IP Insight is a series from Virtuoso Legal the intellectual property specialists. This insight concerns Blizzard Entertainment SAS v Bossland GmbH  EWHC 1665 (Ch) (4 July 2019) in relation to an account of profits and video game software.
Blizzard Entertainment SAS v Bossland GmbH  Background
On 4 July 2019, Deputy Master Bowles gave his decision relating to accounts of profits arising from Blizzard’s dispute with Bossland regarding Bossland and its directors’ copyright infringement, procurement and inducement of users to breach their agreements.
Blizzard is a well known company in the gaming industry. Blizzard creates and publishes many well-known successful video games. Some of these games relevant to the claim were World of Warcraft, Diablo III, Hearthstone, Heroes of the Storm and Overwatch.
Bossland is a company that produces and sells software that allows users of the games mentioned above to “cheat.” The cheats and bots provided for by Bossland are against the terms of the end user licence agreement agreed by the users that play Blizzard’s games.
Blizzard developed further software to identify Bossland’s cheats and bots while Bossland developed software to avoid such detection.
On 21 March 2017, Mann J gave an order recording Bossland’s admissions relating to copyright infringement, inducement of others to breach their agreements with Blizzard.
Mann J ordered Bossland to disclose information allowing Blizzard to elect between damages and an account of profits. Blizzard elected for the account of profits and on 4 July 2019, Deputy Master Bowles gave his decision.
The purpose of an account of profits is to prevent the infringer’s unjust enrichment and not to punish them. Therefore, when dealing with account of profits, there must be decided how much of the profits can be deducted as direct costs incurred by the infringer relating to the infringement.
Bossland had a global business, not respecting territorial limits and therefore only 3.6% of its overall income resulted from sales in the United Kingdom.
In assessing the account of profits that needed to be considered, Blizzard argued that Bossland’s costs in relation to the United Kingdom need to be deducted from the total amount.
Bossland submitted that such approach was overly narrow and that the costs relating to the “entirety of the infringing, or breach of contract inducing” need to be included.
Deputy Master Bowles firstly held that:
“Bossland only had one business, operated worldwide, and that was the business of the production and sale of software, including the software relevant to this case. There is no basis for the conclusion that, if, somehow, Bossland had not directed its operation into the United Kingdom, its United Kingdom sales would have been replaced by sales, or enhanced sales of the relevant, or other software, in other jurisdictions.
Bossland had one business and the existence, or otherwise, of its United Kingdom operation had no material effect upon either the costs incurred in that business, or the sales of its software elsewhere in the world.”– Deputy Master Bowles
Further to the direct costs, as per the case of OOO Abbott v Design and Display Ltd  EWCA Civ 98, “a proportion of the infringer’s general overheads may be deducted from gross relevant profits unless (a) the overheads would have been incurred anyway even if the infringement had not occurred, and (b) the sale of infringing products would not have been replaced by the sale of non-infringing products.”
Such overheads were described by judge Hacon in the OOO case as “those costs which cannot easily be ascribed uniquely to the infringing, or a non-infringing business‘.
While referring to the above, Deputy Master Bowles held that:
“the only costs which should be treated as direct costs are those which are solely and wholly associated with Bossland’s actionable and admitted activities in the United Kingdom and that such of its costs as, although attributable in part to those activities, also, to use Judge Hacon’s word, support its worldwide activities, in respect of the relevant software, are to be treated as overheads.”Deputy Master Bowles
Therefore, the majority of the costs incurred by Bossland could not be deducted from the profits made from the infringing acts as they could not be considered to be direct costs or they were general overheads that would have been incurred by Bossland even if the infringement had not occurred.
This case shows that the approach established in OOO Abbott v Design and Display Ltd  EWCA Civ 98 is still valid in the case of software disputes.
The purpose of an account of profits will not be to penalise the infringing party but to ensure that all profit made by the infringing party is recovered by the injured party.
This is the first case of this nature that involves software, itself a product/service which is multi-jurisdictional in scope. Here Blizzard elected for an account of profits rather than damages, which displayed nous as recoverable quantum may have been harder to achieve.
Such complexity is typical of intellectual property claims, especially where new complex legal interactions in technology and software are concerned.