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PATC Section 3 – Infringement Remedies for Infringement © 2016 Intellectual Property Institute of PATC Section 3 – Infringement Remedies for Infringement © 2016 Intellectual Property Institute of Canada

Remedies Standing to Sue • s. 55 – Infringer is liable to: patentee and Remedies Standing to Sue • s. 55 – Infringer is liable to: patentee and persons claiming under the patentee • “person claiming under patentee” is given a broad meaning [Apotex Inc. v. Sanofi-Aventis Canada Inc. , 2011 FC 1486] © 2016 Intellectual Property Institute of Canada

Remedies Standing to Sue • “person claiming under patentee” includes licensees (exclusive and non-exclusive) Remedies Standing to Sue • “person claiming under patentee” includes licensees (exclusive and non-exclusive) [American Cyanamid Co. v. Novopharm Ltd. , [1972 F. C. 739; Domco Industries Ltd. v. Armstrong Cork Canada Ltd. , [1982] 1 S. C. R. 907] © 2016 Intellectual Property Institute of Canada

Remedies Standing to Sue • Persons who have acquired interest by way of assignment Remedies Standing to Sue • Persons who have acquired interest by way of assignment from inventors [671905 Alberta Inc. v. Q'Max Solutions Inc. , 2003 FCA 241] © 2016 Intellectual Property Institute of Canada

Remedies Standing to Sue • Licensees enjoy benefit of monopoly [Armstrong Cork Canada Ltd. Remedies Standing to Sue • Licensees enjoy benefit of monopoly [Armstrong Cork Canada Ltd. v. Domco Industries Ltd. , 66 C. P. R. (2 d) 46] • Licensees may sue on their own, where patentee declines or neglects to enforce the patent © 2016 Intellectual Property Institute of Canada

Remedies Standing to Sue • Person can claim under patentee so long as there Remedies Standing to Sue • Person can claim under patentee so long as there is some factual basis for doing so that is proven – consent or corporate relationship alone will not suffice [Signalisation de Montréal Inc. v. Services de Béton Universels Ltée; 46 C. P. R. (3 d) 199; Laboratoires Servier v. Apotex Inc. , 2008 FC 825] © 2016 Intellectual Property Institute of Canada

Remedies Standing to Sue • But de facto corporate control of patent may suffice Remedies Standing to Sue • But de facto corporate control of patent may suffice if corporate structure is explained and control is demonstrated – fact dependent Astrazeneca Canada Inc et al v Apotex Inc, 2015 FC 322 © 2016 Intellectual Property Institute of Canada

Monetary Remedies: Election • Patentee plaintiff can choose (elect): Recover damages OR Accounting of Monetary Remedies: Election • Patentee plaintiff can choose (elect): Recover damages OR Accounting of defendant’s profits BUT *not both* © 2016 Intellectual Property Institute of Canada

Monetary Remedies: Election Damages: • Restore the plaintiff to a position that it would Monetary Remedies: Election Damages: • Restore the plaintiff to a position that it would have occupied had there been no infringement Accounting of Profits: • Restore the defendant to a position that it would have occupied had there been no infringement © 2016 Intellectual Property Institute of Canada

Damages • Patentee (and persons claiming under) are entitled to recover damages for infringement Damages • Patentee (and persons claiming under) are entitled to recover damages for infringement • Section 55 of Patent Act : A person who infringes a patent 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 © 2016 Intellectual Property Institute of Canada

General Damages • Restitutionary Purpose • Restore the plaintiff to a position that it General Damages • Restitutionary Purpose • Restore the plaintiff to a position that it would have occupied had there been no infringement [Lubrizol Corp. v Imperial Oil Ltd. , 67 C. P. R. (3 d) 1] © 2016 Intellectual Property Institute of Canada

Damages General Damages • Plaintiff recovers losses directly caused by infringement (i. e. lost Damages General Damages • Plaintiff recovers losses directly caused by infringement (i. e. lost sales and (its) loss of profits caused by price competition with defendant) [Allied Signal Inc. v Du Pont Canada Inc. , 78 C. P. R. (3 d) 129] © 2016 Intellectual Property Institute of Canada

