On August 17, 2023, the Federal Court issued its decision in Angelcare Canada Inc. et al. v Munchkin Inc. et al. (2023 FC 1111) regarding the Plaintiffs' entitlement to certain remedies for patent infringement. This decision follows a judgment issued on April 20, 2022, as amended on June 24, 2022, which found that the Defendants Munchkin, Inc. and Munchkin Baby Canada Ltd (the "Defendants" or "Munchkin") infringed numerous valid patents owned by the Plaintiffs for their diaper disposal system sold under the "Diaper Genie" brand name.
This decision provides clarification for rights holders on their entitlement to injunctive relief when the infringing products are no longer sold on the Canadian market as well as on their ability to claim remedies where there have been multiple corporate rearrangements and the patents in suit are subject to assignments and licenses. The decision also reiterates the applicable tests on entitlement to different types of monetary compensations.
The Plaintiffs were successfully represented by Smart & Biggar litigators François Guay, Guillaume Lavoie Ste-Marie and Denise Felsztyna.
Background
The Plaintiffs Angelcare Canada Inc., Edgewell Personal Care Canada ULC and Playtex Products LLC (the "Plaintiffs" or "Angelcare") commercialize the well-known Diaper Genie diaper disposal system in Canada, which involves a reusable diaper pail and a disposable refill that contains the bag used by the system. A number of patents cover the Diaper Genie system, including the pail, the refills, or their combination. The Plaintiffs, at one point or another, have owned or been licensed to use the patents.
In 2012, Munchkin began selling refills specifically designed to be compatible with the Diaper Genie system. Over time, Munchkin sold four different generations of refills, and eventually its own diaper pail system compatible with its refills.
In the judgment on liability and validity, the Federal Court ruled in favour of the Plaintiffs, confirming that the Defendants' first three refill models directly infringe multiple of the asserted claims, and that all four refill models infringe additional claims when combined with the Plaintiffs' and/or of the Defendants' pails.
The issue of entitlement to remedies was dealt with separately. Munchkin opposed the issuance of an injunction against its first three generations of refills, as they had been discontinued on the Canadian market. Munchkin also objected to the Plaintiffs' entitlement to elect between damages and an accounting of profits, to their entitlement to punitive damages, and to the standing of certain Plaintiffs for certain remedies.
On August 17, 2023, the Federal Court ruled that all Plaintiffs, either as patentees or persons claiming under the patentee, were entitled to injunctive relief against Munchkin's first three refill models and to elect between an accounting of profits and damages.
Key findings
Entitlement to injunctive relief
The Court reiterated that a permanent injunction is a natural remedy available under s. 57 of the Patent Act, and that barring any equitable reasons, it should be granted. In this case, the Court found no equitable reasons that would justify not granting the requested injunction. The Court concluded that the lack of imminent infringement did not support the Defendants' arguments, and on the contrary, weighed against them. Since the Defendants purportedly had no intent of commercializing the impugned products in Canada, they should not be concerned with an injunction being issued until the expiration of the patents. Finally, the Court highlighted that, unlike monetary compensation, which compensates for past infringement, injunctions are forward-looking and act as a moral hazard to prevent future infringement. This would, for example, allow the Plaintiffs to proceed by way of contempt of Court if the Defendants were to resume their infringing activities in Canada.
Entitlement to an accounting of profits
The Plaintiffs requested to have the choice to elect between claiming damages, i.e., the loss they sustained as a result of the infringement, and profits, i.e., the profits earned by the Defendants as a result of the infringement.
Following an extensive review of the jurisprudence, the Court reiterated that an accounting of profits is an equitable remedy to which the successful party is not automatically entitled. However, in the absence of compelling reasons, such as the lack of "clean hands", undue delay by the plaintiff in commencing or prosecuting the proceedings, or complexity, the Court should not deny that option.
In this case, the Defendants focused primarily on their perceived complexity of the accounting of profits exercise. While the Court agreed that this matter was complex (six patents-in-suit, 117 claims, four generations of cassettes, multiple combinations of cassettes and diaper pails, etc.), it concluded that these complexities were not shown to translate into any difficulties with allowing an accounting of profits. In this regard, the Court rejected the contention that asserting rights to multiple patents, especially where the Plaintiffs were successful, could lead to a finding of misconduct by the patentee that would prevent the election of an accounting of profits.
On this basis, the Court ruled that the Plaintiffs are entitled to elect between an accounting of profits and damages.
Entitlement amongst the Plaintiffs – the "persons claiming under the patentee"
The Plaintiffs were subject to multiple corporate reorganizations and acquisitions. They have, over the years, practiced the patents' inventions either directly, through predecessors, in collaboration with one another or by themselves. Given these circumstances, the Defendants argued that certain Plaintiffs lacked standing to be entitled to remedies for various periods of time. The Court disagreed and found that all Plaintiffs were entitled, either as patentees or persons claiming under the patentees, to remedies for all relevant periods.
The cornerstone of the Court's decision was s. 55 of the Patent Act, which provides that both the patentee and "persons claiming under the patentee" can seek remedies for patent infringement. In reviewing the relevant jurisprudence, the Court confirmed that a "person claiming under a patentee" must be broadly interpreted: it refers to any person that derives its rights to use the patented invention, at whatever degree, from the patentee, no matter what technical means may have been used. In practice, this includes a user, assignee, lessee, or licensee of any type of license (written, oral, implied, exclusive, non-exclusive, etc.), whose rights can be traced back to the patentee. Evidence of a business relationship between parties may be used to demonstrate a claim to a patent.
Relying on these findings, the Court concluded that all Plaintiffs were entitled to remedies either as patentees or persons claiming under the patentees for all relevant periods, as the Plaintiffs had been at different times owners or licensees of the asserted patents. The Court confirmed that the fact that the licenses were not always in writing did not bar the licensee from being considered as a person claiming under the patentee, as the law does not require a written instrument. In this case, the Court concluded that the three Plaintiffs' business relationship led to a joint effort towards a shared goal, which included practicing the asserted patents, and that they worked in unison in the litigation, being represented by the same counsel.
Concluding remarks
In this decision, the Federal Court provides a clear and accurate reiteration of the applicable considerations in assessing entitlement to remedies, specifically entitlement to injunctive relief targeting discontinued or prior generations of an infringing product, entitlement to elect between various types of monetary compensations, and the standing of different rights holders in the context of complex corporate reorganizations and business activities in relation to the protected inventions. This decision serves to further reinforce patent owners' rights and provides clarity and stability in what parties can expect in patent litigation before the Federal Court in an otherwise ruthless and competitive consumer-products industry.
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