March 9, 2017
By Amrita V. Singh and Jerry Chen
In 2016, the Federal government proposed changes to the rules that govern litigation, the Federal Courts issued directions for the conduct of intellectual property litigation and Canadian courts issued decisions that affected expert evidence, standard of review, costs, varying judgments, and summary trials. Below are our summaries of key Canadian decisions and advisories that will affect intellectual property litigation.
Changes to the Rules of the Supreme Court of Canada
A number of proposed amendments to the Rules of the Supreme Court of Canada were introduced in November 2016, and came into effect on January 1, 2017. The amendments include a new process for providing notice of constitutional issues, changes to filing deadlines, and electronic filing of documents.
Proposed Amendments to Federal Courts Rules
Late last year, the Federal Courts Rules Committee recommended amendments to the Federal Courts Rules to account for technological advancements, codify existing informal practices, improve judicial efficiency, increase monetary jurisdictions in accordance with inflation, and ensure that confidentially filed material is, in fact, confidential. Below is a brief synopsis of the proposed changes that may affect intellectual property litigation.
These proposed amendments were published in The Federal Gazette, and the public was invited to make submissions until early January 2017. The amendments have yet to be registered, after which they will come into force.
Experimental Testing Direction
The Federal Court also issued a Notice to the Parties and Profession relating specifically to patent litigation and experimental testing. The Court noted that where a party intends to establish a fact in issue by experimental testing, it must provide reasonable notice at least two months before serving its expert reports of:
Where there is no two-month notice possible, the notice period may be abridged by the case management judge. If agreement cannot be reached between the parties, the case management judge may resolve these matters.
If this procedure is not followed, a party cannot lead evidence relating to such experimental testing for the purpose of litigation at the trial or hearing, without leave of the Court.
This formalizes the Court’s practice of allowing parties to attend any experimental testing intended to be relied upon by another party in litigation, and to have access to the results of such testing before expert reports are due. For a decision that relates to this issue, see The Dow Chemical Company et al v Nova Chemicals Corporation, 2012 FC 754.
Directions for PM(NOC) proceedings
In May 2016, the Federal Court issued a Notice to the Parties and the Profession relating to the management of proceedings under the PM(NOC) Regulations. Some of the changes include:
Demonstratives evidence is to be exchanged by the parties at least 30 days prior to the hearing.
In Airbus Helicopters v Bell Helicopter Textron Canada Limitée, 2016 FC 590, Bell brought a motion to rely upon four damages experts’ reports in the damages trial, or in the alternative, to rely on expert reports of two damages experts, with the other two experts being considered part of Bell’s five “as of right” expert witnesses under the Canada Evidence Act and the Rules.1 During the liability trial, Bell had called three expert witnesses and tendered the reports of a fourth.
No distinction may be drawn between the number of experts called at trial and the number of experts whose reports may be served before trial.2 Bell argued that the liability and damages aspects of the case were separate proceedings, and therefore it could call additional experts. The Court held that Bell had used four of its five “as of right” experts during the liability phase of the trial, and therefore could only call one additional expert in the damages phase without leave; both the liability and damages phases together constituted one proceeding under the Evidence Act. Bell was permitted to rely upon two experts’ reports (one above and beyond the limit) because of Airbus’ initial failure to raise the issue Bell had used four, not three, of its experts during the liability phase.
The Court clearly intends to abide by the five-expert limit and will only grant leave in exceptional circumstances. To avoid such circumstances arising, clear and accurate notice should be given regarding any intention to challenge the number of experts being tendered in a proceeding.
In The Dow Chemical Company et al v Nova Chemicals Corporation, 2016 FC 91, Dow sought a lump sum award of between $6.5 and $4.7 million, including disbursements of $3.6 million and fees between $2.9 million and $1.1 million. Despite Nova’s objection that Dow had provided deficient evidence to support these numbers, the Court noted that Nova had not presented any data regarding its own costs and that awarding fees under Column V of Tariff B would result in a recovery of only 11% of Dow’s total legal costs, which was “totally inadequate”. The Court therefore awarded the 30% of Dow’s actual costs as requested ($2.9 million). In addition, the Court assumed that Dow could have proven its disbursements on assessment, despite no affidavit having been filed, and on that basis awarded the full quantum of disbursements sought ($3.6 million). This $6.5 million award is the largest costs award granted by the Federal Court.
In the reference to determine damages or profits following the liability phase of trial in The Dow Chemical Company et al v Nova Chemicals Corporation, 2016 FC 361, Dow sought relief relating to products that had not specifically been at issue in the liability phase of the trial. To obtain this relief, Dow brought a motion seeking a declaration that the additional products were within the scope of the trial judgment and accordingly infringed. In its amended pleading during the liability phase, Dow had not identified these particular products, despite listing some 59 products in four categories. The Order of the Court on liability stipulated, however, that products under a certain brand name were the subject of the reference.
