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IP Litigation 2020 Year in Review

January 28, 2021

By Bruna Kalinoski, Adam Bobker and Scott MacKendrick

A flurry of jurisprudential developments marked 2020 as a significant year in Intellectual Property litigation. The Federal Court of Appeal settled the law on some crucial issues that have longed for legal certainty (e.g., the criteria for prior art to be citable for obviousness), and pivoted from established law on other issues (e.g., jurisdiction and accounting of profits assessment). Numerous rulings at the trial level also feature interesting interpretations of legal points which forecast a lively 2021 with important ramifications to be monitored.

Keep on reading our recapitulation of 10 key legal topics that were discussed in the case law during 2020 to stay abreast of the emerging legal trends affecting the IP litigation landscape in 2021 and beyond.

 

1. Jurisdiction

In SALT Canada, the Federal Court of Appeal held that a determination of patent ownership that hinges upon the application and interpretation of contract law principles was within the Federal Court’s jurisdiction.1 The guiding authority on this issue had been that the Federal Court lacks jurisdiction if the matter relates primarily to contract law, even if the central question is one of patent title. This has now been reversed as the court found that law “not binding on [the] Court” and “incorrectly decided.”2 Justice Stratas’ reasoned that the Federal Court’s jurisdiction derives from s. 52 of the Patent Act, which provides that the “Federal Court has jurisdiction…to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” Since the application before the Court in SALT Canada sought just that, he held that the Federal Court ought to have jurisdiction.

Early this year in McCain Foods Limited v. JR Simplot Company,3 the Federal Court of Appeal had another opportunity to comment on the extent to which the Federal Court has the jurisdiction to decide contractual issues arising in the context of a patent matter. In a patent infringement action, the defendant was alleged to have infringed the plaintiff’s patent and was not permitted to bring a third-party claim against its supplier for indemnification. The Court held that it had no jurisdiction to adjudicate the indemnity issue. It was not enough that the indemnity claim was connected to a claim for patent infringement. The essential nature of the indemnity claim was held to be a claim in contract. The Patent Act was not directly relevant to the third-party claim.4

 

2. Summary Judgment & Default Judgment Motions

Our 2019 Litigation Year in Review discussed whether summary determination of patent infringement claims following Canmar5 was a trend for a day or here to stay. This year, the Federal Court has seen increased attempts by litigants to resolve matters more expeditiously by way of dispositive motions. Summary judgment was granted in three cases6 and two motions for default judgment were brought but dismissed based on insufficient evidence.7 Notably, in ViiV Healthcare Company v. Gilead Sciences Canada,8 the Court held that completion of discoveries is not a precondition to summary trial such that resolution may be sought at very early stages of the proceeding.

We saw the Federal Court grant summary disposition to (a) dispose of claim construction argument,9 (b) hold a patent invalid for obviousness,10 and (c) dispose of a patent infringement action recognizing that the infringing product did not fall within the scope of the asserted claims.11

 

3. Experts & Claim Construction

  1. Experts

In 2020, we also saw more judicial skepticism with respect to blinding of experts, particularly in respect to opinions on who is the hypothetical skilled person of ordinary skill in the art, what her common general knowledge is, and how she would construe the claims in the patent at issue. For example, in Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC., Justice Grammond held that “[w]hatever the merits of blinding in other respects, I must say that it is not particularly helpful with respect to the skilled person, common general knowledge and claims construction”.12

In another case, the court signaled that this skepticism appears to arise from structural problems that impede effective blinding. A blinded expert would be expected not to have read the patent to avoid hindsight bias, but obviousness is assessed from the perspective of a skilled person and determining who the skilled person is requires reading the patent. However, a potential workaround through the sequential instruction of expert witnesses was approved by the Federal Court of Appeal in Amgen Inc. v. Pfizer Canada ULC.13 This means, for instance, having a first expert read the patent and provide an opinion on the skilled person, and having a second expert provided with that definition of the skilled person. The court recognized that this could improve the usefulness of “blinding” the experts, and that “sequential unmasking” may allow for “effective and yet properly blinded opinion”.

  1. Claim construction
  1. Resort to disclosure

On at least two occasions in 2020 the Federal Court was faced with the question of the extent to which the scope of the claims should be affected by the description of the invention and the rest of the specification (i.e., the disclosure). In ViiV Healthcare Company v. Gilead Sciences Canada, Inc.,14 the court found that recourse to disclosure to construe a claim term was permissible in the circumstances and did have an impact on the scope of the claim. Justice Manson held that “[w]hile ‘optionally substituted heterocycle’ as used in claim 1 appears on its face to be a clear and unambiguous term, I accept that recourse to the disclosure is necessary to understand the meaning given to these words by the inventors, and the intended scope of this claim language.”15

In a subsequent case that also turned primarily on claim construction, Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey),16 Justice Grammond also used the specification to interpret (and limit) the claims. His Honour interpreted the law of claim construction as generally allowing recourse to the disclosure in interpreting the claims, and held that this principle of claim construction was made clear in decisions of the Federal Court of Appeal.17