Damages • Section 55 imposes requirement of causation - “all damage sustained”… “by reason Damages • Section 55 imposes requirement of causation - “all damage sustained”… “by reason of the infringement…” • Permissible recovery is limited to loss arising from act(s) of infringement – no more, no less © 2016 Intellectual Property Institute of Canada

Damages [41] The purpose of an award of damages is to compensate a patentee Damages [41] The purpose of an award of damages is to compensate a patentee (or any entity claiming under the patentee) who has suffered loss as a result of patent infringement. The concept of compensation rejects both under-compensation and over-compensation. [Apotex Inc. v. Merck & Co. , Inc. , 2015 FCA 171] © 2016 Intellectual Property Institute of Canada

Damages • Patent Act strikes a balance • Encourages Research & Development *And* Broader Damages • Patent Act strikes a balance • Encourages Research & Development *And* Broader economic activity (free markets) © 2016 Intellectual Property Institute of Canada

Damages • Under-compensation • Will discourage R& D • Overcompensation • chills potential competition Damages • Under-compensation • Will discourage R& D • Overcompensation • chills potential competition to the extent that a potential infringer is uncertain about the scope and validity of a patent. © 2016 Intellectual Property Institute of Canada

Damages – “Perfect Compensation” • “The balance at the heart of the Act requires Damages – “Perfect Compensation” • “The balance at the heart of the Act requires perfect compensation. “ [Apotex Inc. v. Merck & Co. , Inc. , 2015 FCA 171] © 2016 Intellectual Property Institute of Canada

Damages “Goldilocks Principle” © 2016 Intellectual Property Institute of Canada Damages “Goldilocks Principle” © 2016 Intellectual Property Institute of Canada

Damages • Objective is to achieve “perfect compensation” • Other remedies can be used Damages • Objective is to achieve “perfect compensation” • Other remedies can be used to deal with incentiving infringement [Apotex Inc. v. Merck & Co. , Inc. , 2015 FCA 171; also see Eli Lilly and Company v. Apotex Inc. , 2014 FC 1254 ] © 2016 Intellectual Property Institute of Canada

Damages • Look to causation – s. 55 • Create a “but for” world Damages • Look to causation – s. 55 • Create a “but for” world - test for causation • Plaintiff must prove that “but for” defendant’s actions it would not have suffered loss © 2016 Intellectual Property Institute of Canada

Damages • Non-infringing alternatives (NIA) are relevant • Recent case law: Tilts away from Damages • Non-infringing alternatives (NIA) are relevant • Recent case law: Tilts away from UK approach [see Eli Lilly and Company v. Apotex Inc. , 2014 FC 1254] Tilts toward U. S. law (recognizes NIA) [Apotex Inc. v. Merck & Co. , Inc. , 2015 FCA 171] © 2016 Intellectual Property Institute of Canada

Damages • If NIA, patent confers market power, not a complete monopoly [49] Put Damages • If NIA, patent confers market power, not a complete monopoly [49] Put another way, in cases where, in the “but for” world, the infringer could and would have made and sold a non-infringing alternative, these sales may well reduce the patent owner’s sales. Awarding the patentee full damages for lost profits in every case will, therefore, sometimes over-compensate the patentee. [Apotex Inc. v. Merck & Co. , Inc. , 2015 FCA 171] © 2016 Intellectual Property Institute of Canada

Damages “Perfect Compensation” asks: 1. What NIA (if any) could have and would have Damages “Perfect Compensation” asks: 1. What NIA (if any) could have and would have been used in the market? 2. Would lawful competition have reduced patentee’s sales? To what extent? © 2016 Intellectual Property Institute of Canada

Damages • Defendant has burden to prove “factual relevance” of NIA: 1. Is the Damages • Defendant has burden to prove “factual relevance” of NIA: 1. Is the NIA a true substitute (real alternative)? 2. Is the NIA economically viable (real alternative)? 3. Could the infringer have used the NIA ? (i. e. adequate supply of NIA product) 4. Would the infringer have used the NIA? © 2016 Intellectual Property Institute of Canada

Damages • The “real world” informs construction of the “but for” world. • “Real Damages • The “real world” informs construction of the “but for” world. • “Real world” conduct is “very important” to deciding what would have happened in the “but for” world. • Factual findings on liability are relevant when constructing the “but for” world. • “Brazen” infringement in the “real world” makes it very difficult to prove that NIA would have been used in the “but for” world © 2016 Intellectual Property Institute of Canada

