H&M has been in a long-running dispute with bra patent owner Stretchline over its patent for a particular type of underwire. Both sides signed an agreement that H&M would not sell the bras as a compromise and in full and final settlement of all claims. Soon after, H&M breached the agreement and Stretchline claimed financial compensation for the breach from H&M. Stretchline was successful in its breach of contract claim, however in an unusual move the Court held that although H&M had breached the terms of its settlement agreement by continuing to sell infringing bras, it refused to give Stretchline the option to get a share of H&M’s profits from the sale of these bras.
The Judge said that by signing a contractually binding settlement agreement which contained a term that prevented Stretchline from pursing the proceedings, Stretchline could only get damages for its lost licence revenue and had lost the option of getting a share of H&M’s profits instead.
This is unusual as normally if there has been an infringement of IP rights a successful claimant has the option of either an account of profits or damages, whichever is the higher. In this situation the difference was that Stretchline had entered into a contract where it had compromised its claim and the normal remedy for breach of contract is damages and not an account of profits.
What lessons can be learnt?
- If you have a claim and settle it make sure your settlement is clear on what is covered, which means defining the infringing items clearly;
- include the ability to restart or commence separate infringement proceedings in the settlement if there is a breach; and
- include an “account of profits” as an alternative to “damages” in your settlement agreement, together with an obligation on the infringer to provide accounting information.