Patent Litigation 2020

Last Updated February 10, 2020

Canada

Law and Practice

Authors



Smart & Biggar is a dominant force in intellectual property litigation, and widely recognised as Canada’s leading firm for intellectual property law. With offices in five Canadian cities and a national team of more than 25 highly capable trial and appellate counsel, the firm is well-equipped to serve clients across industries. Smart & Biggar has handled many of Canada’s most commercially important and technically complex patent enforcement and infringement cases, applying its deep expertise in IP to develop targeted litigation strategies and numerous courtroom victories. The firm represents clients in related matters involving trade secrets, confidential information, anti-trust and competition law and is skilled in negotiation and ADR. Smart & Biggar litigates in the Provincial Superior Courts and the Federal Court of Canada, and at the highest appellate levels, in both official languages. The firm has represented clients in the Supreme Court of Canada on more than 50 occasions, resulting in leading Canadian precedents and record-setting damages awards.

In Canada, although there are a number of different intellectual property rights that may be applicable to inventions, patents are the primary means by which inventions are protected. The law of patents in Canada has a statutory basis, namely the Canadian Patent Act. However, case law (the prior interpretation of the Patent Act and related regulations by the courts) is also relevant to the scope of protection provided.

In some cases, trade secret protection may be available in Canada for inventions that are not disclosed to the public. Trade secrets are governed by common law in Canadian provinces with the exception of Quebec, where the Civil Code of Quebec applies.

In order to obtain a patent in Canada, an application needs to be filed at the Canadian Intellectual Property Office (CIPO). An application may claim priority based on an earlier-filed Canadian or foreign application under the Paris Convention. Subsequent to filing, an examiner at CIPO will examine the application, upon receipt of a Request for Examination and payment of an examination fee, which can be deferred for up to four years from the date of filing. In the course of the examination, the applicant will have an opportunity to address any concerns raised by the examiner. Once the examiner determines that the application is in condition for allowance, the application may proceed to issue as a patent.

The length of time to obtain a Canadian patent depends on a number of factors, including when an examination is requested, whether examination is expedited, and how many rounds of examination it takes to place a patent application in condition for allowance. 

An inventor does not need to be represented by a patent attorney to obtain a patent. However, due to various unique aspects of Canadian patent law and practice, having a representative can help an inventor maximise the scope of protection obtained.

The minimum government fees to obtain a patent, not including annual maintenance fees, are CAD1,500 for a standard entity or CAD750 for a small entity (one that employs 50 or fewer employees or is a university with certain exceptions). These fees include the filing fee for the application, examination fee and issue fee for the patent.

The term of a Canadian patent is 20 years from its filing date (subject to a possible term extension discussed further in 1.6 Further Protection After Lapse of Maximum Term). 

A patent grants an owner the exclusive right to make, construct, use and sell the subject matter of the patent in Canada. In order to maintain the rights in a patent, the owner must pay annual maintenance fees, discussed further in 1.9 Consequences of Failure to Pay Annual Fees.

Effective from 21 September 2017, a Certificate of Supplementary Protection (CSP) can be obtained for a pharmaceutical product containing a new medicinal ingredient, or a combination thereof, protected by an eligible patent (one that includes a claim for the medicinal ingredient(s) in a pharmaceutical product for which a Notice of Compliance (NOC) has been issued, or a use of the approved medicinal ingredient(s)). There are strict deadlines for filing a CSP application, which may be based on the date of the NOC or the day of patent grant, depending on the circumstances. If the requirements of a CSP are met, the term of the eligible patent can be extended for a period of time calculated by subtracting five years from the period beginning on the filing date of the application for the patent and ending on the day on which the authorisation for sale is issued, for a maximum of two years. 

Third parties can file prior art with CIPO – consisting of patents, applications for patents open to public inspection, and printed publications – at any time during pendency of an application for a patent. A third party who files prior art is required to explain the pertinency of the prior art to the patentability of at least one claim in the application. Third parties have no right of further involvement beyond the original submissions.

If an examiner at CIPO refuses to grant a patent, the applicant may request that the Patent Appeal Board review the application. If the application is refused by the Patent Appeal Board, the applicant can appeal to the Federal Court, which has exclusive jurisdiction to hear and determine appeals. The decision of the Federal Court may be appealed to the Federal Court of Appeal and, with leave, to the Supreme Court of Canada.

