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05 February 2018
Supreme Court strikes down promise doctrine
Dow receives largest award for patent infringement in Canadian history
Accounting of profits and non-infringing alternative defence
Expediting trademark litigation in federal courts
Clarification regarding use of keywords in advertising
Federal Court's willingness to protect trade dress and goodwill
Award for circumvention of technological protection measures
Supreme Court grants global injunction
Res judicata inapplicable to domain name proceedings
Amendments to IP laws
Canadian IP law and practice saw significant developments in 2017, including important court decisions and numerous legislative amendments. This update reviews the top 10 highlights of the past year.
In AstraZeneca Canada Inc v Apotex Inc (2017 SCC 36), the Supreme Court abolished the controversial 'promise of the patent' doctrine, under which patentees had to prove that a claimed invention was useful for any promised uses found in the specification. This judge-made doctrine had been invoked to invalidate numerous patents over the past decade and had resulted in a trade dispute between Eli Lilly Co and Canada under the North American Free Trade Agreement's investor-state arbitration regime (for further details please see "Tribunal dismisses Eli Lilly's NAFTA challenge on promise utility doctrine").
For years patentees had argued that the doctrine was arbitrary and inconsistent, often resulting in the invalidation of patents that were upheld elsewhere. Finally, in June 2017 the Supreme Court unanimously abolished the doctrine, holding that patentees need establish only a scintilla of utility relating to the subject matter of an invention (for further details please see "Promise doctrine struck down and AstraZeneca's NEXIUM patent upheld as useful"). The decision was a victory for AstraZeneca Canada Inc (whose patent for its blockbuster gastrointestinal drug Nexium was declared valid), but also for patentees, as it brought the Canadian standard closer to other jurisdictions in terms of the applicable utility requirements for patentability.
In Dow Chemical Company v Nova Chemical Corporation (2017 FC 637) a record amount was awarded in a patent infringement suit involving polymers used in heavy plastic bags, pallet wrapping and food packaging. Dow Chemical Company, the successful plaintiff, had elected to recover the defendant's infringing profits as opposed to damages from lost sales. The court awarded an amount:
After a reference on quantification, Dow was awarded C$645 million, including pre-judgment interest which was calculated based on a profits-on-profits approach (for further details please see "Dow obtains largest ever Canadian patent infringement award").
In Apotex Inc v ADIR (2017 FCA 23) the Federal Court of Appeal released a significant decision on accounting for profits – a remedy for patent infringement in Canada. The appeal concerned the non-infringing alternative defence raised by Apotex to reduce the profits that it had to disgorge for its wrongful export sales of generic perindopril (Coversyl). The non-infringing alternative defence contends that an infringer's profits, in full or in part, are not causally attributable to the infringement.
The Court of Appeal acknowledged the availability of the non-infringing alternative defence. In particular, an infringer must establish that, hypothetically, it could and would have obtained and used the non-infringing alternative. To prove 'could have', the infringer must demonstrate that it had been possible for it to secure the non-infringing alternative; to prove 'would have', the infringer must demonstrate that events would have transpired in such a way as to put them in that position.
Later, the Federal Court considered the same defence in AstraZeneca Canada Inc v Apotex Inc (2017 FC 726), relating to Apotex's infringement of the omeprazole formulation patent (its Losec). Apotex failed to prove that it could and would have sold a non-infringing alternative at any time during infringement (for further details please see "AstraZeneca succeeds in omeprazole patent infringement profits case").
On November 6 2017 the Federal Court of Appeal issued its decision in Group III International Ltd v Travelway Group International Ltd (2017 FCA 215). Substantively, the decision represented a departure from the principle of a registered trademark acting as a complete defence against trademark infringement, as the respondent's use of its own registered trademarks was found to be an infringement of the applicant's registered trademarks.
From a practical perspective, this decision suggests that the streamlined application procedure available in the Federal Court – in which parties are limited to documentary evidence without discovery and the court issues a decision after an oral hearing rather than a full trial – may nonetheless permit a fulsome recovery of damages. As such, despite previous case law to the contrary, parties proceeding by way of application rather than a conventional action may not, in fact, be leaving money on the table (for further details please see "Streamlined trademark litigation – Federal Court of Appeal opens door to full compensation").
In 2015 the British Columbia Supreme Court issued a decision (2015 BCSC 1470) that garnered significant attention for its conclusions that:
In particular, the second conclusion appeared to run contrary to the established case law (for further details please see "Court finds that keyword advertising does not constitute passing off").
On January 26 2017 the British Columbia Court of Appeal issued its decision in Vancouver Community College v Vancouver Career College (Burnaby) Inc (2017 BCCA 41), which affirmed the lower court's first conclusion and overturned its second. Specifically, the court agreed that the mere purchase of a competitor's trademark as a keyword for search engine advertising did not in itself constitute passing off. However, the court found that that the lower court had erred in assessing confusion only once a had consumer reached the defendant's website – instead, the appropriate time to consider confusion was at an earlier stage, when the consumer had viewed the search engine results page that displayed the defendant's sponsored link.
Ultimately, a party that engages in keyword and search engine advertising using the trademarks of its competitors should proceed cautiously and ensure that the manner in which its sponsored links are displayed by search engines does not cause confusion with those trademarks.
