Canadian courts issued many patent-related decisions in 2022. This article summarizes a number of the more notable court decisions, as well as other patent-related developments from 2022.
- Supreme Court of Canada addresses the accounting of profits remedy
- New patent eligibility test for computer-implemented inventions
- Dismissal of Statutes of Monopolies claim affirmed on appeal
- Decisions regarding summary disposition
- Crocs' industrial design infringed and valid, and accounting of profits awarded
- Decisions under the PM(NOC) Regulations
- New rules and procedures for patent applicants
- Refusals of aberrant bifurcations
- Dismissal of Contempt of Court claim
1. Supreme Court of Canada addresses the accounting of profits remedy
The largest monetary award ever by a Canadian court for patent infringement was upheld by the Supreme Court of Canada in Nova Chemicals Corp v Dow Chemical Co in an 8-1 decision (2022 SCC 43) which provided fresh guidance and a preferred framework for conducting an accounting of profits analysis.
Lower courts had awarded and upheld on appeal a $644-million judgment in favour of Dow Chemical for Nova Chemicals' infringement of Dow's patent. In dismissing Nova Chemicals' further appeal to the Supreme Court, the Court set out a three-step framework for conducting an accounting of profits: (1) calculate the actual profits earned by selling the infringing product (i.e., revenue minus costs); (2) determine whether there is a non-infringing option that can help isolate the profits causally attributable to the invention from the portion of the infringer's profits not causally attributable to the invention; and (3) if there is a non-infringing option, subtract the profits the infringer could have made had it used the non-infringing option from its actual profits, to determine the amount to be disgorged.
The aim of the non-infringing option analysis is to determine how the patented subject matter contributed to the value of what the infringer sold, not to assess what proportion of the infringer's product fell within the patent. In the present case, the Court accepted the Federal Court's finding that customers only purchased Nova's infringing products because they contained the features captured by Dow's patent. As a result, there were no non-infringing options, such that all profits realized from the infringing products were to be disgorged.
The Court upheld the lower courts' award of springboard profits, i.e. profits that arise post-patent-expiry but are causally attributable to infringement of the invention during the period of patent protection.
Please see this article for more details and analysis regarding the Supreme Court's decision.
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2. New patent eligibility test for computer-implemented inventions
The Canadian Intellectual Property Office (CIPO) had rejected two patent applications of Benjamin Moore related to computer-implemented inventions for colour selection and provision of colour combinations on the basis that they are directed at ineligible subject matter.
On appeal to the Federal Court in Benjamin Moore & Co v Canada, (2022 FC 923) the Court reiterated that the "problem-solution" test for claim construction and for patentable subject matter is incorrect. In addition, the Court set out a new test that should be followed by CIPO examiners when assessing the patentability of computer-implemented inventions: (a) purposively construe the claim; (b) ask whether the construed claim as a whole consists of only a mere scientific principle or abstract theorem, or whether it comprises a practical application that employs a scientific principle or abstract theorem; and, (c) if the construed claim comprises a practical application, assess the construed claim for the remaining patentability criteria: statutory categories and judicial exclusions, as well as novelty, obviousness, and utility.
Please see this article for more details and analysis regarding the Federal Court's decision.
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3. Dismissal of Statutes of Monopolies claim affirmed on appeal
In Apotex v Eli Lilly Canada, (2022 ONCA 587) the Ontario Court of Appeal affirmed a decision of the Ontario Superior Court which rejected claims by Apotex for: (i) treble damages under the U.K. and Ontario Statutes of Monopolies; (ii) damages or an accounting of profits under the Trademarks Act; and (iii) damages via the tort of conspiracy. The claims sought monetary remedies for time in which Apotex was allegedly kept from marketing a generic version of the medicine olanzapine due to both the operation of the PM(NOC) Regulations, promulgated under the Patent Act, and a court order adverse to Apotex that was issued under the PM(NOC) Regulations.
