Canada Enforcement of intellectual property Goodmans LLP

Canada
Enforcement of intellectual property
Goodmans LLP
This article first appeared in IP Value 2006, Building and enforcing intellectual property value – An international guide for the boardroom

Harry B Radomski, Richard E Naiberg and Miles Hastie
Goodmans LLP
Canada
Enforcement of intellectual property
In Canada, the time required for an IP case to reach final
determination (including the exhaustion of all appeals)
varies widely, from as little as two to as many as 19 years,
with an IP infringement action taking an average of three
to five years to reach trial. The appeal of the trial result
may require at least a further year to be determined.
The principal factors that determine the length of a
dispute are the nature of the dispute, the specific
procedure invoked, the intensity with which the plaintiff
prosecutes the matter, the frequency with which interim
decisions are appealed, the degree of cooperation shown
by each party, the complexity of the action and the
expected trial length. Most Canadian courts have
adopted measures to help bring cases to trial faster.
IP enforcement is typically litigated using one of two
procedures: an application or an action. In pharmaceutical
cases, where a patent contains claims to a medicine or to
the use of a medicine, the owner of the patent may invoke
a summary application procedure, in the form of an
notice-of-compliance proceeding, to prevent the issuance
of a marketing approval to the manufacturer of a generic
version of the medicine before the expiry of the patent.
The application procedure is also available in those very
rare IP cases where no facts are in dispute.
Applications are determined on the basis of affidavit
evidence and transcripts of out-of-court cross-examinations
upon the affidavit evidence, without complete pre-trial oral
and documentary discovery. Applications are subject to
fairly strict timetables and pre-hearing motions are
discouraged. As a result, these proceedings, excluding any
appeal, are often resolved within two years. However,
pharmaceutical patent notice-of-compliance proceedings
do not finally determine the patent rights of the parties,
which may still be litigated by ordinary action.
Most IP enforcement cases proceed as actions. These
involve an initial exchange of pleadings, extensive
documentary and oral discovery, the exchange of expert
reports and a trial where witnesses give their evidence
before a judge (and, on rare occasions, a jury).
In Canada, the plaintiff has the carriage of the action and
can greatly influence the speed of its progression through
trial. The rules of procedure contain fairly short deadlines
for the completion of pre-trial steps. After ensuring that it
meets its own procedural obligations, a plaintiff can use
these rules to its advantage and force the defendant through
the process, sometimes by seeking court orders compelling
the defendant to do certain things by specific deadlines.
While motions to the court are expensive, they are typically
effective in moving a case along.
In some cases parties attempt to streamline the case
by first trying the issues of liability (the validity and
infringement of the plaintiff’s IP rights), only later to
have discovery and trial on the issue of the nature and
amount of the remedy if required. This bifurcation may
save time in some cases, but not in others.
As a case makes its way to trial, there are many
opportunities for disagreement between the parties. Unlike
some other jurisdictions, in Canadian discovery each party
can decide that certain documents or information in its
possession are irrelevant to the issues in the case and refuse
to produce them, generating significant disputes over the
relevance of documents and information. These must often
be resolved by the court at a motion.
These and other matters of disagreement can
considerably slow a case as the parties wait for a motion
date, its outcome, an appeal date and its outcome. Further,
in many IP cases, examinations for discovery can be
lengthy and their scheduling may require the cooperation
of witnesses and counsel, which is often of crucial
importance to the speed with which a case is determined.
Finally, there is usually considerable delay in securing
a trial date once a case is certified ready for trial.
Depending on the court chosen and the length of the
hearing, trial wait times can exceed two years.
Cost of taking an action through the courts
The costs of an IP case include the filing fees that must
accompany certain court documents, the costs of
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transcripts, photocopying, binding, travel, expert and
witness fees and, most significantly, legal fees.
In Canada, legal fees are typically calculated on a perhour
basis. Depending on experience, expertise and
location, lawyers’ billing rates can range from C$500 to
C$750 per hour for senior counsel and C$180 to C$400
per hour for junior counsel.
In addition, the losing party in a case must expect
to pay at least a portion of the winning party’s reasonable
legal costs. Ordinarily, the losing party will be required
to pay 25 per cent to 40 per cent of the opposing party’s
actual costs. In rare cases where the court finds a punitive
costs award is appropriate, the award can approach full
indemnity for costs.
Most IP cases tried in Canada involve the use of
expert evidence. As with lawyers, the cost of experts may
be considerable and varies from case to case and expert
to expert.
As the costs of IP enforcement actions can vary
widely, it is best to contact Canadian counsel for an
estimate at the outset of the proceeding.
Are the courts specialised for IP matters?
As noted above, IP actions in Canada may be commenced
in either the provincial courts or the Federal Court. In
most instances, the Federal Court is preferred because of
the nationwide effect of its orders (favouring a plaintiff)
and its ability to expunge registrations for copyrights,
trademarks, patents, industrial designs and other IP rights
(favouring a defendant). However, the provincial courts
must be used for trade secret and breach of contract cases.
As IP actions form a significant part of the caseload of
the Federal Court, many Federal Court judges have
expertise in the area. The experience of judges of the
provincial courts with IP cases is more varied.
