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Thursday, 26 June 2014

Crumbs of comfort: McCambridge doesn't even get half a loaf's worth

There is an old and non-legal maxim that "half a loaf is better than none".  But here's a case where a successful plaintiff didn't even get as much as that. It's McCambridge Limited v Joseph Brennan Bakeries [2014] IEHC 269, a recent High Court (Commercial Division) ruling of the thoughtful and erudite Mr Justice Charleton dating back to 27 May. Apologies for the slow post, but this ruling took a little while to find its way on to the BAILII database.  Seasoned readers of this weblog will recall that this is not the first occasion on which these two adversaries have encountered one another in court [see eg "Baker's appeal goes a-rye" here, WednesdayWhimsies here and here, and Monday Miscellany here], but this Kat hopes that it will be the last.

To recap, in earlier proceedings Brennan Bakeries was held to have unintentionally passed off the packaging of McCambridge brown bread. It was then up to McCambridge to choose between damages or an account of profit [as Merpel notes, McCambridge had to use its loaf because it can't have its cake and eat it]. McCambridge opted for the latter, raising the issue of whether an adjudication of an account of profit requires an apportionment approach based only on the extent of the infringement and the sales attributable to misrepresentation -- or a wider approach, taking into account all the profit made by the offending product.

Peter Charleton J determined that an account be carried out of just the profit attributable to the unintentional passing off. He articulated his position as follows:

* Where legislation provides for a choice between damages and an account of profits, the latter is nonetheless discretionary: an account of profit may be refused on the grounds that it is unfair (an account is at heart an equitable remedy, like injunctive relief which may be refused where damages are the proper remedy);

* Where the choice is available, the successful party is entitled to examine the tortious defendant's financial accounts. This is not to measure the damage caused, but so an informed choice may be made as to which remedy to elect.

* Although the intention of the wrongdoer has no impact on establishing whether there has been a passing off or not, it is relevant to the choice of remedy.  This is because, where a degree of malice can be established, damages may be awarded on an aggravated or exemplary basis, whereas an account of profit depends upon the apportionment of profits according to the particular abuse.

* For the purposes of assessing the quantum of damages for passing off, the relevant market is the marketplace of the average consumer, which will be throughout the country where products are advertised on a nationwide basis, and there must be some operative confusion. In this context the sale of goods to middlemen for distribution, even where the goods are not placed on the open market and made available to the average consumer, is relevant to both establishing damage and to the decision whether to elect for damages or opt for an account.  Also, the  fact that infringing goods were sold in different locations is relevant to a broad analysis as to how the tortfeasor's sales increased by its passing off its own product as that of another.

* An account of profit is an equitable remedy requiring a broad approach based on a reasoned approximation of the appropriate proportion of the defendant's profit caused by the wrongdoing. The purpose is neither to punish, nor to analyse the harm done to goodwill, but to remove any unjust enrichment attributable to the improper profit made by the tortfeasor. Relevant factors include profit levels before and after the wrongdoing, the make up of the offending goods and the probability of confusion.

* Passing off is different from other IP rights. In copyright, patent and confidence cases, the approach to an account of profit is nuanced, having regard to the degree of contribution the infringement had to the infringer's overall return. Where infringement is part of a process leading to a product, an approximation must be made and, where the whole product is made through infringement, the entire profits are part of the account. Where a passing off case is equivalent to a trade mark case, the rights holder may be entitled to all profits earned on the ground that the distinguishing mark enables all of the sales. However, where (as in this case) (i) the infringing article was the packaging and not the entire product, (ii) the bread had been on the market and achieving profits prior to the change in its appearance and (iii) the passing off was unintentional, wrongful profit made from the sale of the bread in the offending packaging would be assessed at approximately a third of Brennan Bakeries' brown bread sales.

There's more to this judgment than a blogpost can conveniently summarise, including a considerable quantity of case citation, and it's particularly worth noting since modern cases on account of profits are not that frequent.  This Kat still feels that, under the IP Enforcement Directive 2004/48, a successful plaintiff shouldn't be forced to elect between damages and an account of profits and that he should be able to ask for both so long as there's no actual double-dipping when it comes to quantum -- but that argument never seems to get an airing.

Merpel likes the bit of the judgment that goes:
"As every judge is aware, even basic factual circumstances can be diffracted through legal argument and expert opinion so that what is in plain truth a stone can become as amorphous as sand".
Bread and butter here
Bread and jam here


Norman said...

"This Kat still feels that, under the IP Enforcement Directive 2004/48, a successful plaintiff shouldn't be forced to elect between damages and an account of profits and that he should be able to ask for both so long as there's no actual double-dipping when it comes to quantum -- but that argument never seems to get an airing."

Could you elaborate a bit on this proposal? Are you suggesting that the plaintiff should be able to insist on a full inquiry as to damages, and a full inquiry as to an accounting, and once quantum is determined for both, choose the larger amount?

Jeremy said...

Norman, I'm not making a proposal. I'm stating a fact: the text of the directive does not appear to require or even permit Member States to make a successful litigant choose between damages and an account of profits, any more than it requires or permits a rule that would force that party to choose between damages and an injunction.

Damages cover both past and future loss, whereas an account covers only the past: under the directive there's no reason why a successful claimant shouldn't get an account in respect of money wrongly earned by the infringer in the past, as well as damages in respect of future loss, such as damage to a trade mark's reputation going forward or the inability to secure licensing revenue.

Norman said...

I see your point about the directive. Nor do I see anything in common law principles of remedies that would preclude the split remedy in your example. As I understand it, the primary reason for requiring an election is indeed to avoid double-dipping: see eg Watson Laidlaw (1914), 31 RPC 104 (HL) at 119-20, stating that “although it be true that a patentee cannot have both remedies at the same time. . . this is true simply because it is in that way that overlapping is prevented.” A similar remedy split was granted in House of Spring Gardens Ltd v Point Blank Ltd [1983] FSR 489 (Ir HC) aff’d [1985] FSR 327 (Ir SC) with damages for breach of contract, and an accounting for breaches of confidence and infringement of copyright, with the accounting set off against the damages to avoid double-dipping. Tang Man Sit v Capacious Investments [1996] AC 514, [1995] UKPC 54 (PC) does speak strongly about the need to elect, but only when the remedies are “inconsistent” and in the sense of being awarded in respect of “the same loss.” On the facts, the trial judge had awarded both an accounting and damages in respect of the very same wrong. Tang Man Sit also makes it clear that the plaintiff will not be required to elect until it has sufficient information to know which remedy is more advantageous to it; on the unusual facts, an accounting had been taken and even paid by the defendant, and this was held not to amount to an election. So it seems to me that the requirement to elect is at most a mechanism for ensuring that costs are not incurred unnecessarily in assessing a remedy which would be redundant because it would have to be offset in any event to avoid double-dipping.

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