high court account profits


Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.


The recent decision of the Patents High Court in London in Celanese International Corp. & HNA Holdings Inc (formerly Hoechst Celanese Corp.) -v- BP Chemicals Ltd & Purolite International Ltd was the first Judgment on an account of profits in a patent action for over 100 years. The complicated facts of the case coupled with the large sums of money at stake presented the Judge, Mr Justice Laddie, with an opportunity to opine for the first time on the legal principles generally applicable to an account of profits.

The patent was directed to a method of removing iodides from acetic acid. The First Defendant ("BPC") had been found liable for infringement by using a silver loaded resin bed on two of its four acetic acid plants at Hull known as the A4 and A5 plants. The Second Defendant ("PIL") had been found liable for infringement by the supply of the silver loaded resin to BPC.

Following the Judgement on liability, a successful plaintiff in a patent infringement action has a choice of pecuniary remedy: either an enquiry as to damages suffered by the plaintiff or an account of the defendant's profits. In this case, having obtained pre-election discovery of certain financial information about the manufacture and sale of acetic acid made by BPC on its A4 and A5 plants, the plaintiffs ("HCC") elected for an account of profits.

The case against PIL was settled shortly before the trial which was therefore only concerned with "an account of the profits derived by [BPC] from the infringement of the [patent in suit]".

At the outset, HCC contended that they were entitled to a figure of £180 million based on the proposition that the acetic acid being "a product obtained directly from an infringing process" was itself an infringing product and that therefore, absent an apportionment, they were entitled to 100% of the profits made by BPC on the sales of that infringing acid. By the end of the trial, HCC had conceded that an apportionment was appropriate but contended that the level should be between 20% and 50% of the total profits, these figures being based respectively on BPC's share of acetic acid sales to its iodide sensitive VAM customers and the worldwide share of acetic acid sales to the VAM market.

BPC contended that the profits derived from the infringement should be assessed on the basis of "an incremental profits" approach i.e., a comparison of the revenues and costs before the period of infringement and during the period of infringement.

The Judge effectively rejected both parties' contentions and held that on an account, the Court should carry out the following steps:

  • determine the "total profits pot";
  • if appropriate, apportion to determine the "base allocated profit"
  • weight to take account of general arguments on the relative value of the infringement and any differential profits attributable to the infringement;
  • deduct any tax paid on those profits.

On the facts, the Judge held that:

  • the A4 plant had made a profit of '94 million and the A5 plant had made a loss of '89 million;
  • apportionment was appropriate and on the A4 plant, the starting point for the level of apportionment was the relative capital cost of the infringing part of the plant - a figure of 0.6%, there was no reason to move this initial figure up or down on general arguments of relative value;
  • there were no differential profits resulting from the use of the infringing process.

The net result of the Judge's deliberation was an award against BPC of £567,840 less corporation tax.

The Legal Principles Applicable to an Account

One of the Judge's key findings in the case was that despite the differences between an account of profits and a damages inquiry, they both proceeded on the basis of a common principle of legal causation. It was this key finding which effectively led the Judge to reject BPC's incremental profits approach as the sole determinant of the profits attributable to the infringement and also to reject HCC's argument that they entitled to 100% of the profits made on the sales of the infringing acetic acid.

The "Total Profits Pot"

In his determination of the total profits pot and in particular, the costs to be deducted from revenues, the Judge relied on three principles underlying a claim for an account of profits:

  • first, that the plaintiff has to take the defendant as he finds him; and
  • second, that the purpose of an account is not to punish the defendant but simply to have him surrender the actual profits that he has made at the plaintiff's expense; and
  • third, that normally, standard accounting principles are applied.

Applying these principles to the facts, the Judge permitted the following costs, among others, to be deducted from revenues:

  • fixed production and business support costs as well as variable production, selling and distribution costs;
  • on-going Research and Development costs;
  • interest charges payable under a specific finance charge on the recently constructed A5 plant;
  • common costs on the co-production A5 plant on the basis of the relative volume rather than the relative value of the two co-products.


Having decided that an apportionment was appropriate on the profitable A4 plant, the Judge opted for the capital cost of the resin beds relative to the A4 plant as a whole namely, 0.6% as the starting point for the level of the apportionment.

On the matter of weighting this initial 0.6% figure, the Judge made the following findings on the facts:

  • BPC could have met the requirements of all of their iodide sensitive customers at little or no additional cost absent the use of the infringing process on the A4 and A5 plants during the period of the infringement by using the iodide free acetic acid made on their other two acetic acid plants at Hull;
  • the use of the infringing process had not increased the volume of acetic acid manufactured by BPC on the A4 plant during the period of the infringement; and
  • the price of the lower iodide acetic acid was the same as the price of the higher iodide acetic acid i.e., there was no price premium for the lower iodide acetic acid.

The Judge also accepted BPC's evidence that no differential profits were made by BPC as a result of using the infringing process on the A4 plant.


Finally, on the matter of tax recoverable by BP on the award, the Judge held that because of the uncertainty of BPC obtaining a tax credit or a tax reclaim, this should not be taken into account at this stage subject to the proviso that BPC should account for any such recovery in the future to HCC.


In the last account of profits case in a patent infringement action heard over 100 years ago (Siddell -v- Vickers [1892] RPC 152), the Court of Appeal cautioned prospective plaintiffs from pursuing this pecuniary remedy because of its cost and uncertain outcome.

Although nowadays the Court will normally permit a successful plaintiff to obtain a limited amount of pre-election discovery of financial information about the defendant's business, this will seldom reveal the full financial and commercial picture. In most cases, therefore, a successful plaintiff will be well advised to opt for the certainty of recovering, at the very least, a reasonable royalty on a damages inquiry.

First published in WIPR in January 1999.