Canada: The Basics Of Patent Law - Remedies And Costs

This article is part of a series called 'The basics of patent law', covering:  Types of intellectual property protection for inventions and granting procedure Initiating proceedings; Infringement and related actions; Revocation, non-infringement and clearing the way; Procedure, trial, appeal and settlement; Remedies and costs; Assignment and licensing; and the Unified Patent Court and Unitary Patent system.

The articles underpin Gowling WLG's contribution to Chambers' Global Practice Guide on Patent Litigation 2017, for which Gordon Harris and Ailsa Carter wrote the UK chapter.

The legislation

Pursuant to the Patents Act, section 61, the party asserting infringement may seek from the court, as remedy for patent infringement, an injunction to restrain infringement, an order for delivery up or destruction, damages or an account of profits and/or a declaration that the patent is valid and has been infringed (by the party found to infringe).

Pursuant to the Patents Act, section 69, a claim for damages or an account of profits can be made in respect of infringements that take place after publication of the patent application but before grant of the patent. These proceedings must be brought after grant of the patent, and only on the basis that both the claims in the patent application and the patent, as granted, are infringed.

EU Directive 2004/48 on the enforcement of intellectual property rights (the IP Enforcement Directive) provides that member states "shall provide for the measures, procedures and remedies necessary to ensure the enforcement of the intellectual property rights covered by this Directive". The scope of such intellectual property rights is understood to include patents and supplementary protection certificates (among others), but not to include a cause of action in breach of confidence.

The UK courts give effect to the provisions of the IP Enforcement Directive in the application of national law and procedure regarding remedies. For example, the principle of proportionality is, in keeping with the IP Enforcement Directive, considered by the courts in deciding whether to grant, and the extent of any, interim injunctive relief (see for example Warner-Lambert v Sandoz [2016] EWHC 3317 (Pat), and Warner-Lambert v Actavis [2015] EWHC 485 (Pat))).

More generally, the jurisdiction of the Courts in England and Wales is broad and adaptable, and the courts have demonstrated a willingness to adapt existing types of relief to achieve justice in view of evolving technical and market circumstances.

Injunctive relief

Preliminary or 'interim' injunctive relief is discussed in our article on ' Initiating proceedings'.

In the usual course, where such relief is requested by the patentee, injunctive relief is granted following a first instance finding that at least one valid claim of a patent has been infringed. The usual form is prohibitory and in general terms i.e. not to infringe the patent, for its remaining life.

However, the grant of injunctive relief is within the discretion of the court and outcomes may differ from the norm.

For example, it may be possible, in some circumstances, to obtain an injunction that extends beyond the expiry of the patent, for example to restrain the sale of infringing articles manufactured during its life or to prevent the defendant from obtaining a springboard into the market after expiry of the patent (Dyson v Hoover [2001] EWHC Patents 30). In situations where third parties' lawful activities would be impacted by the proposed injunctive relief, the court may decline to award it (Warner-Lambert v Actavis [2015] EWCA Civ 556). The court may also stay the commencement of any injunctive relief pending appeal, where the alleged infringer has a real prospect of further appeal and the 'balance of justice' favours suspension (Smith & Nephew v ConvaTec [2015] EWCA Civ 803). Conversely, the court may award injunctive relief pending a patentee's appeal on the merits where the patentee has a real prospect of success on the merits and the injunction is necessary for the Court of Appeal to be in a position to do justice between the parties (Novartis v Hospira [2013] EWCA Civ 583).

Where the patent infringed is essential to a technical standard (a 'standard essential patent' or 'SEP'), injunctive relief will be awarded if a licence has first been offered by the patent owner on 'fair, reasonable and non-discriminatory' (FRAND) terms in accordance with the principles laid down by the Court of Justice of the European Union in Huawei v ZTE (Case C-170/13, 16th July 2015 [2015] Bus LR 1261), and not accepted by the infringer. In Unwired Planet v Huawei [2017] EWHC 711 (Pat), the Patents Court issued guidance on terms that constitute FRAND.

Following a finding of liability for breach of confidence, the court may award injunctive relief. The scope of injunctive relief available will depend upon the facts. For example, if the relevant information is already widely known, a general injunction will usually not be awarded. However the court may still grant 'spring-board' injunctive relief, for a limited period, to prevent the infringer from using the information in a competing business (UBS v Vestra [2008] IRLR 965).

Damages or an account of profits

Usually in a claim for infringement, the monetary relief claimed is unspecified. Following a finding of liability, the court will award an inquiry as to damages or an account of profits, at the claimant's election. The claimant is entitled to make a somewhat informed choice between the two remedies and may request disclosure relating to the defendant's sales (Island Records v Tring [1995] EWHC 8 (Ch)). The remedies are alternatives (Redrow Homes v Betts [1998] RPC 793 (HL), Henderson v All Around The World Recordings [2014] EWHC 3087 (IPEC)), and usually take place as the second stage of a 'split' trial procedure.

