A small-screen patent infringement case with a large royalty payment on the line

In Rovi v Videotron, 2022 FC 874, Rovi alleged infringement by Videotron of four patents with respect to interactive television program guides. Rovi sought an accounting of Videotron's profits or, in the alternative, damages in the form of a royalty.

The Federal Court (the "Court") ultimately held the patents at issues to be invalid or not infringed, and dismissed Rovi's action on that basis. However, the Court sill offered its findings with respect to the remedies it would have awarded had one or more patents been valid and infringed. Although the Court's conclusions on remedies may be obiter, they are nonetheless worth noting for patentees with large portfolios.

A patentee cannot obtain an accounting of profits as of right, but the Court should not refuse it without good reason.^[1] The patentee bears the burden to establish its entitlement to an accounting of profits.^[2] In this case, the Court rejected Rovi's request for an accounting of Videotron's profit.

The Court's rejection was primarily based on two factors: Rovi's conduct and the complexity of the accounting of profits. The Court found that the other factors raised by the parties (no delay in commencing litigation, Videotron's conduct, and whether Rovi practiced the invention) were "neutral" in assessing Rovi's entitlement.

The Court found that Rovi's business practices and dealings with Videotron weighted against awarding an accounting of profits. Rovi has a large patent portfolio which it licences to others. Rovi's practice is to licence its portfolio as a whole, as opposed to licencing particular patents or technologies which are of interest or relevant to the licensee.

Videotron was a licensee of Rovi's patent portfolio from 2010 to 2016. According to the background facts outlined by the Court, Videotron did not obtain a licence because of any particular patent concerns, but rather for business reasons in avoiding the risk of being sued for alleged patent infringement by Rovi. Indeed, it appears Videotron had not conducted any particular patent analysis prior to entering into the licence.^[3]

Videotron only sought to conduct a detailed analysis of patents being licenced during negotiations for renewing the licence, after Rovi sought to substantially increase the royalty under the licence. Videotron ultimately did not renew the licence past 2016, including because Rovi would not identify the patents within the portfolio that were relevant to Videotron's platform, or the specific value of those patents.

In assessing whether Rovi should be allowed to elect an accounting of profits, the Court was critical of Rovi's refusal to disclose during the licence negotiations which patents Rovi alleged Videotron would be infringing, or which were the patents that Rovi referred to as its "best patents".^[4] The Court was further critical of Rovi's "hard-ball legal tactics to pressure third parties to license its patent portfolio"^[5] and of "Rovi's apparently deliberate strategy of delaying the prosecution of its patents."^[6]

The Court concluded that "Rovi's questionable business practices cannot help but serve to colour my view of the value of the features that it claims in the Patents. This factor weighs heavily against Rovi."^[7]

With respect to the calculations for an accounting of profits, complexity was not necessarily the issue. Rather, the Court concluded that it was "not satisfied that using any methods proposed by Rovi's expert to calculate profits, which would be fraught with insufficient, speculative, and contradicted evidence would allow me to arrive to reliable and appropriate amount reflecting Videotron's profits."^[8] Consequently, the Court concluded that a reasonable royalty would have been the appropriate remedy had the patents at issue been found valid and infringed.

For a royalty, Rovi sought a royalty equivalent to the licensing fee for its entire portfolio. Videotron, on the other hand, argued the royalty should be equal to the amount it would have cost it to remove an infringing feature from its system (implement a non-infringing alternative), which the evidence showed to be about $150,000 per feature.

The Court rejected Rovi's proposed royalty, noting:

A plaintiff who has been wronged is entitled to a remedy. Yet, Rovi, who bears the burden of proof in this case and has been licencing these types of patents for decades, simply led no independent evidence of the value of its own patented features. When it couldn't make out its case through Videotron's witnesses, all it could point to is a portfolio of some 200 patents. There is no evidence establishing the value, if any, of these patents which would allow me to determine with any degree of certainty a reasonable royalty for the Asserted Claims themselves.^[9]

Instead, the Court adopted Videotron's proposed royalty. Videotron led evidence that the absence of the features at issue would not have impacted Videotron's subscriber base. The Court concluded that had the patent been valid and infringed, Rovi would have been awarded $150,000 per infringing feature.