Annual maintenance fees are payable from the second anniversary of the filing date of a patent application during prosecution of the application, and after the application issues as a patent.

If the deadline to pay an annual fee is missed, there is a period of grace afterwards to pay the annual fee with a penalty fee. If the annual fee is still not paid after the grace period, a patent application will be abandoned, and an issued patent will be placed in a “deemed expired” state. An abandoned patent application or a patent in a “deemed expired” state may be reinstated only if a “due care” standard is met (CIPO will assess whether the applicant took all measures that a reasonably prudent applicant/patentee should have taken). Moreover, third-party rights arise six months after the deadline to pay an annual fee.

In Canada, patent rights are enforced by way of an action for patent infringement. A patentee and “all persons claiming under the patentee” can bring an action for patent infringement.

The most common mechanism by which a third party may challenge the validity of a patent is an impeachment action pursuant to Section 60(1) of the Patent Act. The Federal Court has exclusive jurisdiction over actions for the impeachment of a patent. An impeachment action may be brought by “any interested party,” which has been defined very broadly by the courts to include any person who is in competition with the patentee, who has been sent a cease-and-desist letter, or who has been otherwise accused of infringing a claim of the patent.

There are also several other quasi-judicial procedures available to challenge the scope of some or all of the claims of a pending application or an issued patent pursuant to the Patent Act. These procedures are discussed in further detail below.

Patent infringement actions can be heard in the first instance in either the Federal Court or the appropriate provincial court. However, in practice, most patent infringement matters are brought to the Federal Court given that court’s national jurisdiction and greater experience in patent matters. Additionally, the Federal Court has exclusive jurisdiction to hear patent impeachment actions. A provincial court can only declare a patent to be invalid as between the parties to the litigation, and this does not result in the patent being expunged from the register.

The Federal Court, as well as each provincial court system, has its own appellate court structure. The Canadian appellate courts are discussed in further detail in 7 Appeal.

There are no specialised bodies or organisations in Canada for resolution of intellectual property disputes. As noted above, a patent infringement action may be heard by the Federal Court or the appropriate provincial court, and only the Federal Court can hear a patent impeachment action. That said, because the Federal Court deals with many intellectual property disputes, many judges of the Federal Court are experienced in this area.

There are no prerequisites to filing a patent infringement lawsuit. For example, there is no requirement to send a formal demand letter or warning letter before filing a lawsuit.

Representation by a lawyer in a patent infringement or impeachment proceeding may be optional, depending on the type of party. A corporation must be represented by a lawyer; on the other hand, an individual may choose to be self-represented. However, given the complexities of Canadian patent law, self-representation is rare.

Preliminary injunctions (referred to as interim or interlocutory injunctions) are available in Canada but not routinely sought in patent actions, and they are rarely granted.

Preliminary injunctions can be sought on an interlocutory motion, which typically proceeds based on an affidavit and other documentary evidence and is heard by a judge. In Canada, a tripartite test must be satisfied for a preliminary injunction to be granted, namely:

  • On the basis of a preliminary assessment on the merits of a case, is there a serious question to be tried?
  • Would the plaintiff suffer irreparable harm if the application is refused?
  • Considering all of the circumstances, does the balance of convenience favour the granting of an injunction?

The second element of the test, namely irreparable harm, has often proved difficult to establish in the context of patent litigation. The term irreparable refers to the nature of the harm itself, as opposed to the magnitude of the harm. It is harm which either cannot be quantified in monetary terms or which cannot be cured, for example, because one party cannot collect damages from the other. In addition, courts have held that evidence of irreparable harm must be clear and non-speculative. In patent proceedings, courts have commented that the irreparable harm element of the test is often difficult to satisfy because in most instances an award of damages could likely adequately compensate for any loss sustained prior to trial.

In terms of protections with respect to preliminary injunctions, since preliminary injunction motions are typically brought and heard inter partes, a defendant has the opportunity to respond to any such motion. In addition, typically, a plaintiff seeking a preliminary injunction is required to provide an undertaking to compensate the defendant for any losses incurred as a result of the injunction in the event the plaintiff is ultimately unsuccessful at trial.

