At a glance: patent enforcement proceedings in Canada

Patent enforcement proceedings

What legal or administrative proceedings are available for enforcing patent rights against an infringer? Are there specialised courts in which a patent infringement lawsuit can or must be brought?

The vast majority of patent infringement cases are brought as civil actions in the Federal Court of Canada, which has federal statutory jurisdiction to hear patent infringement cases. Patent infringement actions may also be brought in provincial or territorial courts, which have inherent jurisdiction to hear almost all civil cases (including patent infringement cases).

The difference between actions in the Federal Court compared with those of the provinces and territories generally lies in the scope of available remedies. The Federal Court has certain powers granted under the Patent Act and the Federal Courts Act to provide relief that is not possible in a case brought before a provincial or territorial court. In particular, the Federal Court can:

• provide remedies in respect of unlawful conduct that occurs in any province or territory;
• grant injunctions enforceable across Canada;
• declare a patent invalid, pursuant to section 60(1) of the Patent Act; and
• expunge patents from the records of the patent office, pursuant to section 52 of the Patent Act.

By contrast, where a provincial or territorial court grants relief, it is granted only between the parties to the action and is not automatically enforceable in other provinces or territories.

Given the advantages of bringing an action in the Federal Court, most patent actions are tried federally. As such, while the Federal Court is not a dedicated patent court, Federal Court judges are typically far more experienced in patent matters than their provincial counterparts. In practice, there is a roster of Federal Court judges with patent or intellectual property expertise who hear most of these cases.

The Federal Court is also the venue for proceedings brought under the Patented Medicines (Notice of Compliance) Regulations (PM(NOC)). These Regulations govern the pathway for market entry of generic or biosimilar drugs. They include a mechanism by which a first-entry pharmaceutical company can respond to a second-entry company’s notice of allegation by bringing an action against the second-entry company for a declaration that the making, constructing, using or selling of the second-entry company’s drug would infringe the first-entry company’s patent.

What is the format of a patent infringement trial?

In the Federal Court, where most patent infringement cases are tried in Canada, trials involve both written and oral evidence given by both parties. Typically, documentary evidence (including prior art references and documents obtained during discovery) may be admitted as exhibits in court for infringement and validity issues.

Expert reports, in the form of either affidavits or a signed declaration, are not required in the Federal Court but are almost always submitted by parties in patent cases. Expert reports must be exchanged before trial, which typically occurs after discovery. An expert report alone does not become admitted as evidence unless the expert testifies at trial or the parties agree. Parties have the right to cross-examine any adverse expert who testifies at trial.

In addition to expert witnesses, fact witnesses (including inventors) can be used by each party to tender evidence at trial. Each of those witnesses would also be subject to cross-examination.

Federal Court trials are heard and decided by a single judge, who is assigned by the Court in advance of trial. Jury trials for patent infringement are not available in the Federal Court. Trial length varies, but typically lasts 10 to 20 days.

During the covid-19 pandemic, the Federal Court began to hold virtual hearings, including entire trials. The current expectation is that virtual hearings will continue to be incorporated into proceedings, either in whole or in part, based on the circumstances. The Court has recently allowed foreign witnesses to testify remotely by videoconference in otherwise in-person hearings, where the parties agree and where the circumstances warrant.

What are the burdens of proof for establishing infringement, invalidity and unenforceability of a patent?

The party making an allegation (such as an allegation of infringement) must prove its claim on the balance of probabilities, meaning more likely than not. Typically, a party must at least lead some evidence to meet their burden on a prima facie basis. The Supreme Court of Canada has clarified that the evidence must always be clear, convincing and cogent to satisfy the balance of probabilities test. An issued patent is presumptively valid, so a defendant alleging invalidity has the burden of proving invalidity on the balance of probabilities.

Who may sue for patent infringement? Under what conditions can an accused infringer bring a lawsuit to obtain a judicial ruling or declaration on the accusation?

A patent owner has automatic standing to sue for patent infringement, and an exclusive licensee typically also has standing. Non-exclusive licensees may have standing in certain circumstances.