The Court agreed with Nova that varying the order due to a new discovery was inapplicable because Dow knew about the additional products before the liability trial, but concluded that a new trial would be a waste of judicial resources. Instead, the Court permitted Dow to amend its claim to add the additional products, Nova to amend its response thereto, the parties to apply the previous discoveries and evidence to this issue, and to conduct further discovery as necessary. A trial of further issues on infringement of the additional grades was to be held before the reference took place. This unique solution to the issue should be kept in mind for situations where varying an order or judgment is not appropriate.
In Pfizer Canada Inc v Teva Canada Limited, 2016 FCA 218, Pfizer had paid Teva damages pursuant to a Federal Court order. On appeal, the Federal Court of Appeal set aside the damages award against Pfizer and remitted it back to the Federal Court for reconsideration. Once the damages award was set aside, Pfizer requested that Teva return Pfizer’s prior damages payment, with interest. Teva refused. Pfizer therefore asked the Court of Appeal to vary its judgment to require Teva to return the payment with interest. The Court held variation was inapplicable because the issue of returning the payment and interest was foreseeable and could have been dealt with as part of the underlying appeal. The Court held that Pfizer could sue Teva to recover the monies, or wait until the Federal Court decides the matter on reconsideration. It is clearly quite difficult to vary an order or judgment where the moving party ought to have contemplated an issue beforehand.
Standard of Review
In Hospira Healthcare Corporation v Kennedy Institute of Rheumatology, 2016 FCA 215, the Federal Court of Appeal altered the standard of review to provide greater deference to the discretionary orders of Prothonotaries. The FCA held that the SCC’s Housen standard of review (applying the standard of correctness on questions of law, and palpable and overriding error standard for questions of fact) now applies to Prothonotaries’ orders. This holding consolidates the standard applicable to first instance decisions of both Federal Court Judges and Prothonotaries, and likely makes it more difficult to appeal the decisions of Prothonotaries.
Greater deference to the orders of Prothonotaries was reinforced by the Federal Court in Teva Canada Limited v Janssen Inc, 2016 FC 318, where the Federal Court found that Teva failed to demonstrate that the Prothonotary’s application of the legal test for bifurcation orders was clearly wrong in fact or law, and accordingly declined to interfere with the order.
In Nova Chemicals Corporation v Dow Chemical Company, 2016 FCA 216, in dismissing an appeal from the decision of the Trial Judge, the FCA emphasized that a trial judge is entitled to deference relating to their analysis of factual evidence. The FCA found that as the Trial Judge was aware of the conflicting expert evidence of the parties, and provided reasons for preferring the interpretation of one expert over another, such a finding was “unassailable”. The FCA also noted that while claim construction, being a matter of law, is to be reviewed on the basis of correctness, trial judges are nonetheless entitled to some leeway in that they are often in a much better position than appellate judges to understand the intricacies of the art underlying the invention disclosed in a patent.
In Teva Canada Limited v Novartis Pharmaceuticals Canada Inc, 2016 FCA 248, the Federal Court of Appeal held that the standard of review given to the Minister in issuing an NOC is that of reasonableness, and not correctness as found by the Federal Court in the first instance.
In Cascade Corporation v Kinshofer GmbH, 2016 FC 1117, the parties agreed to adjudication of the plaintiff’s allegations of patent infringement by way of a two-day summary trial under Rule 213 of the Federal Courts Rules. The case involved a patent for a “quick coupler” for attaching buckets and other implements to the arm of an excavator. The only issues before the Court were: 1) whether or not the defendant infringed the asserted claims of the patent; 2) whether the defendant Kinshofer induced or procured infringement of the asserted claims; and 3) the plaintiff’s entitlement to the claimed remedies. There were no allegations of patent invalidity, and the action was bifurcated.
Fact evidence was adduced by way of affidavits in chief and cross-examinations out of Court. Both parties called experts to provide viva voce testimony in chief at the hearing, and the experts were cross-examined. Written arguments were exchanged following the two-day trial. Weighing the evidence, including the evidence of the experts and the wording of the patent specification, the Federal Court concluded that Kinshofer’s coupler did not infringe the patent.
In Kwan Lam v Chanel S de RL, 2016 FCA 111, the FCA endorsed the summary trial procedure in a counterfeiting case decided by the Federal Court in 2015 FC 1091. The FCA noted that there is no need for a full trial in cases where there are ongoing sales of counterfeit goods and where the defendant puts forward weak evidence to support its defence. Notwithstanding this endorsement, the trial decision was set aside and remitted back to the Trial Judge for redetermination based on ambiguity in the trial decision as to the extent of the infringement by the defendant.
1 Federal Courts Rules, rule 52.4(1) provides that if a party wishes to call more than five experts, it must seek leave of the Court. This has also been addressed in the June 2015 Proportionality Practice Direction.
2 Apotex v Sanofi-Aventis, 2010 FC 1282 at para 31.
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