On June 19 2017 the Federal Court handed down its decision in Diageo Canada Inc v Heaven Hill Distilleries Inc (2017 FC 571) (for further details please see "Captain Morgan makes Admiral Nelson's walk the plank"). The plaintiff, one of the world's largest producers of spirits, led evidence of the trade dress associated with its well-known Captain Morgan brand, as well as the extensive goodwill associated with that trade dress and the plaintiff's registered trademarks.
The court agreed with the plaintiff that the defendant had:
Accordingly, brand owners should be reminded of the strategic advantage of registering their core character and label elements as trademarks and should not hesitate in pursuing protection and enforcement of their trade dress in Canada.
The court's decision was also notable for being one of the few decided cases in Canada to involve a finding of liability for depreciation of goodwill of a registered trademark.
On March 1 2017 the Federal Court handed down its precedent-setting decision in Nintendo of America Inc v King (2017 FC 246).
The court concluded that the respondent's sale and installation of video game copier devices and console modification chips, which allowed for unauthorised copies of video games to be played on the applicant's consoles, circumvented the applicant's technological protection measure provisions in the Copyright Act. As a result, the court awarded the applicant over C$12.7 million in statutory damages. The court further awarded C$1 million in punitive damages against the corporate respondent in light of the respondent's conduct.
While the law on technological protection measure circumvention continues to be developed in Canada, this decision sent a clear message to would-be infringers.
On June 28 2017 the Supreme Court of Canada issued its decision in Google Inc v Equustek Solutions Inc (2017 SCC 34), upholding an injunction requiring Google Inc, a non-party to an infringement action, to remove links to infringing websites from its global search results.
Despite originating as an IP infringement matter, the case evolved into one in which the key issue was the jurisdiction of the Canadian courts to issue injunctive relief on a global scale against a non-party as a remedy for infringement on the Internet. In finding that the Canadian courts had such power, the court stated that "the Internet has no borders – its natural habitat is global. The only way to ensure that the interlocutory injunction attained its objective was to have it apply where Google operates – globally".
The decision represents the stance taken by Canada's highest court that the Canadian courts have broad jurisdiction to issue injunctions against both parties and non-parties, including with extraterritorial effect (for further details please see ""The Internet has no borders": Supreme Court upholds global injunction in search results case").
The Canadian Internet Registration Authority (CIRA) Domain Name Dispute Resolution Policy (CDRP) issued a pair of decisions confirming that failure to secure a domain name transfer at a first panel hearing does not bar a brand owner from pursuing and succeeding at a second panel hearing (for further details please see "Down, but not out – initial adverse decision not bar to future recovery of '.ca' domain name").
In these cases, the complainant was unsuccessful in its first attempt to recover a domain name that was confusingly similar to its trademark. The complainant then gathered evidence of prior use of the complainant's trademark in Canada and evidence of bad faith on the registrant's part. The evidence was decisive and the complainant successfully recovered the infringing domain name.
The complainant's ultimate success illustrates that where a brand owner is determined to recover an infringing domain name, failure before the CDRP in the first instance does not necessarily prohibit it from commencing a second proceeding with better evidence in support of its position. However, perhaps more importantly, it highlights the importance of working with counsel who are familiar with such proceedings and understand the evidentiary requirements at play.
In terms of foreshadowing a significant overhaul to Canada's IP legislation across all areas, 2017 was an active year.
Patented Medicines (Notice of Compliance) Regulations
Amendments to these regulations came into force on September 21 2017, bringing significant changes to Canada's pharmaceutical patent linkage litigation. The new regulations replace summary proceedings with a full right of action for determining validity and infringement with a right of appeal to both patentees and generics (for further details please see "Publication of final regulations on patent linkage and term restoration relating to CETA").
Amendments to this act are proposed in order to allow Canada's accession to the Madrid Protocol and the Nice Agreement. The Madrid Protocol simplifies the procedure for filing corresponding trademark applications in foreign countries. The Nice Classification provides a standardised classification of goods and services. The amendments are not expected to come into force before early 2019 (for further details please see "Implementation of amended Trademarks Act not expected before 2018").
Amendments to these rules are proposed in order to allow applicants more flexibility in their filings. However, the amendments also reduce the national phase entry deadline from 42 months from the priority date to 30 and shorten prosecution deadlines (for further details please see "Proposed amendments to Patent Rules published for public consultation").
Industrial Designs Regulations
Amendments to these regulations are proposed in order to allow Canada's accession to the Hague Agreement. The proposed regulations allow applicants more flexibility in their industrial design filing strategy than the existing regime, but are not expected to come into force before early 2019 (for further details please see "Proposed new Industrial Design Regulations mark step towards joining Hague Agreement").
For further information on this topic please contact Kwan T Loh at Smart & Biggar/Fetherstonhaugh's Vancouver office by telephone (+1 613 232 2486) or email (firstname.lastname@example.org). Alternatively, contact Ahmed ElDessouki at Smart & Biggar/Fetherstonhaugh's Toronto office by telephone (+1 416 593 5514) or email (email@example.com). The Smart & Biggar/Fetherstonhaugh website can be accessed at www.smart-biggar.ca.
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