A defendant sued for patent infringement in the Federal Court can seek a declaration of invalidity of the patent and expungement. If a defendant is sued in a provincial court, they may still seek a declaration of invalidity in the Federal Court and may seek a stay of the proceedings in the provincial court pending a determination by the Federal Court.

It is also possible for a prospective defendant to seek pre-emptive declarations of invalidity or non-infringement in the Federal Court before an infringement suit is commenced. To have standing to sue, the plaintiff in such an action must be an ‘interested person’. The plaintiff may also be ordered to pay security for costs into court. This payment is typically returned to the plaintiff (with interest) if the plaintiff is successful and paid (in whole or in part) to the defendant if the defendant is successful, based upon the costs awarded in the proceedings.

To what extent can someone be liable for inducing or contributing to patent infringement? Can multiple parties be jointly liable for infringement if each practises only some of the elements of a patent claim, but together they practise all the elements?

A party can be liable for inducing infringement in Canada if the patentee can prove:

• there is an act of infringement by a direct infringer;
• this act is influenced by the seller to the point where, without this influence, infringement by the buyer would not otherwise have taken place; and
• the influence is knowingly exercised by the seller (ie, the seller knows that this influence will result in the completion of the act of infringement).

Recently, Canadian courts have upheld this three-part test for inducement but have added that ‘encouragement’ of infringement by an inducing party is sufficient to meet the second branch of the test. In the pharmaceutical patent context, induced infringement may be found even when a proposed generic product label does not contain the exact infringing use on a patent claim, although each case is necessarily fact-dependent.

Liability for contributory infringement does not exist in Canada in the absence of a finding of inducement.

Canadian courts have entertained the possibility of infringement by common design between two or more parties by analogy to general tort principles, whereby parties who act in concert to commit a tortious act can each be found liable if all the parties involved arrived at an agreement to carry out the tort. However, there are no Canadian cases where parties have been found liable for patent infringement under such a theory.

Can multiple parties be joined as defendants in the same lawsuit? If so, what are the requirements? Must all of the defendants be accused of infringing all of the same patents?

A plaintiff may name all parties it deems necessary to the action. This can include, for example, one or both of an inducing party and a directly infringing party, or both a seller and a purchaser or user of a patented product. Cases have proceeded where separate companies, each alleged to be infringing the same patent in substantially the same way, are all named as defendants in the same action.

Parties may move for separate actions to be consolidated and heard together under the same circumstances. Conversely, a party can seek separate determinations of claims and issues where the hearing of two or more claims or parties in a single proceeding would cause undue complication or delay or would prejudice a party.

To what extent can activities that take place outside the jurisdiction support a charge of patent infringement?

Generally, Canadian courts can only award remedies in respect of infringing conduct within Canada. If a product is made outside Canada that would otherwise infringe a Canadian patent, the manufacturer of the product would face liability if the product is then sold or the manufacturer caused the product to be sold in Canada. A specific act must be carried out in Canada to give rise to liability. There is less certainty in the law where some, but not all, steps in a method take place in Canada.

Canada applies a form of the Saccharin doctrine, originating from the United Kingdom, under which it can be infringement for a defendant to sell or use products in Canada that were made outside Canada through a process or by way of an intermediate composition that would otherwise infringe a Canadian patent.

To what extent can ‘equivalents’ of the claimed subject matter be shown to infringe?

Canada does not apply a doctrine of equivalents as in the United States; however, Canadian courts undertake an informed and purposive claim construction that seeks to distinguish essential from non-essential elements of a claim.

Whether an element is non-essential in part depends on whether it can be varied or omitted without changing how the invention works; however, all written claim elements are presumed to be essential, and the party asserting non-essentiality has the burden of proving it.

This construction is carried out from the perspective of the notional person of skill in the art (POSITA) – an average person of skill in the field of technology of the patent’s subject matter. The POSITA is considered to be a person who reads the claims and disclosure of the patent with a mind willing to understand how to achieve a construction that is fair to all.

