Account of Profits Heftier on Appeal

The New Zealand Court of Appeal has delivered an important decision on the availability of an account of profits as a remedy for trade mark infringement in Intellectual Property Development Corporation Pty Limited v Primary Distributors New Zealand Limited [2009] NZCA 429, 23 September 2009.

The infringing conduct began in mid 2005 and became known to the plaintiff on 18 January 2006. The plaintiff did not take action to prevent the defendant’s conduct until 13 July 2006.

The High Court Judge ordered an account of the defendant’s profits for the period 31 August 2005 to 18 January 2006, but not for the period 18 January 2006 to 13 July 2006. He held that the plaintiff’s inaction disentitled it to an account of profits from 18 January 2006 onwards.

He also noted that the plaintiff was not in a position to use its trade marks during the time of the infringement, and had suffered no loss. Thus, to award the plaintiff a full account of profits “may give [it] a boon it has not earned and indeed may reward its failure to protest”.

The Court of Appeal allowed the appeal and the award of an account of profits was extended to the date the infringing conduct ceased – 13 July 2006.

The Court of Appeal held that mere delay, without more, is not a bar to a trade mark owner seeking a remedy. It also reinforced the nature of an account of profits as a restitutionary remedy designed to prevent the unjust enrichment of the defendant. Given the nature of the remedy, the fact that the plaintiff was not in a position to use its trade marks was irrelevant. The underlying principle “is to restore to a plaintiff the ‘transfer of value’ to a defendant which has resulted from the defendant’s wrong”, the transfer of value occurring through “the use of the plaintiff’s property to generate profit.”

The decision of the Court of Appeal makes it clear that a mere delay in taking action will generally not deprive a trade mark owner of obtaining a remedy. Even so, it should not be taken as an invitation to be relaxed about enforcing one’s trade mark rights. Owners should remain vigilant and take prompt action against infringement.

Barbara Sullivan - October 2009