Top 10 Highlights of Canadian IP Law and Practice in 2017

by Smart & Biggar
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2017 was a year of significant developments to Canadian IP law and practice, with important court decisions and numerous legislative amendments.  We have taken the opportunity to review the top 10 highlights from the past year.

1. Supreme Court of Canada strikes down “promise doctrine”, upholds AstraZeneca’s NEXIUM patent as useful

In AstraZeneca Canada Inc v Apotex Inc, 2017 SCC 36, the Supreme Court of Canada abolished the controversial “promise of the patent” doctrine, under which patentees had to prove that the 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 as previously reported, resulted in a trade dispute between Eli Lilly Co. and Canada under NAFTA's investor-state arbitration regime.

For years, patentees had argued that the doctrine was arbitrary and inconsistent, often resulting in invalidation of patents that were upheld elsewhere. Finally, in June 2017, the Supreme Court unanimously abolished the doctrine, holding that patentees need only establish a “scintilla” of utility relating to the subject-matter of the invention. The decision was a victory for AstraZeneca Canada Inc. (whose patent for its blockbuster gastrointestinal drug NEXIUM was declared valid), and also for patentees, as the Canadian standard has now been brought closer to other jurisdictions in respect of applicable utility requirements for patentability. 

AstraZeneca was represented by Smart & Biggar from trial all the way to the Supreme Court by a team that included Gunars A Gaikis, Yoon Kang and Lynn Ing.

More details on the Supreme Court decision is available in our IP Update from June 30, 2017.  

2. Dow awarded $645 million, the largest for patent infringement in Canadian history

In The Dow Chemical Company v Nova Chemical Corporation, 2017 FC 637, a record amount was awarded in a patent infringement lawsuit involving polymers used in heavy plastic bags, pallet wrapping and food packaging. The Dow Chemical Company, the successful plaintiff, elected to recover the defendant's infringing profits as opposed to damages from lost sales. The Court awarded an amount for infringing activity that took place after the publication of the patent application but in advance of the patent issuing, and an amount representing the springboard profits enjoyed by the defendant following expiry of the patent as a result of the defendant's infringing activity prior to expiry. After a reference on quantification, Dow Chemical was awarded C$645 million, including pre-judgment interest which was calculated based on a profits-on-profits approach.

Dow Chemical was successfully represented by a trial team from Smart & Biggar which included Steven Garland, Jeremy Want, Colin Ingram, Daniel Davies and Kevin Graham.

More details on the Dow Chemical decision is available in our IP Update from July 5, 2017.

3. Accounting of Profits and the Non-Infringing Alternative Defense

The Federal Court of Appeal released a significant decision on accounting for profits, a remedy for patent infringement in Canada: Apotex Inc v ADIR2017 FCA 23. The appeal concerned the non-infringing alternative (“NIA”) defense raised by Apotex to reduce the profits it had to disgorge for its wrongful export sales of generic perindopril (COVERSYL). The NIA defence contends that an infringer’s profits, in full or part, are not causally attributable to the infringement.

The Court of Appeal acknowledged the availability of the NIA defence.  In particular, an infringer must establish that in the hypothetical world it “could have” and “would have” obtained and used the NIA. To prove “could have”, the infringer must demonstrate that it was possible for it to secure the NIA; to prove “would have”, the infringer must demonstrate that events would have transpired in such a way as to put them in that position.

More detail on the perindopril decision is available in our IP Update from February 21, 2017. 

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 (AstraZeneca’s LOSEC). As discussed in further detail in our IP Update from September 12, 2017, Apotex failed to prove that it could and would have sold a NIA at any time during infringement.  AstraZeneca was successfully represented by a trial team from Smart & Biggar, including Nancy Pei, Mark Biernacki, J. Sheldon Hamilton, Urszula Wojtyra, Abigail Smith, Paul Jorgenson and Brandon Heard.

4. Expediting trademark litigation in Canada’s Federal Courts

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 represents a departure from the principle of a registered trademark acting as a complete defense to 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, as highlighted in our IP Update from December 11, 2017, this decision suggests that the streamlined application procedure available in the Federal Court – in which parties are limited to documentary evidence without discovery, and in which the Court issues a decision after an oral hearing rather than a full trial – may nevertheless 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.

5. Clarification regarding the use of keywords in advertising

In 2015, the British Columbia Supreme Court issued a decision (2015 BCSC 1470) that garnered significant attention for its conclusions that: a) purchasing a competitor’s trademark as a keyword for search engine advertising was not itself sufficient to constitute passing off, and b) the assessment of when a defendant’s activity was likely to cause consumer confusion was to be done only after the consumer had reached the defendant’s website.  In particular, the second conclusion appeared to run contrary to the established case law.

