Disgorgement of profits: analysis of judicial practice

Abstract

The rule of disgorgement of profits is set out in paragraph 2 of Article 15(2) of the Civil Code of the Russian Federation (hereinafter – Civil Code) as a general remedy. Disgorgement of profits is called this rule in common law countries. It is analyzed. The idea of equity is a basis to force a person who has violated someone’s right to transfer the unlawful profit from such a violation to the plaintiff. The idea that an offender is not allowed to benefit from unlawful or dishonest conduct is supported by judicial practice and doctrine, and is enshrined in Article 1(4) of the Civil Code. There is little practice in applying this rule. Examples include violations of intellectual property rights, other absolute rights, negative confidentiality obligations, contracts, etc. In other cases, disgorgement of profits may arise from the specifics of the violated responsibility. The practice of disgorgement of profits from violation of fiduciary duties is considered. It is established that the nature of disgorgement of profits by violating someone’s right is not certain. The law uses the term «lost profits». Therefore, this institution can be interpreted as a way to calculate losses equal to profits. The defendant may refute this and provide evidence that the plaintiff himself would not have made such a profit. Is it allowed however to take all the profits from the defendant, if the plaintiff has no damages, and the defendant’s profit is large? Should the full profit of the defendant from the violation of the plaintiff’s right belong only to the plaintiff? It is possible to limit the compensatory nature of civil liability and to highlight its preventive and punitive function in the case of «cynical» violations.