Damages are intended to compensate the defendant for the loss suffered. They may be assessed according to the loss of profits caused to the patentee by the infringing activities, or by reference to a reasonable royalty rate, or by a combination of the two methods (see, for example, AP Racing v Alcon [2016] EWHC 116 (IPEC)). If the claimant would nevertheless not receive adequate compensation for the actual prejudice suffered, then pursuant to the IP Enforcement Directive, it is potentially possible to be awarded an additional sum relating to the profit made by the defendant from knowing infringement (Henderson v All Around The World Recordings [2014] EWHC 3087 (IPEC)).

If the patentee gives a cross-undertaking in damages to secure the award of interim (or other non-final) injunctive relief and the injuncted party later succeeds on the merits of the underlying claim (or the appeal of the substantive finding of infringement), the court will discharge the injunction and award an inquiry into damages on the cross-undertaking. The award can be expected to be fair but liberal (AstraZeneca v Krka [2015] EWCA Civ 484).

An account of profits is a remedy intended to prevent the unjust enrichment of the infringer. Broadly, the patentee is entitled to profits that have been earned by the use of his invention. This entails the court identifying the patentee's invention and deciding what (if any) profits the infringer derived from the use of that invention (Design & Display v OOO Abbott [2016] EWCA Civ 95).

Following a finding of liability for breach of confidence, the court may award damages or an account of profits. Damages can be expected to be awarded in respect of products or services which incorporate the misused information; compensation may also be awarded in respect of some derived products (MVF 3 APS v Bestnet [2016] EWCA Civ 541).

For cases in the IPEC, monetary relief (damages or an account of profits) is capped at £500,000 (unless the parties agree otherwise).

Declaratory relief

Declaratory and other forms of requested relief referred to above will be considered and awarded by the court following the finding of liability, usually in parallel with the finalising of the terms of any injunctive relief.

Relief following a finding of infringement or non-infringement

Following a finding of infringement, the court may award a declaration of infringement.

Following a claim (or counterclaim) for a declaration of non-infringement which succeeds on the merits, the court will usually order a declaration to that effect. However, if the claimant is not successful across the full scope of its asserted case, the court may decline to award a declaration. For example, in Actavis v Eli Lilly [2015] EWCA Civ 555, the Court of Appeal considered that non-infringement was established regarding section 60(1) of the Patents Act (direct infringement) but not regarding section 60(2) (contributory infringement), and declined to award the relief sought.

Relief following a finding of validity or invalidity

Following a finding that a patent is valid, the court may award a declaration of validity.

Following a finding that the patent is invalid, a declaration of invalidity and an order for revocation will be awarded, but will usually be stayed pending any appeal.

Where the finding of invalidity concerns some, but not all, claims of the patent, an application to amend the patent so as to delete the invalid claims will, in the normal course, be accepted; the Court's order will then be for the amendment of the patent. The court may also award a declaration of contested validity (which has some costs implications in any later proceedings challenging the validity of the same patent).

Fujifilm relief

In Fujifilm Kyowa Kirin Biologics ("FKB") v AbbVie [2017] EWHC 395 (Pat), the Patents Court awarded, in a landmark judgment, a novel type of declaratory relief: that the claimant's product itself (not a patent) was obvious or anticipated at a particular date. In this case the declaration was that the administration of FKB's proposed products in the treatment of a particular medical indication by a particular dosing regimen would have been obvious at a particular date. The relief was said to be available only in relation to the claimant's own product (or process) and not as against the world at large. The facts of the case were unusual, but the court concluded that granting such a declaration would serve a useful purpose in view of AbbVie's patent filing strategy, in particular AbbVie's strategy of abandoning its patents in favour of filing divisional patent applications which were incapable of challenge in the UK courts, and in light of public statements made about the strength of and intentions to enforce its patent portfolio.

Relief to the effect that a claimant's product or process was obvious at a relevant date is a developing area of the law.

Delivery up, destruction and other relief

Following a finding of liability for patent infringement or breach of confidence, the court may award delivery up or destruction of the infringing goods.

The court can also order a party to publicise the result of a case at its own expense.

Costs

The term "costs" in the CPR is generally considered to include court fees, the fees of legal representatives and other expenses (for example fees of expert witnesses) incurred in the course of, or preparation for, litigation.

Costs management - budgets

Claims issued in the Patents Court or wider Chancery Division with a value of less than £10 million are subject to CPR requirements regarding costs management, the purpose of which is that the court should manage both the steps to be taken and the costs to be incurred by the parties to any proceedings, so as to further the overriding objective.

The rules require the filing and exchange of draft costs budgets for the conduct of the action. The budgets estimate the costs of different phases of work up to and including trial, for example, pre-action costs, statements of case, case management, disclosure, witness statements, and expert reports. If the parties fail to agree each other's budgets, they will be reviewed by the court, which may require amendment of them before they are approved. The budgets reached will be reflected in a costs management order and the court will thereafter control the parties' budgets in respect of recoverable costs.