In terms of patent infringement lawsuits generally, a defendant can in some cases protect itself with respect to recovery of legal costs by obtaining an order requiring the plaintiff to post security for the defendant’s costs. Security for costs is available in certain situations, such as where the plaintiff is ordinarily resident outside of Canada or where there is reason to believe that the plaintiff, if unsuccessful, would have insufficient assets in Canada to pay the defendant’s costs. Additionally, a plaintiff in an impeachment action is required to make a deposit into court security for the patentee’s legal costs, although this does not apply if the impeachment action is brought as a counterclaim to an infringement suit relating to the same patent. The initial security typically required in the early stages of a patent proceeding can be within the range of CAD40,000-60,000, or more. Further security for costs may be required as the proceeding progresses to later stages.

The current Patent Act provides a specific limitation period for patent infringement. For patents issued from applications filed on or after 1 October 1989, the Patent Act provides a specific limitation period of six years. Thus, a patentee cannot recover damages or profits for infringing conduct that occurred more than six years prior to the start of the infringement proceeding.

For patents issued from applications filed prior to 1 October 1989, the limitation period is governed by the relevant legislation in the province in which the infringing activities took place. These limitation periods range from two to six years depending on the province.

In a patent infringement proceeding, relevant information and evidence is typically obtained through the discovery process, which includes both documentary and oral discovery.

The first step in the discovery process is for each party to list all documents in its possession, power or control that may be relevant to any issue in the action. All non-privileged documents must be produced to all adverse parties for inspection and copying.

After documentary discovery, each party is permitted to conduct an oral examination of a single representative of each adverse party. The representative must answer any question relevant to any unadmitted allegation of fact contained in the pleadings. The questions must be answered based on the information of the company, not just the personal knowledge of the representative. Accordingly, a representative must make all reasonable enquiries of others within the company to obtain relevant information requested on discovery. The transcript of the examination of an adverse party can be used as evidence at trial.

A party adverse to the patentee is also permitted to examine any assignor of the patent, including the named inventors. Although the transcript of the discovery of an assignor cannot be entered into evidence without leave of the courts, it can be used for the purposes of cross-examination at trial if the assignor is called as a witness.

Oral and documentary discovery of non-parties (ie, a third party) is available, but only permitted by order of the court or on consent. Such orders are difficult to obtain without consent as the requesting party must establish that it cannot obtain the evidence sought from any parties to the action and that it is unfair for the requesting party to proceed to trial without the evidence.

A patent infringement action is commenced by filing and serving a statement of claim.

A statement of claim must set out the material facts that support the action and the relief claimed. In response to the statement of claim, the defendant must serve and file a statement of defence. The plaintiff may respond with a reply.

All the above types of pleadings must contain a concise statement of the material facts on which the party relies, but not the evidence by which those facts are to be proved. If a pleading does not contain sufficient material facts to support the claimed relief, an adverse party may bring a motion to compel further "particulars" of the allegations contained in the pleading. In addition, a party may move to strike all or part of an opposing party’s pleading on various grounds including, for example, that it discloses no reasonable cause of action or defence (as the case may be).

Class actions are permitted in Canada in both the Federal Court and provincial courts. However, class proceedings are not commonly used in a patent litigation context since there is typically no class of persons with common claims. Claims are typically brought by the patent owner or a licensee.

Certain provisions in the Patent Act and the Canadian Competition Act can impose limitations on the assertion of intellectual property rights. However, generally, the patentee’s activities must involve something more than the mere assertion of patent rights. Simply asserting a patent right is, by itself, not considered abusive or anti-competitive conduct.

By way of example, after a patent has been in force for at least three years, any interested person may apply to the Commissioner of Patents alleging that there has been abuse of the exclusive rights granted by the patent, and request relief. There are certain enumerated grounds of abuse in the Patent Act, including where a patent is being used to prevent demand for a product from being met.

Additionally, the Competition Act includes several provisions that can apply to the exercise of a party’s intellectual property rights. Under Section 32 of the Competition Act, the Federal Court may revoke a patent or impose a licence where use has been made of an intellectual property right for certain anti-competitive purposes.

As a further example, the Canadian Competition Tribunal may grant remedies under Section 76 of the Competition Act in cases where a patent is used as part of certain types of improper price fixing schemes.

Also, asserting to a customer of a competitor that the competitor infringes a patent (or another third party) could give rise to liability under Section 7(a) of the Canadian Trademarks Act, and also potentially under Section 52 of the Competition Act, both of which generally prohibit making false or misleading statements tending to discredit the business, goods or services of a competitor. This section can apply, for example, where a statement is made to a competitor’s customer alleging that the competitor has infringed a patent, and the customer acts on those allegations to the competitor’s detriment, but the courts ultimately find that the patent is not infringed or is invalid.

