Account of the infringer’s profits

The account of the infringer’s profits refers to taking into account, when assessing the damages owed to the victim of infringement, the profits that the infringer has derived from its acts. The French Intellectual Property Code requires the court to consider separately the negative economic consequences suffered by the injured party, the non-material damage and the profits made by the infringer, including the savings in intellectual, material and promotional investment (Articles L. 331-1-3, L. 521-7, L. 615-7 and L. 716-4-10 IPC). These provisions transpose Article 13 of Directive 2004/48/EC.

Method of assessment

The court must examine the three heads separately, which does not mean that it adds them together mechanically. The infringer’s profits serve to measure the extent of the loss where the loss suffered by the right holder is difficult to establish, for example where the right holder does not exploit the right itself or where lost sales cannot be reconstructed. The provision offers an alternative, at the request of the injured party: a lump sum exceeding the amount of the royalties that would have been due had the infringer requested authorisation to exploit, that sum not excluding compensation for non-material damage. Determining the profits requires knowledge of the infringer’s turnover and margins, information that the right holder obtains through saisie-contrefaçon, through the right of information or through an accounting expert report.

Controversy over the nature of the measure

The wording adopted by the French legislature in 2007, then strengthened in 2014, has fuelled a debate on whether taking profits into account is compatible with the principle of full compensation, which prohibits compensation beyond the loss. Some commentators see in it restitution of unjust enrichment or a form of private penalty, whereas the prevailing case law holds to a compensatory function, the profits being one factor in assessing the loss without being its automatic measure. The courts thus award amounts that take into account the share of the profits attributable to the infringement, disregarding the portion resulting from other factors, such as the infringer’s own reputation or unprotected features of the product.

Implementation in litigation

The right holder has an interest in producing, from the writ of summons onwards, the information available on the volume of infringing goods and in seeking an order for disclosure of the accounting documents, backed by a penalty payment. An infringer who fails to produce its figures runs the risk of the court ruling solely on the claimant’s estimates. For patents, the assessment most often combines the lost margin on the sales the right holder would have made and a reasonable royalty on the others, according to the rules specific to patents.

Key points

The infringer’s profits are one of the three heads that the court must examine separately in setting compensation, without their full restitution being automatic. Taking them into account remains compensatory in the prevailing case law. Gather the opponent’s accounting data early, through saisie-contrefaçon and the right of information, and quantify each head separately in the submissions.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats litigates patent disputes before the Paris Judicial Court, the Paris Court of Appeal and the Unified Patent Court. When the question arises in a real case, the right moment is almost always before proceedings are issued.

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