Damages or Accounting of Profits?

Pellarin Inc. Damages and Lost Profits calculation Calgary Toronto IPIC Intellectual Property Institute of Canada

Jeff Pellarin is pleased to have contributed to the The Intellectual Property Institute of Canada’s November/December 2016 Bulletin, with “Damages or Accounting of Profits? A Valuator’s Guide on 5 Factors to Consider”. The article reviews the key differences between the two remedies, and suggests alternatives that may assist a plaintiff in determining which remedy should be pursued. By focussing on one remedy (or establishing, early on, which is more likely to yield the higher award), litigation may be sped up, and cost savings may result.

In cases involving infringement on an intellectual property (IP) holder’s rights, remedies sought typically include an injunction (to stop the infringing activity and thus the damages), plus one of either an award of damages or an accounting of profits.  Damages most frequently amount to the lost profit, being the profit the IP holder would have earned, in the absence of the infringement.  In contrast, an accounting of profits focuses on the actual profits earned by the infringing defendant.  The plaintiff usually has an option to elect which of these last two forms of relief it would like.

A primary consideration favoring one alternative over the other is simply which one yields the higher award.  A common litigation strategy is thus to plead both remedies, quantify both, and seek an award for whichever is higher. This can, however, be costly, as it broadens discoveries and expert evidence that might be required—both avenues must be explored, often doubling the volume of document production, questioning, analysis and expert reporting.  In addition to the higher cost, it lengthens the litigation process.  It simply takes much longer to do what can amount to double the volume of work.

This article, written by Jeff Pellarin for The Intellectual Property Institute of Canada Bulletin (November/December 2016 issue) discussed how in some cases, an up-front analysis of some factors is warranted.  Those factors include:

  • Selling prices
  • Costs of production
  • Volumes sold
  • Collateral or “spin-off” damages
  • Costs caused by the infringement itself

Some analysis, performed at the outset, may help a plaintiff determine earlier on in the litigation which remedy, damages or an accounting of profits, would yield a higher award.

The article is available to IPIC members at: ipic.ca.