Account of Profits - Lufthansa Technik v Astronics

Lufthansa Technik's Hangar at Frankfurt Airport

Author Franzffm  Licence CC BY-SA 3.0  Source Wikimedia Commons

 

Jane Lambert

Patents Court (Mr Justice Leech) Lufthansa Technik AG v Astronics Advanced Electronic Systems and Another [2025] EWHC 375 (Pat) (21 Feb 2025) Lufthansa Technik AG v Astronics Advanced Electronic Systems and Another (Re Interest) [2025] EWHC 1034 (Pat) (30 April 2025)

This was a proceeding known as an "account of profits".  Its purpose was to determine the profits that Astronics Advanced Electronics Systems ("Astronics"), Safran Seats GB Zodiac Seats UK Limited ("Safran") and Panasonic Avionics Corp ("Panasonic") had gained from infringing European Patent (UK) 0 881 145 B1 ("the patent"). The transcript of the proceeding was very long, consisting of 693 paragraphs and an appendix.

The Actions

 The account was the second stage of actions that Lufthansa Technik AG ("Lufthabsa") had launched against Astronics, Safran and Panasonic for infringement of the patent.   The first stage had been the trial to decide whether or not Astronics, Safran and Panasonic were liable to Lufthansa.  Judgment in that trial was handed down on 22 July 2020.  By para [290] of his judgment in Lufthansa Technik AG v Astronics Advanced Electronic Systems and another [2020] EWHC 1968 (Pat), [2021] RPC 6, Mr Justice Morgan held that the patent was valid and had been infringed by all three defendants.   I discussed his lordship's judgment in Patents - Lufthansa Technik AG v Astronics Advanced Electronic Systems on 26 July 2020. 

The Order for an Account

S.61 (1) (c) and (d) and s.61 (2) of the Patents Act 1977 provide:

"(1) Subject to the following provisions of this Part of this Act, civil proceedings may be brought in the court by the proprietor of a patent in respect of any act alleged to infringe the patent and (without prejudice to any other jurisdiction of the court) in those proceedings a claim may be made—
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(c) for damages in respect of the infringement;
(d) for an account of the profits derived by him from the infringement;
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(2) The court shall not, in respect of the same infringement, both award the proprietor of a patent damages and order that he shall be given an account of the profits."

Mr Justice Morgan ordered an inquiry as to the damage which Lufthansa had suffered or, at its option, an account of profits on 22 July 2020.   On 8 Sept 2022, Lufthansa opted for an account of profits. 

Taking the Account

The account was taken by Mr Justice Leech between 3 and 24 Oct 2024.  He delivered judgment in Lufthansa Technik AG v Astronics Advanced Electronic Systems and Another [2025] EWHC 375 (Pat) on 21 Feb 2025.  The learned judge held a further hearing on 20 March 2025 to resolve outstanding issues and gave a further judgment on 30 April 2925 (Lufthansa Technik AG v Astronics Advanced Electronic Systems and Another (Re Interest) [2025] EWHC 1034 (Pat)).

Identifying the Issues

Shortly after Lufthansa had chosen an account of profits, Lufthansa would have been directed to serve Points of Claim and the defendants Points of Defence with permission to Lufthansa to file Points of Reply pursuant to para 5 of Practice Direction 40A - Accounts, Inquiries etc.  Mr Justice Leech referred to both the Points of Claim, Points of Defence and Points of Reply at various points of his judgment.  Unfortunately, he did not mention the contents of those pleadings in any detail except at paras [574] and [576].  That makes it very difficult for readers who were not involved in the litigation to identify and understand the issues.

Structure of the Judgment

Mr Justice Leach's judgment is divided into 10 parts:

• I. Preliminary Matters:  Paras [1] to [11] - Brief summary of the litigation;
• II.  Background:  Paras [12] to [125] - Development of In-seat power systems including the patented invention and competing products; 
• III. Liability:  Paras [126] to [157] Review of Mr Justice Morgan's judgment;  
• IV. Non-Infringing Alternatives:  Paras [158] to [304] Whether Astronics could have developed, manufactured and supplied an alternative product which would not have infringed the Patent;
• V. Causation: Paras  [305] to [472] Whether the Court should undertake a "differential profits" analysis or an apportionment of the profits made by the Defendants from exploiting the patent;  
• VI. Panasonic's Liability: Paras  [473] to [485] Whether Panasonic was liable for indirect infringement under s.60 (2) of the Patents Act 1977 and whether the doctrine of equivalents applied; 
• VII. The Profits in issue: Paras [486] to [554] The profits gained by each of the defendants; 
• VIII.  Apportionment: Paras [555] to [631] Apportioning the profits of the individual defendants; 
• IX.  Teaming Agreement: Paras [632] to [690] Whether there should be a deduction of profits because of a compromise in 2003; and 
• X. Disposition: Paras [691] to [693] The judge's assessment and order for payment.