As 2021 gets further underway, another case has turned on claim construction and the court has once more relied on the disclosure to understand the claim language as intended by the inventors. In Allergan Inc. v. Sandoz Canada Inc.,18 the Chief Justice decided a case in which the Court was faced with the question of whether “wet granulation” was essential to the claimed invention. The Chief Justice focused his analysis on the two-prong test from paragraph 55 of Free World Trust19 that allows the patentee to show that a claim element is not essential by demonstrating either (i) that on a purposive construction of the words of the claim it was not intended that a particular element be essential, or (ii) that at the date of publication of the patent, the skilled person would have appreciated that the element in question could be substituted without affecting the working of the invention. The Court noted the uncertainty in the case law over whether the test should be conjunctive, despite the use of the word “or”, but the decision did not turn on that issue. On the first prong, the Chief Justice went beyond the objective manifestations in the patent claims and found that the disclosure taught away from the use of a dry process and explicitly towards a wet granulation process.20 On the second prong, the analysis was whether the element could be substituted without affecting the working of the invention. The Court found that, given the manner in which the 002 Patent taught away from the use of dry processes, and the evidence on the skilled person’s understanding of the properties and implications of the active ingredient for a dry process, the skilled person would not have understood that a dry process could be substituted for the wet granulation process without materially affecting the working of the invention.21

  1. Admissibility of Prosecution History

In 2020, we saw the Federal Court interpret the representations made to the Patent Office during prosecution pursuant to section 53.1 of the Patent Act in a case where the representations made by the patentee were held not to rebut the construction urged by the patentee to the court.22 In another case, the Court had recourse to the prosecution history in order to confirm an interpretation that was plain from the patent itself. The court reasoned that:

“When an issue of claims construction arises, the patentee is always making representations to the Court as to the proper construction of the claims and the defendant is always attempting to rebut those representations. Therefore, in my view, as long as the issue is one of claims construction, section 53.1 applies, and the prosecution history is admissible. In other words, there is no need to identify a particular representation and rebuttal every time a reference is made to the prosecution history. It is simply integrated in the interpretive process.”23

With respect to the admissibility of foreign prosecution history, we saw the court interpret that section 53.1 of the Patent Act covers the patentee’s communications with the Canadian examiner but the provision does not pivot from the existing rule that foreign prosecution history is inadmissible.24 This finding by Justice Lafrenière contrasted with the court’s interpretation in Canmar, where Justice Manson had suggested that foreign prosecution history may be admissible in “extraordinary circumstances.”25

The new year ushered in the appeal decision in Canmar. In the trial decision, Justice Manson had opened the door to admitting foreign file wrapper under what he found to be “extraordinary circumstances”. In the appeal decision, the Court ruled against the use of US foreign prosecution history based on a finding of “incorporation by reference” where the statement by the applicant was only that the set of amended claims correspond to claims submitted in the prosecution of a related US application. However, on the broader issue of whether the prosecution history of a foreign application can ever be considered pursuant to section 53.1 of the Patent Act as a result of incorporation by reference or otherwise, the court panel preferred to express no firm views on the matter.26 At the end, the panel of the Court upheld the summary judgment and the infringement findings of the trial judge dismissing the action.

 

4. Selection Patents & Patentable Subject-Matter

  1. IG Farbenindustrie factors considered

In 2020, the Court issued an interesting decision on selection patents which resulted in a patent being invalidated based on an analysis that appeared to have indirectly taken into consideration the IG Farbenindustrie requirements for a valid selection from among the members of a class of compounds, namely (i) a substantial advantage to be secured or disadvantage to be avoided; (ii) the whole of the selected members (subject to “a few exceptions here and there”) possess the advantage; and (iii) the selection must be in respect of a quality of a special character peculiar to the selected group. The court acknowledged that “[b]eing an improper selection patent by itself is not a ground for invalidity.”27 It nonetheless concluded that “the determination that a patent is not a selection patent has consequences, as the purported advantages relied upon by the patentee, if not in the claims, may not be considered in the assessment of novelty and inventiveness, as examined later on.”28 It will be interesting to see how the Federal Court of Appeal may weigh in on the impact, if any, that the IG Farbenindustrie factors may have in cases involving selection patents.

  1. Dosage and use claims found not to cover unpatentable methods of medical treatment

In 2020, we saw the Federal Court reject the argument that dosage and use claims were directed to unpatentable methods of medical treatment. In Biogen Canada Inc et al v. Taro Pharmaceuticals Inc. and Pharmascience Inc.,29 Justice Manson did not accept the submission that the Federal Court of Appeal had already decided the issue. Justice Manson held that the authorities by the Federal Court of Appeal (the Mylan and Novartis cases) do not stand for the general proposition that any patent claim to ‘how and when’ a drug is administered covers unpatentable subject matter.30 However, Justice Manson’s decision does not elaborate on what the Federal Court of Appeal effectively ruled in those two cases, or what legal principle they do support.

The Federal Court was once more called upon to decide this issue in Janssen Inc. et al v. Apotex Inc. et al.31 In that case, the patent in dispute (the ‘422 Patent) contained several use claims directed to dosage ranges of the two active ingredients that depended from the general use independent claim. The defendant argued that those dosage range claims amounted to methods of medical treatment that are not patentable under section 2 of the Patent Act. Despite the recent revised Patent Examination Notice published by the Canadian Patent Office (read our related articles here and here), in which dependent dosage range claims were deemed unpatentable subject matter, the Court noted that “the issue of method of medical treatment is not a settled one and therefore a court should be cautious in striking down claims on this basis”.32 Monitoring how this issue might evolve in future litigation will be worthwhile.

