Why you shouldn’t overlook Canadian IP litigation
While Canada is known for its natural resources and universal healthcare, it is often overlooked as a jurisdiction to litigate IP disputes.
This article sets out several reasons why this oversight is unwarranted. Owing to a market approval regime for pharmaceuticals similar to the Hatch-Waxman Act in the US, as well as the heavy reliance Canada’s healthcare system places on generic pharmaceuticals, Canadian courts are tried and tested when it comes to resolving complex patent and other IP disputes.
Canada’s strength in this area is largely the result of the chief forum for IP disputes: the Federal Court of Canada. Since its inception almost 50 years ago, the Federal Court has had near-exclusive jurisdiction over IP matters. This has resulted in court practices that are tailored to, and a judiciary familiar with, IP litigation. Beyond the effective forum of the Federal Court, the available remedies and the comparatively lower expense associated with litigation make Canada an ideal jurisdiction when considering where to litigate IP matters.
The Federal Court of Canada
Nearly all IP disputes are litigated in the Federal Court due to the court’s statutory grant of jurisdiction over patents, trademarks, and copyright. While a party may choose to bring proceedings in provincial superior courts, certain forms of relief are within the exclusive jurisdiction of the Federal Court (eg, a declaration of patent invalidity or expungement of a trademark registration).
The added benefit of the Federal Court is its unitary and broad jurisdiction which extends to all provinces and territories. The nature of this jurisdiction prevents forum disputes and provides litigants with relief across Canada.
The Federal Court’s long-standing jurisdiction over IP matters, coupled with the rise of increasingly complex litigation, has required the court to develop several procedures and practices to effectively and efficiently resolve IP disputes. These include:
- Case management: most IP proceedings are case managed, otherwise known as “special management”. Case management is readily available, either on the request of one or more of the parties, or mandatory in the case of complex proceedings involving IP. The basis of case management is the appointment of a “case manager”, either a judge or a prothonotary (like a magistrate), who is put in charge of ensuring the efficient progression of the proceeding. The chief function of the case manager is to resolve procedural issues that arise during the proceeding. Case managers provide a helpful conduit between the parties and the court, and are often available on short notice. Since its inception, case management has significantly increased the efficiency of proceedings.
- Early trial dates: the Federal Court is committed to the expedited determination of IP disputes. In this pursuit, the court is amenable to scheduling trial dates early in the proceeding. Unlike other jurisdictions, in Canada there is no requirement for certain procedural steps to be completed before the matter is set down for trial. As such, trial dates are often requested, and fixed, at the outset of the proceeding and parties can expect a trial to be scheduled two years from the start of the proceeding. With the trial date fixed well in advance, pre-trial steps are forced to progress efficiently and on-schedule.
- Limited depositions: depositions in Canada, known as “discovery”, are much less extensive than the deposition practice in the US. After an exchange of production documents, each party selects a single representative to be examined for discovery. As a result, there is no limitless examination of all relevant parties or experts. The examining party has the right to put portions of the examination transcripts into evidence at trial. In patent cases, however, the defendant has the right to examine the inventor as an assignor of the rights at issue. Transcripts from inventor examinations cannot be introduced as evidence as the inventor is not a party to the proceeding, although these transcripts may be used to impeach their testimony at trial.
- Judges, not juries: the Federal Court does not allow for jury trials. Instead, a single judge acts as both judge and juror. Due to the high volume of IP disputes, the Federal Court judiciary is well-versed in IP matters. Moreover, the current judiciary includes several former IP practitioners. The results of this are efficient, principled, predictable, and more fully reasoned decisions. Beyond trials, the Federal Court offers mediation services at no charge to the parties. Mediators are drawn from the judiciary (including prothonotaries), resulting in focused and often successful resolution of disputes while avoiding the costs of a trial.
- Trial management: in its commitment to the efficient resolution of disputes, the Federal Court has published guidelines for trial management. The guidelines mandate certain pre-trial procedures and timelines for matters such as expert report objections, interlocutory motions, witness schedules, and the exchange of, and objection to, demonstrative aides.
Remedies
Under Canadian law, the successful plaintiff in a patent infringement action may elect between damages or a disgorgement of the defendant’s profits (“accounting of profits”) in its request for monetary relief. In the case of a disgorgement, this relief can extend to profits generated outside of Canada where the infringing acts took place in Canada.
In a recent Federal Court judgment, the defendant manufactured the infringing product in Canada but was ordered to disgorge profits from sales in the US. Although the defendant was ordered to pay damages for the sales of the same product following a proceeding in the US, the Federal Court permitted the plaintiff to recoup profits that went beyond the damages award in the US. This aspect of an accounting of profits is becoming more common and provides a useful tool for rights holders for the complete recovery of illegally generated profits.
Expenses
The expenses associated with IP litigation in Canada are lower than the US. This is primarily the result of counsel fees which are comparably lower, but also from the nature of Federal Court procedure and practice. As mentioned above, discovery practice is significantly limited. This translates to lower counsel fees associated with discovery preparation and attendance, as well as lower disbursements such as travel costs and expert witness fees.
Fee-shifting is another important mechanism by which a successful party can reduce its upfront litigation costs. In Canada, fee-shifting is a fundamental tenet of civil litigation. In the normal course, the successful party is entitled to recoup a portion of its legal fees and all of its reasonable disbursements.
The traditional practice was to assess legal fees (ie, counsel fees) in accordance with a tariff set out in the Federal Courts Rules. With the advent of more complex litigation, the tariff is increasingly seen as inadequate to compensate the successful party. The recent trend of the court, at least in IP matters, is to depart from the tariff and to calculate legal fees as a portion of the fees actually expended (known as a “lump sum” and usually between 15 and 30% of the actual fees).
A lump sum order of fees coupled with total recovery of all reasonable disbursements can result in substantial costs awards. As an example, two recent costs orders awarded the successful party over C$6 million associated with the patent infringement portion of the action, and over C$4 million associated with the quantification of the defendant’s illegal profits.
Conclusion
The Federal Court has proved itself to be a competent forum for IP disputes, and potential litigants can expect a litigation process that is effective, faster, more efficient, and less expensive than that in other comparable jurisdictions. As a result, Canada should be seen as a standard-bearer for IP litigation and feature on the short-list of any company seeking to enforce its rights in an effective and efficient fashion.
Ron Dimock is a partner at DLA Piper. He can be contacted at: ron.dimock@dlapiper.com
Sangeetha Punniyamoorthy is a partner at DLA Piper. She can be contacted at: s.punn@dlapiper.com
Nikolas Purcell is an associate at DLA Piper. He can be contacted at: nikolas.purcell@dlapiper.com
