Canada
Enforcement of intellectual property
Harry B Radomski, Richard E Naiberg and Miles Hastie
Goodmans LLP
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 transcripts, photocopying, binding, travel, expert and witness fees and, most significantly, legal fees.
In Canada, legal fees are typically calculated on a per-hour 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.
• 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 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 multi-faceted 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.
