Canada: The New Frontier For Global IP Litigation

2017 has been a banner year for IP litigation in Canada. A series of recent cases, from big trials to precedent-setting appeals before the Supreme Court, have garnered international attention from IP owners. With these decisions, changes in law, and improved court procedures for assisting litigants in getting to trial efficiently and in obtaining interlocutory remedies more quickly, Canada is proving to be an extremely attractive jurisdiction for the protection and enforcement of intellectual property rights.

Patents

In AstraZeneca v Apotex1, the Supreme Court of Canada abolished the controversial "promise of the patent" doctrine, under which patentees had to prove that the claimed invention was useful for any "promised" uses found in the specification. This judge-made doctrine had been invoked to invalidate numerous patents over the past decade, and even resulted in a trade dispute between Eli Lilly and Canada under NAFTA's investor-state arbitration regime2. For years, patentees have argued that the doctrine was arbitrary and inconsistent, often resulting in invalidation of patents that were upheld elsewhere. Finally, in June 2017, the Supreme Court unanimously abolished the doctrine, holding that patentees need only establish a "scintilla" of utility relating to the subject-matter of the invention. The decision was a victory for AstraZeneca (whose patent for its blockbuster gastrointestinal drug Nexium was declared valid), but also for patentees, as the Canadian standard of utility has now been brought closer to other jurisdictions in respect of applicable utility requirements for patentability.

AstraZeneca was successfully represented before the Supreme Court of Canada by  Gunars A Gaikis Yoon Kang and  Lynn Ing.

Copyright

In the case of Nintendo v King3, the Federal Court of Canada had occasion to consider and apply the technological protection measure (TPM) circumvention provisions in the Copyright Act, which had yet to be substantively interpreted since the provisions were enacted in 2012. The Court held that the defendants' sale and installation of mod chips and game copier devices which circumvented Nintendo's TPMs – thereby enabling users to play unauthorized copies of video games – constituted circumvention acts which were prohibited under the Copyright Act. The Court awarded Nintendo C$12.8 million in statutory damages, calculated based on the number of works which were protected by the TPMs. The decision sets a strong precedent, particularly for the protection of distribution of copyrighted content over proprietary platforms.

Mark Biernacki and  Kevin Siu acted as counsel on behalf of Nintendo of America Inc., the successful applicant.

Trademarks

In a recent high-profile case, Diageo v Heaven Hill4, Diageo was successful in asserting its Captain Morgan trademark and trade dress over its bottled rum against the defendant's Admiral Nelson's brand of rum products. The Court found that the famous Captain Morgan character had accrued significant goodwill in the marketplace, and that the defendant's use of a similar looking character and imagery (an admiral in front of a sailing ship) and a similarly shaped bottle and label constituted passing off even though the defendant's product prominently displayed the brand Admiral Nelson's. The Court also found that the defendant's marketing and sale of Admiral Nelson's brand of rum was an infringement of the plaintiff's registered trademarks for the Captain Morgan character and label, and that the defendant's actions resulted in deprecation of goodwill on those trademarks. This decision is a reminder of the benefits of trademark registrations in key character and label elements used on product packaging, and is the latest example of Canadian courts willing to protect trade dress and goodwill.

Diageo was successfully represented by  François Guay Mark  Evans Ekaterina Tsimberis and Renaud Garon Gendron.

Remedies

These substantive legal developments are bolstered by a recent string of decisions in which Canadian courts awarded substantial and effective remedies.

In Dow v Nova5, a record amount was awarded in a patent infringement lawsuit involving polymers used in heavy plastic bags, pallet wrapping and food packaging. Dow, the successful plaintiff, elected to recover the defendant's infringing profits as opposed to damages from lost sales, as is often permitted in IP matters in Canada. In this case, the Court also awarded an amount for infringing activity that took place after the publication of the patent application but in advance of the patent issuing, and an amount representing the springboard profits enjoyed by the defendant following expiry of the patent as a result of the defendant's infringing activity prior to expiry. After a reference on quantification, Dow was awarded C$645 million, including pre-judgment interest which was calculated based on a profits-on-profits approach.

Steven Garland Jeremy Want Colin Ingram Daniel Davies and  Kevin Graham acted as co-counsel on behalf of Dow.

Punitive damages are also available in IP litigation under the right circumstances. In the aforementioned Nintendo v King decision, the Court awarded $1 million in punitive damages against the corporate defendant based on the evidence of the scale of infringing activity and selfpromotion as the "#1" source for the circumvention devices, having regard to the need to deter this type of large scale commercial unlawful activity. In another recent case, Airbus Helicopters v Bell Helicopter6, a patent infringement case about helicopter landing gears, the Federal Court awarded $1 million in punitive damages based on "deliberate and outrageous" conduct of the defendant in wilfully infringing the plaintiff's patent. The punitive damage award was particularly notable because it tripled the total damages award (the Court having found that only C$500,000 should be awarded as compensatory damages based on a hypothetical royalty between the parties).

Injunctive relief has also been an effective tool to stop infringing activities based in Canada in a variety of recent cases. For example, in Bell Canada v ITVBox.net et al7, the Court granted an interlocutory injunction against the defendants, who were in the business of selling set-top boxes preloaded with software designed to access illegal streams of television programmes from the internet. The Court commented that the emerging and new technology used to violate copyright law was no barrier to obtaining an injunction against those who participate in infringing activities. The decision may be a signal that courts are ready to employ interlocutory relief more readily than in the past.

Bell Canada was successfully represented by  François Guay and  Guillaume Lavoie Ste-Marie.

The Supreme Court of Canada also recently weighed in on global injunctions against search engines. In Google v Equustek8, a Canadian technology company, Equustek Solutions, initially brought an action against a competitor, Datalink, who allegedly sold re-labelled Equustek products and appropriated its trade secrets. Datalink carried on business over the internet, largely outside of Canada. Equustek sought an injunction against Google to remove all search entries for Datalink. Google voluntarily de-indexed a number of Datalink's website entries, but only on its Canadian search portal on Google.ca. Not content with this outcome, however, Equustek sought an interlocutory injunction against Google to remove all of Datalink's search results worldwide. The Supreme Court upheld the global interlocutory injunction granted by the lower courts, opining that because the "Internet has no borders", the only effective remedy to attain the objective of the injunction was to apply it globally, where Google operated.

The Google decision raises interesting questions of jurisdiction and enforcement. Indeed, Google has brought a further lawsuit before a US District Court seeking a declaration that the Supreme Court of Canada decision cannot be enforced in the United States.

Benefits of litigating in Canada

Litigating in Canada can be fast, effective and of strategic importance to IP owners. In addition to the recent legal developments described above, several features of the court system make Canada an attractive jurisdiction to commence proceedings.

  1. Effective remedies. As noted above, plaintiffs have access to a variety of flexible remedies including damages, disgorgement of profits, punitive damages, and permanent/interlocutory injunctive relief.
  2. Costs to the victor. Canada is a loser-pays jurisdiction, meaning that a successful party is entitled to a percentage of the costs of lawyers' fees and full reimbursement for all reasonable disbursements (such as expert fees). In complex IP litigation, parties have received substantial costs awards– for example, in the Dow v Nova decision described above, the Court awarded $6.5 million to Dow for the costs of its successful patent infringement action.
  3. No forum shopping. In Canada, IP litigation such as patent and trade mark infringement actions are typically conducted in the Federal Court, which has exclusive jurisdiction over validity of patents and trade mark registrations. This generally means that parties will not spend significant time on disputes over forum or jurisdictional shopping issues (a matter that may be of great interest to US litigants following the Supreme Court decision in TC Heartland v Kraft Foods).
  4. No file wrapper estoppel for patent actions. Unlike the US, there is no doctrine of file wrapper estoppel in Canada. Courts have consistently refused the use of prosecution history and other extrinsic evidence to interpret patent claims.
  5. Quick and cost-effective procedures available. Canadian courts have recognised the need for timely adjudication of claims by civil litigants. Courts have been encouraged to adopt rules and procedures to facilitate quick resolution9. In the Federal Court, where most IP litigation occurs, there are numerous ways to achieve a speedy result. If discovery of the defendant is not necessary, a plaintiff can proceed by way of application using affidavit evidence, instead of the usual viva voce testimony in the case of full actions. Litigants may also seek to pursue summary trials where the number of disputed issues are limited. Summary judgment is also available where there is no genuine issue to be decided at trial. Finally, the Federal Court has implemented proactive case management guidelines for IP litigation resulting in faster adjudication of interlocutory and procedural matters. With full use of these tools, litigants can readily reach a hearing on the merits within two years
  6. No jury trials. Also unlike the US, IP litigation in the Federal Court does not feature jury trials. Instead, complex issues of infringement, including in the patent context, are decided by a trial judge alone.
  7. More focused, less expensive, discovery. Pursuant to the Federal Court Rules, only the attendance of a single corporate representative for each party for oral discovery is required (though inventors may also be deposed). Unlike in the US, there is no requirement for the fact deposition of numerous individuals during the discovery process. As a result, discovery is relatively less expensive. Recent case management guidelines from the Federal Court also limit the amount of time that can be allotted for discovery, thereby incentivising parties to focus on the important issues.

The landscape for Canadian IP litigation has changed dramatically and Canada has evolved into an extremely attractive jurisdiction for litigation with effective remedies for IP enforcement. Global IP owners should consider the strategic value and importance of litigation in Canada, especially given its close economic relationship and strong trade position with the US.

[This article originally appeared in Managing Intellectual Property, September 2017]

Footnotes

1 AstraZeneca Canada Inc v Apotex Inc, 2017 SCC 37.

2 Eli Lilly and Co v Government of Canada, ICSID Case No UNCT/14/2.

3 Nintendo of America Inc v King et al, 2017 FC 246.

4 Diageo Canada Inc v Heaven Hill Distilleries Inc et al, 2017 FC 571.

5 The Dow Chemical Co v Nova Chemicals Corp, 2017 FC 350, further reasons at 2017 FC 637, appeal pending.

6 Airbus Helicopters SAS v Bell Helicopter Textron Canada Limitée, 2017 FC 170, appeal pending.

7 Bell Canada v 1326030 Ontario Inc dba ITVBox.net et al, 2016 FC 612, aff'd 2017 FCA 55.

8 Google Inc v Equustek Solutions Inc, 2017 SCC 34.

9 Hryniak v Mauldin, 2014 SCC 7.

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

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