 

5. Anticipation & Obviousness

  1. Reasonably diligent search discounted

In the past year, the Federal Court of Appeal issued an important decision relating to the criteria for prior art to be citable for obviousness. It held that it was an error to exclude from the court’s consideration prior art that was available to the public at the relevant date simply because it is not shown that it would have been located in a reasonably diligent search. The statutory requirement for relevant prior art per section 28.3 of the Patent Act contemplates “information disclosed…in such a manner that the information became available to the public”. The section does not speak to the lengths a skilled person may need to go to locate the information.33 In Biogen Canada Inc et al v. Taro Pharmaceuticals Inc; Pharmascience Inc.,34 Justice Manson addressed and applied Hospira, holding that the state of the art for the purpose of an obviousness attack can include all relevant prior art, not just that which would be reasonably discoverable.

  1. Obvious & Obvious-to-try

In Amgen Inc. v. Pfizer Canada ULC,35 the court clarified the obvious-to-try test stating, in broad strokes, that if an invention would have been obvious to try, it would not per force go down under the obvious-to-try doctrine because two subsequent inquiries are required. After establishing that there was motive to try such that the decision to try would have been obvious, the party still has to establish that (a) it was more or less self-evident that what was being tried ought to work (b) without undue effort. If these two questions are answered in the negative, then there may be a non-obvious invention even if it was obvious to think about trying.

  1. Enablement branch of anticipation not satisfied

In 2020, we saw the court hold that an anticipatory prior art product that had been displayed to the public did not anticipate the invention because it was not enabling. In Bombardier Recreational Products Inc. v. Arctic Cat, Inc., the court recapitulated the law that the use of a product makes an invention part of the state of the art, i.e., equivalent to disclosure, only insofar as that use makes available the information.36 In the circumstances of the case, the evidence was that the allegedly anticipatory product, the T/S Mod snowmobile, was on display after races, and there was no evidence that reverse engineering could have made it possible for skilled person to perform the invention using the information available from a mere visual inspection of the T/S Mod snowmobile on display.

  1. Range disclosed in prior art found to anticipate claimed point within range

Innovator pharmaceutical companies may want to monitor the potential ramifications from Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC37 as it relates to the novelty of claims that cover dosage ranges of an active pharmaceutical ingredient alleged to be disclosed in prior art. In this case, five generic drug companies challenged Lilly’s patent for tadalafil. The claims were to dosage forms of tadalafil for treating erectile disfunction (doses from 1 to about 20 mg) and specific doses within that range (2.5, 5, 10 and 20 mg strengths of tadalafil). The prior art considered by the Court was the Canadian Patent Application No. 2,226,784, which also claimed tadalafil for the treatment of erectile disfunction and disclosed doses of tadalafil from 0.2 to 400mg. Justice St-Louis found on the facts that carrying out the trials required to narrow down the doses from the .02 to 400mg range to the ranges claimed would require only routine work from the skilled team. The Court held that there was motivation to do so and the claimed invention was obvious to try.38 Interestingly, the Court also found that the ‘784 application anticipated Lilly’s patent. Justice St-Louis held that “[i]n general, dosing a drug itself does not bring anything novel, subject to exceptional circumstances, which means that a dosage patent will almost always be anticipated”.39 It will be interesting to see if and how the Federal Court of Appeal will reconcile this approach with the leading law on anticipation requiring a two-step analysis (i.e., disclosure and enablement) whereby said steps are to be analyzed separately, and the enablement step does not permit trial and experimentation by the skilled person to reach the invention.

 

6. Overbreadth & Sufficiency

  1. Overbreadth survives as standalone invalidity attack

In Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC,40 it was argued that the overbreadth doctrine had no support in the Patent Act, and that it has frequently been criticized as a redundant doctrine. The Federal Court disagreed. It held that this ground of invalidity has a statutory basis derived “by implication, from the scheme of the Patent Act, and in particular section 27(4), which requires ‘a claim or claims defining distinctly and in explicit terms the subject-matter of the invention for which an exclusive privilege or property is claimed.’” The Court reasoned that “[i]f the subject-matter of the invention must be defined, it must be defined accurately and not in an overly broad manner. In the end, Justice Grammond invalidated the patent on the sole basis of overbreadth. In another decision, by contrast, Justice St-Louis rejected an overbreadth attack as being akin to the promise doctrine. The Court held that the way that the defendant, Apotex, had articulated the overbreadth allegation appeared to be an attempt to revive the promise doctrine abolished by the Supreme Court of Canada in AstraZeneca. The Court understood that Apotex was asking the Court to mine the disclosure for certain promises and import them into the asserted claim in the absence of any ambiguity, striking the claim as a result.41

  1. Best mode requirement limited to machine patents

From Western Oilfield Equipment Rentals Ltd. v. M-I LLC,42 an important ramification may arise affecting system and method type patents in high tech industry. In that case, the patent at issue related to an invention for a method and system for separating components of a slurry. The plaintiff/defendant by counterclaim, Western Oilfield Equipment Rentals Ltd., argued that the inventor had a duty to describe the best mode of putting the invention into practice citing the provision of section 27(3)(c) of the Patent Act.43 The best mode allegation falls under the sufficiency of disclosure invalidity attack. Justice O’Rilley interpreted that provision to relate solely to machine patents, not method and system patents. Because he understood that the patent claimed a method and a system, not a machine, His Honour held that the best mode statutory requirement did not apply.44

