Answer ... Damages: Damages are available to a successful plaintiff patentee. Generally, damages are meant to be compensatory: they are intended to place the aggrieved party in the position it would have been in but for the wrongdoing. Quantification of damages occurs during the main trial on infringement and validity if the action has not been bifurcated. If the action has been bifurcated, a separate trial will be held just for damages quantification for the successful plaintiff patentee; though most often, a judgment on infringement and validity that is in favour of the plaintiff patentee will lead to a negotiated settlement on compensation.
Where patent infringement has been established, the infringer “is liable to the patentee and to all persons claiming under the patentee for all damage sustained by the patentee or by any such person, after the grant of the patent, by reason of the infringement”. Such “persons claiming under the patentee” comprise exclusive licensees, non-exclusive licensees, sole licensees and purchasers and lessees of the patented product. A party need only establish that it has rights under the patent in order to qualify as such a person. Typically, damages take the form of:
- lost profits of a patentee or licensee with respect to the sales that the patentee or licensee would have captured but for the presence of the infringer on the market; and
- a reasonable royalty for sales that the patentee or licensee cannot prove it would have captured.
The right to elect between damages and an accounting of profits rests with the patentee, not the infringer; although this election is subject to the court’s discretion in relation to entitlement (or lack thereof) to equitable remedies.
In 2015, the Federal Court of Appeal opened the door to considering non-infringing alternatives (NIAs) when calculating a patentee’s damages for infringement. The court described the test as a “could and would” requirement, whereby the infringing party would be required to prove that it both could and would have used an NIA before such a consideration is taken into account in assessing damages. A legitimate NIA must be non-infringing and must be “objectively and economically viable substitute at the relevant time”.
Accounting of an infringer’s profits: Instead of (not in addition to) claiming damages, a successful patentee may elect for an accounting of the infringer’s profits. Although there is a statutory reference to the concept of an accounting of profits, this is an equitable remedy that requires the court to exercise discretion. To invoke the court’s equitable powers, the patentee must come to the court with ‘clean hands’ – that is, it must not have acted in bad faith or unethically with respect to the matters in dispute; although the patentee need not have lived a blameless life either. An accounting of profits is calculated based on a differential profit approach – that is, the infringer’s profits attributable to the invention are compared to the infringer’s profits assuming the best non-infringing alternative was used. In Monsanto v Schmeiser, the patentee established patent infringement and elected an accounting of profits. Because it was found that the infringer made no profits as a result of the invention, the patentee was not awarded any monetary compensation. In Nova Chemicals Corp v Dow Chemical Co, the patentee was awarded approximately C$650 million. In that case, the Supreme Court of Canada clarified that under the differential profit approach, the court is to determine whether there is a suitable NIA; and if there is, the profits not causally attributable to the patented invention (ie, the profits arising from the NIA) are subtracted from the infringer’s overall profits.
Reasonable compensation for pre-grant infringement: In addition to recovering either damages or infringer’s profits, the infringer is liable to pay reasonable compensation to the patentee and to all persons claiming under the patentee for any act by the infringer, which occurred between the date of publication of the application for the patent and the date of grant of the patent, which would have constituted patent infringement if the patent had been granted on the date of publication. ‘Reasonable compensation’ in this regard is akin to a reasonable royalty.
Costs and security for costs: In Canada, awards of costs are frequently granted in favour of the successful party. Such costs awards usually amount to:
- roughly 20% to 30% of a party’s actual legal (attorneys’) fees; and
- all of a party’s actual (subject to reasonableness) disbursements (including experts’ fees).
The portion (20% to 30%) related to a party’s actual legal fees can be doubled by the court where the successful party serves an offer to settle that the party eventually ‘beats’; but the doubling is limited to legal fees beginning from the date of the offer to settle.
In addition to costs being awarded to the successful party at the conclusion of litigation, plaintiffs must post security for costs if:
- they are foreign based; or
- they have insufficient assets in Canada to satisfy any eventual award of costs against them.
Typically, security is posted by a plaintiff paying cash into court. Amounts may vary significantly depending on the complexity of a case and will range from an initial amount in the low five-figure range to an amount covering the entirety of the litigation that is in the mid-to-high six-figure range.