2021 Year in Review: IP Litigation

Despite the continued pandemic making 2021 a year of ongoing challenges, Canadian courts continued to issue significant decisions concerning Intellectual Property litigation. The year saw perhaps the beginning of the end of claims under the 400-year-old English Statute of Monopolies, the Federal Court of Appeal providing guidance on when patent infringement actions can be heard by way of summary trial, and also Canada’s first website-blocking order upheld on appeal. Keep reading for our Top 10 developments in IP litigation from 2021.

1. Pleadings (Allegations not in NOA)

While the significant amendments to Canada’s Patented Medicines (Notice of Compliance) Regulations (“PM(NOC) Regulations”) have been in place now since September 17, 2017, procedural questions implicating the amendments continue to be addressed. In Sunovion Pharmaceuticals Canada Inc. v. Taro Pharmaceuticals Inc., 2021 FC 37, the Federal Court allowed amendments to a Statement of Defence in a PM(NOC) action that went beyond the grounds of invalidity set out in the Defendant’s Notice of Allegation (“NOA”). The decision was later affirmed on appeal (Sunovion Pharmaceuticals Canada Inc. v. Taro Pharmaceuticals Inc., 2021 FCA 113). This represents a significant shift from the practice under the previous PM(NOC) regime in place until 2017, under which the second person was more strictly limited to the allegations contained in its NOA. See our article from January 18, 2021, for more information.

2. Causes of Action

2021 brought a decision on the applicability of historical legislation regarding monopolies to current patent law disputes. In Apotex Inc. v. Eli Lilly Canada Inc., 2021 ONSC 1588, the Court confirmed on a summary judgment motion that the 1624 English Statute of Monopolies, along with a similar Ontario Statute of Monopolies and the common law, are not applicable in the determination of damages sought by generic companies that were kept off the market by patents that were later held invalid under Canada’s patented drug regime. In practice, the decision limits a generic company’s recoverable damages caused by operation of Canada’s PM(NOC) Regulations to those pursuant to s. 8 of the PM(NOC) Regulations. While further comment on the issue is anticipated from appellate courts, the decision provides clarity to an issue left unresolved in multiple actions before Canada’s courts for a decade. See our article from March 24, 2021 for further details about the decision.

2021 also saw the advancement of a rather novel cause of action of inducement of copyright infringement. In Bell Canada v. L3d Distributing Inc. (INL3D), 2021 FC 832, the Federal Court awarded over $29M in statutory damages for a claim of copyright infringement brought by a group of media broadcasters against sellers of pre-programmed set-top boxes for streaming alleged pirated content. While the Court found the Defendants had infringed the Plaintiffs’ statutory rights under the Copyright Act, it also found as a separate cause of action that the Defendants knowingly induced copyright infringement. The finding is notable given the paucity of Canadian authority relating to inducing copyright infringement, and what may be the first application of an inducement test—regularly applied in the context of patent law—to an instance of copyright infringement. See our article from August 13, 2021 for further details.

3. Summary Trial & Summary Judgment

In another Canadian IP case decided using a summary trial procedure, 2021 saw the Federal Court of Appeal provide guidance regarding when patent infringement actions can be heard by way of summary trial. In ViiV Healthcare Company v. Gilead Sciences Canada, Inc., 2021 FCA 122, the Court found that while in some cases summary proceedings end up adding to the cost and duration of litigation, there are instances where such procedures can improve access to speedy and cost-efficient justice. ViiV has since sought leave from the Supreme Court of Canada to appeal the decision.  

Summary judgment decisions from lower courts also issued in 2021. Of particular note is the decision in Patterned Concrete Mississauga Inc. v. Bomanite Toronto Ltd., 2021 FC 314, in which the Federal Court granted a motion for summary judgment in favour of the Plaintiff in the context of a copyright infringement action brought against its competitor. In particular, the plaintiff asserted copyright subsisting in various job-related forms, including for quotes and contracts. The Court was satisfied there was no genuine issue for trial and concluded copyright subsisted in the forms and was infringed. See our article from April 16, 2021 for further details.

