This article was originally published in IAM Weekly on January 12, 2022.
Organisations acquire patent rights in a number of different ways and for a number of different reasons. Innovators may conceive of new inventions and file patent applications for them. These applications may be filed for a variety of reasons, including gaining market/technology exclusivity and attracting investment. Patent licensing companies may acquire patents from innovators for the purpose of licensing them to third parties as part of a monetisation campaign. Operating companies may also obtain patents from innovators with the objective of holding them for defensive purposes (eg, as intellectual property to potentially assert, if ever sued by a competitor for patent infringement). Separate and apart from patent acquisition, implementers of patented technology often enter into licence agreements with patent owners in order to settle or avoid court actions for infringement.
Whatever the context, owners and licensees of patents often grapple with the question of "what is this patent worth?" Valuation of patent rights is not simple or clear cut: there are many different valuation techniques. Ultimately, as patent owners have the ability to enforce their patent rights and obtain various remedies in cases of infringement, the nature and extent of those remedies are often crucial to how particular patent rights are valued.
Where Canadian patent rights are to be acquired or licensed, a number of enforcement-related considerations may significantly affect their valuation.
Damages or accounting of profits
In some jurisdictions, a successful plaintiff patentee in an infringement action may have limited options with respect to available monetary remedies. For example, they may be strictly limited to recovering only a royalty as compensation for any instances of infringement, and/or restricted to recovering a monetary remedy only in respect of infringement where the infringer had notice of the patent in suit. These limitations do not exist in Canada.
In Canada, a successful plaintiff patentee may claim either damages or an accounting (ie, a disgorgement) of an infringer's profits with respect to post-grant instances of infringement. Damages could take the form of a plaintiff's lost profits and/or a reasonable royalty, depending on the circumstances of the case. A plaintiff will also have access to an accounting of profits, as an alternative, where the court is satisfied that equitable considerations support such a remedy being awarded.
Notably, the accounting of profits remedy recently resulted in the highest monetary court award for patent infringement in Canadian history: C$644 million, plus interest. (This award in Dow v Nova is the subject of an appeal to the Supreme Court of Canada that is scheduled to be heard in February 2022.)
In addition to post-grant damages or an accounting of profits, 'reasonable compensation' is available to a successful plaintiff regarding pre-grant instances of infringement back to the laid open date of the relevant patent application. Such reasonable compensation typically takes the form of a reasonable royalty.
Quantification of a reasonable royalty in Canada is performed in a manner that is similar to other jurisdictions, including the United States. Generally, the court will consider what a willing licensor and a willing licensee would have negotiated as part of a hypothetical negotiation on the eve of first infringement.
No notice requirement
There is no notice requirement in Canada for liability for any monetary remedies to begin accruing. Therefore, subject to the applicable limitation period, all instances of infringement may be awarded compensation. With respect to the limitation period, in Canada no remedy may be awarded for an act of infringement committed more than six years before the commencement of the action for infringement.
For competitor-versus-competitor disputes, a permanent injunction is often the most valuable remedy that a successful plaintiff may be awarded. Market exclusivity may, in many such disputes, be preferable to continued competition with only ongoing royalty payments to the plaintiff for the infringer's continued exploitation of the patented technology.
In Canada, the Federal Court has stated that it is "only in very rare circumstances" that a court should refuse to grant a permanent injunction, where there is a finding of infringement. The situation in Canada is different from jurisdictions like the United States, where court decisions such as eBay v MercExchange make it more difficult for a successful plaintiff to obtain a permanent injunction.