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 the second.  Specifically, the BCCA agreed that the mere purchase of a competitor’s trademark as a keyword for search engine advertising does not, without more, constitute passing off.  However, the BCCA found that that the lower court erred in assessing confusion only once a consumer reaches a defendant’s website; instead, the appropriate time to consider confusion is at an earlier stage, when the consumer views the search engine results page that displays 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. More details regarding the BCCA decision and its implications can be found in our January 30, 2017 IP Update.

6. A willingness by the Federal Court to protect trade dress and goodwill

As reported in our IP Update from June 19, 2017, the Smart & Biggar team of François Guay, Mark Evans, Ekaterina Tsimberis and Renaud Garon Gendron successfully represented the plaintiff in the Federal Court’s decision in Diageo Canada Inc v Heaven Hill Distilleries Inc, 2017 FC 571. 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.

In the result, the Court agreed with the plaintiff that the defendant had passed off its ADMIRAL NELSON’S rum products as those of the plaintiff, and infringed the plaintiff’s registered trademarks for its CAPTAIN MORGAN character and label.  Accordingly, brand owners should be reminded of the strategic advantage of registering their core character and label elements as trademarks, and to not hesitate in pursuing protection and enforcement of their trade dress in Canada.

The Court’s decision is also notable for being one of the few decided cases in Canada where there has been a finding of liability for depreciation of goodwill of a registered trademark.

7. $12.7 million awarded for circumvention of Technological Protection Measures (TPMs)

On March 1, 2017, the Federal Court released its precedent-setting decision in Nintendo of America Inc v King et al, 2017 FC 246, in which Mark Biernacki and Kevin Siu of Smart & Biggar acted as counsel for Nintendo of America Inc, the successful applicant.

The Court concluded that the respondent’s sale and installation of video game copier devices and console modification chips, which allowed for unauthorized copies of video games to be played on the applicant’s consoles, circumvented the applicant’s Technological Protection Measure (TPM) 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 TPM circumvention continues to be developed in Canada, this decision is a strong shot across the bow at would be infringers. More detail on the decision can be found in our March 2, 2017 IP Update.

8. Supreme Court of Canada grants global injunction

The Supreme Court of Canada issued its decision in Google Inc v Equustek Solutions Inc on June 28, 2017 (2017 SCC 34), upholding an injunction requiring a non-party to an infringement action, Google Inc, to remove links to infringing websites from its global search results. 

Despite beginning life as an intellectual property infringement matter, the case evolved into one in which the key issue became the jurisdiction of 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 Canadian courts did have 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 signifies a stance taken by Canada’s highest court that our courts have broad jurisdiction to issue injunctions against both parties and non-parties, including with extraterritorial effect. Further discussion of the decision can be found in our June 28, 2017 IP Update.

9. Res judicata inapplicable to domain name proceedings

As reported in our July 26, 2017 IP Update, 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.

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 sought the guidance of Daniel Anthony and Timothy Stevenson of Smart & Biggar’s Domain Names & Internet Law Group, who worked with the complainant to muster evidence of prior use of the complainant’s trademark in Canada, and evidence of bad faith on the part of the registrant. The evidence was decisive, and the complainant successfully recovered the infringing domain name.

The ultimate success of the complainant illustrates that where a brand owner is determined to recover an infringing domain name, failure in the first instance before the CDRP does not necessarily prohibit it from commencing a second proceeding with better evidence in support of its position. Perhaps more importantly, however, it serves to highlight the importance of working with counsel familiar with such proceedings, who understand the evidentiary requirements at play.

10. Looking Ahead - Amendments to Canada’s IP laws

2017 was an active year in terms of foreshadowing a significant overhaul to Canada’s IP legislation across all areas.  Some of the most noteworthy legislative changes and proposed changes include:

  • Amendments to the Patented Medicines (Notice of Compliance) Regulations, which came into force on September 21, 2017, brought 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. More details are available here.
  • Amendments are proposed to Canada’s Trademarks Act to allow Canada’s inclusion 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 standardized classification of goods and services. The amendments are not expected to come into force before early 2019. More details on the proposed changes are available here
  • Amendments are proposed to Canada’s Patent Rules to provide applicants more flexibility in their filings. However, the amendments also reduce the national phase entry deadline from 42 months to 30 months from the priority date and shorten prosecution deadlines. More details are available here.
  • Amendments are proposed to Canada’s Industrial Designs Regulations to allow Canada to join the Hague Agreement. The proposed Regulations provide applicants more flexibility in their industrial design filing strategy over the current regime, but are not expected to come into force before early 2019. More details are available here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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