Account of profits for patent infringement: apportionment where infringement does not “drive” sales; exclusive licensee “single pot” limits patentee recovery

Court: England and Wales Court of Appeal (Civil Division)
Neutral citation: [2026] EWCA Civ 964
Date: 27 July 2026
Appeal from: Mr Justice Leech ([2025] EWHC 375 (Pat); [2025] EWHC 1034 (Pat))
Judges: Lewison LJ, Arnold LJ, Nugee LJ

1. Introduction

The appeals arise from long-running UK patent infringement proceedings concerning a safety feature in aircraft in-seat power supply systems. The claimant, Lufthansa Technik AG (“the patentee”), owned European Patent (UK) No. 0 881 145 (expired 22 May 2018) covering a socket safety mechanism requiring simultaneous detection of two contact pins before energising the outlet.

The defendants supplied systems incorporating the patented feature: Astronics Advanced Electronic Systems manufactured key components; Panasonic Avionics Corporation integrated systems into in-flight entertainment (“IFE”) packages; and Safran Seats GB Limited was involved in seat installation. After liability was established, the patentee elected an account of profits under section 61(1)(d) of the Patents Act 1977.

Key issues

• Legal causation on an account of profits: when is the infringer required to disgorge all profits from sales of complex products, and when must profits be apportioned?
• Differential profits vs apportionment: is a “nearest non-infringing alternative” (“NIA”) analysis required or determinative?
• Comparable-licence apportionment: can a royalty derived from a licence be used to apportion profits on an account?
• Exclusive licence and “single pot” profits: whether a German-law “Teaming Agreement” was an “exclusive licence” under UK law; and whether an exclusive licensee’s compromised rights reduce the patentee’s recoverable profits (section 67, Patents Act 1977).
• Double recovery across jurisdictions: whether the English court should craft an order to prevent potential overlap with French/German proceedings.
• Interest: jurisdiction to award pre-judgment interest pre-election; and proper interest benchmark/currency.

2. Summary of the Judgment

3. Analysis

3.1 Statutory and remedial framework: sections 61 and 67 Patents Act 1977

The court anchored the inquiry in section 61(1)(d): the infringer must account for profits “derived by him from the infringement”. The remedy is equitable (confirmed by Lifestyle Equities CV v Ahmed [2024] UKSC 17, [2025] AC 1), is not punitive, and is conceptually aimed at stripping wrongful gains rather than compensating loss.

The Court also addressed the interface between patentee and exclusive licensee claims under section 67. A critical practical question arose: where an exclusive licensee has rights “in respect of” the invention (and has compromised them), what remains available to the patentee from the same infringer’s profits?

3.2 Precedents cited: how they shaped the account-of-profits methodology

(A) English authorities establishing apportionment as orthodox

• Cartier v Carlisle (1862) 31 Beav 292 — early statement that the defendant accounts only for profits properly attributable to wrongful use.
• United Horse Shoe and Nail Co Ltd v Stewart & Co (1888) 5 RPC 260 — Lord Watson’s distinction: for an account, it is “material to ascertain how much of [the] invention was actually appropriated” to identify the attributable proportion.
• My Kinda Town Ltd v Soll [1983] RPC 15 — a leading modern articulation of “fair apportionment” so that neither side takes what “justly belongs” to the other.
• Potton Ltd v Yorkclose Ltd [1990] FSR 11 — Millett J accepted apportionment where profits have multiple causes (land, marketing, timing), and suggested “distribution by costs” as a starting guide.
• Celanese International Corp v BP Chemicals Ltd [1999] RPC 203 — Laddie J’s influential explanation that “substance not form” matters: profits attributable to non-infringing parts are not derived from the invention.
• Hotel Cipriani Srl v Cipriani (Grosvenor Street) Ltd [2010] EWHC 628 (Ch) — Briggs J’s summary: when one head of profit has infringing and non-infringing causes, broad-brush apportionment is appropriate.
• OOO Abbott v Design and Display Ltd [2016] EWCA Civ 98, [2016] FSR 27 — binding Court of Appeal authority that where infringement does not “drive” the sale, attributing all profit to infringement is wrong; apportionment is required.
• Jack Wills Ltd v House of Fraser (Stores) Ltd [2016] EWHC 626 (Ch) — applied OOO Abbott v Design and Display Ltd to require apportionment absent “driven” sales.

(B) “All profits” cases: where apportionment is unnecessary

• Peter Pan v Silhouette — no apportionment where the product would not exist at all without the misuse of the claimant’s confidential information.
• Dart Industries v Decor Corp . and the cited Australian line (Colbeam Palmer Ltd v Stock Affiliates Pty Ltd [1972] RPC 303) — accepted that where the patented feature characterises the infringing product such that the particular product “would never have been produced at all”, all profits may be attributable; but also gave the canonical “car with a patented brake” illustration supporting apportionment for complex products.

