Canada: Substantial Indemnity Costs Upheld (Intellectual Property Weekly Abstracts Bulletin - Week Of April 7, 2014)

Last Updated: April 10 2014

Edited by Chantal Saunders and Beverley Moore , Adrian Howard and Ryan Steeves

NOC Proceedings

Substantial Indemnity Costs Upheld

Pfizer Canada Inc. v. Apotex Inc., 2014 FC 173
Drug: celecoxib

Pfizer appealed the costs portion of a decision of the case-management Prothonotary striking portions of its evidence on reply (Decision here; summary here). Pfizer argued that costs should not have been awarded on an elevated scale without giving it a chance to make submissions or without a finding of exceptional circumstances.

The Court disagreed and dismissed the motion, holding that there was no unfairness to Pfizer in the circumstances, and nothing unreasonable about the Prothonotary's decision.

S. 8 Cases

Method for Assessing Quantum of Damages Determined by Court

TevaCanada Limited v. Pfizer Canada Inc., 2014 FC 248

Drug: venlafaxine

In this case, the Court made key findings as to the method of determining quantum of s. 8 damages, and sent the parties away to determine the actual quantum. As background, a predecessor to Teva, Ratiopharm, had filed an ANDS and agreed to await expiry of the patent on the Patent Register at that time. A second patent was listed on the Patent Register, and Ratiopharm sent a NOA with respect to that patent. It then brought a motion to have the patent removed from the Patent Register. That motion was successful, and Ratiopharm came to market with its venlafaxine product. Another predecessor to Teva, Novopharm, had entered into a licence with Pfizer to sell venlavaxine. The Court of Appeal held that the damages claim was not to be reduced by Novopharm's gains under the licence (decision here; summary  here). Ratiopharm also entered into a cross-licence agreement with another generic company, Pharmascience.

The Court considered the relevant period for damages, and held that although it is not in issue in this case, there is no discretion as to the end date for the period. With respect to the start date, in this case, the Patent Hold date preceded the expiry of the patent to which Ratiopharm had agreed to await.

The Court considered the applicability of this date, along with the arguments of Ratiopharm and Pfizer for other dates. Ratiopharm argued  that the start date should be the date that patent expired. Pfizer argued that the start date should be the date 45 days after Ratiopharm had sent a NOA on the second patent, because until that time, Ratiopharm had not met the requirements of the NOC Regulations. The Court held that the appropriate date was the expiry date of the patent because there was no loss claimed by Ratiopharm prior to that date.

The Court used actual sales of venlafaxine during the relevant period to determine the size of the market. Novopharm's actual sales, with an adjustment for differences in provincial formulary listing dates was agreed to be the size of the generic market. The Court then considered Ratiopharm's market share in the "but-for"  world together with the share of other generic companies. The Court held that Ratiopharm  must show that it was able to supply the market, and that Pfizer must prove when competitors would have entered the market. The Court then considered all of the other relevant factors, including formulary listing, trade-spend, ramp-up and interest.

Trade-Marks Cases

New Evidence Not Material; TMOB Decision Upheld as Reasonable

Rothmans, Benson & Hedges Inc. v. Imperial Tobacco Products Ltd., 2014 FC 300

This is an appeal under s. 56 of the Trade-marks Act from a decision of the Trade-marks Opposition Board (TMOB) in relation to two trade-marks filed by Imperial Tobacco Products Ltd (ITPL). Both applications relate to orange package design. Rothmans, Benson & Hedges Inc. (RBH) opposed both applications, but the TMOB rejected both oppositions. The Court noted that in separate proceedings, another tobacco company had also opposed the same two applications, but had been unsuccessful (decision here, summary here).

Both parties adduced new evidence on appeal. However the Court held that the new evidence would not have materially affected the TMOB's decision. Thus, the Court agreed that the reasonableness standard was applicable to the appeal. The Court then held that the TMOB's decision was reasonable, as it fell within the range of possible, acceptable outcomes which are defensible in respect of the facts and in law.

Applicant is not a Broadcasting Undertaking; thus held Not to have Previous Use in Broadcasting Services

Unicast SA v. South Asian Broadcasting Corporation Inc., 2014 FC 295

In this case, Unicast brought an application pursuant to s. 57 of the Trade-marks Act requesting expungement of the trade-mark "RED FM" from the Register. The Court dismissed the application.

The Applicant operates a radio station in association with the trade-mark "ROUGE FM". It is operated over the internet in Canada. The Respondent offers radio programming in association with the RED FM trade-mark. The Court held that for the Applicant to be successful, it must satisfy the Court that it had used its trade-mark before the Respondent, had not abandoned it, and that the two marks were confusing.

