2022 Year in Review: IP Litigation
In a year dominated with headlines of interest rate hikes, inflation, and general economic uncertainty, perhaps it is unsurprising that in the area of intellectual property litigation, a noticeable trend from 2022 was the increased number of summary trial decisions, as litigants seek more timely and cost-effective ways to resolve their IP disputes. Below we take a look back at this and other significant trends and decisions affecting IP litigation in Canada from 2022.
2022 saw a surge in the number of issued IP decisions stemming from motions for summary trial (at least 9 decisions in the past year, compared with a total of 20 over the previous decade). The decisions largely dealt with patent or trademark enforcement, with motions brought by both plaintiffs and defendants. Four separate summary trial decisions were issued relating to patent infringement. In each instance the court was satisfied that the summary trial procedure was appropriate. The court decided by summary trial: (1) that a plaintiff did not own the patents it asserted in an infringement action (in a motion brought by the plaintiff in Mud Engineering Inc v Secure Energy (Drilling Services) Inc, 2022 FC 943); (2) that there was patent infringement in two motions brought by alleged infringers, warranting the actions to proceed to trial on the remaining defences of invalidity (Janssen Inc v Pharmascience Inc, 2022 FC 62; Janssen Inc v Apotex Inc, 2022 FC 107); and (3) that there was no infringement, and dismissed the action in its entirety, in a motion brought by a defendant (Steelhead LNG (ASLNG) Ltd v ARC Resources Ltd, 2022 FC 998). The Janssen decisions are notable as they both involved motions for summary trial brought by defendants in the context of proceedings under Canada’s Patented Medicines (Notice of Compliance) Regulations, which are already intended as condensed proceedings.
Litigants also employed the summary trial process to enforce trademark rights. The court considered issues of trademark infringement under sections 19 and 20 of the Trademarks Act (Gentec v Nuheara IP Pty Ltd et al, 2022 FC 1715), passing off (Dragona Carpet Supplies Mississauga Inc v Dragona Carpet Supplies Ltd, 2022 FC 1042), and the validity of a trademark registration under section 18 of the Trademarks Act (Mainstreet Equity Corp v Canadian Mortgage Capital Corporation, 2022 FC 20). An unopposed motion for summary trial dealing with counterfeit goods was also considered in Lululemon Athletica Canada Inc v Campbell, 2022 FC 194 (see our article from February 18, 2022 on the decision).
In addition to time and cost benefits, the rise in summary trial decisions for IP disputes is further supported by the limited utility of summary judgment motions—the other mechanism for the court to substantively and summarily decide an action. Jurisprudence has held that credibility issues should not be decided on a summary judgment motion. Conversely, the Federal Courts Rules provide that on a motion for summary trial, the Court may order an affiant to appear before the court for cross-examination, to assist the court in assessing credibility. This limitation was illustrated in GEMAK Trust v Jempak Corporation, 2022 FCA 141, where the Federal Court of Appeal overturned a decision that granted summary judgment in an action for patent infringement relating to dishwashing and laundry detergent pods. The Court of Appeal found multiple errors, including the lower court’s making of credibility findings relating to expert evidence that were not open to it to make on a motion for summary judgment. In its reasons the Court of Appeal states: “that while patent infringement issues are not by definition excluded from the ambit of the summary judgment process, they tend to raise complex issues of fact and law that are usually better left for trial”.
Recent Federal Court jurisprudence has considered the utility of confidentiality agreements and protective orders to govern the confidentiality of documents in light of the implied undertaking rule. In an appeal concerning a confidentiality designation pursuant to a confidentiality agreement, the Federal Court of Appeal reaffirmed that “[p]rotective orders and confidentiality agreements are integral to how litigation proceeds in the Federal Court”, “ensure that pre-trial proceedings are conducted in an efficient manner” and “ensure that discoveries are timely and progress in a predictable manner” (Fibrogen, Inc v Akebia Therapeutics, Inc, 2022 FCA 135). Other IP decisions issued in 2022 dealing with procedural issues include: an appeal granting a stay of an action for copyright and trademark infringement in favour of an arbitration in Bermuda (General Entertainment and Music Inc v Gold Line Telemanagement Inc, 2022 FC 418); the Federal Court granting a motion for increased security for costs totaling $145,000 in a patent infringement action (T-Rex Property AB v Pattison Outdoor Advertising Limited Partnership, 2022 FC 1007); and the Federal Court’s dismissal of a motion by a corporate plaintiff in a patent infringement action to be represented by a non-solicitor under Rule 120 of the Federal Courts Rules (Glycobiosciences Inc v L’Oreal Canada, 2022 FC 1517).
