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?

  1. 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; 
  2. include the ability to restart or commence separate infringement proceedings in the settlement if there is a breach; and
  3. 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.

 

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