Court Analyses Approach to Election between Damages and Loss of Profits in Comparative Advertising Case

In Aldi Stores v Dunnes Stores [2016] IEHC 256, the High Court refused to order Aldi to elect between a claim in damages and an account of profits prior to a damages trial.  The application arose in circumstances where Dunnes had been previously found to have engaged in misleading comparative advertising and infringed Aldi's trademarks. 

Aldi had indicated that they intended to pursue a claim for both damages and an account of profits however, Dunnes objected and called upon Aldi to elect, prior to the hearing on the issue of damages, between either pursuing a claim for damages or seeking an account of profits.

Damages or Account of Profits?

Having reviewed the authorities, Cregan J held that it was clear that there is a rule of law in trademark and patent infringement cases that a plaintiff who has established an infringement must make an election between an inquiry into damages or an account of profits. However, he noted that the scope, operation and rationale of this rule were not so clear. The purpose of an award of damages was to ascertain the extent of the plaintiff’s losses and to restore him to the position he would have been in if the infringement had not been committed while the purpose of an account of profits, on the other hand, was to deprive the infringer of the unjust enrichment he had derived from the infringement.

He was of the view that the underlying reason for the rule was to ensure that a plaintiff did not recover “on the double”. However, Cregan J held that he should not apply the rule in a mechanistic way but rather in an appropriate manner to ensure justice was done to the plaintiff whilst also ensuring that the plaintiff was not over – compensated.

Cregan J was also of the view that the use of the word “election” was a misnomer in that the two remedies were, in effect, remedies in the alternative. Because an account of profits is an equitable remedy, it is at the discretion of the court as to whether it will be granted in any particular case. Thus, although a party may “elect” for an account of profits that is not determinative of the issue. The Court is not bound by that election.

Cregan J went on to hold that the rule in relation to election requires an election between an account of profits or an inquiry into special damages (or loss of profits) suffered by the plaintiffs. It does not mean an election between an account of profits and general damages.

Timing of Election

Dunnes also argued that Aldi should make its election before discovery was agreed or ordered and before the hearing of the damages module. Aldi submitted that such an election could only be made at the conclusion of the hearing on damages when it had all available information.

Cregan J held that it was difficult to see how a plaintiff could make an informed election between an account of profits and damages in circumstances where the plaintiff could not know what figure for damages might be awarded by the court.  He held that Aldi should have all relevant information to make an informed election between damages and/or an account of profits and to compel Aldi to make an election between damages or an account of profits without providing any figures in respect of either claim would be entirely wrong and unreasonable.

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Date Published: 14 June 2016