 

7. Accounting of Profits

  1. Full costs relevant to the calculation of profits to be disgorged

In 2020, the Federal Court of Appeal issued a decision45 which has been interpreted to have “effectively flipped the default approach to accounting of profits.”46 Before the panel of the court was an appeal and cross-appeal concerning the principles that should govern the calculation of the profits to be disgorged from the infringer defendant. The defendant (“Nova”) had been found liable for infringing the patent owned by the plaintiff (“Dow”) relating to metallocene linear low-density polyethylene. Nova manufactured its product, SURPASS, and sold it in competition to Dow’s product, ELITE.

When Dow elected to receive profits of Nova, the dispute became one of deciding how the calculation of the amount Dow was entitled to receive should proceed. Justice Stratas’ reasons offered a detailed analysis of the guiding principles that underlie the law regarding accounting of profits and held, more specifically, that “absent some exceptional or compelling circumstance or persuasive expert evidence to the contrary in a particular case, the full cost method is the appropriate approach to deducting costs in an accounting of profits.”47 Prior to this decision, the Court had typically used an incremental cost approach.

This exercise would involve assessing the profit to be disgorged by comparing the infringer’s actual profit against a non-infringing “baseline” which reveals the value of the invention associated with the “inventive quality” of the patented technology.48 The Federal Court of Appeal panel was unanimous on setting out the principles of an accounting of profits in an infringement. Justice Woods dissented from Justice Stratas and Justice Near only with respect to the issue of apportionment. She concluded that the Federal Court made a reviewable error by not considering the issue of causation at the heart of the legal test of apportionment. She would have accepted Nova’s argument that there should be an apportionment of SURPASS profits that removed its profit attributable to the production of the ethylene used to make the polyethylene at issue since the production of ethylene was not part of the patent. She held that the trial judge was required to consider whether a portion of SURPASS profits were attributable to something other than the infringing activity.49

The court has since interpreted the newly established guiding principle for an accounting of profits twice. In Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey),50 a motion was brought by the defendant one day after trial had started seeking leave to file a supplemental report of its remedies expert to address how profits should be calculated in light of the Federal Court of Appeal’s holding. Justice Grammond granted the motion reasoning that the appropriate approach to deducting costs in an accounting of profits is that “not only incremental costs, but also fixed costs, are deductible.”51 Similarly, in Rovi Guides, Inc. v. Videotron Ltd.,52 a motion was brought by the defendant, this time after trial was ended, seeking to reopen evidence to permit that expert evidence be adduced relating to the accounting of profits remedy. Justice Lafrenière doubled down and recognized that he was bound by the holding in Nova Chemicals as it “unambiguously provides that the full costs approach should be the default one.”53 In 2021, we will look to the courts for further clarification on how the full cost method will play out in calculating profits, and in particular to how the Federal Court of Appeal may clarify the causation link for deducting overhead costs.

b. Entities that are in the business of granting licenses may be presumptively disentitled to an accounting of profits

Organizations whose businesses are focused primarily on grating licenses for the lawful use of their intellectual property — as opposed to selling products or services covered by the patent — would be well advised to monitor 2021’s judicial developments on the issue of what remedies may or may not be available for these organizations. Examples of such organizations are patent assertion entities (“PAEs”), a.k.a. non-practicing entities (“NPEs”), which often own a vast patent portfolio covering inventions which they do not practice. In 2020, one trial decision held that “if the patentee made its profits by selling licenses, it should not be entitled to compensation beyond a reasonable royalty”.54 All the asserted claims were found invalid in that case, so this holding was in obiter. The Court nonetheless referenced numerous Federal Court, Federal Court of Appeal, and Supreme Court authorities in stating that it would not have allowed Seedlings to elect an accounting of Pfizer’s profits because Seedlings was a non-practicing entity.55

c. NIA “would have” analysis is informed by the infringer’s subjective perspective

In Apotex Inc. v. ADIR, the unanimous panel of the Federal Court of Appeal restated that “[t]he significance of a party’s intentions and preferences has been specifically addressed by this Court in the context of the non-infringing alternative defence, and they have been found to be relevant to the “would have” component of the test.”56

The Court was seized of an appeal by the generic pharmaceutical company, Apotex, whose founder and board chairman, Dr. Sherman, had given evidence of Apotex’s chief preference for manufacturing products in-house and its resistance to doing it offshore through non-affiliated third parties. Apotex faulted the decision below for taking into account the company’s preferences in assessing whether it would have availed itself of the non-infringing perindopril that would have been available from non-affiliated drug manufacturers, Signa, IPCA and/or Intas, respectively based in Mexico and India, in the hypothetical world.