Multiple decisions in 2022 canvassed pleadings issues relating to IP. On a motion to strike brought by the defendants in Fox Restaurant Concepts LLC v 43 North Restaurant Group Inc et al, 2022 FC 1149, the Federal Court found that the plaintiff failed to identify with particularity the alleged copyright protected works at issue, and struck the claim with leave to amend. On another motion to strike brought by the defendant in a copyright infringement action, the Federal Court struck the claim with leave to amend based on the plaintiff’s failure to explicitly plead that a “written” license was in place (Sony Music Entertainment Canada Inc v SUVA Beauty Inc et al, T-1256-21; see our article from March 11, 2022 for more details). Lastly, during a patent infringement trial, the Federal Court dismissed a motion brought by the defendant to amend its statement of defence to add an allegation of inutility particularly because of the delay in bringing the motion (Google LLC v Sonos, Inc, 2022 FC 1069).
Unique issues relating to evidence were also addressed in several IP decisions from 2022. In at least three decisions, the court has continued to rely on statements made in a drug product monograph to support a finding of patent infringement by inducement where a generic drug manufacturer is said to induce prescribing physicians (Janssen Inc v Apotex Inc, 2022 FC 107; Janssen Inc v Apotex Inc, 2022 FC 996; and Janssen Inc v Pharmascience, 2022 FC 62). Similarly, in UPL NA Inc v AgraCity Crop & Nutrition Ltd, 2022 FC 1422, an action for patent infringement relating to an herbicide, the Federal Court found that there is an analogy to be made between a drug product monograph and the end-use label for an herbicide, the latter which was found to induce farmers to infringe the claims of the patent at issue.
Other cases dealing with evidence included the Federal Court weighing in on the issue of plagiarism when it became apparent in cross-examination that an expert’s report in a patent infringement action included passages from a different expert’s report, without attribution (Rovi Guides v Bell Canada, 2022 FC 1388). The Court described this as “plagiarism pure and simple” and said it “puts into real doubt the impartiality and independence of the expert”. The report was ultimately not excluded, with the finding going to weight (see our article on the topic from December 15, 2022). In another action for patent infringement, the Federal Court granted a motion to exclude a reply expert report, being impermissible case splitting (T-Rex Property AB v Pattison Outdoor Advertising Limited Partnership, 2022 FC 1008). In another case, the Court dismissed, in part, a simplified action for copyright infringement relating to certain photographs of Jennifer Lopez (August Image LLC v AirG Inc, 2022 FC 470), due to the plaintiff’s failure to produce evidence establishing the author of the photographs was a Canadian resident or citizen of a Berne Convention country at the time the photos were taken to establish that copyright subsisted pursuant to the Copyright Act.
Several decisions from 2022 addressed the scope of certain actionable rights including the enforcement of a trademark application, “paper” acts of infringement, and infringement by common design. In 2788610 Ontario Inc v Bhagwani et al, 2022 ONSC 905, an Ontario court granted an interlocutory injunction against the respondent’s use of a “Bombay Frankie” trademark based on the applicant’s trademark application which had not registered. The decision was overturned on appeal in 2788610 Ontario Inc v Bhagwani, 2022 ONSC 6098, where the Ontario Divisional Court confirmed that the mere application to register a trademark is insufficient to support of a cause of action for trademark infringement under the Trademarks Act (for further details on the decision, see our article from November 24, 2022).