Plaintiffs

A patentee and “all persons claiming under the patentee” may bring an infringement action. A “patentee” is defined in the Patent Act as the person entitled to the benefit of the patent – ie, the owner.

“All persons claiming under the patentee” has been interpreted broadly by the courts and includes exclusive and non-exclusive licensees (including by way of an implied licence). However, the patentee must be made a party to any action for infringement brought by a person claiming under the patentee (either as a plaintiff if the patentee consents, or else as a defendant).

Defendants

The Patent Act provides a patentee with “the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used.” Direct infringers who could be named as defendants are any persons who are making/constructing/using/selling the patented invention in Canada. A patentee can also name as a defendant anyone who has induced or procured the direct infringer to infringe the patent. In some circumstances, corporate directors and officers may also be added as defendants.

Direct Infringement

A patentee has “the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used.” Canadian courts have held that any act in Canada that interferes with, in whole or in part, directly or indirectly, the full enjoyment of the monopoly granted to the patentee during the term of the patent, without the patentee's consent, constitutes an infringement. One who engages in such acts may be referred to as a “direct infringer.”

Indirect Infringement

One may also be liable for “indirect” infringement for inducing or procuring another person to infringe a patent. Three elements are required for a defendant to be found liable for inducing or procuring infringement, namely:

  • an actual act of infringement was completed by a direct infringer – if there is no act of infringement completed by a direct infringer, there cannot be infringement by inducement;
  • the completed act of infringement was influenced by the alleged inducer, to the point where without such influence, infringement by the direct infringer would not otherwise have taken place; and
  • the alleged inducer knowingly exercised the influence, such that the alleged inducer knew that the influence would result in the completion of the act of infringement.

Manufacturing, constructing or selling an article that is used by another in a manner that infringes a patent has been held to be insufficient to establish inducement, even if the vendor has knowledge that the article will be used by the purchaser in the infringing manner.

The scope of protection granted by a Canadian patent is defined by the claims as construed by the courts. 

In Canada, patent claims are construed purposively, not in a purely literal fashion. The key to "purposive" construction is the identification of the particular words or phrases in the claims that describe what an inventor considered to be the "essential" elements of an invention.

To ensure that a patent claim is given an interpretation that "best ensures the attainment of the patent’s objects," it is construed based upon a knowledgeable reading of the whole patent specification (including the claims, description and drawings) through the eyes of a person skilled in the art. The "intention of the inventor" is the objective intention determined from the patent specification.

Historically, reference to extrinsic evidence (such as domestic or foreign file histories) was not admissible for construing the claims of a patent. However, on 13 December 2018, an amendment to the Patent Act came into force, which allows written communications made between the patentee and the Patent Office during the prosecution of the Canadian patent application to be admitted into evidence, to rebut representations made by the patentee in the action as to the construction of a claim in the patent. In extraordinary circumstances, the prosecution history of a corresponding foreign application may also be admissible for this purpose if the applicant relied on it during prosecution of the Canadian application.

Defences against infringement include the following:

Non-infringement

A defendant typically pleads that its activities do not infringe the claims as properly construed.

Invalidity

In a patent infringement proceeding, in addition to alleging non-infringement, a defendant will typically attack the validity of the asserted claims of the patent.

Research Exemption

Use of a patented invention in the course of not-for-profit experiments to determine if the patented article can be manufactured in accordance with the patent or improved upon has been held not to constitute infringement.

Regulatory Use Exception

Section 55.2(1) of the Patent Act provides that it is not an infringement to make, construct, use or sell a patented invention solely for uses reasonably related to the development and submission of information required under any law of Canada or any other country that regulates the manufacture, construction, use or sale of the product. This includes activity related to compliance with the Canadian Food and Drug Regulations, including obtaining a Notice of Compliance (NOC) from the Minister of National Health and Welfare for the sale of a pharmaceutical product in Canada, or a similar government approval elsewhere.

Canadian courts have applied this exemption to the manufacture or use of all samples of a patented product prepared for the purposes set out in Section 55.2(1), irrespective of whether or not the samples are ultimately referenced in any submissions. However, Section 55.2(1) requires that the impugned activity be “solely” for uses reasonably related to the development and submission of information required under law. Thus, if the impugned activity is also used for other purposes, the exemption in Section 55.2(1) may not apply.