Apotex’s argued that NIAs serve for determining the real value of an invention for which a monopoly was granted, and that the mere subjective preference for manufacturing in Canada and through its own offshore affiliates did not make the invention at issue any more valuable than it would otherwise have been. Apotex submitted that its subjective perspective did not provide a clear answer to the question of whether it would have used the next best available NIA and not its preference amongst unavailable alternatives as there would have been no impediments to using the NIA available from Signa, IPCA and/or Intas. Justices Mactavish, Webb, and Near rejected Apotex’s proposition and conserved established law that dictates that the subjective perspective of an infringer may indeed be relevant to the question of whether the infringer would have used the non-infringing alternative.57

 

8. Damages & Reasonable Compensation

  1. Damages for convoyed sales

Can the sales of a non-infringing multi-component product ground an award of damages if the sales of the multi-component product were driven by a single patented component in the product? In 2020, the Federal Court of Appeal confirmed that “[a]n entity claiming under a patent is entitled to damages assessed upon the sale of non-infringing components when there is a finding of fact that such sale arose from infringing the patented component”.58

However, the Court clarified that the type of evidence required to establish the causal nexus is evidence that the non-infringing products were sold because infringing components were sold with them. The fact that the convoyed goods are commonly sold with the infringing goods may not be sufficient.59 Justices Dawson, Rennie, and Rivoalen agreed with the appellant’s submission that “[s]imply because a non-infringing product appears on the same invoice as a drive is not sufficient to establish causation,”60 and reversed part of the decision below that had awarded damages for lost convoyed sales.

  1. Reasonable Compensation period

In Western Oilfield Equipment Rentals Ltd. v. M-I LLC,61 the Federal Court considered the issue of when the period for assessing reasonable compensation under section 55(2) of the Patent Act runs. The patentee, M-I, claimed a reasonable compensation for all acts of infringement that occurred since the day the specification was laid open to public inspection. The defendant, Western, relied on the evidence that the patent specification and claims as originally drafted provided for a more narrow concept (e.g., toggling, pulsing, or intermittently interrupting the pressure differential), not the more general concept of “controlling air flow”, and that the patent was amended to add a broader meaning to “first screen” that was not in the original application. Western argued that such amendments introduced concepts that could not have reasonably been inferred from the patent application as filed.62 The point was that the claims had changed between the date the patent was laid open and the date it was granted. However, Justice O’Reilly reasoned that “subsequent amendments to the patent did not introduce new subject matter. Accordingly, the operative date for calculating reasonable compensation is October 2, 2013 [the publication date].” The decision does not elaborate on why entitlement to reasonable compensation would arise for the period starting when the claims were substantially amended to add new matter, not before.63 It appears that either the point may not have been fully argued, or the parties did not diverge on this issue.

The only other decision of the Federal Court that touched on this point (and was not referenced in Western Oilfield) is fairly aged and, to date, has never been cited for the proposition that the period for reasonable compensation starts running from when the claims were amended to add new matter. The decision in Ferring Inc. v. Canada (Minister of Health)64 relates to a judicial review application of the Minister’s decision to issue Notices of Compliance. There, Justice Hughes considered that a patent application may give rise to a conditional right to reasonable compensation as of the publication date, noting that “As of the date of publication, actual or deemed, a conditional right to receive reasonable compensation arises which crystallizes only if a patent is actually granted with claims that are essentially identical to those of the published application (section 55(1)(b) of the Patent Act). A third person such as a generic could be liable for "infringement" if it sold a drug as claimed in the patent application at any time after the publication date but only if and when the patent issued with such a claim.”65 It will be interesting to monitor whether the courts may give this issue any further consideration in 2021 or beyond.

 

9. Injunctive Relief

  1. Factors impacting the “Irreparable Harm” analysis for a stay pending appeal

The Federal Court of Appeal was called upon to decide motions for a stay of judgment pending appeal on at least three occasions. In assessing the irreparable harm branch of the test for granting the stay, the court held, in Western Oilfield Equipment Rentals Ltd. v. M-I L.L.C.,66 that the risk of going out of business is not accepted as irreparable harm if based merely on hearsay evidence. The Court stressed that the evidence expected would be “an affidavit from [the] bank outlining its position following the rendering of the judgment and its position in the event that a stay was not granted” and similar evidence from a managing director of one of the venture capital companies as to “the impact of the Decision on their funding decisions and whether or not a stay of the Decision would lead to a different position on their part”. Because this evidence was absent, Justice Nadon concluded that irreparable harm was not established.67

By contrast, irreparable harm was made out in Evolution Technologies Inc. v. Human Care Canada Inc.68 where it was established that the defendant did not have enough money to pay the major part of the judgment and would go out of business if required to pay.69 Critically, it was also established that, absent an undertaking by the adverse party to pay any amount for any loss sustained if the stay was not granted, the defendant would be entirely uncompensated for the loss suffered from being enjoined from selling the goods at issue until the appeal is decided. Justice Webb considered all that irreparable harm and stayed payment of the largest amount awarded concerning the accounting of profits.70

In further contrast with that last decision, a stay pending appeal was denied in Arctic Cat, Inc. v. Bombardier Recreational Products Inc.71 even though the patentee did not give an undertaking to damages. This goes to show that if an undertaking is not given, irreparable harm is not presumptively made and a stay may still be denied even where the absence of an undertaking by the adverse party signals that any actual loss will be irreparable.