4. Privilege

In Janssen Inc and Mitsubishi Tanabe Pharma Corp v Sandoz Canada Inc., 2021 FC 1265, the Federal Court made a ruling on the scope of privilege to be applied to communications with a patent agent. In 2016, ss. 16.1(1) of the Patent Act was amended to extend privilege to communications made for the purpose of seeking or giving advice with respect to any matter relating to the protection of an invention. The Federal Court interpreted the amendment to exclude a “non-infringement opinion for a product”, finding that communications “relating to the protection of an invention” does not extend to an analysis of whether a product infringes third party patent rights. Although the Court held that patent agent privilege does not cover opinions relating to third-party patents (e.g., freedom to operate opinions), it remains undecided whether an infringement analysis of a competitor’s product would be protected. See our article from  December 6, 2021 for more information.

5. Evidence

Decisions from 2021 also touched on various aspects of evidence unique to IP litigation. The use of foreign prosecution histories was addressed by the Federal Court of Appeal in Canmar Foods Ltd. v. TA Food Ltd., 2021 FCA 7, in the context of an appeal from a summary judgment motion dismissing a patent infringement action. The lower Court’s decision was the first application of s. 53.1 of the Patent Act regarding the admissibility of prosecution history to construe a patent’s claims since the section came into force in late 2018. The Court of Appeal upheld the dismissal of the infringement action but held that the lower Court should not have considered statements made by the patentee to the United States Patent Office to construe the patent’s claims. The Federal Court of Appeal again cautioned against an expansive view of s. 53.1 in Bauer Hockey Ltd. v. Sport Maska Inc., 2021 FCA 166. There, the court repeated that s. 53.1 of the Patent Act should only allow for consideration of the prosecution history when there is evidence of inconsistent positions being taken by the patentee – one before the patent office and another before the court. Otherwise, the rule from Free World Trust that extrinsic evidence such as the prosecution history should not be admitted should govern. See our articles from January 27, 2021 and August 24, 2021 for more details about the cases.

The use of “antipiracy software” to generate infringement evidence was before the Court in Trimble Solutions Corporation v. Quantum Dynamics Inc., 2021 FC 63. There, the Plaintiffs brought an ex parte motion for default judgment for infringement copyright in a software program. The Plaintiffs’ evidence of copying is notable as they relied on an “infringement report” generated by a third-party antipiracy software program. The Court accepted this electronic evidence of infringement, despite the Plaintiffs not having access to the Defendants’ actual devices on which the copies were alleged to have been made. See our article from January 26, 2021 for further details.

6. Stay

In Teva Canada Innovation v. Pharmascience Inc., 2021 FC 367, the Court stayed an ongoing patent re-examination proceeding before the Canadian Patent Office until final judgment in a related patent infringement action. To be granted the stay, Teva was required to show: (1) a serious issue to be tried, (2) that it would suffer irreparable harm if the stay were not granted; and (3) that the balance of convenience favours the stay. Notably, the Court held that this particular re-examination was akin to duplicative litigation with the risk of inconsistent results, which amounted to a non-speculative form of irreparable harm. While the decision is largely fact driven, it suggests that in the context of a stay, irreparable harm may be established where facts demonstrate the “risk” of an inconsistent result. See our article from June 2, 2021 for more information.

7. Relief: Website Takedowns

The availability of website blocking orders have continued their momentum in Canada in 2021, with the Federal Court of Appeal upholding Canada’s first site-blocking order. In Teksavvy Solutions Inc. v. Bell Media Inc., 2021 FCA 100,  the Court unanimously affirmed the site-blocking order issued against a number of Canadian Internet Service Providers (ISPs), requiring them to block their customers from accessing infringing content streamed through the websites at issue. The underlying action involved a claim for copyright infringement brought by three major Canadian broadcasters. The decision affirmed the Federal Court’s jurisdiction to grant such orders, and deals squarely with issues of net neutrality and freedom of expression. For further details about the decision, see our article from June 11, 2021.