Other Types of Damages Aggravated Damages • Compensatory damages over and above “general damages” Other Types of Damages Aggravated Damages • Compensatory damages over and above “general damages” caused by defendant’s high-handed behaviour © 2016 Intellectual Property Institute of Canada

Other Types of Damages Punitive Damages • Not compensatory • Intended to punish defendant Other Types of Damages Punitive Damages • Not compensatory • Intended to punish defendant for malicious/outrageous conduct © 2016 Intellectual Property Institute of Canada

Other Types of Damages Punitive Damages • Serve as deterrent • Very rarely awarded Other Types of Damages Punitive Damages • Serve as deterrent • Very rarely awarded [Lubrizol Corp. v Imperial Oil Ltd. , 67 C. P. R. (3 d) 1; Eurocopter v. Bell Helicopter Textron Canada Ltée, 2012 FC 113] © 2016 Intellectual Property Institute of Canada

Accounting of Profits Equitable Remedy • Awarded at court’s discretion, not as of right Accounting of Profits Equitable Remedy • Awarded at court’s discretion, not as of right • No presumption in favour of plaintiff © 2016 Intellectual Property Institute of Canada

Accounting of Profits • Where granted, it requires the defendant to disgorge (pay to Accounting of Profits • Where granted, it requires the defendant to disgorge (pay to plaintiff) the profits it has made from the infringing activities [143] The objective of an accounting of profits is to restore the wrongdoer in the position it would have been in, had there been no infringement. Therefore, an accounting of profits must include the indirect profits or return made by the infringer on the profits earned from the sale of the infringing product. This is to prevent the unjust enrichment of the infringer who “retains and thus is deemed to benefit from, the profits gained from his misappropriation” (Teledyne, above at p. 226). [ADIR v. Apotex Inc. , 2015 FC 721] © 2016 Intellectual Property Institute of Canada

Accounting of Profits • Purpose: 1. Restitutionary (as opposed to compensatory) 2. Deterrent [i. Accounting of Profits • Purpose: 1. Restitutionary (as opposed to compensatory) 2. Deterrent [i. e. Varco Canada Limited v. Pason Systems Corp. , 2013 FC 750] © 2016 Intellectual Property Institute of Canada

Accounting of Profits • Factors (against) may include - complexity & length of proceeding Accounting of Profits • Factors (against) may include - complexity & length of proceeding - excessive delay - misconduct [Merck & Co. v. Apotex, 2006 FCA 323] © 2016 Intellectual Property Institute of Canada

Accounting of Profits • If accounting granted, patentee only entitled to the portion of Accounting of Profits • If accounting granted, patentee only entitled to the portion of infringer's profit which is causally attributable to the invention. [Monsanto Canada Inc. v. Rivett, 2010 FCA 207] • But existence of NIA is not relevant [see ADIR v. Apotex Inc. , 2015 FC 721] © 2016 Intellectual Property Institute of Canada

Accounting of Profits [118] With respect, I am of the view that the Supreme Accounting of Profits [118] With respect, I am of the view that the Supreme Court did not make new law in Schmeiser, nor did it suggest that in an accounting of profits, courts are bound to always consider NIA products, options or scenarios, as fanciful as they may be. In my view, the Supreme Court simply reiterated that “the inventor is only entitled to that portion of the infringer’s profit which is causally attributable to the invention” (Schmeiser, at para 101)…. [119] In that search for causation, courts have developed a variety of different formulas or used different terminologies, depending of the facts of each case, to simply decipher the use of the invention by the infringer and the extent in which this use contributed to the infringer’s gross revenues or profits. © 2016 Intellectual Property Institute of Canada

Accounting of Profits …Tracing causation is a factual endeavour. In some cases, it could Accounting of Profits …Tracing causation is a factual endeavour. In some cases, it could almost be as complex as the invention, and it will require factual or expert evidence. In other cases, as the one before me, there is no need for a very sophisticated analysis of the causal relationship between the infringement and the infringer’s profits as the defendants merely sold perindopril, the compound covered by the 196 Patent…. [121] The defendants have asked me to deduct from their profits to be disgorged the profits that they would have made had they manufactured all of the perindopril API and finished tablet dosage that they export during the relevant period from abroad…. © 2016 Intellectual Property Institute of Canada