Licence

A valid licence granted by the patentee to the defendant to engage in the acts alleged to infringe the patent is a complete defence to an allegation of infringement. The courts will interpret any relevant agreement between the parties to determine if it provides the defendant with a licence to engage in the allegedly infringing activities. If it is found that the activities fall within the scope of the licence and that the defendant has complied with all terms of the licence, then the licence will be an absolute defence.

Private Prior Use

Under Section 56 of the Patent Act, any person who, before the relevant date, has purchased, constructed or acquired the subject matter defined by the claim of a patent, is permitted to use and sell to others the specific article, machine, manufacture or composition of matter so purchased, constructed or acquired, without being liable to the patentee. This exception only applies to the "specific article, machine, manufacture or composition of matter" previously purchased, constructed or acquired (note that a “process” is not included in this provision). However, the right to “use” includes the right to use any form of the invention, including the right to use and sell things produced with or by the specific article. The onus lies on the person relying on the exemption to prove the necessary facts.

Exhaustion

The sale of a patented article to a purchaser is presumed to give the purchaser an implied licence to use, sell or deal with the patented article as he or she pleases. Any restrictive conditions that the patentee wishes to impose upon a purchaser must be brought to the attention of the purchaser when the patented article is acquired. Thus, unless expressly stipulated to the contrary, the licensee (purchaser) is able to pass to subsequent purchasers the right to use, sell or deal with the patented article without liability to the patentee.

Limitation

In certain circumstances where the patentee has delayed asserting its rights, a defendant may also be able to assert defences based on limitation periods, acquiescence or laches.

In Canadian patent proceedings, each party typically submits expert evidence. The role of an expert is to provide assistance to the courts through an independent and unbiased opinion on matters within the scope of their expertise. If a party intends to call an expert witness to give evidence at trial, the party is required to produce an expert report setting out that evidence in advance of trial. Typically, an expert report is provided by way of an affidavit signed by the expert. Generally speaking, the trial is the first opportunity for a party to cross-examine an expert, as there is no pre-trial discovery of an expert witness in Canada.

There are procedures available in Canada that permit the determination of a legal question in advance of trial in some circumstances. However, to date such procedures have not successfully been used so as to have the court construe patent claims prior to trial. Thus, patent claim construction issues are determined at trial at the same time as other issues, such as infringement and validity.

Remedies available for revocation or cancellation of an intellectual property right in Canada include:

Impeachment Action

As discussed previously, the most common mechanism by which a third party may challenge the validity of a patent is an impeachment action pursuant to Section 60(1) of the Patent Act. In an impeachment action, the validity of a patent may be challenged on a number of different grounds, including anticipation, obviousness, non-patentable subject matter, inutility and double patenting. It is also possible to challenge the validity of a patent on a number of other technical grounds including the alleged insufficiency of disclosure, claims broader than the invention made or disclosed, ambiguous disclosure or claims, and wilful material misstatements.

Re-examination

There is also a procedure available to have a patent re-examined by the Patent Office. Pursuant to Section 48.1 of the Patent Act, any person (patentee or third party) may request a re-examination of any claim of an issued patent by filing prior art with the Commissioner of Patents. The request for re-examination must also include written submissions setting forth the pertinence of the prior art and the manner of applying the prior art to the claims in issue. Given a third-party’s limited right of participation in the process and the limited right of appeal against a decision of the Patent Office on a re-examination question, this provision is seldom used by third parties.

Abuse of Patents

As discussed previously, pursuant to Sections 65 and 66 of the Patent Act, the Attorney General or any interested person can apply to the Commissioner of Patents to allege an abuse by the patentee of the exclusive rights granted by the patent. The Commissioner may choose to grant a compulsory licence, or may revoke the patent altogether, if it is determined that the patent is being abused. However, historically, Sections 65 and 66 have not been relied upon to any great extent in Canada. In addition, many of the grounds upon which the Commissioner could deem that a patent was being abused were repealed, effective 1 October 1996.

In an impeachment action, the court may find that some claims of the patent are invalid, while other claims are valid and therefore remain in force.

Similarly, in a re-examination proceeding, the re-examination board of the Patent Office may conclude that some claims of the patent are unpatentable, while other claims are patentable and therefore remain in force.

Amendments to a patent are possible in re-examination proceedings. In a re-examination, an amendment may be made if the patentee proposes an amendment and the re-examination board determines that such an amendment is patentable. Amendments can only narrow, not enlarge, the scope of the claims.

