithstanding a formal bid for the rights by the licensee that was apparently never formally rejected). Given that the licensee seems to have admitted to the infringement and was no doubt aware that their bid to purchase the trade mark rights had not been accepted (even if it had not been rejected) one cannot help but feel that Primary Distributors knew they were taking a chance when selling the products and were enriched (unjustly) in doing so, notwithstanding the delay by the Licensor.

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