Each of Apotex's claims were rejected on their individual merits. The claims were also rejected as a collective whole as they were based on alleged harm caused by the operation of law rather than the Defendants, because the Defendants' actions were authorized by law, and because the governing statutory scheme constituted a complete code that did not allow for the remedies sought by the Plaintiffs.
This case represents the first final appellate decision issued in a series of similar cases brought before the Ontario and Quebec Superior Courts.
Please see this article for a summary of the underlying Ontario Superior Court decision.
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4. Decisions regarding summary disposition
The past several years have seen an increase in the use of summary disposition procedures – summary judgment and summary trial – in patent actions. In 2022, this was no different. However, whereas such motions in past years had largely been successful, 2022 saw several decisions that went against the moving party.
The decision of Gemak Trust v Jempak, (2022 FCA 141) saw the Federal Court of Appeal (FCA) overturn a decision of the Federal Court in which summary judgment had been granted. The FCA found that summary judgment was inappropriate because the underlying decision relied on adverse credibility findings without viva voce testimony. The FCA also held that the Federal Court erred in determining the scope of "common general knowledge" by inappropriately including knowledge only discoverable via a reasonably diligent search, and by inappropriately dismissing an expert's opinion regarding experimental testing.
Companion cases involving motions for summary trial in respect of a patent covering Janssen's INVEGA SUSTENNA® product became the first summary trial infringement decisions under the PM(NOC) Regulations. In these decisions, Janssen v Pharmascience, (2022 FC 62) and Janssen v Apotex, (2022 FC 107) the summary motions for non-infringement brought by the respective Defendants, Pharmascience and Apotex, were dismissed. Further, in both cases the Federal Court per Manson J. found that the Defendant infringed Janssen's patent.
Please see this article for more details and analysis regarding the Janssen v Pharmascience summary trial decision.
A motion by the Plaintiffs in a patent infringement action for summary trial in relation to issues of disputed ownership was dismissed in Mud Engineering Inc v Secure Energy (Drilling Services) Inc, (2022 FC 943). In coming to this decision, the Federal Court addressed the issue of burden in a summary trial, holding that the moving party bears to burden in respect of both: (i) establishing that is appropriate to proceed by way of a summary trial; and (ii) proving the issue(s) raised as a basis for summary disposition. It was ultimately held that the Plaintiffs did not meet their burden to prove ownership of the patents at issue. The Plaintiffs' action was dismissed accordingly.
Finally, in the decision of Steelhead LNG v ARC Resources, (2022 FC 998) the Defendants succeeded in establishing non-infringement via a motion for summary trial. The Court rejected the Plaintiffs' arguments of infringement via the Defendants' alleged use of "a conceptual design…by the Defendants in promotional materials to third parties," from a period of time in which the patented invention did not yet exist. Rather, the Defendants' activity was equated with, at best, "paper offers, without actual use" of the claimed invention.
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5. Crocs' industrial design infringed and valid, and accounting of profits awarded
Standalone infringement decisions in Canada on industrial designs – known as design patents in the United States – are relatively infrequent. 2022 saw a decision, Crocs Canada v Double Diamond Distribution, in which a Plaintiff, Crocs, successfully sued for infringement of an industrial design relating to a unique shoe design (2022 FC 1443). The Court applied the standard four-part test in finding that the Defendant's "Fleece Dawgs" product did not differ substantially from Crocs' industrial design. By contrast, Crocs' design was found to be original, with Fuhrer J. finding that Crocs "pioneered a new, and hence uncrowded, subfield of footwear aesthetics that was original in overall appearance." Crocs was awarded an accounting of the Defendant's profits as a result of the infringement.
Please see this article for more on the Crocs industrial design decision.
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6. Decisions under the PM(NOC) Regulations
Various decisions in respect of infringement and invalidity were released in actions commenced under subsection 6(1) of the PM(NOC) Regulations. We report on four of these below, as well as one interlocutory decision of interest.
