It tends to be a little known fact in intellectual property court disputes that a successful claimant must elect to either recover any losses by seeking damages or, alternatively by an account of profits, each of which has its benefits and drawbacks depending on the claimant's circumstances.
The two different options focus on the affairs of the different parties.
In an award for damages, the focus is on the losses sustained by the claimant. There is no upper limit on the amount which can be sought. However any losses which are not caused by the defending party are not recoverable.
Alternatively with an account of profits, no reference is made to the loss suffered by the claimant. Instead, the focus is on the benefit obtained by the defender as a result of their infringement of the claimant's intellectual property. Ultimately the raison d'etre for this method is to prevent the defender from being unjustifiably enriched as a result of his wrongdoings. However, unlike an award of damages, as discussed earlier, opting for an account of profits limits the pay-out to the amount of profit which has been made by the infringing party.
A further problem with this option is that it can very often be a complex calculation to ascertain precisely what profits resulted as a consequence of the infringement. This distinction is made even more complex where the infringing party has profited partly as a result of infringing the claimant's intellectual property but also partly as a result of legitimate, non-infringing actions. In this case, only the part of the profit which is attributable to the infringement will be payable. Clearly, this distinction can, at times, be very difficult to make.
Normally an award of damages will at least equal (and will often exceed) an award under an account of profit. However many commentators have suggested that, in the right case, an award under an account of profit could potentially far exceed that of damages.
The issue on whether such a 'choice' is still relevant arose in the recent case of Magical Marking Ltd and Andrew Phillis v Holly and others where, in his decision, the judge stated that he was going to give the claimant's the right to elect for account of profits in lieu of damages or equitable compensation. However, the judge also ordered an enquiry as to damages or equitable compensation in the event of infringement of copyright, database right or confidential information.
As a result of this case, a debate has emerged as to whether IP claimants should be made to elect between damages and an account of profits especially in light of the fact that it does not appear as though there is anything within the IP Enforcement Directive (2004/48/EC) which indicates that this should necessarily be the case. Instead, several commentators believe that, where appropriate, a choice should not have to be made and a claim for both damages and also for an account of profits should be possible. While there does not appear to be much further guidance on this issue at the moment, it is likely to be an area which will develop and be the subject of much debate in the months to come, so watch this space.