Accounting of Profits
What does "Accounting of Profits" mean in law?
An accounting of profits is an equitable remedy that requires the defendant to disgorge all profits earned through wrongful conduct, such as breach of fiduciary duty, infringement of intellectual property, or misappropriation of trade secrets. The remedy shifts the focus from the plaintiff's loss to the defendant's gain, and it is particularly appropriate when the plaintiff's actual damages are difficult to quantify but the defendant has clearly profited from the wrong. The plaintiff typically need only prove the defendant's gross revenues attributable to the wrongful conduct; the burden then shifts to the defendant to prove any deductible expenses or costs. An accounting of profits is closely related to disgorgement and is frequently invoked in partnership disputes, trustee breaches, and intellectual property cases.
Definition
An accounting of profits is an equitable remedy that requires the defendant to disgorge all profits earned through wrongful conduct, such as breach of fiduciary duty, infringement of intellectual property, or misappropriation of trade secrets. The remedy shifts the focus from the plaintiff's loss to the defendant's gain, and it is particularly appropriate when the plaintiff's actual damages are difficult to quantify but the defendant has clearly profited from the wrong. The plaintiff typically need only prove the defendant's gross revenues attributable to the wrongful conduct; the burden then shifts to the defendant to prove any deductible expenses or costs. An accounting of profits is closely related to disgorgement and is frequently invoked in partnership disputes, trustee breaches, and intellectual property cases.
Example
When a trustee secretly invested trust funds in a personal venture that generated $2 million in profits, the court ordered an accounting of profits requiring the trustee to turn over all gains to the trust beneficiaries.