In considering these elements, the Court held that the Applicant's online activities did not constitute "broadcasting" for the purposes of the legislation. The Applicant does not store its transmitted content on Canadian servers. It is not physically present in Canada. It does not seek or have advertisers in Canada. Finally, it did not take steps towards gathering Canadian listeners, other than offering its programming online. Thus, the Applicant's activities were held not to constitute a "broadcasting undertaking" as they are not "carried in whole or in part in Canada", under the Broadcasting Act. Thus, it cannot claim to have used the ROUGE FM trade- mark while providing broadcasting services to Canadians. As a result, the application must be dismissed.

Registrar's Decision was Reasonable: "Use it or Lose it"

Corporativo de Marcas GJB, SA de CV v. Bacardi & Company Ltd.,2014 FC 323

This was an application for judicial review of a decision of the Registrar of Trade-marks. The Registrar allowed an opposition by Bacardi & Company Ltd. (the "Opponent") and refused an application for the trade-mark RON CASTILLO LABEL design filed on behalf of Corporativo de Marcas GJB, SA de DV ("Marcas" or the "Applicant"). The judicial review turned on the issue of "use".

The Opponent opposed the design mark on the ground that it did not satisfy the use requirement under subsection 30(b) of the Trade-marks Act (the "Act"). While there is an initial evidentiary burden on the Opponent to adduce sufficient evidence supporting its claim of non-compliance by Marcas, the Court held that the Opponent met that burden. The Court found that the record was "clearly inconsistent" with Marcas' claim of continuous use, and therefore satisfied the evidentiary burden imposed on the Opponent. The Court also held that it was reasonable for the Registrar to draw an adverse inference from the lack of evidence of use filed by Marcas, and conclude that the evidentiary burden with respect to use had been met by the Opponent on that basis.

With the Opponent having satisfied its evidential burden, Marcas was then required to satisfy its legal burden with respect to the compliance of its application under section 30 of the Act. The Court found that it was reasonable for the Registrar to conclude that the design mark was not sufficiently used throughout the material time and, as a result, that Marcas had failed to satisfy its legal burden regarding the continuous use of the design mark during the relevant period. The Court noted that the evidence pointed strongly against continuous use, and found that there were no reasonable explanations for the "total void of evidence of use for a majority of the material time". The Court therefore dismissed Marcas' application for judicial review.

Copyright Cases

FCA: Broadcasters Required to Pay for Ephemeral Copies

Canadian Broadcasting Corporation v. Sodrac 2003 Inc., 2014 FCA 84

These reasons applied to three applications for judicial review. In two of those applications, the CBC and Astral Media each sought to set aside several terms of the 2008-2012 license issued to it pursuant to the respective decisions of the Copyright Board (the "Board"). The third application for judicial review dealt with Board's decision extending the 2008- 2012 license to the 2012-2016 period on an interim basis pending a final determination of SODRAC's request under section 70.2 of the Copyright Act (the "Act") for that period.

Section 70.2 of the Act provides for a form of arbitration in which parties who are unable to agree on the term of a license can apply to the Board to fix those terms. The disputes involving the CBC and Astral Media, and SODRAC, were focused on SODRAC's business model, which  the CBC and Astral Media argued is "inconsistent with the prevailing industry model". The CBC and Astral Media argued that the normal practice is for the producer of an audiovisual work to obtain a license-to-the-viewer license from the rights holder (i.e. where the producer obtains or 'clears' all necessary rights for downstream users). In comparison to this model, SODRAC has adopted a layered approach to licensing in which each link in the distribution chain must acquire (and pay for) the right to make the copies required for its commercial purposes. The Court of Appeal noted that SODRAC's strategy corresponds to the adoption of new technology that generally necessitates, for example, multiple copies (i.e. ephemeral copies) of a musical work in order to incorporate it into an audiovisual work. The Board then set the various terms of licenses to the CBC and Astral Media.

The main argument put forth by the CBC and Astral Media before the Court of Appeal was that the analysis by the Board flew in the face of the principle of technological neutrality established by the Supreme Court of Canada in ESA v. SOCAN, 2012 SCC 34 ("ESA"). The Board's decision was grounded in the Supreme Court of Canada's decision in Bishop v. Stevens, a case in which the Supreme Court held that each of the rights enumerated in subsection 3(1) of the Act was a separate right reserved to the owner of copyright, whose use by another attracted liability for the payment of royalties. Therefore, the Court of Appeal held that unless Bishop v. Stevens had been overturned or disavowed by the Supreme Court (in ESA), it would determine the outcome of this branch of the applications for judicial review. The CBC and Astral Media argued that Bishop v. Stevens has been overturned by ESA.

The Court of Appeal acknowledged that the Supreme Court in ESA affirmed the principle of technological neutrality. However, the Court of Appeal held that in view of the different views of technological neutrality articulated in ESA,  "it is difficult to know how one is to approach technological neutrality post-ESA." The Court  of Appeal held that "ESA, while restating the principle of technological neutrality in copyright law, provides no guidance as to how a court should apply that principle when faced with a copyright problem in which technological change is a material fact." The Court of Appeal found that nothing in ESA authorized the Board to create a category of reproductions or copies which, by their association with broadcasting, would cease to be protected by the Act. As such, the Court of Appeal held that ESA did not overrule Bishop v. Stevens. The arguments made by the CBC and Astral Media with respect to technological neutrality therefore failed, in the Court of Appeal's view.

