The Regents of the University of California and TearLab Corporation v I-MED Pharma Inc, 2016 FC 606

Parties seeking an interlocutory injunction must be able to provide evidence of irreparable harm that is clear and non-speculative.

In this case, the Federal Court (“FC”) dismissed TearLab Corporation’s (“TearLab”) application for an interlocutory injunction preventing I-MED Pharma Inc. (“I-MED”) from selling its i-Pen System. [88] The FC additionally ordered TearLab to pay security for costs. [96]

The ‘540 Patent: “Tear Film Osmometry”

TearLab is the exclusive licensee of Canadian Patent No. 2,494,540 (“the ‘540 Patent”) entitled “Tear Film Osmometry”. [5] TearLab markets the TearLab Osmolarity System, which measures the osmolarity of tear fluid to assist in the diagnosis and treatment of dry eye disease. [6-7] TearLab discovered that I-MED was offering for sale a tear osmolarity measuring device called the i-Pen System, which would be available in March 2016. [14] TearLab commenced a patent infringement proceeding, alleging the i-Pen System infringed the ‘540 Patent. [17] TearLab additionally filed motions for an interlocutory injunction and an interim injunction. [18] Prior to this decision, the FC dismissed the motion for an interim injunction, finding that TearLab did not establish irreparable harm or that the balance of convenience favoured an injunction (2016 FC 350). [20] At issue in this decision was whether the interlocutory injunction should be granted and whether I-MED was entitled to any security for its costs. [1-2]

Interlocutory Injunction: Irreparable Harm and Balance of Convenience Not Established

The test for an interim or interlocutory injunction was articulated RJR – MacDonald v Canada (Attorney General), 1994 CanLII 117 and requires TearLab to establish:

  1. A serious issue to be tried;
  2. That they will suffer irreparable harm if the injunction is not granted; and
  3. That the balance of convenience favours the granting of an injunction. [26]

The FC found that the threshold for determining whether there is a serious issue to be tried is low and was met by TearLab. [28] In contrast, the threshold for establishing irreparable harm is very high. [32] The harm will not be considered irreparable simply because precisely calculating the damages would be difficult or because it cannot be exactly quantified. [32] The FC was not persuaded by TearLab’s assertions that the i-Pen system would cause irreparable harm to its goodwill and reputation as the assertions were lacking any clear, non-speculative evidence and support. [40] Similarly, the FC found that TearLab’s arguments for potential loss of market share and permanent price reduction of their product were unsubstantiated and ultimately speculative. [46]

TearLab alleged that irreparable harm also ensues from the impossibility of calculating lost sales due to no reasonable methodology to do so. [47] After analyzing the expert evidence submitted by both parties, the FC found that TearLab’s evidence was insufficient to constitute clear and not speculative evidence that actual unquantifiable harm would occur. [65] The FC noted that TearLab’s presence in the market for six years weakened their assertion that the nascent market would make damages unquantifiable. [63] The FC additionally found that I-MED’s evidence adequately and sufficiently explained that TearLab’s past sales could be used to “reasonably” calculate damages, which is the standard required by the court, rather than with precision or certainty. [66, 70] TearLab also alleged that a defendant’s inability to pay a monetary award after trial can constitute irreparable harm. [74] I-MED submitted its insurance policy, which demonstrated I-MED was insured for damages up to a limit of approximately CAD $2,600,000. [77] While the FC did not find this to be proper sur-reply evidence, it was not prepared to draw an adverse inference on I-MED’s ability to pay a monetary award. [78]

In regards to the balance of convenience, the FC found that it favoured I-MED. [83] If the interlocutory injunction were granted, I-MED would be entirely excluded from the market and lose all of its potential revenue in respect of the i-Pen System. [87] In contrast, if the injunction were refused, TearLab would lose some potential revenue and be subjected to competition in a market to which the evidence demonstrated it had not yet been able to truly penetrate. [87]

Security for Costs Granted

Both TearLab and The Regents of the University of California fall under Rule 416(1)(a) of the Federal Courts Rules for being ordinarily resident outside of Canada. [90] As such, they had the burden of demonstrating they had sufficient Canadian assets to pay costs. [90] The FC found that the financial and banking information provided by TearLab was weak and showed little asset value. [96] The FC ordered TearLab pay a total of $100,000 into the court as security. [96]