Canada: That's A Wrap: Springboard Profits, Full Cost Accounting, And More From The Federal Court In Dow v. Nova

Last Updated: May 18 2017
Article by James Green and Laurent Massam

Most Read Contributor in Canada, October 2018

In a recent decision (Dow Chemical Co. v. Nova Chemicals Corp, 2017 FC 350) the Federal Court has addressed an assortment of issues that can arise when calculating and quantifying financial remedies in intellectual property infringement cases.

This decision follows a 2014 decision in which a patentee, Dow, succeeded in claims of patent infringement against Nova. The patent, concerning compositions of film-grade polyethylene polymers used in consumer goods such as food wrap and garbage bags, had been found to be valid and infringed by the manufacture and sale of certain of Nova's products.

Like many complex intellectual property cases before the Federal Court in recent years, the present case was "bifurcated", meaning that the 2014 decision only addressed liability for infringement. The goal of bifurcation is to conserve the resources of the parties and the Court and advance proceedings to trial more efficiently. In a bifurcated case, any issues related to the quantification of financial remedies (whether through discovery, expert evidence, and trial) are only dealt with when, and if, the Court first finds liability for infringement.

In this case, the Court was required to address quantification issues related to two distinct categories of remedies: (1) "reasonable compensation" for the patentee's "pre-grant" damages sustained for the period between the date the patent application was first published and the date the patent was granted; and (2) damages, or alternatively, an accounting of the infringer's profits, with respect to all infringing activity occurring after the date the patent was granted.

Pre-grant "reasonable compensation"

With respect to pre-grant "reasonable compensation", the Court followed the approach adopted by the Federal Court in prior cases and found that Dow was entitled to a reasonable royalty based on a hypothetical negotiation between a willing licensor and a willing licensee for the use of the patented technology.

After considering the evidence of economic experts put forward by the parties on the issue, the Court concluded that the appropriate royalty rate would be 8.8%.

Application of the "full cost" accounting approach

With respect to the post-grant period, Dow elected to receive an accounting of profits.

In Canada, an accounting of profits is an equitable remedy which is restitutionary in nature and not intended to be punitive. In an accounting, the objective is simply to restore the infringer to the position that he would have been in had he not infringed. This is done by stripping away only those profits which he has earned which are causally attributable to the infringing use of the patented technology.

In an accounting, the patentee bears the onus to prove revenues earned from the infringement. The onus then shifts to the defendant to prove any costs to be deducted from revenues to arrive at the quantum of profits to be disgorged.

In Canada there are several recognized methods of conducting an accounting, the choice of which determines the allowable deductions from revenues. These methods are: the "differential profits" approach (where the profits disgorged are those earned from infringement less the profits that would have been earned by a non-infringing alternative); the "incremental cost" approach (where the profits disgorged are the revenues less any variable costs and any increased fixed or capital costs attributable to the invention); and the "full cost" approach (where the profits disgorged are the revenues less applicable variable, incremental fixed costs, and a proportion of certain non-incremental fixed and capital costs).

In prior decisions Courts have described the "differential profits" method as the "preferred approach". At the same time, Courts have cast doubt on the use "full cost" approach. In this case, however, the Court found that the availability of the "full cost" method was "not foreclosed" in the appropriate circumstances.

Here, the Court found that there were no direct non-infringing alternatives meaning the "differential profits" approach was unavailable. The Court also found that incremental costs were negligible, and so in the circumstances, the "incremental costs" approach would produce an inequitable and punitive result.

In deciding that the "full cost" method was most appropriate, the Court found that if Nova had not manufactured the infringing products it would have used its manufacturing capacity to make alternative products. The Court therefore determined that Nova was permitted to deduct a proportion of certain fixed and capital costs from its revenues.

Availability of "springboard profits"

Another issue for the Court was whether the patentee was entitled to recover "springboard profits" as part of the accounting.

It is well-established that "springboard damages" can be awarded in the damages context to compensate a patentee after the expiry of the patent which have been caused by the infringer's accelerated market entry and capture of market share made possible by infringement.

Until now, it was unsettled in Canada whether analogous "springboard profits" were available where a patentee had elected an accounting rather than damages.

Here the Court concluded that there was no reason why "springboard" principles should operate differently where the patentee elects to receive an accounting of profits: if it can be proven that the infringer actually received a "springboard" advantage, the profits earned from that advantage should be disgorged.

Based on the evidence in this case, the Court found that it would indeed have taken Nova "some time" to overcome the long-established presence of the patentee's products in the market, and ramp up its sales to the levels it enjoyed after the expiry of the patent. On this basis the Court determined that the accounting should include a "springboard" period of approximately 20 months following expiry of the patent.

Accounting for infringing products not explicitly addressed during liability trial

Another unusual feature of the case was the fact that the patentee sought to include in the accounting profits earned from other product variants not explicitly addressed during the liability proceeding.

Importantly, it was conceded that these other products would have been found to be infringing if they had been specifically dealt with. Nonetheless, various technical arguments were raised as to why they could not be now considered at the quantification stage.

The Court determined that even if not explicitly addressed at the liability stage, the disputed products had been encompassed by the broad language of the liability judgment. In so doing, the Court cited the risk of "never-ending litigation" if the patentee was required to bring separate claims to establish liability for other admittedly infringing product variants.

Currency conversion

A final wrinkle to the calculation of financial remedies in this case was the fact that the infringer's profits were mostly realized in US dollars. However, because Canadian courts must award monetary relief in Canadian dollars, the profits earned in U.S. currency had to be converted into Canadian currency.

The parties disputed the appropriate exchange rate to be applied. That is, whether the profits should be converted according to the exchange rate in effect when the profits were actually earned between 2004 and 2014, or instead converted based on the exchange rate in place as of the date of the Court's judgment.

The Court found that the profits had not only been earned in U.S. dollars but in fact primarily retained in U.S. currency since being earned. Accordingly, the Court determined that the exchange rate to be applied would be as of the date of the Court's judgment.


Subject to the outcome of any appeal, the next stage will be for the parties' accountants to actually calculate the sums owed based on this decision.

Overall, the decision provides clarification about the Federal Court's approach to a diverse range of issues which can arise in accounting of profits cases. Moreover, the decision is the latest demonstration of the Federal Court's willingness to consider flexible approaches to procedural and substantive issues to enable just and expeditious outcomes.

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
Smart & Biggar/Fetherstonhaugh
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Smart & Biggar/Fetherstonhaugh
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