The decision of the FCA in Pharmascience v Bristol-Myers Squibb, (2022 FCA 142) relating to a patent covering the anticoagulant medicine apixaban, confirmed the validity of two patents against various invalidity attacks. Of particular note was Pharmascience's insufficiency allegation, which contended that the application as filed, rather than the patent as granted, was to be considered for the purpose of insufficiency, and thus that claims that were amended during prosecution to the compound apixaban itself were not to be considered for the purpose of insufficiency. Pharmascience argued that the application as filed, which did not contain specific claims to the compound apixaban, did not disclose an invention as of the patent's filing or publication date. The FCA rejected Pharamscience's argument, distinguishing between the date for determining insufficiency and the document in respect of which insufficiency is to be assessed (namely, the patent as granted).
In Janssen v Apotex, (2022 FCA 184) the FCA addressed an appeal concerning the validity of a patent held by Janssen that related to the treatment of prostate cancer by co-administration of abiraterone acetate and prednisone. The decision is noteworthy in respect of the FCA's willingness to find, in three instances, that the reasons and Judgment of the underlying Federal Court decision contained erroneous statements – all said to constitute "slip[s] of the pen" – and the FCA's willingness to seemingly "correct" these errors under Rule 397(2). Ultimately the appeal was dismissed, with Janssen's patent found to be obvious.
A trial level decision finding infringement and dismissing argument of invalidity in respect of a patent covering Merck's JANUVIA product was released in Merck Sharp & Dohme v Pharmascinence, (2022 FC 417). The patent at issue claimed, inter alia, an enantiomer of a particular salt and crystalline form of the active ingredient sitagliptin. That this subject matter resulted in beneficial properties over sitagliptin in free base form was held to be the patent's inventive concept. As the prior art relied upon by the Defendant Pharmascience did not lead to the compound sitagliptin in particular, nor to the specific salt or crystalline form claimed much less its beneficial properties, the claimed subject matter was not obvious to try and Pharmascience's obviousness defence failed.
The decision of Janssen v Apotex, (2022 FC 996) related to infringement via inducement. The patent at issue claimed, generally speaking, the use of the active ingredient macitentan in combination with another medicine, namely a PDE5-inhibitor. The indication in the Product Monograph of both the innovator (Janssen) and the infringer (Apotex) seemingly did not speak of the combination, though Apotex's specific proposed indication is redacted. The case turned primarily on the second prong of the three-part inducement test – whether the acts of direct infringement are influenced by the acts of the inducer to the point that, without the influence, direct infringement would not take place. With the majority of the use of macitentan being in combination with a PDE5-inhibitor, and with Apotex's product monograph referring, inter alia, to a landmark clinical study which established that macitentan is safe and effective in combination with PDE5-inhibitors, the Court found infringement via inducement.
Bayer v Sandoz, (2022 FC 1187) was an interlocutory decision that related to an attempt by the second person to overhaul its invalidity defence late in a proceeding following a change in solicitors. This included the attempted late introduction of an obviousness allegation based on 38 pieces of alleged prior art. Recognizing the prejudice that such an amendment could have on the first person, the Court granted leave to Sandoz to file its proposed amended defence, but held that doing so in respect of many of the proposed defences would result in the trial being adjourned, with a commensurate extension of the 24-month statutory stay.
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7. New rules and procedures for patent applicants
Amendments to Canada's Patent Rules regarding excess claim fees and Requests for Continued Examination (RCE) came into force in 2022. In particular, for applications for which a request for examination was made on or after Oct. 3, 2022:
- The fee for each claim in excess of 20 is $100 CAD or $50 CAD for a small entity. As a multiple dependent claim counts as one claim, applicants may wish to make use of such a type of claim to increase scope of coverage while minimizing costs;
- For an applicant to continue examination after three examination reports (office actions), an applicant must file an RCE and pay a fee of $816 CAD or $408 CAD for a small entity. After the first and any subsequent RCEs, two examination reports may issue before a further RCE must be filed; and
- Where an examiner considers an application allowable subject to the applicant addressing minor defects, a conditional notice of allowance may be issued. The conditional notice of allowance would requisition the applicant to address the defects and pay the final fee, failing which the conditional notice of allowance may be withdrawn and examination may be continued.