(C) Canadian jurisprudence and academic writing: differential profits as “preferred” (but not adopted as an English rule)

• Schmieser v Monsanto Canada Inc [2004] SCC 34, [2004] 1 SCR 902 — endorsed the “differential profit” approach comparing profits with the best non-infringing option.
• Nova Chemical Corp v Dow Chemical Co [2022] SCC 43, [2022] 3 SCR 352 — articulated a structured “non-infringing option” analysis to isolate profits causally attributable to the invention.
• The Court of Appeal treated these as helpful but not prescriptive for English law, emphasising practical and doctrinal difficulties in making NIA analysis determinative.

(D) Causation guidance cross-referenced from damages: legal causation as evaluative and “driver”-focused

• Anan Kasei Co Ltd v Neo Chemicals & Oxides (Europe) Ltd [2023] EWCA Civ 11, [2023] FSR 14 — the “real driver” concept: even if infringement is necessary, the “real driver” of sales may be external requirements (there, emissions standards), defeating legal causation for certain claimed losses.
• Kuwait Airways Corp v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19, [2002] 2 AC 883 — legal causation as an evaluative judgment (cited to frame appellate restraint).

3.3 The core legal development: legal causation on an account of profits is not resolved by NIA failure

(A) The Court’s synthesis: when to disgorge 100% and when to apportion

The Court of Appeal rejected the patentee’s attempt to treat the defendants’ failure to prove a true NIA as automatically entitling the patentee to 100% of profits. The court’s central clarification is practical and doctrinal:

• Factual causation may be satisfied without identifying a workable NIA; it is not a universal gateway to full disgorgement.
• Legal causation in this context performs a broader function than simply cutting off remote chains; it requires separating profits fairly attributable to the invention from profits attributable to other concurrent causes.
• The court adopted a structured approach (drawing from Celanese International Corp v BP Chemicals Ltd and OOO Abbott v Design and Display Ltd):
  1. Ask whether the product/process would not have existed at all without the infringement, or whether the invention was the “essential ingredient” in the infringer’s whole product/process. If yes, all profits may be legally caused by infringement.
  2. If not, the correct response is apportionment (broad-brush, evidence-led), because profits are generated by multiple concurrent drivers.

(B) Why the patentee’s “no NIA = 100%” submission was rejected

The Court gave several reasons, with obvious forward-looking significance:

• NIA analysis can be litigation-expensive and can collapse into mini-trials on hypothetical infringement (here, whether a modified outlet would still infringe).
• The burden question is unstable: placing the whole burden on the defendant risks unjust “windfalls” for claimants where no suitable NIA is proved; placing it on the claimant risks strategic selection of an unprofitable comparator.
• Availability and probability problems (commercial access, regulatory constraints, likelihood of adoption) may be irrelevant to isolating the invention’s true contribution.
• Complex products are often implicated by multiple patents; a rigid NIA-driven 100% rule risks overreach and incoherence where multiple inventions contribute to a single “profit pot”.

3.4 Application to the aircraft power systems: “gateway” but not the commercial driver

The trial judge found (and the Court of Appeal accepted as an evaluative conclusion) that the patent’s safety feature was necessary to satisfy particular certification/approval requirements. That did not make it the “real driver” of profits. The judge’s findings—accepted on appeal—identified substantial independent drivers: meeting numerous additional safety and technical requirements, and competitive product/service factors (weight, integration, performance and market dynamics).

The Court of Appeal confirmed that “gateway” status (necessary for market access) does not entail that infringement sufficiently explains the totality of profits from complex systems. This is the doctrinal bridge between the “car with a patented brake” illustration and real-world complex products sold for reasons not reducible to the patent.

3.5 Apportionment method: using a comparable licence is principled (and can be decisive)

The judge used a royalty implied by the 2014 Teaming Agreement (a licence between the patentee and KID) as a proxy for the patent’s relative contribution, producing a 13% attribution to infringement for Astronics’ and Panasonic’s net profits.

The patentee’s objection—that licences are profit-sharing while an account requires full disgorgement—was rejected. The Court of Appeal accepted that a negotiated royalty can function as market evidence of the invention’s value within a larger profit pool, and thus as a reasonable apportionment tool where no better tool is advanced.

The court also upheld robust case-management consequences: the patentee’s strategic decision not to plead or pursue a positive alternative apportionment methodology limited its ability to pivot late to an alternative licence/comparator analysis.

3.6 KID apportionment: exclusive licence construction and the “single pot of profits” under section 67

(A) Exclusive licence: contract construed under German law, status determined under UK patent law

A decisive part of the appeal concerned whether the 1998 Teaming Agreement granted KID an “exclusive licence” within section 130(1) Patents Act 1977. The Court of Appeal held it did, overturning the judge. Key points included:

• Proper approach to foreign-law contracts: experts prove principles, not ultimate interpretation; evidence strayed into inadmissible opinion on construction and into irrelevant German patent-law questions.
• On the contract’s text and commercial allocation of roles, KID had sole responsibility for development/manufacture/marketing, with the patentee receiving royalties and potentially providing installation services.
• “Exclusive user’s right” in Article 6, read with the agreement’s structure and good-faith interpretation, pointed to exclusivity to the exclusion of the patentee (subject to any retained installation role, which did not undermine exclusivity for placing the system on the market).
• The court noted the exhaustion principle as reinforcing that installers do not need patent permission to install consented products, but the decision primarily turned on the agreement’s internal allocation of exploitation rights.

