$644 million patent infringement judgment is largest in Canadian history

This award is, by a substantial margin, the largest monetary award for patent infringement ever granted in a Federal Court judgment. The award was based on a combination of a reasonable royalty for the pre-grant publication period of the patent, an accounting of profits for the post-grant period, and an accounting of "springboard profits" for a period of time following expiry of the patent.

Case Background and Court"s Decision

The liability phase of this patent infringement action was decided in 2014. The Federal Court concluded that Dow Chemical"s patent was valid and infringed. This decision was upheld by the Federal Court of Appeal.[1]

Earlier in 2017, as previously reported in our article That's a wrap: springboard profits, full cost accounting, and more from the Federal Court in Dow v. Nova, the Federal Court issued a decision in relation to the compensation phase of this action [the "First Compensation Decision"].[2]

The First Compensation Decision confirmed that Dow Chemical would be entitled to compensation in the form of a reasonable royalty (of 8.8%) for the pre-grant publication period of the patent, an accounting of profits for the post-grant period, and an accounting of "springboard profits" for a period of 20 months following expiry of the patent. An accounting (disgorgement) of an infringer"s profits is permitted under the Canadian Patent Act as an alternative to (but not in addition to) damages for the post-grant period of infringement.

In addition, the First Compensation Decision set out a number of parameters and findings concerning the calculation of Nova Chemicals" costs. These parameters and findings were to be used by the parties to calculate and agree upon a final quantum of profits to be accounted for. In this regard, the First Compensation Decision provided that Nova Chemicals would be allowed to deduct its costs on a full costs basis, as opposed to a more traditional incremental costs basis. The Court was of the view that an incremental approach would be punitive, as Nova Chemicals would have used its capital infrastructure for other purposes during the infringement period.

Following the First Compensation Decision, the parties" respective experts came to different conclusions regarding the allocation of two fixed costs at issue, and the appropriate timing for currency conversion in relation to capital expenditures.

In its most recent decision,[3] the Federal Court was asked to resolve these outstanding issues between the parties. Ultimately, the Court agreed with Dow Chemical and its expert regarding the allocation of the two fixed costs, and with Nova Chemicals and its expert regarding the timing of the currency conversion in relation to the capital expenditures. The decision also confirmed the ultimate final quantum of compensation for patent infringement: $644,623,550.00 plus interest beyond April 7, 2017. A costs award remains to be decided.

Conclusion

The award in this case is, by a substantial margin, the largest monetary award for patent infringement ever granted in a Federal Court of Canada judgment.

While judgments in other cases have been significant - for example, see Merck & Co., Inc. v. Apotex Inc., 2013 FC 751 for an award of $119 million in damages, plus interest, and Eli Lilly and Company v. Apotex Inc., 2014 FC 1254 for an award of over $100 million in damages including prejudgment interest - the award in the present case sets a new high water mark.

In addition, the award in this case highlights the broad and flexible nature of monetary remedies available in Canada for patent infringement. Indeed, the available remedies in Canada are in some ways unique when compared to a number of other jurisdictions. In this regard, and depending on the circumstances of a particular case, the available remedies include pre-grant compensation in the form of a reasonable royalty, post-grant damages or an accounting of an infringer"s profits, and post-expiry springboard damages or springboard profits. In all instances, there is no requirement for actual or constructive notice to an infringer - compensation remedies accrue automatically as of the date of patent application publication