In an impeachment action, there is no opportunity for the patentee to amend the claims.

An impeachment action can be brought as a counterclaim in an infringement action, in which case it would be heard together with the infringement action.

A re-examination is not heard at the same time as an infringement proceeding. Re-examination proceedings are heard by a re-examination board while infringement proceedings are brought either in the Federal Court or a provincial court. However, the Federal Court has held that it has the power to stay a re-examination proceeding when it is in the interest of justice to do so in view of an ongoing infringement proceeding.

In a patent infringement proceeding, the standard procedural rules of the court in which the proceeding is brought apply. The steps typically include pleadings, discovery, exchange of expert reports and trial. The Federal Court has several procedures available that can shorten or streamline intellectual property proceedings, including:

Summary Procedures

Litigants may seek to pursue a summary trial or summary judgment where there is no genuine issue to be decided at trial; where the only genuine issues for trial is a question of law; or where any genuine issue is suitable to be determined by summary trial.

Case Management

The Federal Court has also implemented proactive case management for certain types of intellectual property litigation relating to pharmaceuticals. In other cases, case management may be requested by a party or implemented at the court’s own initiative. Case management is a procedure whereby a judge is appointed to oversee and manage the procedural aspects of the case so as to expedite the proceedings, clear court backlogs and promote settlement.

Expedited Trial Dates

Pursuant to a 2009 Practice Notice, at any point in a case-managed proceeding, a party may request that a trial date be assigned. Where a party requests a trial date early in the action, the courts will endeavour to have the action tried within two years of its commencement.

Bifurcation of Quantification Issues

In patent cases, parties often agree to sever or "bifurcate" issues of damages or accounting of the defendant’s profits from the trial of the issues of liability (infringement and validity). This results in determination of these issues being deferred to a separate proceeding following the liability trial, if necessary. The postponement of these issues can reduce the complexity and expense of the initial discoveries and trial, and can delay the disclosure of potentially confidential business information (ie, revenues and expenses). Indeed, these issues will not have to be explored at all if the plaintiff is unsuccessful in establishing liability at the initial trial.

Patent infringement actions in the Federal Court are heard by a judge alone, not by jury. The Federal Court is a single court, in which any of the court’s judges may preside over a matter anywhere in the country. The parties typically do not learn the identity of the trial judge until a few months before trial and have no influence over who is appointed.

The parties are free to settle the case at any stage. In the Federal Court, there are also several procedures intended to promote settlement. Parties to litigation are required to discuss possible settlement within 60 days after the close of pleadings. Furthermore, prior to obtaining a trial date, a pre-trial conference must be held with a court that typically includes an attempt to settle or narrow the issues for trial. Moreover, a dispute resolution conference may be conducted by order of the court. A dispute resolution conference can take the form of mediation, a neutral evaluation of the proceeding or mini-trial. Overall, the Federal Court is proactive in encouraging settlement discussions or other alternative dispute resolution procedures, including volunteering its own services as a mediator/arbitrator. Most provincial court systems in Canada have also adopted similar systems of case management and alternative dispute resolution.

Stays of proceedings may be granted in some circumstances; for example, where there are concurrent duplicative court proceedings between the same parties, such as an infringement action in a provincial court and an impeachment action on the same patent between the same parties in the Federal Court. The Federal Court has also granted stays of re-examinations before the Patent Office commenced during the course of ongoing litigation in the Federal Court relating to the same patent.

There are a number of remedies available to a patentee who is successful in an action for infringement, including:

Monetary Remedies

In Canada, an infringer of a patent is liable for any damages sustained by the patentee by reason of the infringement. A patentee has a statutory right to an award of damages. Alternatively, a patentee may be permitted to elect an account of the defendant’s profits made as a result of the infringing activity. The decision to award the patentee the option to elect an accounting of profits is at the discretion of the court.

Damages are calculated based on the principle of restoration, namely, to restore the patentee to the position it would have been in had the infringement not occurred. The jurisprudence has established two measures of damages, namely the plaintiff’s lost profits from lost sales as a result of the infringement, or a reasonable royalty for use of the patented invention. In contrast, an accounting of the defendant’s profits is based on the profits made by the infringer through infringing the patent.

A patentee is also entitled to reasonable compensation for any damages, sustained as a result of acts between the date the patent application became open to public inspection and the date of the grant of the patent, that would have constituted an infringement if the patent had been granted. While there may be other measures, reasonable compensation awards to date have typically been based on a “reasonable royalty.”