The CBC and Astral Media also raised a number of other issues with the Board's decision, only one of which was successful. In objecting to a 'blanket license', the CBC objected on the basis of a discount formula, which is designed to  give broadcasters credit when they broadcast a program in which the producer has in fact obtained a through-to-the-viewer license from SODRAC. The Court of Appeal reviewed the 'discount formula' and found that it was flawed. As a result, the Court of Appeal allowed the applications in part to allow for the amendment of the 'discount formula'.

With respect to the application for judicial review of the interim license, the Board disagreed with the CBC that the license did not represent the status quo given its significant differences from the parties' prior pattern of dealings. The Court of Appeal held that once the Board made the order with respect to the 2008-2012 period, the terms of that order became the new status quo. Given that the Court of Appeal proposed to uphold the 2008-2012 license (with the one small change), it saw no reason not to treat that order as the status quo. Therefore, the Court of Appeal dismissed this application for judicial review.

The Court of Appeal allowed the applications for judicial review (Re: ephemeral copies) in part, but only for the purpose of amending the 'discount formula'. The Court of Appeal also dissolved the stays of execution of the licenses issued by the Board, and awarded costs to SODRAC, but reduced by 10% for CBC and Astral Media's partial success.

Divisional Court Overturns Motion Judge and Certifies Class Proceeding for Copyright Infringement

Keatley Surveying Ltd. v.Teranet Inc., 2014 ONSC 1677

In this case, Keatley Surveying Ltd. (the "Appellant") appealed a decision of Horkins J., denying a motion to certify a class proceeding under the Class Proceedings Act ("CPA"). The proposed class action alleges that Teranet Inc.'s (the "Respondent") database constitutes copyright infringement in the plans of survey under the Copyright Act. In denying the certification, the motion judge held that four of the five criteria required  by the CPA were not met, namely (1) there was no identifiable class; (2) the proposed common issues would not significantly advance the litigation; (3) a class proceeding was not the preferable procedure; and (4) the representative plaintiff did not adequately represent the interests of the class nor did it put forward a workable litigation plan. On appeal, the Appellant significantly revised its certification request.

On appeal, the Divisional Court found that the Appellant's revisions to its request for certification made it appropriate for its case to proceed as a class proceeding. While the Respondent alleged that the Appellant's case on appeal constituted an abusive and prejudicial re-formulation of the case on almost all of the certification criteria, the Court disagreed. The Court found no prejudice (but noted that if there were prejudice, this is exactly the sort that can be addressed through costs), and favoured deciding the matter itself, rather than remitting it back to the certification judge for a new hearing; in the Court's view, this approach recognized the goals of judicial economy and access to justice.

With respect to the 'identifiable class' criterion, the motion judge found that the Appellant had not met this criterion because the class definition was "merit-based", and because the Appellant had failed to provide satisfactory evidence that there were two or more persons "interested" in joining the action. On appeal, the Appellant submitted a new class definition, and the Court agreed that it was no longer 'merit-based'. With respect to whether there were two or more persons "interested", the Court found that the motion judge erred in principle when, as part of her identifiable class criterion analysis, she required the Appellant to adduce evidence that there was someone, in addition to the Plaintiff, who also wished to pursue a claim for copyright infringement against the Respondent. The Court found that the CPA does  not (nor does the case law) require evidence of a desire among class members to pursue an action.

With respect to the 'common issues' criterion, the Appellant filed a revised list of common issues on appeal, seeking to meet the concerns identified by the motion judge. The Court found the revised common issues to be suitable for certification. And with respect to the 'preferable procedure' criterion, the Court found that, given the revised list of common issues, the action now met the preferability criterion as well. The Court also noted that three other copyright infringement cases involving electronic databases that raised significant individual issues were also found suitable for certification.

With respect to the final issue, and whether the representative plaintiff had a workable litigation plan, the Court agreed with the motion judge that the Appellant's circumstances were atypical of most surveyors in Ontario. However, the fact that its circumstances were "atypical" did not render it unsuitable to be a representative plaintiff. Noting that litigation plans are a "work in progress" and may have to be amended during the course of proceedings, the Court held that, if the Appellant amends its Statement of Claim to abandon its claim for an injunction, it can fairly and adequately represent the interests of the class.

As such, and subject to the Appellant amending its Statement of Claim, the Court allowed the appeal, set aside the decision of the motion judge and certified the modified common issues.

Other Industry News

The Competition Bureau has released a draft update of its Intellectual Property Enforcement Guidelines for public consultation. The consultation is open until June 2, 2014.

CIPO and the Competition Bureau have announced that they have signed a Memorandum of Understanding calling for closer cooperation between the two agencies.

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