Dart Industries Inc v The Decor Corporation Pty Ltd

The High Court of Australia heard an appeal concerning the principles governing the taking of an account of profits following a finding of patent infringement. The appellant, Dart Industries Inc, sought to overturn an order made by the Full Court which permitted the respondents, The Decor Corporation Pty Ltd and Rian Tooling Industries Pty, to deduct certain overhead expenses in the account of profits. The dispute centred on the correct method for calculating profits attributable to infringing activities.

The primary legal issue before the High Court was whether, in taking an account of profits for patent infringement, an infringer is entitled to deduct overhead expenses that contributed to the profit of infringing products, even if those expenses were not increased by the infringing activities. The appellant contended that only those overheads that were demonstrably incurred *by reason of* the infringing activities, and thus increased by them, should be deductible. Conversely, the respondents argued for a broader approach, allowing deduction of overheads that contributed to the profit of the infringing products, regardless of whether their quantum was increased.

The appellant's argument was founded on the principle that an account of profits should reflect the actual profits made from the infringing conduct. This involves starting with gross revenue from infringing sales and deducting only those costs directly attributable to the manufacture and sale of the infringing products, including only that portion of overheads that was increased by the infringing activities. The appellant argued that the Full Court had erred in its application of this principle and had misconstrued relevant Australian and United Kingdom authorities, while also misinterpreting United States jurisprudence. The appellant submitted that the correct approach, supported by authority, is to allow deduction of expenses only to the extent they were incurred due to the infringement.