From profits to damages: Canada’s NIA defence

A recent decision in Canada means defendants in patent infringement cases can raise the non-infringing alternative defence in response to damages claims. Mark Biernacki and Cameron Weir of Smart & Biggar/Fetherstonhaugh considers its potential impact on litigation between drugs companies.

On July 23, 2015, in Apotex v Merck & Co, Canada’s Federal Court of Appeal found for the first time that the availability to an infringer of a non-infringing alternative (NIA) is a relevant consideration when calculating damages for patent infringement. This is a significant legal development. 

Historically, the availability of NIAs in Canada was only relevant in an accounting of profits—an infrequently used equitable remedy that seeks to disgorge an infringer’s unjustly earned profits. Now one can expect defendants in patent infringement disputes to raise the availability of NIAs in response to claims for damages. 

However, the test set out by the appeal court requires that the infringer establishes that it had a NIA, that it both “could and would” have used it absent infringement, and that such NIA would have reduced the plaintiff’s sales. This is anticipated to be a difficult test to meet.