8. Interest Awards

In Apotex Inc. v. Eli Lilly and Company, 2021 FCA 149, the Federal Court of Appeal provided guidance on the test a party must meet to establish a damages claim for interest on lost profits. In a previous related decision dealing with the quantification of damages, the Court held that damages for lost interest on lost profits cannot be presumed and “must be proved in the same way as any other form of loss or damage.” On this appeal, dealing specifically with the computation of an interest award, the Appeal Court accepted the Federal Court’s application of the “would have” and “could have” framework—namely whether interest would and could have been earned but for the adverse party depriving its adversary from using its profits. See our article from August 10, 2021 for more information.

9. Costs

2021 saw cost-related IP decisions as well. In particular, the Federal Court of Appeal in Teksavvy Solutions Inc. v. Bell Media Inc., 2021 FCA 181 provided further guidance on the circumstances under which litigants may obtain costs awards exceeding those amounts stipulated in Tariff B of the Federal Courts Rules. The Court of Appeal rejected the Respondent’s argument that an elevated lump sum cost award was justified. The Court explained that although all parties were sophisticated commercial litigations, the novelty of the website-blocking order that was at issue, coupled with the fact that the Appellant was an innocent third-party intermediary, weighed in favour of a cost award under the tariff which was elevated to reflect the importance and complexity of the issues on appeal. See our article from October 1, 2021 that describes the case in greater detail.

Nevertheless, the growing trend of lump sum cost awards in IP disputes also contin
ued in 2021. In Allergan Inc. v. Sandoz Canada Inc., 2021 FC 186 the Court was tasked with determining costs claimed in relation to a patent infringement action filed under Canada’s PM(NOC) Regulations. In doing so, the Court recognized the growing practice of awarding lump sim cost awards in IP disputes between sophisticated commercial parties, which are often well in excess of the amounts otherwise available under the tariff. The Court found that in complex proceedings under the PM(NOC) Regulations, 37.5% of fees was an appropriate starting point for such lump sum costs, and ultimately awarded lump sum costs in excess of $380,000 against the unsuccessful plaintiff. See our article from March 10, 2021 for further details about the decision.

10. Contempt

Lastly, there were decisions in 2021 dealing with orders of contempt of court, particularly in the area of copyright infringement. In Canadian Standards Association v. P.S. Knight Co. Ltd., 2021 FC 770, the Federal Court found the defendants in contempt of court for failing to abide by, or aiding and abetting others to contravene, a previous judgment relating to copyright infringement. Despite the finding of infringement, the Defendants resumed copying of the literary work at issue through a newly incorporated US company. The Court found the Defendants had intentionally contravened the judgement and were guilty of contempt. A decision on the penalty was issued in December (2021 FC 1346) requiring the defendants (who did not appear at the sentencing hearing, the individual defendant having apparently left Canada for the United States) to pay a fine and costs and sentencing the individual defendant to a 6-month term of imprisonment if he failed to purge his contempt.

The decisions in Warner Bros. Entertainment Inc. v. White (Beast IPTV), 2021 FC 989 and 2021 FC 996 arose from the appeal of contempt orders also relating to copyright infringement. In the underlying action, Plaintiff entertainment companies commenced claims for copyright infringement against the Defendants for operating an online streaming service. Once litigation commenced, the Plaintiffs obtained an interim injunction to stop operation of the service. After the Defendants ignored the injunction order, the Court ordered the defendant to appear for a contempt hearing, in which the Court issued orders of contempt against each of the individual Defendants. On the appeals, the Court accepted the guilty plea by one of the Defendants, deferring sentencing to a later date, while dismissing the contempt charges against the other Defendant who offered an “abject apology” and took responsibility for his actions. See our article from January 5, 2022 for further information on the decisions.