Cr 378 199450fcr378at393 1993 179 clr 101 328 w

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Unformatted text preview: ess. When the dealership subsequently failed to sell the truck, it then attempted to repudiate the contract of purchase for misrepresentation. The Federal Court of Australia, noting that Jad had availed itself of opportunities to sell the truck at a profit in the 12 months between purchase and subsequent attempt to rescind the original purchase contract and, therefore, as the failure to sell the truck at a profit was unconnected to the misrepresentations entitling it to rescission, refused to award compound interest on a major portion of the damages award.44 In Dart Industries v Decor Corporation45 (1993) The High Court of Australia, in an intellectual property dispute, was faced with the problem of how to determine the 'profit' of a company charged with violation of a copyright relating to plastic container lids. The choice open to the plaintiffs in compensation for the violation was either to seek damages for the violation, or to require an account of the profits. An account of profits is an equitable remedy, whereas damages is a common law remedy. "Damages and an account of profits are alternative remedies ... an account of profits retains its equitable characteristics in that a defendant is made to account for, and is then stripped of, profi (1994) 50 F.C.R. 378. (1994)50F.C.R.378at393. (1993) 179 C.L.R. 101. 328 w hich it has dishonestly m a d e by the infringement and which it w ould be unconscionable for it to retain."46 The problem confronting the court was how to calculate the profits attributable to the offending product which the defendants had manufactured and sold in contravention of the plaintiffs patent. The plaintiffs contended that no overhead expenses should be included in the amount the defendants were allowed to deduct from the sale price of the offending products, whereas the Full Federal Court had allowed the defendants to be "at liberty to show that various categories of overhead costs contributed to the obtaining of the relevant profit, and to show how and in what proportion they should be allocated in the taking of the account of profit."47 The High Court was faced with differing accounting methods (incremental, or marginal cost, and absorption method) and how such methods affected the concept of profits, and whether or not, faced with a complex manufacturing enterprise, the court should consider that the defendant would have employed the manufacturing capacity to an alternative product, where instead it was used to manufacture the offending product. The plaintiffs asked the court to find that no overheads should be allowed to be deducted from the sale price of the offending products in calculating profits,48 relying on Colbeam Palmer Ltd. v Stock Affiliates Pty. Ltd.49 (1968) where Windeyer J., in the High Court of Australia, had prohibited inclusion of managerial expenses and general overheads in an account of profits ordered against a defendant for trademark violation.50 If, on the other hand, manufacturing efforts were directed toward the offending product which would otherwise have been profitably 4& (1993)179C.L.R. 101 at 109. Decor Corporation Pty. Ltd. v Dart Industries Inc. (1991) 104 A.L.R. 621 at 629. 48 In trial atfirstinstance, King J. of the Federal Court refused to allow consideration of overheads to be included in the account of profits, as none of them were shown by Decor to be directly attributable to the offending products. Dart Industries Inc. v Decor Corporation Pty. Ltd. (1990) 20 I.P.R. 144 at 152. 49 (1968)122C.L.R.25. 47 329 e mployed in an alternative product, the defendant would be worse off than if no offending products were produced, for it would not be able to recoup overhead expenses which it otherwise would have been able to recover from manufacturing a non-offending product. The court unanimously allowed overheads "attributable" to the offending product to be included in the deductions from the sale price to derive the appropriate profit figure. I the course of judgment the court noted that the cost of manufacturing and marketing an offending product may include the cost of: forgoing the profit from the manufacture and marketing of alternative products ... called an opportunity cost. "Opportunity cost" can be defined as "the value of the alternative foregone by adopting a particular strategy or employing resources in a specific manner..." A s used in economics, the opportunity cost of any designated alternative in the greatest net benefit lost by taking an alternative.51 As Decor Corporation had incurred overhead expenses attributable to the production and sales of the offending product, the court ordered that they were at liberty to show what overhead expenses were appropriate to be deducted, for the court assumed that Decor was a "rational" manufacturer who, if presented with a prohibition against manufacturing an article in contravention of an enforceable patent, would not have left the excess manufacturing capacity idle. The court found that Decor would have redirected unused capacity into profit-making alternatives ins...
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This note was uploaded on 09/03/2012 for the course LAW 1501 taught by Professor Garva during the Three '12 term at University of Adelaide.

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