The Invention

Mr Justice Morgan described the invention for which the patent had been granted at para [2] of his judgment:

"Claim 1 of the Patent described the invention as a voltage supply apparatus for providing a supply voltage for electric devices in an aeroplane cabin. The invention was intended to enable an aeroplane passenger to plug his personal electronic device directly into a socket at his seat. The power supply to the socket was to be high voltage AC and the aim of the invention was to ensure a high level of safety in relation to such a supply to a socket in the seat. Before the invention, some aeroplane seats did have a socket into which a passenger could plug his personal electronic device but the power supply was low voltage DC and it was necessary to use an adapter to plug the device into the socket."

He amplified his description between paras [19] and [44] and discussed the patent claims at para [45].  

Mr Justice Leech decided at [360] that the inventive core of the patented invention was safety and that it had two features which were designed to achieve that objective, namely, the insertion feature and the remoteness feature.

Infringement

I summarized Mr Justice Morgan's judgment in my case note.

Declarations

By his order dated 22 July 2020, Mr Justice made the first 5 of the following declarations.   The 6th was added by Mr Recorder Campbell on 26 April 2023.   Mr Justice Leech set out those declarations in para [150] of his judgment:

"1. The EmPower In-Seat Power Supply System is a product falling within claims 1 to 3 of European Patent (UK) No. 0,881,145 B1 ("the Patent").
2. The Modified EmPower In-Seat Power Supply System is a product falling within claim 1 of the Patent.
3. The Modified EmPower In-Seat Power Supply System is not a product falling within claim 2 of the Patent.
4. Astronics Advanced Electronic Systems has infringed claims 1 to 3 of the Patent by supplying in the UK components of the EmPower System.
5. Panasonic Avionics Corporation has infringed claims 1 to 3 of the Patent by reason of its common design with its customer to connect the components to form the EmPower System in the UK.
6. Safran Seats GB Limited has infringed claims 1 to 3 of the Patent by assembling EmPower Systems in the UK."

OOO Abbott

The learned judge considered para [7] of Lord Justice Lewison's judgment in OOO Abbott v Design & Display Ltd [2016] EWCA Civ 95, [2016] FSR 27:

"Section 61 (1) (d) of the Patents Act 1977 entitles a patentee to claim against an infringer an account of the profits 'derived by him from the infringement'. An account of profits is confined to profits actually made, its purpose being not to punish the defendant but to prevent his unjust enrichment. The underlying theory is that the infringer is treated as having carried on his business (to the extent that it infringes) on behalf of the patentee. The broad principle is that the patentee is entitled to profits that have been earned by the use of his invention. If the patentee does not recover those profits, the infringer will have been unjustly enriched. So the purpose of the account is to quantify the extent to which the infringer would be unjustly enriched if he were to retain the profits derived by him from the infringement. That requires the fact finder first to identify the patentee's invention and second to decide what (if any) profits the infringer derived from the use of that invention. The second of these questions may give rise to difficulty where the infringer sells products associated with the subject matter of the patent (often called 'convoyed goods') or products into which the subject matter of the patent is incorporated. The court must determine what profit has been earned, in a legal sense, by the infringer's wrongful acts. It is clear, then, that an account of profits looks at the facts through the lens of what the infringer has done; and what the patentee might have suffered by way of loss in the real world is irrelevant."

Lifestyle Equities

He also referred to Lord Leggatt's judgment in Lifestyle Equities CV v Ahmed  [2024] 2 WLR 1297, [2024] Bus LR 1438, [2024] ETMR 32, [2024] RPC 14, [2025] AC 1, [2024] UKSC 17, [2024] WLR(D) 233 at [315]:

"[155] A central purpose of intellectual property rights is to encourage and reward creativity and innovation by enabling the owner of the right to enjoy the fruits of its exploitation. That purpose is promoted by allocating profits made from exploiting the right to the owner, including where the right is infringed by commercial use made without the owner's consent. For this purpose it does not matter whether the infringement is deliberate or innocent. The reason for redirecting the profits to the owner of the right is not to punish or deter wrongdoing. It is to achieve the goals which the right exists to further. As Robert Stevens puts it in a valuable discussion of this subject in The Laws of Restitution (2023) at p 306: 'The remedy of an account of profits is here the continuation of the reason for the right.'This explains why, in the words of Kitchin LJ in Hollister Inc v Medik Ostomy Supplies Ltd [2012] EWCA Civ 1419; [2013] Bus LR 428, para 55, the infringer 'is treated as if he has conducted the infringing business on behalf of the claimant.'
[156] Seen from this perspective, ordering an account of profits against an innocent infringer is in fact easier to justify than awarding compensatory damages. Whereas an award of damages may make the infringer worse off than if the infringement had not occurred, an account of profits does not have this effect. The effect is simply to put the infringer back in the same position financially as if no infringement had taken place. It is hard to see how an innocent infringer can legitimately object to such restitution. Thus there is no irrationality in the approach adopted in the Copyright, Designs and Patents Act 1988 of establishing a defence based on lack of knowledge to a claim for damages but not to a claim for an account of profits. But I find it hard to see how the converse approach could be justified. As, therefore, lack of knowledge is no defence to a claim for damages for infringement of a trade mark, it should not defeat a claim for an account of profits."

