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A New High Water Mark in the Awarding of Damages

June 12, 2012

The Federal Court recently held in the Eurocopter v. Bell Helicopter1 that punitive damages can be awarded in relatively run-of-the-mill patent cases in Canada. The punitive damages holding is all the more remarkable given that none of the claims of the patent were held infringed by the defendant’s actual production design.

The defendant, Bell Helicopter, had developed a first design for a “moustache” landing gear for a helicopter. Upon receiving the Plaintiff Eurocopter’s statement of claim, Bell Helicopter redesigned the landing gear to a second design that was used in production. Although 21 units of the first design had been built by Bell Helicopter, those units were quarantined. None was ever delivered to a customer. The only units delivered to customers were units built according to the production design.

The earlier design was held to infringe. Although none of these units were ever sold or delivered, nonetheless, the court awarded punitive damages.

Under existing governing Supreme Court of Canada precedent:

Punitive damages may be awarded in situations where the defendant’s misconduct is so malicious, oppressive and high-handed that it offends the court’s sense of decency. Punitive damages bear no relation to what the plaintiff should receive by way of compensation. Their aim is not to compensate the plaintiff but rather to punish the defendant. It is the means by which the jury or judge expresses its outrage at the egregious conduct of the defendant.2

Punitive damages may be awarded where:

(a) ... there is a patent infringement and a willful breach of injunction following that ...3

(b) The defendant “may have intentionally hidden the fact that they were infringing the patent.

In this case, the court determined that Bell Helicopter had been wilfully blind as to the existence of the Eurocopter design and patent rights Eurocopter might have in that design. The court relied upon a “knew or should have known” standard in respect of the original design, and drew negative inferences on the basis of witnesses not called by the defendant, and privileged opinions not produced by the defendant. From these negative inferences the court held that “on the balance of probability, the Court finds that there is clear evidence of bad faith and egregious conduct on the part of Bell.” This appears to be a sharp divergence from previous case law.

The court also characterised some of the testimony given on behalf of the defendant, as “far from candid”4. It is not clear why this issue could not have been appropriately addressed by an appropriate award of costs. Punishment is not the job of the Patent Act. To award punitive damages of capricious size and scope, potentially far beyond the statutory penalties for perjury and contempt of court, without the protections of the criminal law, as an arbitrary penalty for suspected perjury, has not heretofore been the law in Canada.

While this is a decision of the Federal Court, it is hoped that the fact situation is unique and that lower courts will not start awarding punitive damages for patent infringement.

Ken Bousfield, B.A.Sc. (Mech. Eng.), LL.B., is a partner in Bereskin & Parr LLP's Mechanical & Industrial Processes practice group. Ken can be reached in Toronto at 416.957.1650 or kbousfield@bereskinparr.com.


1 Eurocopter v. Bell Helicopter 2012 FC 113
2 Hill v. Church of Scientology of Toronto (1995), 2 SCR 1130, at para. [196].
3 Lubrizol Corp. v. Imperial Oil Ltd. (1996), 67 CPR (3d) 1 (FCA), at 20.
4 p. 137, para. [428]

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