The Court also weighed in on the question of whether harm to third parties could be considered in the irreparable harm assessment under the RJR MacDonald test. Direct and indirect irreparable harm were alleged by Artic Cat because of its business arrangements with many dealers who were single-line dealers only selling snowmobiles manufactured by Artic Cat and thus unable to supply a competing product. Justice Rivoalen held that irreparable harm to the dealers could not be relied upon to establish irreparable harm and only harm suffered directly by the party must be considered in the second branch of the RJR MacDonald test.72 The Court further stressed that attempts to rely on harm suffered by third-parties have been consistently rejected, save harm suffered by charities. It will be interesting to see the ramifications of this ruling in considering the third stage of the RJR MacDonald test, and what types of harm to third-parties, if any, the courts may consider as relevant public interest in the balance of convenience exercise.

b. Cease and desist letters asserting patent infringement may form the basis for an action under section 7(a) of the Trademarks Act

In Fluid Energy Group Ltd. v. Exaltexx Inc.,73 the Federal Court held that an interlocutory injunction based on section 7(a) of the Trademarks Act is available for a wronged party to enjoin inappropriate cease and desist letters of a threatening nature directed at third parties doing business with the defendant in a patent infringement action. The Court noted that “it is clear that cease and desist letters that assert patent infringement may form the basis for an action under subsection 7(a), and that an injunction may issue in the appropriate case to enjoin the issuance of such letters.”74 Critically, the Court held that two procedural requirements for urgent motions under Rule 37275 must be met, namely (1) urgency and (2) undertaking in the event the injunctive relief does not subsist after trial of the matter.

 

10. Standard of Appellate Review & Effect of New Evidence

  1. Standard of Appellate Review

In three interesting decisions discussed below the Federal Court considered the issue of the standard of review to be applied in appeals from decisions of the Trademarks Opposition Board and in appeals of registrability refusals. It did so oriented by the Supreme Court of Canada’s decision76 in the Bell-NFL-Vavilov trilogy of administrative law appeals which established the standard of review in appeals of administrative decisions.

Justice Kane was the first to apply the Supreme Court decision in a trademark opposition appeal in Pentastar Transport Ltd. v. FCA US LLC.77 She noted that the Supreme Court established that reasonableness is the presumptive standard of review for administrative decisions unless the enabling statute provides for a statutory right of appeal, in which case the appellate standard of review applies. In the context of trademark opposition appeals, section 56 of the Trademarks Act provides a statutory right of appeal to the Federal Court. Justice Kane held that to give effect to Parliament’s expressed intention in the Act, and in view of Vavilov, the Registrar’s decision should be reviewed on the appellate standard of review. The appellate standard requires that for questions of fact and questions of mixed fact and law where the legal principle or question of law is not extricable, the applicable standard is palpable and overriding error. Palpable and overriding error is a highly deferential standard of review, where “palpable” means an obvious error, and “overriding” means it affects the outcome of the case. Questions of law — including statutory interpretation and the scope of a decision-maker’s authority — are subject to the non-deferential standard of correctness.

  1. Effect of New Evidence

In Arterra Wines Canada, Inc. v. Diageo North America, Inc.,78 the Federal Court addressed the applicable standard of review once more, but this time considering the effect of new evidence that was filed as part of a trademark opposition appeal. Justice Fuhrer observed that the Federal Court’s approach to new evidence required an adjustment considering the Supreme Court’s newly established principles on standard of review. She found that, where the new evidence is material, “the correctness standard…permits this Court to conduct a de novo analysis in respect of the relevant issue[s], according no deference to the conclusion[s] of the underlying decision-maker.”

Subsequently in Obsidian Group Inc v. Canada (Attorney General),79 the Federal Court, to similar effect, addressed the applicable standard of review in the context of an appeal of a registrability refusal. Justice Fuhrer noted that subsection 56(5) of the Act permits the trademark applicant to file new evidence in a refusal appeal, and found that such evidence will trigger a de novo review if it is “sufficiently substantial and significant”.80

The Federal Court of Appeal also had the opportunity to address the standard of review where material new evidence was adduced. In Miller Thomson LLP v. Hilton Worldwide Holding LLP,81 the Court was seized of an appeal seeking to reverse Justice Pentney’s finding contrary to the prevailing view that trademarks covering “hotel services” could not be maintained in response to non-use cancellation proceedings without use in association with brick and mortar hotels in Canada. The panel of the Court ultimately upheld Justice Pentney’s finding, and in respect of the standard of review it clarified that

“The requirement that the Federal Court conduct a correctness review with respect to issues for which there is material new evidence before it has not changed as a result of the Vavilov decision. In such cases, the Court is still entitled to substitute its opinion for that of the Registrar.

Where the standard of review applicable to Registrar’s decisions has changed as a result of Vavilov is where there is no new evidence before the Federal Court that would materially have affected the decision under appeal. The standards of review to be applied by the Federal Court in such cases are the appellate standards of correctness and palpable and overriding error that were prescribed by the Supreme Court in Housen.”82

The appellant submitted that Justice Pentney did not correctly apply the deferential standard of review in assessing the materiality of the new evidence. It alleged that there was nothing in the evidence that could have affected the Registrar’s decision in any way.83 The panel of the Court clarified that the new evidence is material if it is “sufficiently substantial and significant” and “of probative value”. The Court further clarified that materiality of the new evidence is a question of mixed fact and law, and “findings of this nature will stand in the absence of a palpable and overriding error or an extricable error of law.”84 The appellate decision discussed the new evidence and concluded that it was sufficiently probative as to permit a de novo consideration of the issue. The panel of the Court held that Justice Pentney had clearly understood the relevance that the new evidence had for the standard of review in an appeal from a section 45 decision, and the need to address the nature, significance, probative value, and reliability of that evidence prior to identifying the appropriate standard of review.85 No error was found in his decision to use the correctness standard of review.