Finally, the judge quoted para [117] of Lord Leggatt's judgment in relation to causation:

"I would comment in passing that, although the Ahmeds who were acting in person at the second trial did not take the point, the profit for which a trader who sells infringing goods is liable to account is not necessarily the difference between the proceeds of sale of such goods and the costs attributable to those sales. As pointed out by Windeyer J in Colbeam Palmer Ltd v Stock Affiliates Pty Ltd, at p 37, the profit for which the infringer of a trade mark must account is not the profit made from selling the article itself but the profit made from selling it under the trade mark. In My Kinda Town Ltd (trading as Chicago Pizza Pie Factory) v Soll [1982] FSR 147, for example, the claim was for passing off by using a name confusingly similar to the name used by the claimant for a chain of restaurants. Slade J, after an extensive review of cases involving trade mark infringement as well as passing off, held that the profits for which the defendant was liable to account were those caused by the confusion, and not all the profits made by the defendant from its restaurant business. The principle was clearly explained by Lewison LJ in OOO Abbott v Design & Display Ltd [2016] EWCA Civ 98; [2016] FSR 27, para 36 (a patent case but where the same principle applies):

'In a case in which the infringement does not 'drive' the sale it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement. In particular it does not follow from the fact that the customer wanted a slat wall that incorporated an insert that the customer wanted a slat wall that incorporated the infringing insert." (emphasis in original).'"

Applying Lifestyle Equities
Although Lifestyle Equities was a trade mark case, Mr Justice Leech accepted that the above principle applied to patents. He also accepted that the case was high authority for the proposition that the court should assess profits by reference to the causative effect of the infringement, as in an action for damages.

Anan Kasei

He held at [334] that in determining whether the test for causation is satisfied, the Court should apply the following propositions which his lordship had drawn from the indicated paragraphs of Lord Justice Arnold's judgment in Anan Kasei Co Limited & Another v Neo Chemicals & Oxides (Europe) Ltd and others [2023] EWCA Civ 11 (17 Jan 2023)

"(1) The burden is on the patentee to plead and prove all of the factual elements of the claim and, in particular, that the infringement was a proximate cause of the relevant losses: see [115]
(2) It is necessary for the patentee to prove that the infringer was unable to develop, produce or supply a Non-Infringing Alternative but this is not sufficient by itself to establish that the infringement was a proximate cause: see [116].
(3) Where the infringement relates to a single component of a complex product and the infringer has to meet performance standards not only in relation to that component but the other components or the product as a whole, the patentee must demonstrate that the performance of the infringing component was the real driver of the sales in issue: see [116].
(4) In order to determine whether the infringement is a proximate cause of the relevant losses, it is not enough simply to consider the counterfactual in which the infringer did not make the infringing supplies although this may be a useful cross-check: see [117]
(5) Ultimately, the question whether the infringement is a proximate cause of the losses involves an evaluative exercise which may depend on the cumulative effect of a number of different factors (of which the judge's three factors provide useful examples): see [111] to [114] and [118]"

Burden of Proof

Mr Justice Leech summarized his conclusions at [355].  The burden of proof was on Lufthansa to plead and prove that infringement was the proximate cause of the profits that it claimed.  Because the defendants had disputed that infringement was the proximate cause because they could have developed a non-infringing alternative to the infringing product, there was an evidential burden on them to plead and prove that relevant alternative.  There was also an evidential burden on them to demonstrate that the infringement had not been the proximate cause of the profits that they made on secondary components and the ancillary goods and services.

