Account of profits against non-combatant defendants

An extempore decision of Mr Justice Vos (Chancery Division, England and Wales) last month addressed the question of whether it was appropriate for an IP owner to seek an account of profits against an alleged infringer who takes no part in the proceedings at all. This decision, Pfizer Incorporated v Mills and others (10 May 2010), arose from a claim by Pfizer that the defendants had infringed one of its registered trade marks by passing their products off as Pfizer's [from this note, taken from LexisNexis Butterworths, it's unclear whether the action was for trade mark infringement, passing-off or both]. Pfizer obtained search and seizure orders requiring disclosure of relevant materials, then in May 2009 issued and served a claim form. The particulars of claim were served on the defendants, after some difficulties, in November 2009. In March 2010 Pfizer applied for judgment in default of acknowledgement of service or defence, seeking, among other things (i) an enquiry as to damages or an account of profits and (ii) payment on account, under Civil Procedure Rules r25.7(i)(b), of 75% of the defendants' estimated profits.

Vos J felt that the best course for Pfizer was to elect an account of profits. Since earlier disclosure orders had not been complied with, it was inappropriate for the court to make further orders of that type. Regarding the claim for an interim payment, Pfizer's 75% calculation was a fair one, which gave the defendants the benefit of the doubt. Since Pfizer belonged to a substantial international corporation -- which would be able to repay any excess should the amount eventually assessed be lower than anticipated -- any overpayment could be compensated. For these reasons, and since the defendants were the authors of their own misfortunes, the claim for payment on account of 75% of their estimated profits was fair.

How much is the use of "Lindsay" worth?

"Lindsay Lohan wants $100M over E-Trade ad" is the headline of an article by Kieran Crowley in the NY Post (thanks, Miri Frankel, for the link). The article reports that actress, model, singer and general purpose celebrity Lindsay Lohan is commencing legal proceedings against financial company E-Trade before the Nassau County Supreme Court. Ms Lohan maintains that a boyfriend-stealing, "milkaholic" baby in its latest commercial -- who happens to be named Lindsay -- was modelled on her. Damages of $100 million are sought for her pain and suffering.

The advertisement in question is part of a series starring babies who play the stock market. It depicts a boy apologizing to his girlfriend via video chat for not calling her the night before.
"And that milkaholic Lindsay wasn't over?" the baby girl asks him suspiciously. "Lindsay?" the boy replies, just before a baby girl sticks her head into the frame and slurs, "Milk-a-what?"

According to Stephanie Ovadia, the attorney acting for Ms Lohan, her client has the same single-name recognition as Oprah or Madonna: "Many celebrities are known by one name only, and E-Trade is using that knowledge to profit".

Without prejudice to the issue of liability, the interesting issue is the claim for damages and the basis of its assessment. While it is stated that "since the spot was seen by hundreds of millions of people watching the Super Bowl and Winter Olympics finals, the firm has garnered great profits". It does not appear however that an account of profits is sought. It would be good to see a judicial inquiry into damages, given Neil Wilkof's thoughtful piece on this blog earlier on the changing face of Super Bowl advertising. Maybe we would then get some guidance as to the quantification, in terms of profit, of advertising which both boosts immediate sales and -- to the extent that it still does so -- enriches the brand's equity.

In any event, the convenient and arbitrary figure of $100 million is sought, this being made up of $50 million in exemplary damages, plus another $50 million in compensatory damages. IP Finance looks forward to the next developments.

Delay no bar to an account of profits, rules Hefty court

IP Finance thanks John Smith for drawing the attention of this weblog to the recent ruling in Intellectual Property Development Corporation Pty Ltd and Hefty NZ Ltd v Primary Distributors New Zealand Ltd, D. J. Graham and R. J. Jones [2009] NZCA 429, Appeal Court of New Zealand, 23 September 2009 (IP Finance previously reported on the trial decision here). In this trade mark infringement case the Court -- which had a good deal to say about the the remedy of an account of profits -- held that mere delay in seeking relief is not in itself a ground for refusing an account of profits. You can read this decision in full here.

A full and very helpful account of this decision -- which also reflects on issues relating to the receivership and liquidation of the trade mark proprietor -- can be found on the IP Now blog here.

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.