1 SALT Canada Inc v. Baker, 2020 FCA 127 (Stratas, Near, Woods JJA), rev’g 2016 FC 830 (Justice Boswell).

2 SALT Canada Inc v. Baker, 2020 FCA 127 at para. 27 (Stratas, Near, Woods JJA).

3 McCain Foods Limited v. JR Simplot Company, 2021 FCA 4 (Locke, Near, Mactavish JJA).

4 McCain Foods Limited v. JR Simplot Company, 2021 FCA 4 at para. 88 (Locke, Near, Mactavish JJA).

5 Canmar Foods Ltd v. TA Foods Ltd., 2019 FC 1233 (Justice Manson).

6 ViiV Healthcare Company v. Gilead Sciences Canada, Inc., 2020 FC 486 (Justice Manson); Gemak v. Jempak, 2020 FC 644 (Justice Lafrenière); and Flatwork Technologies, LLC (Powerblanket) v. Brierley, 2020 FC 997 (Justice McVeigh).

7 Tatuyou, LLC v. H2Ocean Inc., 2020 FC 865 (Justice Little); NuWave Industries Inc. v. Trennen Industries Ltd., 2020 FC 867 (Justice Little).

8 ViiV Healthcare Company v. Gilead Sciences Canada, 2020 FC 11 (Justice Manson).

9 Gemak v. Jempak, 2020 FC 644 (Justice Lafrenière).

10 Flatwork Technologies, LLC (Powerblanket) v. Brierley, 2020 FC 997 (Justice McVeigh).

11 ViiV Healthcare Company v. Gilead Sciences Canada, Inc., 2020 FC 486 (Justice Manson).

12 Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC, 2020 FC 1 (Justice Grammond).

13 Amgen Inc. v. Pfizer Canada ULC, 2020 FCA 188 (Stratas, Gleason, Laskin JJA.).

14 ViiV Healthcare Company v. Gilead Sciences Canada, Inc., 2020 FC 486.

15 ViiV Healthcare Company v. Gilead Sciences Canada, Inc., 2020 FC 486 at para. 128.

16 Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey), 2020 FC 624 at paras. 55-57.

17 Tetra Tech EBA Inc v Georgetown Rail Equipment Company, 2019 FCA 203 at para. 86.

18 Allergan Inc. v. Sandoz Canada Inc., 2020 FC 1189.

19 Free World Trust v. Electro Sante Inc., 2000 SCC 66.

20 Allergan Inc. v. Sandoz Canada Inc., 2020 FC 1189 at paras. 81-84.

21 Allergan Inc. v. Sandoz Canada Inc., 2020 FC 1189 at para. 111.

22 Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC, 2020 FC 1 (Justice Grammond).

23 Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey), 2020 FC 624.

24 Gemak v. Jempak, 2020 FC 644.

25 Canmar Foods Ltd v TA Foods Ltd., 2019 FC 1233 at paras. 73, 74, 77.

26 Canmar Foods Ltd. v. TA Foods Ltd., 2021 FCA 7 at para. 77.

27 Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC, 2020 FC 816 at para. 126 (Justice St-Louis).

28 Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC, 2020 FC 816 at para. 128.

29 Biogen Canada Inc et al v. Taro Pharmaceuticals Inc; Pharmascience Inc., 2020 FC 621 (Justice Manson).

30 Biogen Canada Inc et al v. Taro Pharmaceuticals Inc; Pharmascience Inc., 2020 FC 621 at para. 211.

31 Janssen Inc. et al v. Apotex Inc. et al, 2021 FC 7 (Justice Phelan).

32 Janssen Inc. et al v. Apotex Inc. et al, 2021 FC 7 at para. 223 (Justice Phelan).

33 Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research, 2020 FCA 30 (Nadon, Rivoalen, Locke JJA.).

34 Biogen Canada Inc et al v. Taro Pharmaceuticals Inc; Pharmascience Inc., 2020 FC 621.

35 Amgen Inc. v. Pfizer Canada ULC, 2020 FC 522 (Justice Southcott), aff’d 2020 FCA 188 (Stratas, Gleason, Laskin JJA.).

36 Bombardier Recreational Products Inc. v. Arctic Cat, Inc., 2020 FC 691 at para. 112 (Justice Roy).

37 Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC, 2020 FC 816 (Justice St-Louis).

38 Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC, 2020 FC 816 at paras. 323, 325-28, 330.

39 Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC, 2020 FC 816 at paras. 257-258.

40 Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC, 2020 FC 1 (Justice Grammond).

41 Eli Lilly Canada Inc. v. Apotex Inc., 2020 FC 814 (Justice St-Louis).

42 Western Oilfield Equipment Rentals Ltd. v. M-I LLC, 2019 FC 1606 (Justice O’Reilly).

43 Patent Act, RSC 1985, c. P-4.

44 Western Oilfield Equipment Rentals Ltd. v. M-I LLC, 2019 FC 1606 at para. 146 (Justice O’Reilly).

45 Nova Chemicals Corporation v. Dow Chemicals Company, 2020 FCA 141 [Nova Chemicals].

46 Rovi Guides, Inc. v. Videotron Ltd., 2021 FC 19 at para. 14 (Justice Lafrenière).

47 Nova Chemicals at para. 164.

48 Nova Chemicals at paras. 62-78.

49 Nova Chemicals Corporation v. Dow Chemicals Company, 2020 FCA 141 at paras. 206-207.

50 Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey), 2020 FC 1123 (Justice Grammond).