In Steelhead LNG (ASLNG) Ltd v ARC Resources Ltd, 2022 FC 998, the Federal Court dealt with the issue of whether “paper” acts of patent infringement were actionable. The plaintiffs asserted infringement of a patent dealing with liquefied natural gas. Notably, there was no pleading of a quia timet cause of action and accordingly, there was no issue with respect to forward-looking or threat of infringement. The plaintiffs alleged that the defendants’ presentation of a study to third parties which included a design the defendants conceded would have infringed the patent at issue—if made—constituted patent infringement. The defendants moved for a summary trial on the issue of infringement, arguing that at best, the plaintiffs’ allegations amounted to “paper” acts of infringement. The Court agreed and dismissed the action in its entirety. The Court found that any marketing, offering, or promotional activity of the invention contained in the patent in dispute would, at best, amount to “paper offers”, without actual use of the invention claimed, which did not amount to infringement.
In two appeals heard consecutively on motions to strike, the Federal Court held open the door to plead allegations of patent infringement by common design (Rovi Guides, Inc v Videotron Ltd, 2022 FC 981; Rovi Guides, Inc v BCE Inc, 2022 FC 979). Infringement by common design is said to arise where one party is found to be a joint tortfeasor when another party commits the tort in furtherance of a common plan. An essential element of the common design is that the parties must agree on a common action and the act of infringement must be in furtherance of that agreement. The merits of the allegations were not at issue on the motions.
Remedies: Accounting of Profits for Patent Infringement
The Supreme Court of Canada issued its decision in Nova Chemicals Corp v Dow Chemical Co, 2022 SCC 43 which focused on the correct approach to quantifying accounting of profits for patent infringement. The Court articulated a three-step test to determine an accounting of profits, which includes first calculating the actual profits earned by selling the infringing product and then determining whether there is a non-infringing option that can help isolate the profits attributable to the invention. If there is a non-infringing option, the profits the infringer could have made had it used the non-infringing option are subtracted from its actual profits to determine the amount to be disgorged.
Awards of lump sum costs in IP infringement actions continued to gain traction in 2022, with multiple cases granting lump sum costs for trademark infringement (Beijing Judian Restaurant Co Ltd v Meng, 2022 FC 1789), copyright infringement (Ark Innovation Technology Inc v Matidor Technologies Inc, 2022 FC 72) and patent infringement (Janssen Inc v Teva Canada Ltd, 2022 FC 269). Other decisions dealing with costs include a Federal Court decision awarding elevated costs on the basis of a refusal to bifurcate a decision (Paid Search Engine Tools, LLC v Google Canada Corporation, 2022 FC 519; see our article from June 15, 2022) and a decision from the Federal Court of Appeal which reiterated that the court has discretion to consider any offer to settle—whether made under the rules or otherwise—when determining an appropriate amount of costs (Pharmascience Inc v Teva Canada Innovation, 2022 FCA 207).
At least two decisions from 2022 dealt with the issues of contempt in IP disputes. The Federal Court in Deeproot Green Infrastructure, LLC v Greenblue Urban North America Inc, 2022 FC 709, addressed a claim for contempt arising from a patent infringement action in which the defendant was enjoined from infringing the two patents at issue. Following a trial that found the defendant had infringed a pair of patents dealing with a pavement support system, the defendant modified its device to intentionally fall outside the scope of the claims. Rather than commence a new action for patent infringement against the new device, the plaintiff brought a motion for contempt alleging the new device was in contravention of the injunction issued against the defendant. The Federal Court dismissed the plaintiff’s motion, finding that the defendant’s new device did not amount to contempt as it fell outside the scope of the claims.
In Dish Network LLC et al v Butt et al, 2022 ONSC 1710, the Ontario court dealt with an issue relating to sentencing and the implications of positive changes in a defendants’ conduct after being found in contempt in an action for copyright and trademark infringement. Contempt was found based on the defendants’ continuing to operate the impugned streaming service at issue and selling set-top boxes that could access such services. According to the court, contempt is mainly a tool of persuasion rather than punishment, and given the defendants’ attempt to comply with the original order, the court found a sentence of a conditional discharge (subject to probation of two years less a day) as more appropriate than the prison terms sought by the applicant, suggesting that a change in conduct bears weight with the court even after a finding of contempt and may influence sentencing (see our article from May 30, 2022 for further details on this and other similar contempt decisions).