Generally, both pre-judgment and post-judgment interest is also awarded on monetary awards by Canadian courts.

Punitive or Exemplary Damages

Punitive or exemplary damages can be awarded in exceptional circumstances, namely for high-handed, malicious, arbitrary or highly reprehensible conduct by a defendant that departs to a marked degree from ordinary standards of decent behaviour.

In Canada, there is no multiple applied to damages on the basis of wilful infringement. In addition, knowingly infringing a patent, by itself, is typically insufficient for entitlement to punitive or exemplary damages.

Permanent Injunction and Delivery or Destruction of Infringing Articles

Although a successful patentee is typically awarded a permanent injunction restraining a defendant from future infringing activities, an injunction is an equitable remedy and is thus subject to the discretion of the court.

A successful patentee may also be awarded an order requiring the defendant to destroy or deliver to the patentee all infringing articles in its possession.

Costs

A successful plaintiff is typically awarded its legal costs, which consist of a partial indemnity for its attorneys' fees and recovery of all reasonable disbursements. In the Federal Court, the fee element is calculated with reference to a tariff. The Federal Court can also award a lump sum instead of basing the fee award on the tariff, which it prefers to do in some circumstances. In exceptional circumstances, full indemnity for attorneys' fees (often referred to as “solicitor-client costs”) may be awarded.

The court may consider any factors it deems relevant in determining costs; the quantum of costs is a discretionary decision. Factors that may be considered by the court include, inter alia: the result of the proceeding; the amounts claimed and recovered; the importance and complexity of the issues; any apportionment of liability; any written offer of settlement; the amount of work; and the conduct of the parties.

A successful defendant will typically be awarded its costs on a partial indemnity basis, similar to that described in 6.1 Remedies for the Patentee, in respect of a successful plaintiff.

The types of remedies available are described in 6.1 Remedies for the Patentee.

There is no automatic stay of a permanent injunction pending an appeal. Stays of injunction are obtained in the same manner as preliminary injunctions and are subject to the same tripartite test discussed in 2.7 Interim Injunctions. Accordingly, although stays have been granted in some circumstances, they are typically difficult to obtain.

As discussed in previous sections, the Federal Court and each provincial court system has its own appellate court structure.

There are no special appellate procedures for intellectual property proceedings. Appeals from both interlocutory and final orders of the Federal Court are available as of right to the Federal Court of Appeal. Appeals from final orders of the provincial superior courts can be appealed to the provincial courts of appeal, though leave to appeal is sometimes required in order to appeal interlocutory orders.

Appeals from the Federal Court of Appeal and provincial appellate courts are heard by the Supreme Court of Canada, only with leave of the Supreme Court.

On appeal from a patent infringement decision of a trial-level court, an appellate court will review the trial court’s findings of law for correctness, but will give deference to the trial judge’s factual findings. An appellate court will only interfere with the trial judge’s findings of fact if it finds that the trial judge made a “palpable and overriding error” – a difficult proposition to establish. Questions of mixed fact and law (ie, the judge’s application of the law to the facts) are also reviewed on the “palpable and overriding error” standard of review, unless there is an extricable issue of law (ie, the way in which the law was applied by the judge implies he or she must have made a legal error), which would be reviewed for correctness.

Costs that may arise before the filing of a lawsuit include the legal fees associated with factual investigations; analysing patent infringement and validity issues; and sending or responding to any cease-and-desist letters. Legal costs incurred before the filing of a lawsuit are generally not recoverable from the opposing party.

The fee for commencing a Federal or Provincial court action is a fixed fee, payable upon filing a statement of claim to commence an action. The fee does not depend on the number of patents, patent claims or defendants included in the statement of claim. As of 2020, the fee for issuance of a statement of claim in the Federal Court is CAD150. Additional court fees are payable for certain other steps in an action.

As discussed above, in 6.1 Remedies for the Patentee, the costs of litigation subsequent to the filing of the lawsuit are typically paid by the losing party. However, the courts have full discretionary power over the award of costs of a legal proceeding. Generally, a successful litigant (be it the plaintiff or the defendant) is typically awarded its costs which consist of a portion of its attorneys' fees (usually based on a tariff or schedule of allowable fees contained in the applicable court rules or based on a lump sum) and full reimbursement for all reasonable disbursements (including, for example, expert fees). In exceptional circumstances, full indemnity for actual legal costs (solicitor-client costs) incurred in the course of litigation may be awarded.