For more information regarding these changes, please see this article.
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8. Refusals of aberrant bifurcations
In proceedings under the Patent Act, the most common form of bifurcation is between liability (validity and infringement, entitlement to injunctive relief) and damages (quantum). In 2022, the Federal Court rejected two motions for bifurcation that fell outside of these situations.
In Apple v Wi-Lan, (2022 FC 276) Apple brought a motion for bifurcation seeking Wi-Lan's rights to an injunction, delivery up of infringing devices, and damages to be determined in a second trial, after the issues of patent validity and infringement are addressed. In response, Wi-Lan conceded that if bifurcation was not ordered, it would limit its claim for damages to a reasonable royalty, and not an accounting of profits. The Federal Court clarified that if substantial savings are considered as a reason to bifurcate, then those savings must come from the likelihood that the determination of the first phase issues would inherently narrow the issues in the second phase. In this case, Wi-Lan's concession with respect to only claiming a reasonable royalty outweighed Apple's efforts to demonstrate that bifurcation might lead to other savings of time or expenses, regardless of the outcome of the liability phase.
The Federal Court also did not entertain Apple's "highly unusual" request to delay the injunction issue to the second phase of the matter. Apple's position required the Court to prematurely conclude that Wi-Lan's claim for the injunction was most likely to fail. As such, it was held that this was not a proper point for the Court to consider on a bifurcation motion.
The Federal Court also dismissed Farmer Edge's bifurcation motion in Farmobile v Farmer's Edge, (2022 FC 22; aff'd in 2022 FCA 116). Farmers Edge sought to split the first and second phases of trial according to two different points in time: The first phase was to address patent infringement and validity prior to the date Farmers Edge made software changes that it claimed were a non-infringing alternative to Farmobile's patented farming data collection and exchange system; and, the second phase was to address infringement after Farmer's Edge's software changes, along with Farmer's Edge's additional validity defences, and issues of damages and equitable remedies.
While the Federal Court recognized that Rule 107 "does not limit the Court to a particular approach to bifurcation…" it rejected Farmer's Edge's argument that its bifurcation method would be more efficient and less expensive. Although the Court acknowledged that if Farmer's Edge was successful in the first phase this could "obviate the need for a second trial entirely," the possibility for the opposite effect and the inefficiencies associated with conducting a second trial were held to outweigh the possible advantages of granting the bifurcation.
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9. Dismissal of Contempt of Court claim
In 2022, the Federal Court re-iterated the high threshold required for granting a contempt order. In DeepRoot v GreenBlue, (2022 FC 709) DeepRoot did not convince the Federal Court beyond a reasonable doubt that GreenBlue was in contempt of the Court's injunction order which prevented GreenBlue from infringing DeepRoot's patents. DeepRoot alleged that GreenBlue's product, the RootSpace AirForm package, released after the injunction was granted, continued to infringe DeepRoot's patents related to an integrated tree root and storm water system. GreenBlue claimed that the addition of the "AirForm" component to its product overcame any allegations that it was in violation of the injunction.
The case turned on the third prong of the test for establishing contempt beyond a reasonable doubt; namely, whether GreenBlue intentionally carried out the act that the order prohibited or failed to carry out the act that the order required. The Court did not find sufficient evidence demonstrating that certain features of the AirForm component were captured by essential elements of DeepRoot's patent claims nor sufficient evidence that GreenBlue induced infringement in the assembly of the AirForm-containing product. As a result, the contempt motion was dismissed with costs.
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Should you have any specific questions about this article or would like to discuss it further, you can contact the authors or a member of our Patents Group.