The Points of Defence

The Defendants set out their case as follows in their Amended Points of Defence:

"19. The profits for which Safran is liable to account are those derived from its infringements, that is to say its assembly of components of EmPower Systems into EmPower Systems. Safran assembles components of EmPower Systems that are provided by its customers (and owned by its customers) into seats in the UK and sells the seats to its customers. It makes no profit from assembling EmPower Systems. Alternatively the only profit derived from Safran's infringement is a portion of the proportion of its profit on its sales of seats attributable to the assembly of EmPower Systems. The portion of Safran's profit on its sales of seats attributable to the assembly of EmPower Systems can be assessed by comparing Safran's total direct costs associated with the assembly of EmPower Systems into the aircraft seats it has sold and the total direct costs of manufacturing those aircraft seats. Further, the portion of profit so derived for which Safran is liable to account (if its primary case that it is not liable to account for any profit is not accepted) is set out below."
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24. In the premises, Lufthansa is only entitled to a portion of the overall profits earned by the Defendants from their activities in respect of EmPower Systems, being that portion attributable to the Components. The basis for that apportionment is a matter for evidence. Without prejudice to the foregoing, the Defendants will say that the appropriate portion is no higher than the cost of the Components as a proportion of the total cost of all the components of the EmPower System.
24A. Further or alternatively, Lufthansa is only entitled to a portion of the overall profits earned by the Defendants from their activities in respect of PPD EmPower Systems, such portion being quantified by reference to the total number of patents which protected the Primary Components ("Total Patents") of which the Patent was but one. The remaining patents (the "Other Patents") relate to ISPS/SBP/SPM units in the manner identified in Annex 5. The Defendants will say that insofar as the technology residing in the Primary Components was the subject of patent protection, the Patent and each of the Other Patents should be treated as equally important for the purposes of this Account. In the premises, the proportion of the overall profits to which Lufthansa is entitled in respect of PPD EmPower Systems comprising the ISPS/SBP/SPM Units in Annex 5 is no more than the reciprocal of the number of Total Patents set out therein.
24B. Further or alternatively, the Defendants will say that the appropriate portion of the profits to which Lufthansa is entitled is to be assessed by reference to the facts and matters set out in paragraphs 21-23 above.

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28B. Further or alternatively, the Defendants will say that the appropriate measure of the profits to which Lufthansa is entitled is to be assessed by reference to the payment provisions of the 2014 Teaming Agreement referred to in paragraph 37e below. The Defendants will say that the profit due to Lufthansa throughout the Relevant Period is no more than the rate payable per sale of Outlet Unit in the 2014 Teaming Agreement."

The Points of Reply

Lufthansa responded as follows in its Points of Reply:

"12. As to paragraph 24, Lufthansa will say that an apportionment of profit by reference to the cost of components is inconsistent with s.61 of the Patents Act 1977 and wrong in principle. It is in any event the wrong approach on the facts of this case, for the reasons set out in the Points of Claim and above.
12A. As to paragraphs 24A-24B, the Defendants are put to proof in respect of the alleged Total Patents. The Defendants have not pleaded any facts or matters in support of the contention that each of the alleged Total Patents is equally important and/or that, in law, either of the alternative outcomes for which the Defendants contend is justified. In the premises, paragraphs 24A and 24B are denied.
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14A...(b) Paragraph 28B is directed to the 'comparables' case, which is denied as a matter of law. In any event, the royalty rate in the 2014 Teaming Agreement was agreed against a factual background in which the Defendants were engaged in the Infringing Dealings, and accordingly is not an appropriate 'comparable' for the counterfactual in which the Defendants were not so engaged."

Assessment

His lordship held that Astronics had derived profits of US $4.42 million from the infringement of the patent between 29 Dec 2011 and 22 May 2018, Panasonic profits of US $7.384 million from the infringement of the patent from 13 May 2013 to 22 May 2018 and Safran derived profits of US $81,800 between 29 Dec 2011 and 22 May 2018. He ordered all three Defendants to account to Lufthansa for those sums under s. 61 of the  Patents 1977.

Interest and Consequential Orders

A further hearing took place on 20 March 2025 to determine unresolved issues, such as the overheads that Safran was entitled to deduct and the interest to be charged on the sums due to Lufthansa.  The judge held that Safran could deduct only incremental overheads and increased its liability from US$81,800 to US$567,800.  He ruled that he had equitable jurisdiction to interest as well as jurisdiction under s.35A of the Senior Courts Act 1981 and fixed the sums that each of the defendants had to pay to Lufthansa (see Lufthansa Technik AG v Astronics Advanced Electronic Systems and another (Re Interest) [2025] EWHC 1034 (Pat) (30 April 2025)).

Conclusion

 While this judgment may not be the easiest to follow, it is closely reasoned with each finding supported by authority.  Anyone wishing to discuss this case is welcome to call me on 020 7404 5252 during office hours or send me a message through my contact page at other times.

Further Reading

• Jane Lambert Patents - Lufthansa Technik AG v Astronics Advanced Electronic Systems 26 July 2020;  
• Jane Lambert Practice - Lufthansa Technik AG v Astronics Advanced Electronic Systems  12 May 2023  
• Jane Lambert The Second Appeal - Lufthansa Technik AG v Panasonic Avionics Corporation 10 Nov 2023