Account of Profits
An equitable remedy requiring a party to disgorge and pay over all profits earned from misappropriation or breach.
While straightforward in theory, many businesses fail to actively track obligations tied to this concept - often resulting in missed deadlines, unintended renewals, penalties, or loss of contractual rights.
US Law · For business owners and foundersWhat is a Account of Profits?
An account of profits is an equitable remedy that requires a defendant to surrender all profits earned through wrongful conduct - such as patent infringement, trademark violation, breach of a confidentiality agreement, or misappropriation of trade secrets.
Unlike monetary damages (which require you to prove your actual loss), an account of profits focuses on preventing the wrongdoer from benefiting from their wrongdoing. You only need to show that the defendant earned profits; you do not have to prove you lost money.
This remedy is particularly valuable in IP cases where quantifying the plaintiff's losses is difficult but the defendant's gains are clear and measurable.
In practice, many teams rely on a contract expiry tracking system to stay on top of dates and obligations tied to clauses like this.
Key Elements
Wrongful Conduct Established
You must first prove the defendant committed a wrong - infringement, breach, or misappropriation. The account of profits follows as a remedy.Profits Traceable
The profits must be traceable to the wrongful activity. This requires detailed accounting of revenue and expenses attributable to the infringement or breach.No Double Recovery
You cannot recover both actual damages and an account of profits for the same conduct. You must elect which remedy to pursue.Defendant's Intent Irrelevant
Even innocent, inadvertent infringement can trigger an account of profits. The defendant's state of mind does not matter for this equitable remedy.Real-World Example
Your company owns a patented manufacturing process. A competitor reverse-engineers it and uses it to produce similar products for two years, earning $2 million in revenue. You file suit.
You may seek an account of profits, requiring the competitor to disgorge profits attributable to the patented process. If the competitor earned $500,000 in net profit on those sales, you recover that $500,000 without needing to prove your own lost sales or damages.
This is why many businesses adopt automated deadline tracking to ensure no critical dates are missed before they pass.
Sample Clause Language
IP Protection ClauseWatch Out For
Must prove traceability
Courts require clear accounting showing which profits flowed from the wrongful conduct. Commingled profits (where the defendant uses the IP as only one component) are harder to isolate and value.Election of remedies
Once you choose to pursue an account of profits, you typically waive the right to monetary damages for that same conduct. Choose strategically based on the numbers.Available only in equity
Account of profits is an equitable remedy, not a damage award. This means no jury trial and different procedural rules apply.Don't let account of profits deadlines catch you off guard
Key dates tied to account of profitss - renewal windows, expiry cutoffs, notice periods - can easily slip through the cracks when tracked manually. Missing them triggers automatic extensions, penalties, or lost rights. ExpiryEdge tracks every critical deadline and sends automated reminders before they're due - so nothing slips.
Instead of relying on spreadsheets or manual follow-ups, a centralized renewal reminder system ensures every deadline is visible, tracked, and actioned automatically.
How to Use This in Your Favor
Include account-of-profits language in IP provisions
State clearly in confidentiality and IP agreements that breach triggers a right to account for profits, not just damages.Maintain detailed revenue records
When alleging infringement, have clear financial records showing revenue and costs. The easier you make the accounting, the more likely a court awards this remedy.Consider parallel damages claims
Sometimes you can prove both your damages and the defendant's profits. Consult counsel early about which remedy is more valuable in your specific case.Related Terms
Frequently Asked Questions
How is an account of profits different from damages?
Damages are based on your loss; account of profits is based on the defendant's gain. If an infringer earned $1 million but you lost $500,000, damages would recover $500,000 while an account of profits would recover $1 million.
Can I recover both damages and account of profits?
No. You must elect one remedy or the other for the same conduct. You cannot "double dip" by recovering both your losses and the defendant's gains from the same infringement.
Do I have to prove the defendant acted intentionally?
No. Account of profits applies even to innocent infringement. The defendant's knowledge or intent is irrelevant; what matters is that profits were earned through wrongful conduct.