Accounting of Profits …. To accept the defendants’ position would be to provide them Accounting of Profits …. To accept the defendants’ position would be to provide them a perfect shelter against the consequences of any future patent infringement in Canada. Now that the Apotex group of companies own important manufacturing facilities [abroad] they would never have to disgorge any profits from infringing a Canadian patent, as they would only have to prove that their affiliates had the capacity to manufacture abroad and that they would have been willing to do so in an effort to advance a NIA defence. We know that manufacturing costs are lower [in other countries] Therefore, profits from manufacturing abroad would most likely exceed profits From manufacturing in Canada in any given scenario. These scenarios are exactly the “catch me if you can” situation contemplated by Zinn J in Rivett FC. [ADIR v. Apotex Inc. , 2015 FC 721] © 2016 Intellectual Property Institute of Canada

Accounting of Profits 1. Is there a causal connection between the profits made and Accounting of Profits 1. Is there a causal connection between the profits made and the infringement? If there is none, then there are no profits that require an accounting. 2. If there is a causal connection, then what were the profits made by the infringer as a result of the infringement? (“Gross Profits of Infringement”) © 2016 Intellectual Property Institute of Canada

Accounting of Profits 3. Is there a non-infringing option that the infringer could have Accounting of Profits 3. Is there a non-infringing option that the infringer could have used? 4. If there is no non-infringing option, then the Gross Profits of Infringement are to be paid to the patentee. 5. If there is a non-infringing option, then what profit would the infringer have made, had he used it? (“Gross Profits of Non-Infringement”) © 2016 Intellectual Property Institute of Canada

Accounting of Profits 6. Where there was a non-infringing option available, the amount to Accounting of Profits 6. Where there was a non-infringing option available, the amount to be paid to the patentee is: Gross Profits of Infringement minus Gross Profits of Non-Infringement. This is the profit directly attributable to and resulting from infringement [Monsanto Canada Inc. v. Rivett, 2010 FCA 207] © 2016 Intellectual Property Institute of Canada

Pre-Grant Infringement • Patentee may recover for “infringing acts” occurring after patent is laid Pre-Grant Infringement • Patentee may recover for “infringing acts” occurring after patent is laid open but before issuance (s. 55(2)) © 2016 Intellectual Property Institute of Canada

Pre-Grant Infringement • Remedy is confined to “reasonable compensation” NOT damages • “Reasonable compensation” Pre-Grant Infringement • Remedy is confined to “reasonable compensation” NOT damages • “Reasonable compensation” means royalty at rate that would result from negotiations between willing licensor and willing licensee [Jay-Lor International Inc. v. Penta Farm Systems Ltd. , 2007 FC 358; Bauer Hockey Corp. v. Easton Sports Canada Inc. , 2010 FC 361] © 2016 Intellectual Property Institute of Canada

Injunction • Court Order that restrains defendant from making, using, selling claimed subject matter Injunction • Court Order that restrains defendant from making, using, selling claimed subject matter after trial of infringement action • Section 57, Patent Act • Court has broad jurisdiction to issue injunction and set terms (“ … as Court sees fit…”) © 2016 Intellectual Property Institute of Canada

Interlocutory Remedies Interim/Interlocutory Injunction • Injunction that restrains infringement between start of infringement action Interlocutory Remedies Interim/Interlocutory Injunction • Injunction that restrains infringement between start of infringement action and trial • Difficult to obtain © 2016 Intellectual Property Institute of Canada

Interlocutory Remedies Interlocutory Injunction • Serious question to be tried • Irreparable harm to Interlocutory Remedies Interlocutory Injunction • Serious question to be tried • Irreparable harm to plaintiff if not granted (harm that is so bad, money damages will not compensate) • Balance of convenience [RJR Macdonald Inc. v Canada, [1994] 1 S. C. R. 311] © 2016 Intellectual Property Institute of Canada

Delivery Up • Equitable remedy • Defendant required to account for and hand over Delivery Up • Equitable remedy • Defendant required to account for and hand over (deliver up) all infringing items in his possession • Rationale: infringing items are “property” of plaintiff © 2016 Intellectual Property Institute of Canada