Springing Into Action: Supreme Court Of Canada Clarifies Accounting Of Profits Remedy In Patent Infringement Cases

• Published date: 24 November 2022
• Subject Matter: Accounting and Audit, Intellectual Property, Accounting Standards, Patent
• Law Firm: Cassels
• Author: Mr Mark Davis, Stephen Selznick, Kassandra Shortt and Steven Henderson

On November 18, 2022, the Supreme Court of Canada released its decision in Nova Chemicals Corp. v. Dow Chemical Co.¹ In a near-unanimous decision, the Court upheld the largest monetary award ever in a Canadian patent case and, in doing so, clarified the test for an accounting of profits. The Court also confirmed that springboard profits - profits that a patent infringer made from an infringing product after the patent expired but which are attributable to infringement that took place during the term of the patent - may be included in an accounting. This is an important decision because it sets out the analytical framework that litigants will have to consider, and courts will have to apply, to determine patent remedies.

Background

Dow Chemical Co. (Dow) sued Nova Chemicals Corp. (Nova) for patent infringement, arguing that Nova's polyethylene plastic products infringed Dow's patent. In 2014 the Federal Court,² as affirmed in 2016 by the Federal Court of Appeal,³ found that Nova infringed and allowed Dow to seek an accounting of profits that Nova made from that infringement.

In a subsequent 2017 Federal Court reference,⁴ Dow was awarded Nova's actual revenue from selling the infringing plastics, minus Nova's actual costs of producing them. For the first time in Canadian law, the reference judge awarded Dow "springboard profits", profits Nova made after Dow's patent expired, but which were causally attributable to the head start Nova gained from its infringement during the term of the patent.

In 2022, the Federal Court of Appeal upheld this reference decision,⁵ leaving Nova to further appeal to the Supreme Court of Canada (SCC).

Analysis

The majority of the SCC began its analysis by confirming that the Patent Act provides three different monetary remedies for patent infringement:

• Reasonable Compensation - subsection 55(2) - Reasonable compensation can be granted for any loss caused by the infringer's use of the invention between the patent's publication and the grant of the patent. Reasonable compensation is typically computed as the "reasonable royalty" that the infringer would have had to pay in order to obtain a licence.
• Damages - subsection 55(1) - Damages compensate the patentee for all pecuniary losses causally attributable to infringement after the grant of the patent. Damages can include lost profits on sales or due to depression of prices and lost income from licensing opportunities, among others.
• Accounting of Profits - paragraph 57(1)(b) - An...