(B) New and important statutory analysis: the patentee cannot “scoop” the exclusive licensee’s profit share

The Court addressed a point on which there was no direct authority: where an exclusive licensee has compromised its infringement claim (here, via the 2003 Settlement Agreement), can the patentee nonetheless claim the whole infringer profit pot?

The Court’s answer was no. It held there is one pot of profits derived from infringement, and section 67(2) (“so far as it constitutes an infringement of the rights of the exclusive licensee as such”) means that, to the extent of exclusivity, the exclusive licensee stands in the patentee’s shoes and is entitled to that share to the exclusion of the patentee. This prevents double recovery within UK law and aligns with the equitable nature of the remedy.

Nugee LJ noted a possible interpretive nuance about “such proceedings” in section 67(2), but it did not affect the outcome.

3.7 Double recovery in France/Germany: comity over “protective” provisional English orders

The defendants sought an order/recital enabling later adjustment to prevent overlap with foreign awards. The Court upheld refusal. The decisive reason was constitutional and international: English courts should decide the English case on English law; French and German courts should decide theirs on their law. The English court should not “mark the homework” of foreign courts—doing so would breach comity.

3.8 Interest: pre-election interest is available; currency coherence matters

(A) Jurisdiction

The Court upheld interest both (i) in equity (drawing from President of India v La Pintada Compania Navigacion SA [1985] AC 104 and older Chancery practice around accounts), and (ii) under section 35A(1) Senior Courts Act 1981.

On section 35A, the Court treated the relevant “cause of action” as patent infringement; the “debt” analysis follows once the election is made, but interest may run from when infringement occurred because the entitlement to the money is rooted in the same cause of action (with consistency to limitation principles: General Tire & Rubber Co v Firestone Tyre & Rubber Co Ltd [1975] 1 WLR 819; Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No.2) [1997] 1 WLR 1627).

(B) Rate and currency

The Court upheld US Prime for US$ awards, rejecting a Euro/Euribor-based approach that would implicitly compensate for exchange-rate movements. Relying on principle from Attorney General of Ghana v Texaco Overseas Tankships Ltd (The Texaco Melbourne) [1994] 1 Lloyd's Rep 473, the court emphasised: identify the proper award currency, then award interest in that currency—courts do not adjust for FX fluctuations between breach and judgment.

4. Complex concepts simplified

• Account of profits: a remedy requiring an infringer to hand over profits made from infringing exploitation; not punishment, but disgorgement of wrongful gain.
• Factual vs legal causation: factual asks “did infringement help lead to these profits?”; legal asks “which part of the profits is fairly attributable to the invention (not to other drivers)?”.
• Nearest non-infringing alternative (NIA): a hypothetical substitute used to isolate the invention’s value. This case holds it is not always workable or determinative, especially for complex products.
• Apportionment: dividing a single profit pool between infringing and non-infringing causes (or between patentee and exclusive licensee) on a reasonable, evidence-based basis.
• “Drives the sale”: shorthand for whether the patented feature is a significant commercial driver of the customer’s purchasing decision; if not, 100% disgorgement is typically unjust.
• Exclusive licence (UK): a licence that excludes everyone (including the patentee) from the licensed right(s). UK law does not recognise “sole licence” as a statutory category.
• “Single pot of profits” under section 67: one set of infringer profits cannot be fully claimed twice; an exclusive licensee’s rights can reduce what the patentee can recover.
• Comity: mutual respect between courts of different states; an English court should not attempt to supervise or correct foreign courts’ future damages/profits awards.

5. Impact

• UK accounts of profits in complex products: the judgment consolidates that apportionment is the orthodox response where the patent does not “drive” sales, and that failure to prove an NIA does not automatically yield 100% disgorgement.
• Evidence and pleading strategy: a claimant who insists on “100% or nothing” apportionment evidence risks leaving the court with only the defendant’s workable comparators (here, a licence-based proxy).
• Exclusive licence drafting and settlements: parties should treat “exclusive user’s right” language as likely to be construed as section 130(1) exclusivity unless rights are clearly carved out; and settlements by exclusive licensees can materially affect subsequent patentee recovery.
• Cross-border enforcement: English courts will be reluctant to craft contingent/provisional mechanisms to avoid overlap with foreign proceedings; defendants must argue double recovery primarily in the foreign forum.
• Interest on accounts: confirms robust availability of pre-election interest and emphasises currency coherence in interest computation for foreign-currency awards.

6. Conclusion

[2026] EWCA Civ 964 is a major modern authority on accounts of profits for patent infringement in complex-product markets. It clarifies that (i) full disgorgement is reserved for cases where the invention is the essential ingredient or the product would not exist without the infringement; (ii) otherwise, apportionment is required, and a comparable licence can be a principled tool; (iii) exclusive licence arrangements can constrain patentee recovery because there is a single profit pot, reflected in section 67(2); and (iv) English courts will not attempt to manage foreign-court outcomes via contingent “double recovery” mechanisms.