Pro or anti-IP owners?
Canada has ratified major IP treaties in the fields of
patents and copyright, providing some degree of
uniformity in basic IP rights with other nations.
Canadian courts, particularly the Federal Court, are
regarded as being friendly to rights holders. IP rights are
given a broad and liberal interpretation to support their
validity and to find infringement.
In addition, there is no doctrine of file wrapper
estoppel in Canada and, thus, statements made by an
applicant for IP instruments may not be used to interpret
(ie, limit) the scope of the applicant’s rights once the
instrument issues. Further, the documentary disclosure
requirements, which are lower than those in other
jurisdictions, yield more favourable results for rights
holders, particularly on issues of validity.
Remedies available to rights owners
The remedies that may be available to IP rights holders
for infringement of their rights include:
• temporary and permanent injunctions to prevent
further infringement;
• seizure and destruction of any infringing articles
in the defendant’s possession;
• damages for losses suffered by the rights
holder including, in the case of copyright,
statutory damages;
• as an alternative to compensatory damages, an
accounting of the defendant’s profits earned by
the infringement;
• punitive and exemplary damages; and
• recovery of legal and expert expenses.
Key points to be aware of when enforcing IP rights
When planning to litigate IP rights in Canada, the
potential plaintiff should keep in mind the following:
• Different IP cases are subject to different limitation
periods, which should be discussed with counsel
before proceeding.
• The Canadian courts consider decisions of foreign
courts involving IP rights, but do not simply
adopt them.
• Experimental and other non-commercial work with a
patented article and repair of the article may not
constitute infringement.
• Canadian patent law provides certain exemptions from
infringement for products acquired prior to the issuance
of a patent – counsel should be sought to determine
whether a given activity comes within this exemption.
• Mechanisms exist to bring actions against John or
Jane Doe defendants – upon the commencement of
such a proceeding, third parties can be compelled to
disclose information about their identities in order to
prosecute the proceeding.
• Foreign plaintiffs and those seeking to impeach a
patent, if requested, must post security for the
defendant’s costs as a condition of proceeding in
Canada; the amount of security depends on the costs
expected to be incurred by the defendant and may
often be advanced in stages as the action progresses.
• Oral and written information obtained at discovery may
not be used for any purpose collateral to the Canadian
proceeding without leave of the court; improper use of
such information may constitute contempt of court.
• Sealing (protective) orders of the court seeking to
preserve confidential information of the parties are
often available.
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• There is a specialised IP bar – while general
practitioners may take patent, copyright and
trademark matters, particularly in the provincial
courts, specialised counsel should be considered for
all IP litigation.
Availability of damages and an account of profits
An award of damages to a successful plaintiff in an
IP action is intended to place the plaintiff in the
same position that it would have been in had the
infringement not occurred. Accordingly, a rights holder
can recover the profits it proves it lost to infringement or
can recover damages based upon a calculation of a
reasonable royalty.
Punitive damages awards in IP infringement actions
are rare. The courts will more frequently punish
egregious conduct on the part of an infringer with
recovery of legal expenses on a full indemnity basis.
In Canada, unlike in some other jurisdictions, the
courts can and often are willing to permit an IP rights
holder to elect to claim the profits of an infringer as an
alternative to damages. Only the profits earned that are
causally attributable to the infringement are recoverable.
Availability of interlocutory relief
The most common form of interlocutory relief is an
injunction to prevent infringement until trial. In order to
obtain an interlocutory injunction, the applicant must
satisfy a three-part test.
First, the applicant must demonstrate that its action is
not frivolous and that it raises a serious issue to be
determined. This is a fairly low threshold.
Second, the applicant must establish that the
injunction is not granted it will suffer ‘irreparable harm’,
meaning harm that cannot be quantified in monetary
terms or cannot be cured by an award of damages and a
prohibitory injunction at trial, usually because one party
cannot collect damages from the other. The harm in each
case will be assessed on its particular facts. An injunction
may be granted where a party would otherwise be put
out of business or suffer permanent market loss or
irrevocable damage to its business reputation. However,
as IP cases often involve losses that are primarily
monetary, the difficulty in proving irreparable harm
means that injunctions are infrequently granted.
Finally, if an applicant for an injunction establishes
that it will suffer irreparable harm if the injunction is not
granted, the court will weigh the relative harm that
would be suffered by the parties if an interlocutory
injunction were granted or refused and make a
discretionary determination of where the balance of
convenience lies.
An exception to the difficulties in obtaining
interlocutory injunctions arises in the context of
pharmaceutical patents, where Canadian legislation
gives patent holders the right to an automatic statutory
injunction without having to satisfy the test normally
applicable for the grant of such relief. This enables patent
holders to prevent competitors from entering the market.
Legislation links the regulatory (health and safety)
approval process for pharmaceutical products to
pharmaceutical patent rights and allows patentees to
invoke a 24-month statutory injunction where a generic
competitor compares its product to that of the patent
holder for the purposes of regulatory approval.
Alternatives to litigation
As IP litigation is lengthy and costly, parties may wish to
consider using alternative dispute resolution techniques
to resolve IP disputes.
