Case No. CC-12-P-01174

55.Abbott has stated that if I were to decide in Design & Display’s favour on the issue of wages and salaries, it seeks permission to appeal and has asked me to decide the question of permission in this judgment. 56.Two grounds for appeal are advanced. The first is that it was not open to me to decide on the evidence that the wages in question were ‘overheads’ and therefore not open to me to make any deduction at all in respect of such wages. I have dealt with Abbott’s submissions on this above. It was an issue resolved on the evidence and for that reason would not generally be revisited by the Court of Appeal. 57.The second ground of appeal relates to a paragraph in the Second Account Judgment. I quoted what Lewison LJ had said in the Appeal Judgment at [42] and went on to say this: “[54] Thus, issues such as opportunity cost and working to capacity, which were given some prominence in Dart should not be central to the question whether the infringer should be permitted to deduct overheads from his profits. The infringer working to capacity is not a threshold requirement, but nor is it irrelevant. If the infringer is working to capacity the infringing business is likely to have displaced non-infringing business without increasing overheads. Had there been no infringement the business would have had the same overheads, the non-infringing business would not have been displaced and therefore the sale of infringing products would have been ‘replaced by’ the sale of non-infringing products. Condition (b) would not be satisfied and the allowance for the overheads would be permitted. In other words, working to capacity can be a useful way for an infringer to demonstrate that it is entitled to deduct overheads.” 58.My reference to ‘condition (b)’ was to the one identified in paragraph 7(3)(b) in this judgment. 59.Abbott submitted that I was wrong in this paragraph to hold that the issue of opportunity cost should not be central to the question whether the infringer should be permitted to deduct overheads from his profits. Abbott developed its argument by saying that Design & Display had been obliged to show that the non-infringing business would have made a gross profit. It had failed to do so. Therefore Design & Display had not established that, absent infringement, the overheads incurred in the infringing business would have been used to generate profits in the non-infringing business. 60.‘Opportunity cost’ is the profit that a defendant would have made from a lawful business that was displaced by the infringing business. This was considered in a little detail in Dart Industries Inc v Decor Corp Pty Ltd [1994] FSR 567. It was not in doubt, even in that case, that the defendant may not claim the opportunity cost. The question was whether the defendant could claim the apportioned overheads which would have sustained that business, see the First Account Judgment at [39]. 61.I am not persuaded that it was incorrect to have said in paragraph 54 of the Second Account Judgment that the issue of opportunity cost is not central to the question whether the infringer should be able to deduct overheads, according to the law stated in the Appeal Judgment. Or that there is a real prospect of persuading the Court of Appeal that it was incorrect. As was explained by Lewison LJ: “[42] … It seems to me to be clear that if the infringer would have manufactured or sold non-infringing products had he not infringed and would have incurred overheads in supporting that manufacture or sale, then he ought to be allowed a proportion of his general overheads. The question is not dependent on whether the infringer is or is not working to capacity. The bottom line is whether (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 sale of non-infringing products. It is in those circumstances that an allowance for overheads will not be permitted.” 62.Thus, the first criterion to be satisfied by an infringer wishing to deduct overheads from his profits is that the overheads claimed would have been incurred anyway even if the infringement had not occurred. For the reasons given in the Second Account Judgment at [63]-[65], Design & Display satisfied that criterion. 63.This first criterion did not require Design & Display to prove that, taken in isolation, the non-infringing business would have generated gross profits. Abbott’s argument is really a variation on its earlier theme. Design & Display showed that its business overall generated a gross profit. For reasons explained by Mr Lloyd, it would have been disproportionately costly to isolate the profits and costs exclusively relating to the non-infringing business and from these to arrive at a figure for the profit, or otherwise, of the non-infringing business. As it happens there is a reasonable inference from Mr Lloyd’s evidence that if this had been done the figures would have revealed that the non-infringing business generated a gross profit. It is true that this was not specifically demonstrated, but that is neither here nor there since there was no obligation on Design & Display to establish a gross profit. 64.I take the view that there is no real prospect of Abbott succeeding in an appeal. Permission to appeal is refused.