Canada: Court Grants Largest Patent Infringement Damages Award In Canadian History

On July 16, 2013, the Federal Court released its decision granting the largest award of damages for patent infringement in Canadian history. In Merck & Co., Inc. v. Apotex Inc. (2013 FC 751) ("Merck"), Justice Snider found that Merck is entitled to over $119 million in damages, plus interest, for Apotex's infringement of Merck's patent for the anti-cholesterol drug lovastatin. 

In Canada, virtually all patent cases are heard by the Federal Court, and it is rare for that Court to render decisions regarding damages. This is because there is a common practice in Canada for parties to bifurcate the issue of liability (i.e., patent infringement and validity) from the issue of compensation (i.e., quantum of damages or accounting of an infringer's profits). Bifurcation is often seen as an attractive approach because it saves the parties from spending time and money on compensation-related issues in the event that the patent is found either not infringed or invalid. Even where a case is bifurcated and an accused infringer is liable for patent infringement, parties are often able to settle the compensation aspect of a case without the need for a second trial to determine quantum of damages or profits. Accordingly, decisions such as Merck do not come along very often, especially decisions where such a large quantum of damages is involved.

During the earlier liability trial, the Court decided that Merck would only be able to claim compensation in the form of damages, not an accounting of the infringer's profits. Damages in Canada can take a number of forms, but the most common forms in patent infringement actions are (i) lost profits on sales a plaintiff patentee would have made but for the presence of the infringing product in the market, and (ii) for those sales made by the defendant that the plaintiff patentee would not have made or cannot persuade the Court it would have made but for the presence of the infringing product, the plaintiff is entitled to a reasonable royalty. 

In Merck, the plaintiffs claimed lost profits with respect to lost tablet sales that Merck Canada would have made within Canada, lost tablet sales that Merck US would have made to Merck Canada, and lost tablet sales within Canada after patent expiry but during a hypothetical ramp-up period of Apotex. Merck also claimed a royalty with respect to sales it would not have made, namely, tablets sold onto the export market (pre and post-patent expiry) and tablets sold within Canada post-expiry. Based on these various claims, Merck was asking the Court to grant it over $156 million in damages, plus interest.

Apotex opposed Merck's claims and argued for a nominal (approximately $9 million) damages quantification. One of Apotex's key arguments for a drastically lower damages total was that it had a "non-infringing alternative". The rationale behind the argument is that when performing a "but for" analysis to determine what position the plaintiff would have been in had the defendant not infringed the patent, the Court must take into account whether the defendant had available to it a non-infringing alternative that would have allowed it to continue competing legally. The effect of the argument, if successful, would have been to limit any damages to a reasonable royalty with respect to sales where the non-infringing alternative could have been used to prevent the plaintiff patentee from otherwise capturing the sales under the "but for" analysis.

In rejecting Apotex's "non-infringing alternative" argument, the Court reiterated the fundamental difference between a claim for damages and a claim for an accounting of an infringer's profits. Damages are to address a plaintiff's loss suffered from the unauthorized use of its invention. An accounting of profits looks at the benefit or advantage that a defendant derived from the use of the invention relative to what was otherwise available but non-infringing. Notwithstanding that in the United States there was found to be some law endorsing the "non-infringing alternative" argument for damages quantification, Justice Snider concluded that there was no basis in Canadian law for such an argument. The argument, if allowed, would incentivize infringers to infringe because they would in effect be taking a compulsory license and their liability would, at most, be limited to a reasonable royalty. To allow the "non-infringing alternative" argument in a damages context would result in inadequate compensation for injured plaintiffs and the infringer escaping responsibility for its infringement. Accordingly, Merck makes it clear that the "non-infringing alternative" argument can only be made in accounting of profits cases. 

With respect to determining a reasonable royalty, the Court acknowledged the "hypothetical negotiation" approach endorsed in Jay-Lor International Inc v Penta Farm Systems Ltd, 2007 FC 358 ("Jay-Lor"). In Jay-Lor, the Court found that one uses a percentage of the defendant's anticipated profits to form the basis of a royalty. However, in Merck, only one expert (called by Merck) gave evidence on the subject of a reasonable royalty. That expert used a different methodology that focused on two end points in a bargaining range: the highest royalty that would leave the defendant better off by taking a licence (i.e., the "maximum willingness to pay" amount); and, the lowest royalty that leaves the plaintiff better off by granting a licence (i.e., the "minimum willingness to accept" amount). 

A problem arises in cases where there is no overlap between the "maximum willingness to pay" and the "minimum willingness to accept" amounts. In such cases, Merck's expert opined that the ultimate royalty from a hypothetical negotiation must adequately compensate the patentee for the infringement. Therefore, and as accepted by the Court, the royalty would be based on the patentee's "minimum willingness to accept" amount. Significantly, the Court held that an infringer's net profit margin does not constitute the ceiling at which a reasonable royalty is capped. 

As a result of the Court's findings with respect to the above and the evidence before it, Merck was awarded approximately $114 million in lost profits for Merck Canada's lost sales in Canada and Merck US's lost sales to Merck Canada, but not for lost sales post-patent expiry. With respect to lost sales post-patent expiry during the hypothetical ramp-up or "springboarding" period where the generic has yet to fully capture the market, the Patent Act does not preclude recovery of damages for such lost sales. However, in this case, as insufficient notice was provided to Apotex that Merck was claiming such damages, and there was an inadequate evidentiary record to support Merck's claim, the Court declined to award such springboard damages. With respect to all other infringing sales, Merck was therefore compensated by way of a reasonable royalty totalling approximately $5 million. 

On top of the amounts for lost profits and reasonable royalty, the Court exercised its discretion and awarded Merck prejudgment interest at 1% above the 1997 Bank of Canada rate. As a result, Merck's total recovery will be tens of millions of dollars in excess of the base award of $119 million, as the litigation dates back to the mid-1990s. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions