Canada: Patent Litigation Comparative Guide

1 Legal framework

1.1 Which laws and regulations govern patent litigation in your jurisdiction?

The Patent Act, a federal statute, governs patent law in Canada. This aligns with Canada's Constitution Act, which provides the federal government with jurisdiction over "patents of invention and discovery".

Additionally, a large portion of Canada's patent litigation is filed under the Patented Medicines (Notice of Compliance) Regulations. These regulations were made under the Patent Act and work to link the Patent Act to the Food and Drugs Act, in order to address the interplay between Canada's patent regime and the country's pharmaceutical regulatory regime.

With respect to procedural aspects of patent litigation, the Federal Courts Act and the Federal Courts Rules govern all patent actions brought forward in the Federal Court of Canada, which is the court in which the vast majority of patent disputes in Canada are litigated.

1.2 Which bilateral and multilateral agreements with relevance to patent litigation have effect in your jurisdiction?

With respect to patent litigation specifically, there are no such agreements. However, Canada is a member of several international treaties and conventions that affect patent law. These agreements generally set out specific standards and rules that assist in harmonising administrative procedures for patents around the globe.

Specifically, Canada is a member of:

• the World Trade Organization's multilateral Agreement on Trade-Related Aspects of Intellectual Property Rights; and
• both the World Intellectual Property Organization's (WIPO) Paris Convention and Hague International Design System Agreement.

These agreements all pertain to IP law generally.

With regard to patents in particular, Canada is a member of:

• the Budapest Treaty on the International Recognition of the Deposit of Microorganisms for the Purposes of Patent Procedure;
• the Patent Cooperation Treaty;
• the Strasbourg Agreement Concerning International Patent Classification; and
• the Union for the Protection of New Varieties of Plants Convention.

Most recently, Canada became a member of the Patent Law Treaty with WIPO.

1.3 Which courts and/or agencies are responsible for interpreting and enforcing the patent laws? What is the framework for doing so?

The Canadian Intellectual Property Office (CIPO), the provincial superior courts and the Federal Court of Canada are responsible for interpreting and enforcing patent law in Canada. Each of these bodies holds different responsibilities and roles in patent interpretation and enforcement.

First, patent applicants must apply to CIPO for a patent over their invention to gain any enforceable rights by way of a granted patent. CIPO is responsible for examining patent applications and determining whether the proposed invention is patentable subject matter as prescribed under the Patent Act: namely, the invention must:

• be novel, useful, and non-obvious; and
• meet subject-matter eligibility requirements.

If CIPO grants the patent, the patentee gains the exclusive rights to make, construct, use and sell the claimed invention, as well as the right to license its patent rights. If CIPO rejects a patent application, the applicant may appeal the decision to CIPO's internal Patent Appeal Board. The applicant can also bring further appeals to the Federal Court.

In terms of enforcing patent rights, the Federal Court is responsible for hearing the vast majority of patent infringement litigation and has exclusive jurisdiction over matters of impeachment (validity) and amendments to CIPO's patent records. The provincial superior courts may also hear infringement matters but are seldom used for patent litigation in Canada and may not declare patents to be invalid. Most enforcement cases are brought before the Federal Court, as this is the most favourable court in terms of subject-matter expertise and procedural rules/practices.

Once the Federal Court has decided a case, the losing party has the right to appeal the decision to the Federal Court of Appeal. The Supreme Court of Canada may hear any further appeal from the Federal Court of Appeal if leave to appeal is granted.

2 Forum

2.1 In what forum(s) is patent litigation heard in your jurisdiction? Are patent infringement and validity decided in the same forum or separate forums?

In Canada, patent litigation regarding infringement and validity is most frequently heard by the Federal Court, although infringement proceedings may also be brought before a provincial superior court. While the provincial superior courts may hear patent infringement actions, only the Federal Court can declare a patent invalid on an in rem basis.

With respect to validity-specific proceedings such as re-examinations, these may be brought before the Canadian Intellectual Property Office after the grant of a patent.

2.2 Who hears and decides patent disputes (eg, a judge, a panel and/or a jury)?

One judge sitting alone hears each patent trial in the Federal Court. Although any judge of the Federal Court may hear a patent dispute, it is typical for those judges with experience in IP law to hear the majority of patent cases. Indeed, the Federal Court maintains a roster of judges who specialise in IP disputes.

If either party appeals the Federal Court decision, a three-judge panel at the Federal Court of appeal will hear the appeal. The nine-judge bench of the Supreme Court of Canada will hear any further appeals from the Federal Court of Appeal (if leave is granted).

2.3 Are there any opportunities for forum shopping in your jurisdiction? If so, where and how do those opportunities exist?

While the Federal Court and the provincial superior courts have concurrent jurisdiction over patent infringement proceedings, the Federal Court is seen as the most favourable court in terms of subject-matter expertise and procedural rules/practices, so the vast majority of patentees choose to litigate in the Federal Court. The Federal Court has offices and courtrooms across the country, so there is no ability to 'forum shop' within the Federal Court.

3 Parties

3.1 Who has standing to file suit for patent infringement? What requirements and restrictions apply in this regard?

In Canada, the patentee and all persons claiming under the patentee can bring an infringement action.

Under the Patent Act, the patentee is the person entitled to the benefit of the patent, (ie, the owner). If there are multiple patentees, any one or more of the patentees can bring the infringement action.

Canadian courts have broadly interpreted this to generally include exclusive and non-exclusive licensees of the patent. These licensees need not have their licences registered with the Canadian Intellectual Property Office to pursue an infringement action. In situations where a person claiming under the patentee sues for infringement, the patentee must be made a party to the action.

3.2 Can a patent infringement suit be brought against a defendant who is a foreign entity with only a residence or place of business outside the jurisdiction?

Canadian patents have a national scope of protection. Thus, if the infringement occurs within Canada, the patentee (or a person claiming under the patentee) may bring an action against any party (including a foreign defendant) that:

• has engaged in such infringement in Canada; or
• either inside or outside of Canada, has induced a third party to engage in such infringement in Canada.

3.3 Can a single infringement action be brought against multiple defendants? What requirements and restrictions apply in this regard?

Generally, a patentee is free to name as many defendants as it wishes, provided that there are material facts to allege that such defendants either directly infringed a patent or induced a third party to infringe.

Where two or more defendants act in concert to defeat a plaintiff's patent rights, the plaintiff may claim joint tortfeasorship (ie, joint infringement) or 'common design infringement' as against those defendants.

Thus, Canadian patent enforcement laws protect against both direct and indirect infringement. With respect to inducing infringement, there are three requirements to establish this:

• There has been an act of infringement by a direct infringer;
• The act of infringement was influenced by the 'inducer' to the point where, without its influence, infringement by the direct infringer would not have taken place; and
• The 'inducer' knowingly exercised the influence (ie, it knew that influence was being exercised – not that the result of the influence would be an act of infringement).

Therefore, a patentee plaintiff may take action against one or both of an inducing party and a directly infringing party. A patentee plaintiff may also take action against multiple parties where those infringing parties are the buyer, seller and/or user of the patented product. Cases have proceeded in which separate companies – each alleged to be infringing the same patent in substantially the same way – have all been named as defendants in the same action. Additionally, parties may move for separate actions to be consolidated and heard together where the infringement has occurred in a substantially similar way for the same patented product.

One possible limitation to permitting a patentee to name multiple defendants is if having multiple parties in a single proceeding:

• would cause undue complication or delay; or
• would prejudice a party.

3.4 Can a third party seek a declaration of non-infringement or invalidity in your jurisdiction? If so, how?

Yes, a patent proceeding may be commenced by a third party:

• seeking to impeach (ie, invalidate) a patent; or
• seeking a declaration regarding non-infringement of a proposed product or process where there is reasonable cause to believe that a patentee may assert infringement.

For an impeachment (invalidity) action to proceed, the third party must be an 'interested person' in the matter. The threshold for qualifying as an 'interested person' is low. Generally, a party engaged in the design and manufacture of similar products and a trader in articles similar to the alleged invention has sufficient interest. In addition, if a person is interested in using anything described in a patent which that person has reason to believe is invalid, that the person has sufficient interest to bring an impeachment action. No notice or threat of infringement from the patentee is required.

4 Patent infringement

4.1 What constitutes patent infringement in your jurisdiction?

Every patent issued under the Patent Act grants the patentee "the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used" for the term of the patent. Anyone that encroaches on these exclusive rights infringes the patent.

4.2 How is infringement determined?

To determine whether a person is encroaching on the patentee's exclusive rights and is thus infringing a patent, the patent claims must first be construed to determine their scope. In particular, the claims are given a 'purposive' construction. Purposive construction involves determining which claim elements are essential and which are non-essential.

Once the claims have been construed, the allegedly infringing product or process can be considered. If an essential element is substituted or omitted, there is no infringement. Non-essential elements may be substituted or omitted and there may still be infringement. The infringement analysis boils down to three questions:

• Does the defendant's device omit or vary an element of a claim, and does this omission or variation have a material effect on the way the product works? If yes, then the variant is outside the claim. If no, then:
• Would the fact that the variant has no material effect on the way the product works have been obvious at the date of publication of the patent to a reader skilled in the art? If no, then the variant is outside the claim. If yes, then:
• Would the reader skilled in the art nevertheless have understood from the language of the claim that the patentee intended that strict compliance with the primary meaning was an essential requirement of the product? If yes, then the variant is outside the claim.

Under Canadian patent law, there is also a presumption in the Patent Act whereby if a person is selling a product that is the same as a product obtained by a patented process, that person is presumed to have infringed the patented process.

In addition, the Saccharin doctrine is applicable in Canada. This doctrine provides that a person infringes a patent where it imports into Canada a product made by a process that is protected by a patent in Canada.

4.3 Does your jurisdiction apply the doctrine of equivalents?

No. Unlike the approach in the United States, where both literal infringement and infringement under the doctrine of equivalents are considered, infringement in Canada is decided based on a single, purposive construction of the claims.

4.4 Is wilful infringement recognised? If so, what is the applicable standard?

Wilful infringement is not explicitly recognised in Canada's Patent Act. However, wilful infringement may influence the remedies granted to the patentee. In rare circumstances in which infringement is found to be not only wilful, but also associated with egregious and reprehensible conduct, punitive damages may be awarded in addition to damages for patent infringement.

5 Bringing a claim

5.1 What measures can a patent holder take to enforce its rights in your jurisdiction? Are interim measures available before receiving a ruling on the merits?

A Canadian patentee can enforce its rights through a civil proceeding: namely, an action for patent infringement. A patentee can bring the action in either the Federal Court or the relevant provincial superior court.

A patentee cannot seek criminal enforcement of its patent rights under the Patent Act.

Interim measures for patent enforcement in Canada are limited. A pre-judgment remedy of a preliminary injunction is possible, but is difficult to obtain. In particular, a preliminary injunction will not be granted unless the requesting party can establish, among other things, irreparable harm – that is, the requesting party must show that it stands to suffer harm that cannot be compensated or quantified. The difficulty for patentees seeking preliminary injunctions is that harm due to patent infringement typically can be compensated or quantified. A court may find irreparable harm, but generally only in cases where:

• a defendant will be unable to compensate a plaintiff (eg, an insolvent defendant);
• a plaintiff will go out of business; or
• the harm is incalculable.

5.2 What is the limitation period for patent infringement in your jurisdiction?

There is a six-year limitation period for patent infringement actions. Therefore, where an alleged act of infringement occurs more than six years before the date on which the court action commences, an infringer will not be liable for that act.

5.3 Must the alleged infringer be notified in advance before a claim is brought?

There is no requirement to provide notice to an alleged infringer before commencing patent infringement proceedings. However, cease and desist letters are often sent in an attempt to resolve a matter without litigation.

5.4 What are the procedural and substantive requirements for bringing a claim for patent infringement? How much detail must be presented in the complaint?

A patent infringement claim follows the standard procedural rules of the court in which the proceeding is brought. If the infringement claim is brought in a provincial superior court, the respective provincial Rules of Civil Procedure will apply. Similarly, if the infringement claim is brought in the Federal Court of Canada, the Federal Courts Rules will apply. Generally, the steps of a patent infringement claim include:

• pleadings (including the statement of claim and statement of defence);
• documentary and oral discovery;
• the exchange of expert reports; and
• trial.

In bringing a claim for patent infringement, there is no requirement for a plaintiff to have actual, physical evidence of patent infringement before commencing litigation. A plaintiff must only plead with particularity the material facts it alleges make the defendant liable for patent infringement. Of course, it is always prudent for a plaintiff to gather as much evidence of infringement as possible before commencing litigation:

• to assess the merits of its case; and
• to preserve the evidence for later use during the discovery process and at trial.

The burden of proof will be on the plaintiff to prove infringement on the balance of probabilities standard.

5.5 Are interim remedies available in patent litigation in your jurisdiction? If so, how are they obtained and what form do they take?

See question 5.1.

5.6 Under what circumstances must security for costs and/or damages incurred by the other party be provided?

Damages: Damages are available to a successful plaintiff patentee. Generally, damages are meant to be compensatory: they are intended to place the aggrieved party in the position it would have been in but for the wrongdoing. Quantification of damages occurs during the main trial on infringement and validity if the action has not been bifurcated. If the action has been bifurcated, a separate trial will be held just for damages quantification for the successful plaintiff patentee; though most often, a judgment on infringement and validity that is in favour of the plaintiff patentee will lead to a negotiated settlement on compensation.

Where patent infringement has been established, the infringer "is liable to the patentee and to all persons claiming under the patentee for all damage sustained by the patentee or by any such person, after the grant of the patent, by reason of the infringement". Such "persons claiming under the patentee" comprise exclusive licensees, non-exclusive licensees, sole licensees and purchasers and lessees of the patented product. A party need only establish that it has rights under the patent in order to qualify as such a person. Typically, damages take the form of:

• lost profits of a patentee or licensee with respect to the sales that the patentee or licensee would have captured but for the presence of the infringer on the market; and
• a reasonable royalty for sales that the patentee or licensee cannot prove it would have captured.

The right to elect between damages and an accounting of profits rests with the patentee, not the infringer; although this election is subject to the court's discretion in relation to entitlement (or lack thereof) to equitable remedies.

In 2015, the Federal Court of Appeal opened the door to considering non-infringing alternatives (NIAs) when calculating a patentee's damages for infringement. The court described the test as a "could and would" requirement, whereby the infringing party would be required to prove that it both could and would have used an NIA before such a consideration is taken into account in assessing damages. A legitimate NIA must be non-infringing and must be "objectively and economically viable substitute at the relevant time".

Accounting of an infringer's profits: Instead of (not in addition to) claiming damages, a successful patentee may elect for an accounting of the infringer's profits. Although there is a statutory reference to the concept of an accounting of profits, this is an equitable remedy that requires the court to exercise discretion. To invoke the court's equitable powers, the patentee must come to the court with 'clean hands' – that is, it must not have acted in bad faith or unethically with respect to the matters in dispute; although the patentee need not have lived a blameless life either. An accounting of profits is calculated based on a differential profit approach – that is, the infringer's profits attributable to the invention are compared to the infringer's profits assuming the best non-infringing alternative was used. In Monsanto v Schmeiser, the patentee established patent infringement and elected an accounting of profits. Because it was found that the infringer made no profits as a result of the invention, the patentee was not awarded any monetary compensation. In Nova Chemicals Corp v Dow Chemical Co, the patentee was awarded approximately C$650 million. In that case, the Supreme Court of Canada clarified that under the differential profit approach, the court is to determine whether there is a suitable NIA; and if there is, the profits not causally attributable to the patented invention (ie, the profits arising from the NIA) are subtracted from the infringer's overall profits.

Reasonable compensation for pre-grant infringement: In addition to recovering either damages or infringer's profits, the infringer is liable to pay reasonable compensation to the patentee and to all persons claiming under the patentee for any act by the infringer, which occurred between the date of publication of the application for the patent and the date of grant of the patent, which would have constituted patent infringement if the patent had been granted on the date of publication. 'Reasonable compensation' in this regard is akin to a reasonable royalty.

Costs and security for costs: In Canada, awards of costs are frequently granted in favour of the successful party. Such costs awards usually amount to:

• roughly 20% to 30% of a party's actual legal (attorneys') fees; and
• all of a party's actual (subject to reasonableness) disbursements (including experts' fees).

The portion (20% to 30%) related to a party's actual legal fees can be doubled by the court where the successful party serves an offer to settle that the party eventually 'beats'; but the doubling is limited to legal fees beginning from the date of the offer to settle.

In addition to costs being awarded to the successful party at the conclusion of litigation, plaintiffs must post security for costs if:

• they are foreign based; or
• they have insufficient assets in Canada to satisfy any eventual award of costs against them.

Typically, security is posted by a plaintiff paying cash into court. Amounts may vary significantly depending on the complexity of a case and will range from an initial amount in the low five-figure range to an amount covering the entirety of the litigation that is in the mid-to-high six-figure range.

6 Disclosure and privilege

6.1 What rules on disclosure apply in your jurisdiction? Do any exceptions apply?

In Canada, a party is required to disclose all relevant documents. These include:

• all documents that a party may rely on; and
• all documents that may adversely affect the party (eg, documents that may assist the opposing party).

An important exception to the requirement to disclose relevant documents relates to privilege. Parties must disclose the existence of privileged documents or bundles thereof, but they are not required to disclose copies of the documents themselves.

Confidential documents are routinely disclosed in Canada, and their disclosure may be protected by way of a protective order (ie, an order governing confidentiality as between the parties) and/or a confidentiality order (ie, an order governing treatment of materials by the court). Confidentiality restrictions under either order may be:

• limited (eg, no public or third-party disclosure is permitted); or
• restrictive (eg, documents may only be disclosed to opposing counsel and independent experts).

Documents and information obtained in the process of discovery in a civil action may only be used by the party to which they are given for the purposes of the action. The contents of these documents and other information are not to be disclosed or otherwise made use of for any purpose other than the litigation unless and until it is produced in evidence and becomes part of the public record. This principle is known as the implied undertaking rule.

6.2 What rules on third-party disclosure apply in your jurisdiction? Do any exceptions apply?

While available, oral and documentary discovery of third parties in Canada is quite limited. Typically, a third party will only participate in discovery and disclosure by order of the court or on consent of the parties. The plaintiff claiming infringement may also be able to obtain discovery of a third party prior to litigation through a Norwich order. Parties seeking third-party discovery are expected to exhaustively attempt to obtain the evidence sought before coming before the court to seek an order compelling third-party discovery.

6.3 What rules on privilege apply in your jurisdiction? Do any exceptions apply?

There are three primary types of privilege available in Canada:

• solicitor-client privilege;
• litigation privilege; and
• settlement privilege.

Exceptions to privilege apply quite narrowly and typically only where maintaining privilege goes against public interest and safety. Such exceptions are more common in criminal cases than in a civil case such as patent litigation.

Solicitor-client privilege: Solicitor-client privilege protects from disclosure communications between a solicitor and their client where the client seeks legal advice. It is an example of a class privilege, which warrants a prima facie presumption of inadmissibility. The prima facie protection for solicitor-client communications is based on the fact that the relationship and the communications between solicitor and client are essential to the effective operation of the legal system.

Solicitor-client privilege can be waived. Waiver of solicitor-client privilege is established when it is demonstrated that the possessor of the privilege knows of the existence of the privilege and voluntarily shows an intention to waive it. Solicitor-client privilege can also be waived by implication.

Litigation privilege: Litigation privilege gives rise to an immunity from disclosure for documents and communications whose dominant purpose is preparation for litigation. The purpose of litigation privilege is to ensure the efficacy of the adversarial process, while the purpose of solicitor-client privilege is to protect a relationship. Litigation privilege is temporary and lapses when the litigation ends; while solicitor-client privilege is permanent. Litigation privilege applies to unrepresented parties, even where there is no need to protect access to legal services. Litigation privilege applies to non-confidential documents and is not directed at communications between solicitors and clients like solicitor-client privilege.

Settlement privilege: Settlement privilege is a type of privilege that protects communications between parties engaged in without prejudice settlement discussions. The purpose of the privilege is to encourage parties to compromise and make concessions in an effort to settle their disputes without being concerned that their compromises or concessions will be held against them in litigation. Settlement privilege ends once litigation has concluded. In this regard, a party may refer to settlement communications during submissions on costs before the court after judgment in order to argue that it should receive an elevated costs award due to earlier offers made by not accepted by the opposing party.

7 Evidence

7.1 What procedure(s) exist for collecting and presenting evidence in patent infringement litigation?

Collecting evidence: In Canada, the parties to patent infringement litigation obtain and disclose evidence – including documents and information – through both documentary and oral discovery. The discovery phase follows immediately after the pleadings phase. The discovery phase begins with each party:

• searching for relevant documents;
• listing those documents in an affidavit of documents; and
• serving that affidavit on every other party.

Following the exchange of affidavits of documents, each party is entitled to examine each opposing party in an examination for discovery. Each party is only required to make available one witness to testify on behalf of the party. Where that witness does not know the answer to a question, the party may review its records and information and provide an answer at a later date. A further examination may be required to follow up on any answers delivered following the first examination. In addition, where a patent has been assigned, the assignor – such as an inventor – may be discovered separately. However, answers given by an inventor during an examination for discovery may not be 'read in' at trial, unless the inventor was the appointed representative of a party.

Presenting evidence: At the commencement of a trial in the Federal Court, unless the court directs otherwise, the plaintiff will be first to make an opening submission and to adduce its evidence. When the plaintiff's evidence is concluded, the defendant then makes an opening submission (if it did not do one previously) and then adduce its evidence. When the defendant's evidence is concluded, the plaintiff may adduce reply evidence. Where the court has made an order permitting two or more plaintiffs to put in separate cases, or where more than one defendant is separately represented, the order of presentation shall be as directed by the court.

Unless the court directs otherwise, the parties will be heard in argument, after all parties have been given full opportunity to put in their respective cases, in the order in which they adduced evidence. The parties have a right of reply to the arguments of adverse parties and, if the party raises a new point of law, an adverse party may answer on that point.

The court may give directions at trial concerning the method of proving a fact or of adducing evidence. All witnesses should testify under oath. Unless the court orders otherwise, witnesses at trial are examined orally and in open court. All exhibits adduced in evidence are marked and numbered.

A party may introduce as its own evidence at trial any part of its examination for discovery of an adverse party or of a person examined on behalf of an adverse party, whether or not the adverse party or person has already testified. A party may use any part of its examination for discovery of a person as evidence to impeach the credibility of that person as a witness at trial only if the party first puts to the person the questions asked in that part of the examination.

Unless the court orders otherwise, no expert witness evidence is admissible at trial unless:

• the issue addressed by the expert has been defined by the pleadings or in an order made about the conduct of the action;
• an affidavit or statement of the expert has been properly served; and
• the expert is available at the trial for cross-examination.

Unless the court orders otherwise, the evidence in chief of an expert witness may be tendered at trial by the witness:

• reading into evidence all or part of an affidavit or statement; and
• explaining any of the content of an affidavit or statement that has been read into evidence.

7.2 What types of evidence are permissible in your jurisdiction? Is expert evidence accepted?

Both fact evidence and expert evidence are permissible in Canadian patent infringement litigation. Expert evidence must first be provided by way of a written report, followed by the expert being tendered at trial for examination, including cross-examination. Fact evidence may be tendered by way of:

• fact witnesses (oral testimony);
• read-ins from discovery; and
• agreed-upon facts of documents.

7.3 What are the applicable standards of proof?

The standard of proof with respect to issues of patent infringement and invalidity is the balance of probabilities.

7.4 On whom does the burden of proof rest?

The burden of proof to demonstrate infringement rests on the plaintiff patentee (ie, the party claiming infringement). The burden of proof to demonstrate invalidity rests on the defendant accused infringer (ie, the party claiming invalidity).

8 Claim construction

8.1 Is there a procedure for construing claims during a patent infringement action? If so, when and how is it performed?

Claim construction is a question of law in Canada. Claims are construed by the trial judge at trial. In limited cases, a party bring a motion for summary judgment or summary trial, during which the presiding judge may be required to construe any claims at issue.

Claims must be construed purposively. There is a two-step process to construing the claims. The first step is to identify the person of ordinary skill in the art and such person's common general knowledge as of the date of publication of the patent application. The next step is to determine the essential and non-essential elements of the claims from the viewpoint of such person of ordinary skill in the art. For an element to be considered non-essential and thus substitutable, it must be shown either that:

• on a purposive construction of the words of the claim it was clearly not intended to be essential; or
• at the date of publication of the patent, the skilled addressee would have appreciated that a particular element could be substituted without affecting the working of the invention – in other words, had the skilled worker at that time been told of both the element specified in the claim and a variant and asked whether the variant would obviously work in the same way, the answer would be yes. In this context, 'work in the same way' means that the variant would perform substantially the same function in substantially the same way to obtain substantially the same result.

8.2 What is the legal standard used to define disputed claim terms?

See question 8.1.

8.3 What evidence does the court consider in defining the claim terms?

In construing the claims of a patent, only the patent specification and the common general knowledge of the skilled person may be considered. It is important to consider:

• a skilled person with experience in the relevant area of technology; and
• the understanding that skilled person would have with respect to the claim language at issue.

Evidence regarding the characteristics of the skilled person and that person's common general knowledge is typically adduced through expert witnesses.

While resorting to extrinsic evidence was previously not permitted in Canada, prosecution file histories are now admissible before the court for the purposes of claim construction following recent amendments to the Patent Act. In this regard, representations of a patentee during prosecution can limit a plaintiff's construction arguments made in litigation.

8.4 Can the claims of a patent be amended in the course of the proceedings?

Generally, patent claims cannot be amended after the issue of the patent and during the course of patent infringement proceedings. This notwithstanding, there are certain patent office procedures (eg, reissue and re-examination) that a patentee may be able to use to amend its claims outside of litigation or if litigation is paused or stayed.

9 Defences and counterclaims

9.1 What defences are typically available in patent litigation?

Invalidity: Patentees benefit from a presumption of validity of granted patents in patent proceedings. Therefore, the alleged infringer bears the burden of establishing invalidity. Typical validity challenges include:

• anticipation;
• obviousness;
• lack of utility;
• lack of patentable subject matter;
• overbreadth;
• ambiguity; and
• insufficiency.

Non-infringement: In addition to validity attacks, an alleged infringer may allege non-infringement – that is, an alleged infringer may argue that the claims, when properly construed, are not infringed by the allegedly infringing product or process.

Experimental use: Permitted or experimental use is a statutory exception. The Patent Act provides an exception to patent infringement for "an act committed for the purpose of experimentation relating to the subject-matter of a patent".

Research exception: Use of a patented invention "privately and on a non-commercial scale or for a non-commercial purpose" is a statutory exception.

Prior use: A person that, in good faith and before the claim date, committed an act that would otherwise constitute an infringement of a patent, or made serious and effective preparations to commit such an act, does not infringe the patent if the person commits the same act on or after that claim date.

Licence or exhaustion: An implied or express licence in favour of the alleged infringer with respect to the patent. In addition, where a patentee's rights have been exhausted under the doctrine of patent exhaustion, an alleged infringer may assert such a defence.

Regulatory use exception: A patented invention can be made, constructed, used or sold if the purpose of these activities is solely related to the development of information to submit to any regulatory agency – federal, provincial or international.

9.2 Can the defendant counterclaim for revocation or invalidation of the patent? If so, on what grounds and what is the process for doing so?

Before the formal discovery process begins in a patent infringement case, the parties to the litigation must exchange pleadings. The statement of claim initiates the litigation. In response, a defendant will serve and file a statement of defence. Defendants in patent actions typically also request that the patent in suit be declared invalid. As such, a defendant's response may be in the form of a statement of defence and counterclaim, where the counterclaim requests a declaration of invalidity.

With respect to grounds for invalidation, these are discussed in question 9.1(1).

9.3 Are there any grounds on which an otherwise valid patent may be deemed unenforceable against a defendant?

The Patent Act contains provisions that allow the attorney general of Canada or any other interested party to seek a declaration of patent misconduct or abuse from the commissioner of patents. These provisions set a summary, administrative procedure to classify and remedy patent misconduct or abuse. Determinations of patent abuse are solely based on written statements, where, in exceptional circumstances, a party can demand a hearing before the commissioner.

Four instances constitute patent abuse:

• The demand for the patented article in Canada is not being met to an adequate extent or on reasonable terms;
• The refusal of the patentee to grant a licence or licences on reasonable terms is causing prejudice to an existing trade, industry or class of persons trading in Canada or blocking the establishment of any new trade or industry, and it is in the public interest that a licence should be granted;
• The conditions attached to the purchase, hire, licence or use of the patented article or to using the patented process are unfairly prejudicing any trade or industry in Canada or any persons or class of persons engaged in these trades or industries; or
• The existence of the patent, being a process patent or a patent related to a substance produced by such a process, is being utilised so as to unfairly prejudice the manufacture, sale or use of any materials in Canada.

The circumstances that qualify as patent abuse in Canada also include:

• the patentee's failure to adequately work the invention in Canada;
• the patentee's refusal to license a patent on reasonable terms; and
• improper licensing practices that are prejudicial, even if they do not produce anti-competitive effects.

In Canada, abuse of patents is a sword, not just a shield, as it is in other jurisdictions. In addition to patent abuse, the Federal Court also has the authority to:

• revoke a patent; or
• impose a licence to a patent for anti-competitive purposes.

10 Settlement

10.1 Are mediation and/or other forms of settlement discussions required by the court in your jurisdiction or merely optional to the parties?

Most patent infringement actions will be the subject of at least some dispute resolution process. Mediation and negotiation are the most common forms of dispute resolution processes. With respect to mediation, a mediator will assist the parties by meeting with them together, separately or both to encourage and facilitate discussion between them in an attempt to reach a mutually acceptable resolution of the dispute.

In the Federal Court, a judge or associate judge will often act as the mediator in lieu of a private mediator. Depending on a party's perspective, this can be advantageous for at least three reasons:

• The judges and associate judges conduct mediations on a regular basis and, as such, are highly experienced with facilitating settlements;
• An independent evaluation of one's case, or the case of one's opponent, by a judge or associate judge can be more persuasive and effective than an evaluation by a non-judicial mediator; and
• The court does not charge any fee to the parties for this service.

In addition to judicially assisted mediation, once again for no fee to the litigants, the Federal Court may:

• conduct an early neutral evaluation of a proceeding to evaluate the relative strengths and weaknesses of the positions advanced by the parties and render a non-binding opinion regarding the probable outcome of the proceeding; and
• conduct a mini-trial, presiding over presentation by counsel for the parties of their best case and rendering a non-binding opinion regarding the probable outcome of the proceeding.

Regardless of the form of judicially assisted dispute resolution, all discussions at and documents prepared for any dispute resolution processes must be kept strictly confidential. Further, the judge or prothonotary who conducts the dispute resolution process must not preside over the trial of the action, unless the parties consent.

10.2 Can the proceedings be stayed or discontinued in view of settlement discussions?

Pursuant to Rule 390 of the Federal Court Rules, proceedings can be stayed for a period of no more than six months, on the grounds that the parties will undertake a means of alternative dispute resolution, other than a dispute resolution conference.

Otherwise, and generally, where parties are engaged in settlement discussions, the Federal Court will be flexible and grant stays provided that the parties keep the court updated as to their progress.

10.3 Is it necessary to report the results of settlement discussions to the court? If so, how; and what are the implications?

If a settlement is reached through a formal dispute resolution conference, it must be put into writing and signed by the parties and solicitors. Furthermore, within 10 days, a notice of settlement (Form 389) must be filed with the court.

Otherwise, and generally, parties are typically not required to disclose their settlement agreements to the court. Upon settlement, the parties will typically discontinue the litigation or seek (on consent) to have it dismissed.

11 Court proceedings for infringement and validity

11.1 Are court proceedings in your jurisdiction public or private? If public, are any options available to the parties to keep the proceedings or related information confidential?

Court proceedings for infringement and validity are generally public; however, there can be restrictions on the public versus confidential treatment of documents and information exchanged during the course of the proceedings.

Documents and information obtained in the process of discovery in a civil action in the Federal Court are to be used only by the party to which they are given for the purposes of the action. The contents of these documents and other information are not to be disclosed or otherwise made use of for any purpose other than the litigation unless and until it is produced in evidence and becomes part of the public record. This is principle is known as the implied undertaking rule.

On a motion, the Federal Court may issue a protective order, which provides additional restrictions for the use of information exchanged during discovery. Terms can include:

• how confidential documents should be marked;
• to whom confidential documents can be disclosed; and
• how to deal with disputes raised over confidentiality.

Protective orders are routinely granted in the Federal Court on an informal basis, but some judicial officers may require supporting evidence that:

• the information in question has been treated at all relevant times as confidential; and
• on the balance of probabilities, its proprietary, commercial and scientific interests could reasonably be harmed by the disclosure of the information.

On a motion, the Federal Court can also issue a confidentiality order, which provides that material filed with the court must be sealed and treated as confidential. A confidentiality order will be granted only if the following two requirements are satisfied:

• An order must be necessary in order to prevent a serious risk to an important interest, including a commercial interest, in the context of litigation because reasonable alternative measures will not prevent the risk; and
• The salutary effects of the confidentiality order – including the effects on the right of civil litigants to a fair trial – must outweigh its deleterious effects, including the effects on the right to free expression, which in this context includes the public interest in open and accessible court proceedings.

11.2 Procedurally, what are the main steps in patent infringement proceedings in your jurisdiction? Is patent validity handled in the same proceedings as infringement or is it handled separately? If separate validity proceedings are available, what are the main steps in those proceedings?

With respect to types of court actions:

• a patentee may commence a proceeding claiming patent infringement; or
• an interested person may:
• • seek to impeach/invalidate a patent; or
  • file an action for a declaration of non-infringement.

In each of those examples, the main steps are:

• pleadings;
• document discovery;
• oral discovery;
• exchange of expert reports; and
• trial (before a single judge).

In Canada, issues of infringement and validity are heard in the same proceedings. Sometimes, patent infringement proceedings in Canada will address the issues of liability (infringement and validity) separately from the issues related to compensation. This is known as a bifurcated proceeding. Should a patentee succeed with the first trial on validity and infringement in a bifurcated proceeding, a second trial will deal with any claim for compensation.

Post-trial, the parties must address the issue of costs. The losing party is generally responsible for paying the successful party's costs (at least in part). In addition, the losing party may appeal as of right to a three-judge panel of the Federal Court of Appeal. Further appeals may be made to the Supreme Court of Canada, but leave is required for such further appeals.

In addition, a party seeking to challenge or have re-determined the validity of a granted patent may seek re-examination of that patent. Re-examination proceedings involve a party requesting re-examination by the patent office by filing prior art and submissions on such prior art. If the Canadian Intellectual Property Office (CIPO) determines that a substantial new question of patentability affecting any claim of the patent concerned is raised by the request for re-examination, a re-examination will be made and CIPO will correspond directly with the patentee, which may involve the patentee submitting arguments and/or amendments. Otherwise, where no substantial new question of patentability affecting any claim of the patent concerned is raised by the request for re-examination, there will be no re-examination.

11.3 What is the typical timeframe for patent infringement proceedings? If separate patent validity proceedings are available, with is the typical timeframe for those proceedings?

The average time from filing of a patent infringement or invalidity proceeding to decision is approximately 36 months. The Federal Court has set a goal to conduct trials within 24 months of filing, although this goal may sometimes be difficult to meet in complex patent proceedings.

Re-examination proceedings typically run for approximately one year.

11.4 To what extent do the decisions of national or foreign courts or bodies influence the court's decision?

As Canada is a common law jurisdiction, Federal Court judges must consider previous decisions of the court when rendering a new decision. The court can also consider international judgments; however, these are at most persuasive, as opposed to binding, on judges. Lastly, although a federal statute (the Patent Act) regulates Canadian patents, Canada is also a signatory to numerous international agreements that seek to standardise IP protection internationally. These agreements can influence the court's decision and include, but are not limited to:

• the Paris Convention;
• the Agreement on Trade-Related Aspects of Intellectual Property Rights; and
• the Canada-US-Mexico Agreement.

12 Remedies

12.1 What remedies for infringement are available to a patent holder in your jurisdiction?

Patentees in Canada must elect between:

• damages (ie, the patentee's lost sales and/or a reasonable royalty); and
• an accounting of profits vis-à-vis monetary remedies for infringement occurring post-patent grant.

Reasonable compensation is available for any pre-grant activities that would have constituted infringement had the patent been granted on the laid-open date of the patent.

In addition to monetary compensation, it is possible to obtain both interlocutory and permanent injunctions. Interlocutory (preliminary) injunctions are temporary injunctions granted until a final decision is rendered. While in theory these temporary injunctions are available in cases of patent infringement, they are rarely granted, as the standard for these injunctions is relatively high. For an interlocutory injunction, the court must be satisfied as to:

• the seriousness of the issue before the court; and
• the risk of irreparable harm.

However, most patent infringement cases do not pose a sufficiently significant risk of irreparable harm to warrant an interlocutory injunction. In contrast, permanent injunctions sought by patentees for infringement are frequently granted following a judicial finding of infringement. Furthermore, permanent injunctions are enforceable against:

• the infringer;
• its distributors; and
• its customers.

12.2 Are punitive or enhanced damages available in your jurisdiction? If so, how are they determined?

Punitive or enhanced damages are awarded only in extraordinary circumstances, including, but not limited to, malicious conduct that markedly departs from ordinary standards of decency.

12.3 What factors will the courts consider when deciding on the quantum of damages?

There are two primary means for quantifying damages in the context of patent litigation:

• lost profits from lost sales (including price suppression); and
• reasonable royalty.

Regardless, these damages are calculated with the goal of restoring the patentee to the monetary position it would have been in had the infringement not occurred.

To determine lost profits, the court must determine whether the patentee would likely have captured the infringing sales made by the defendant had the defendant not be on the market with the infringing product or process. Non-infringing alternatives may be considered in the analysis. To determine a reasonable royalty, the court will consider what royalty rate the parties would have negotiated on the eve of first infringement, assuming that the parties conducted themselves as willing licensor and willing licensee.

13 Appeals

13.1 Can the decision of a first instance court or body be appealed? If so, on what grounds and what is the process for doing so? Please also describe the availability and process for additional levels of appeal.

Either party in a patent litigation action may appeal the decision of the Federal Court to the Federal Court of Appeal as of right; no request for permission or leave is required. The Federal Court of Appeal sits in three-judge panels. Appeals from the Federal Court of Appeal are to the Supreme Court of Canada, with leave only.

The Federal Court of Appeal will reverse a decision of the Federal Court only where the Federal Court:

• erred in law (assessed at the 'correctness' standard); or
• misapprehended the facts (assessed at the 'palpable and overriding error' standard).

13.2 What is the average time for each level of appeal in your jurisdiction?

The approximate average time from a trial decision of the Federal Court to an appeal decision of the Federal Court of Appeal has been about 12 months.

14 Costs, fees and funding

14.1 What costs and fees are incurred when litigating in your jurisdiction? Can the winning party recover its costs?

A party's costs (legal fees and disbursements) to prosecute or defend an action for infringement will depend substantially on the nature of the specific case. Simple cases can be done for under C$1 million; whereas more complex cases will cost over C$1 million and sometimes will cost several millions of dollars.

In Canada, awards of costs are frequently granted in favour of the successful party. Such costs awards usually amount to:

• roughly 20% to 30% of a party's actual legal (attorneys') fees; and
• all of a party's actual (subject to reasonableness) disbursements (including experts' fees).

The portion (20% to 30%) related to a party's actual legal fees can be doubled by the court where the successful party serves an offer to settle that the party eventually 'beats'; but the doubling is limited to legal fees beginning as of the date of the offer to settle.

14.2 Are contingency fee and/or other alternative fee arrangements permitted in your jurisdiction?

Contingency fee arrangements and alternative fee arrangements are permitted in Canadian patent litigation suits.

14.3 Is third-party litigation funding permitted in your jurisdiction?

Third-party litigation funding is permitted in Canadian patent litigation suits.

15 Trends and predictions

15.1 How would you describe the current patent litigation landscape and prevailing trends in your jurisdiction? Are any new developments anticipated in the next 12 months, including any proposed legislative reforms?

Generally, there is no anti-patent or pro-patent trend or cycle in Canada, either in the courts or based on legislation. Patent laws in Canada tend to remain relatively balanced. No major legislative reforms are anticipated.

16 Tips and traps

16.1 What would be your recommendations to parties facing patent litigation in your jurisdiction and what potential pitfalls would you highlight?

In Canada, the process is similar to the United States in that there is discovery. However, the scope of discovery is narrower than in the United States. Thus, litigants accustomed to US-style discovery should modify their expectations – and practices – when litigating in Canada due to the narrower scope of discovery. In addition, there are (to date) no Markman hearings in Canada and summary disposition is rare. Thus, litigants should be prepared for the reality that testing of each side's positions on infringement and validity in almost all cases occurs at trial and at trial alone. Finally, unlike in the United States, accounting of profits (ie, disgorgement) is available in patent infringement actions in Canada, which can in some cases (eg, the Nova Chemicals case discussed in question 5.6) lead to very substantial monetary awards for patent infringement.

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.