In some circumstances, alternative dispute resolution (ADR) can be an alternative to litigation. ADR may be elected by the parties, stipulated in an agreement governing the parties’ relationship, or required by court rules or by a judge (such as in a dispute resolution conference as set out in the Federal Courts Rules). There are many ADR processes available to parties, including negotiation and mediation; binding and non-binding arbitration; and mediation-arbitration (which is a hybrid of both).

In the Federal Court, most dispute-resolution conferences are conducted as mediations, and take place within the context of case management. They are usually carried out with the case-management judge as the mediator, although third-party mediators are also common.

The rights to a patent for an invention are assignable, including prior to the filing of a patent application; while the patent application is pending; and after the issuance of a patent. Assignment of the rights of a patentee can be made either in whole or in part. To be valid, an assignment must be in writing.

An assignment of a patent application may be registered with the Patent Office. Once such an assignment is registered, the application cannot thereafter be withdrawn without the written consent of the assignee(s).

Registration of an assignment of a patent is governed by Section 50(2) of the Patent Act which provides that "every assignment of a patent, and every grant and conveyance of any exclusive right to make and use and to grant to others the right to make and use the invention patented, within and through Canada or any part thereof shall be registered in the Patent Office."

Registration of an assignment in Canada provides priority in title. In particular, Section 51 of the Patent Act provides that an assignment is void against any subsequent assignee unless the assignment is registered before the registration of the instrument under which the subsequent assignee claims. That said, Canadian courts have held that other than the priority set out in Section 51, there is no indication that failure to register renders the assignment void for any other purpose.

An assignment is an agreement negotiated between the patentee and the assignee. Subject to the requirements above, the parties are free to determine the terms of the assignment.

A Canadian patent may be licensed by way of a voluntary licence negotiated between a patentee and a licensee. There are typically three types of voluntary licences which can be granted in respect of Canadian patents, namely:

  • an exclusive licence – the licensee is given the exclusive right to work the invention in Canada, including to the exclusion of the licensor;
  • a sole licence – the licensor undertakes not to grant any other licences but retains the right to work the invention; and
  • a non-exclusive licence – the licensor may grant licences to work the invention to multiple third parties and in addition may also work the invention itself.

Where a patent is owned by more than one patentee, the consent of each co-owner is required for a licence. A licence granted in the absence of the consent of all the co-owners is invalid.

A voluntary licence to a Canadian patent does not have to be in writing to be valid and thus can either be express or implied. Where no express licence exists, each case is considered on its facts to determine whether an implied licence exists. Canadian courts have implied the existence of a licence from a corporate relationship and the actions of the parties. However, the mere existence of a parent-subsidiary relationship does not necessarily constitute sufficient evidence of a licence.

Section 50(2) of the Patent Act requires that any grant or conveyance of an exclusive right in the patented invention be registered. Although this provision has been interpreted to extend to an exclusive licence, the failure to register the licence is not fatal. Canadian courts have held that failing to register an exclusive licence alone does not render the licence void, since the purpose of registration is to establish priority between different persons who allege to hold an exclusive right in the same patent. There is no requirement to register a non-exclusive licence, though the licensee may choose to do so.

A licence agreement defines the relationship between the licensor and the licensee and is negotiated by the parties. As such, subject to the limitations set out in 10.3 Requirements for Restrictions to License an Intellectual Property Right, the parties are free to determine the terms of the licence.

Smart & Biggar

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Ottawa ON K1P 5Y6
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Smart & Biggar is a dominant force in intellectual property litigation, and widely recognised as Canada’s leading firm for intellectual property law. With offices in five Canadian cities and a national team of more than 25 highly capable trial and appellate counsel, the firm is well-equipped to serve clients across industries. Smart & Biggar has handled many of Canada’s most commercially important and technically complex patent enforcement and infringement cases, applying its deep expertise in IP to develop targeted litigation strategies and numerous courtroom victories. The firm represents clients in related matters involving trade secrets, confidential information, anti-trust and competition law and is skilled in negotiation and ADR. Smart & Biggar litigates in the Provincial Superior Courts and the Federal Court of Canada, and at the highest appellate levels, in both official languages. The firm has represented clients in the Supreme Court of Canada on more than 50 occasions, resulting in leading Canadian precedents and record-setting damages awards.

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