51 Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey), 2020 FC 1123 at para. 3 (Justice Grammond).

52 Rovi Guides, Inc. v. Videotron Ltd., 2021 FC 19 (Justice Lafrenière).

53 Rovi Guides, Inc. v. Videotron Ltd., 2021 FC 19 at para. 23 (Justice Lafrenière).

54 Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC, 2020 FC 1 at para. 253 (Justice Grammond).

55 Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC, 2020 FC 1 at para. 252 (Justice Grammond)

56 Apotex Inc. v. ADIR, 2020 FCA 60 at para. 106 (Webb, Near, Mactavish JJA.).

57 Apotex Inc. v. ADIR, 2020 FCA 60 at paras. 107-110.

58 Dnow Canada ULC v. Grenke Estate, 2020 FCA 61 at para. 143 (Dawson, Rennie, Rivoalen JJA.).

59 Dnow Canada ULC v. Grenke Estate, 2020 FCA 61 at para. 153-155.

60 Dnow Canada ULC v. Grenke Estate, 2020 FCA 61 at para. 151-153.

61 Western Oilfield Equipment Rentals Ltd. v. M-I LLC, 2019 FC 1606 (Justice O’Reilly). [Western Oilfield]

62 Western Oilfield Equipment Rentals Ltd. v. M-I LLC, 2019 FC 1606 at para. 235 (Justice O’Reilly).

63 Western Oilfield Equipment Rentals Ltd. v. M-I LLC, 2019 FC 1606 at para. 264 (Justice O’Reilly).

64 Ferring Inc. v. Canada (Minister of Health), 2007 CF 300 (Justice Hughes) aff’d 2007 FCA 276.

65 Ferring Inc. v. Canada (Minister of Health), 2007 CF 300 at para. 44 (Justice Hughes).

66 Western Oilfield Equipment Rentals Ltd. v. M-I L.L.C., 2020 FCA 3 (Justice Nadon).

67 Western Oilfield Equipment Rentals Ltd. v. M-I L.L.C., 2020 FCA 3 (Justice Nadon).

68 Evolution Technologies Inc. v. Human Care Canada Inc., 2019 FCA 11 (Justice Webb).

69 Evolution Technologies Inc. v. Human Care Canada Inc., 2019 FCA 11 at para. 29 (Justice Webb).

70 Evolution Technologies Inc. v. Human Care Canada Inc., 2019 FCA 11 (Justice Webb).

71 Arctic Cat, Inc. v. Bombardier Recreational Products Inc., 2020 FCA 116 (Justice Rivoalen).

72 Arctic Cat, Inc. v. Bombardier Recreational Products Inc., 2020 FCA 116 at para. 32 (Justice Rivoalen).

​73 Fluid Energy Group Ltd. v. Exaltexx Inc., 2020 FC 81 (Justice McHaffie).

​74 Fluid Energy Group Ltd. v. Exaltexx Inc., 2020 FC 81 (Justice McHaffie).

​75 Federal Courts Rules, SOR/98-106.

​76 Canada (Minister of Citizenship & Immigration) v. Vavilov, 2019 SCC 65; Bell Canada v. Canada (Attorney General); National Football League. v. Canada (Attorney General), 2019 SCC 66.

77 Pentastar Transport Ltd. v. FCA US LLC, 2020 FC 367(Justice Kane).

​78 Arterra Wines Canada, Inc. v. Diageo North America, Inc., 2020 FC 508 (Justice Fuhrer).

​79 Obsidian Group Inc v. Canada (Attorney General), 2020 FC 586 (Justice Fuhrer).

80 Obsidian Group Inc v. Canada (Attorney General), 2020 FC 586 at para. 27 (Justice Fuhrer).

81 Miller Thomson LLP v. Hilton Worldwide Holding LLP, 2020 FCA 134 (Mactavish, Webb, Near JJA).

​82 Miller Thomson LLP v. Hilton Worldwide Holding LLP, 2020 FCA 134 at paras. 47-48 (citations omitted).

​83 Miller Thomson LLP v. Hilton Worldwide Holding LLP, 2020 FCA 134 at para. 51.

​84 Miller Thomson LLP v. Hilton Worldwide Holding LLP, 2020 FCA 134 at paras. 52-54.

​85 Miller Thomson LLP v. Hilton Worldwide Holding LLP, 2020 FCA 134 at para. 55-56.

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Author(s):

Bruna D.D. Kalinoski Bruna D.D. Kalinoski
LL.B., L.L.M.
Associate
416.957.1648  email Bruna D.D. Kalinoski
Adam Bobker Adam Bobker
B.Sc. (Elec. Eng.), LL.B.
Partner
416.957.1681  email Adam Bobker
R. Scott MacKendrick R. Scott MacKendrick
B.A.Sc. (Chem. Eng.), LL.B.
Partner
416.957.1675  email R. Scott MacKendrick