The High Court has handed down its judgment calculating the account of profits awarded to the video game publisher, Blizzard Entertainment SAS (Blizzard), in connection with its claim against the producer of software designed to facilitate cheating or unfair practices in Blizzard’s video games.
The Claimant, Blizzard is the creator and publisher of numerous successful online role playing games, including World of Warcraft, Overwatch and Hearthstone. The Defendant, Bossland GmbH (Bossland), produces and sells software, “Bots and Cheats”, that allows users to bypass the pre-set mechanics of the games to secure advantages against other players. After what may be aptly described as an “arms race” between the parties in developing software to simultaneously detect and nullify the others efforts, Blizzard brought a claim against Bossland for inducing its UK customers to breach their end user licence agreements as well as authorising copyright infringement. Bossland admitted liability in March 2017 and Blizzard elected for an account of profits rather than an enquiry as to damages.
In its judgment, the court upheld the dicta in Dart Industries Inc. v Décor Corp Pty Ltd that an account of profits should not entitle the aggrieved party to profits which it did not earn and similarly the infringing party is not entitled to deduct from its gross profits as to be unjustly enriched from their infringing conduct. When calculating the figure for account of profits, the court sought to ensure that the infringing party provides all of the profit made in the relevant period to the injured party without prejudice to either side.
In calculating this figure, it was necessary for the Court to differentiate between Bossland’s UK business, where Bossland had accepted liability, and the rest of the world, where it had not. The approach by the English Courts in respect of profits made from IP infringing activity is, at base level, to take the gross profits from the sale of the infringing product and deduct any costs solely and wholly attributable to those acts (“direct costs”). A further deduction may be applied for a proportion of the costs associated with the broader operation of the business not solely attributed to the infringing conduct (“general overheads”). The judge established that these general overheads cannot be deducted where:
As Bossland operated across multiple jurisdictions of varying profit levels its costs are distributed globally, and were difficult to ascribe to a particular jurisdiction. The difficulty arose in what costs Bossland could attribute to being costs directly focused on the UK business and therefore deductible for the purpose of establishing net profits.
The Court concluded that, save as to affiliate costs, none of the costs were general overheads that could be deducted, as:
This judgment is the first relating to a global software business and reaffirms the line between “direct costs” and “general overheads” for the purpose of calculating a final account of profits figure for online businesses without territorial scope.
  FSR 567