A costs management order enables the parties to know that, at the recovery stage, the approved budget costs are likely to be considered proportionate and consequently any excess costs are likely to be considered to be disproportionate (Kellie v Wheatley [2014] EWHC 2886 (TCC)). The budget is not a cap but a guideline which the court has power to depart from. It will only do so where it is satisfied that there is a good reason to do so taking into account all the circumstances of the case. Particular considerations include the function of the budget in ensuring that the costs incurred are proportionate and reasonable, and the value to the opposing party in understanding what is being done and what it is going to cost. Each phase of the budget is to be considered separately and it is not legitimate to combine two phases where one is overspent and the other is underspent. The rules do not intend that any distinction should be drawn between budgets which have been agreed and those which have been approved. (Sony v SSH [2016] EWHC 2985 (Pat)).

Any party which fails to file a budget despite being required to do so will be treated as having filed a budget comprising only the applicable court fees (unless the court orders otherwise).

Part 36 costs mechanism

The CPR provides, in Part 36, a mechanism intended to encourage the settlement of civil disputes by imposing costs consequences where a compliant offer is not bettered. The consequences depend upon if and when a compliant offer is made and accepted, or if it is not accepted, upon the outcome of the case at trial (or summary dismissal). The discussion below regarding costs recovery does not consider Part 36 consequences, but it should be noted that in some circumstances in which Part 36 is invoked, the IPEC costs caps can be exceeded.

Costs recovery

The IP Enforcement Directive requires Member States to ensure that "reasonable and proportionate legal costs and other expenses incurred by the successful party shall, as a general rule, be borne by the unsuccessful party, unless equity does not allow this".

The CJEU has ruled (United Video Properties v Telenet, Case 57/15) that, for these purposes:

  1. proportionality cannot be assessed independently of the costs that the successful party actually incurred in respect of the assistance of a lawyer, provided they are reasonable; and
  2. "reasonable" does not justify the imposition of a flat-rate significantly below the average rate actually charged for the services of a lawyer in IP litigation in that Member State.

Patents Court and Chancery Division

Pursuant to the CPR, Part 44, the court has discretion as to whether costs are payable by one party to another, the amount of those costs and when they are to be paid. Where the court makes an order about costs (which is usual following the substantive decision), the general rule is that the unsuccessful party is ordered to pay the costs of the successful party. However, in deciding what order to make about costs, the court will have regard to all the circumstances, including the conduct of all the parties, whether a party has succeeded on part of its case even if not wholly successful, and any admissible offer to settle made by a party which is drawn to the court's attention (and is not an offer to which costs consequences under Part 36 apply).

Where the parties fail to reach agreement regarding payment of costs and it falls to the court to assess the amount of costs payable, the usual basis for assessment is the 'standard' basis. Pursuant to the standard basis, the court will only allow costs which are considered to be proportionate to the matters in issue and to have been reasonably incurred, and will resolve any doubt in favour of the paying party. Typically, such assessment results in 60-70% recovery of a party's incurred legal costs. Where a costs management order has been made, in a costs assessment on the standard basis the court can be expected not to depart materially from the agreed or approved budgets (assuming the budgeted costs were reasonably incurred) without good reason.

The court also has discretion to award costs on an indemnity basis, pursuant to which proportionality is not a factor. The court will resolve any doubt as to reasonability in favour of the receiving party. This tends to result in a payable amount of costs 10-15% above the amount reached on the standard basis. Orders for indemnity costs are unusual; the sanction tends only to be applied where the conduct is considered 'unreasonable to a high degree', taking it out of the norm (Excelsior v Salisbury [2002] EWCA Civ 879, Kiam v MGN (No.2) [2002] EWCA Civ 66).

In the Patents Court, it is common for the court to consider (at the request of the paying party) whether the costs awarded to the overall winner in the litigation should be reduced to reflect issues on which that party was unsuccessful. The court considers whether any issue is suitably circumscribable, and if so, whether the overall winner should recover the costs of that issue, and whether the case is so exceptional that the overall winning party should pay the otherwise unsuccessful party's costs incurred in respect of that issue. Awards for issue-specific payments from the overall winner to the overall loser are unusual but do occur.

IPEC

In the IPEC, recoverable costs are capped for each stage of a claim (e.g. particulars of claim, defence and counterclaim, preparing witness statements, expert reports, disclosure and inspection, and experiments) and in total. The total cap up to determination of liability is £50,000; the total cap for an inquiry or account is £25,000. The total caps are reached only if each of the stage caps is reached, which is rare. In some circumstances in which Part 36 is invoked, the IPEC costs caps can be exceeded (see PPL v Hagan [2016] EWHC 3076 (IPEC).

Comptroller

In proceedings before the Comptroller, the Comptroller may, by order, award to any party such costs as he may consider reasonable (PA s.107). However, in practice, costs are awarded according to a standard scale intended to represent only a contribution towards the full expense, below the level recoverable in the IPEC. The costs of any appeal from a decision of the Comptroller to the court are governed by the CPR (Patents Rules 2007, TPN 4/2007 & 6/2008).

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.

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