Mediation and arbitration involve participation by a
neutral third party (often a retired judge or judges)
chosen by the parties to reach a resolution outside the
court system. Mediation involves the third party
acting as a facilitator of consensual discussions and
negotiations, whereas an arbitrator can ultimately
impose a binding resolution upon the parties (with
or without appeal rights). Some Canadian courts
require parties to attempt mediation before proceeding
to trial.
Mediation and arbitration offer procedural flexibility
and reduced costs, permitting the parties to choose their
mediator/adjudicator, set the evidentiary rules and
schedule the steps in the proceeding. Mediation and
arbitration often make it easier for the parties to preserve
a business relationship. However, as IP disputes often
involve claims of market exclusivity, compromise is often
impossible and binding judicial determinations may be
preferred to alternative dispute resolution techniques.
Another means of reducing litigation costs is by
reducing the scope of the issues to be litigated. The Federal
Court can conduct a mini-trial of the case, or a portion of
the case, and render a non-binding opinion as to the
probable outcome of the proceeding. In addition, the court
has the power to sever issues and try them separately.
Recent developments in IP litigation
In the last year some of the most significant
developments in intellectual property in Canada have
involved legislative reform.
Parliament has enacted two bills modifying the
Patent Act to permit drug manufacturers to obtain
compulsory licences for the export of medicines to
African countries, and to permit patentees to correct
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past payments to the Patent Office whose inadequacy
previously invalidated patents.
Parliament is also considering a bill that would
significantly amend the Canadian Copyright Act to ratify
World Intellectual Property Organisation treaties by
extending rights of performers and creators of sound
recordings, introducing rights associated with digital rights
management and technological protection measures, and
creating notice and retention provisions to require internet
hosts, upon request, to inform their users of and retain
information regarding allegations of infringement.
On the judicial front, in one recent case the Supreme
Court of Canada indicated that passive internet service
providers were not liable for copyright infringement
perpetrated by their users. The Supreme Court also held
that digital copyright infringement can take place
whenever the infringement has a “real and substantial
connection” to Canada, whether or not the supplier, host
or receiver of the copyrighted material is located in
Canada. In a second case, the Supreme Court held that
copyright required its material to be the subject of “an
exercise of skill and judgment”, rejecting the lower ‘sweat
of the brow’ and higher ‘creativity standard of originality’
standards. The Supreme Court also established a multifaceted
test to determine whether the fair dealing
exemption from copyright infringement applies.
In a recent Federal Court of Appeal decision, the court
held that internet service providers could be compelled
by copyright holders to provide information about John
and Jane Doe defendant users if they have a genuine
claim and are unable to access the information from
another source. The Federal Court of Appeal also
disapproved of the lower court’s determination that
copyright infringement exemptions would necessarily
apply in the context of downloading or sharing digital
music files through peer-to-peer networks.
In patent law, the Supreme Court of Canada
has recently held that innocent intent is not generally
a defence to patent infringement. Obtaining an
advantage from the patented article, no matter whether
it is precisely the same one intended by the
patentee, constitutes patent infringement, and
possession of a patented article may give rise to a
presumption of infringement.
In pharmaceutical patent law, the Supreme Court
recently held that the prohibition order available to
patentees to prevent generic drug manufacturers
from obtaining marketing approval can be obtained only
to prevent abuse of the patent infringement exemptions
for regulatory and experimental use of the patented
subject matter.
Harry heads the firm’s IP group. He obtained his BComm (1972) and LLB
(1975) from the University of Toronto and his LLM (1976) from the University
of California at Berkeley. He has been a partner since 1987 and
is a member of the firm’s executive committee. In 1999 Harry was named
Canadian IP patent litigator of the year by Managing Intellectual Property.
He has written and spoken extensively on various IP issues, and lectures
in IP law.
Harry B Radomski
Partner, Toronto
Tel +1 416 597 4142
Email hradomski@goodmans.ca
Goodmans LLP
Canada
Richard is a partner in the litigation section. He holds a BEng
from the University of Western Ontario (1987) and an LLB from the
University of Toronto (1991). He joined Goodmans in 1993 and practises IP
and general commercial litigation. Richard is the secretary of the IP section
of the Canadian Bar Association, and sits on several committees of the IP
Institute of Canada. He lectures at the Rotman School of Business on IP
rights and remedies.
Richard E Naiberg
Partner, Toronto
Tel +1 416 597 4247
Email rnaiberg@goodmans.ca
Goodmans LLP
Canada
Miles is an associate in the litigation section. He received his BA (Hons) from
Queen’s University (1998) and his LLB from the University
of Western Ontario (2003). He articled at Goodmans, joining the firm in
2004. Miles practises IP and general commercial litigation. He is a
member of the IP section of the Canadian Bar Association and the
Advocates Society. He is involved in trial and appellate advocacy in the
Ontario and federal courts.
Miles Hastie
Associate, Toronto
Tel +1 416 849 6008
Email mhastie@goodmans.ca
Goodmans LLP
Canada
Building and enforcing intellectual property value 2006 71

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