This construction is then used to determine infringement. Infringement occurs if the defendant’s product or process incorporates all the essential elements of the claims. A defendant’s product or process may still be found to be infringing if it omits or substitutes a non-essential element of a claim.

What mechanisms are available for obtaining evidence from an opponent, from third parties or from outside the country for proving infringement, damages or invalidity?

A party is entitled to discovery during litigation to gather evidence and admissions to prove its case. Discovery includes both documentary discovery and oral examinations for discovery.

With regard to documents, a party must provide copies of every document referred to in the pleadings (within 10 days). Following the close of pleadings, the parties must exchange affidavits of documents, setting out all relevant documents in the party’s power, possession or control.

Parties must deliver (typically digital) copies of all relevant documents unless it is privileged or no longer in their possession. Parties have an ongoing obligation to produce any relevant documents that they discover during the course of the action.

Examinations for discovery follow documentary discovery and are typically conducted as out-of-court oral examinations. Corporate parties are represented by a single representative who must be reasonably informed on the issues. Defendants are also entitled to examine named inventors of the patented invention.

Third-party discovery is possible upon application to court but is relatively uncommon and limited. A party seeking third-party discovery must first establish that the information in the third party’s power, possession or control relates to relevant issues and cannot be obtained by the parties to the action. Where a third party is outside the country, seeking and enforcing an order for third-party discovery is more difficult as the order may require the involvement of a foreign court.

What is the typical timetable for a patent infringement lawsuit in the trial and appellate courts?

The major phases of a typical patent infringement action are:

1. pleadings;
2. discovery;
3. expert reports;
4. trial; and
5. appeal (if any).

The exchange of pleadings typically lasts about three months. A patent infringement action is commenced by a statement of claim setting out the material facts giving rise to the action. This is followed by a statement of defence (and, optionally, a counterclaim), often alleging non-infringement and invalidity. If there is a counterclaim, the original plaintiff will typically serve a defence to the counterclaim, and sometimes a reply, following which the original defendants may serve a reply to the defence to the counterclaim.

A party may seek to bifurcate the proceedings, for example between liability and damages issues, in which case steps (2) through (5) could occur in each of the bifurcated phases of the action.

Following the close of pleadings, the parties exchange affidavits of documents and commence oral and documentary discovery. Depending on the complexity, discovery typically takes about six to nine months.

Usually following discovery (although not necessarily before the end of discovery), parties are expected to exchange expert reports on all issues. This may involve both expert reports in chief and responding expert reports. The timeline for expert reports varies depending on the case and the number of issues but takes approximately three to six months in a typical schedule.

In total, it is possible to schedule a trial in less than three years from the commencement of an action. The Federal Court has implemented guidelines for complex intellectual property actions, under which the Court may set a trial date early in the case management process. Once a date is set, parties are expected to take all reasonable steps to advance the case to meet the required deadlines.

In pharmaceutical contexts, PM(NOC) cases are governed by federal regulations and case management guidelines that target a two-year timeline to fully determine infringement and validity issues.

Appeals are available following a final decision of a trial judge. Appeals from the Federal Court must be commenced within 30 days. Appeals at the Federal Court of Appeal usually take 12 to 18 months from a notice of appeal through to a hearing.

What is the typical range of costs of a patent infringement lawsuit before trial, during trial and for an appeal? Are contingency fees permitted?

Costs of patent infringement litigation can vary widely depending on the number of patents, parties and contested issues but can reach several million Canadian dollars from pleadings through to final disposition. While legal fees through trial may be as low as C$2 million to C$4 million in a simple case, in one high-profile case, Dow v Nova (2016 FC 91), a costs decision revealed one party’s legal fees for only the liability phase to be C$9.6 million, plus at least C$3.6 million in disbursements. Appeal costs are usually much lower than trial costs as no new evidence is permitted on appeal.

Contingency fee arrangements are generally permitted by Canadian law societies, subject to rules in some provincial jurisdictions regarding retainer agreement forms and disclosure requirements. Case law regarding third-party litigation funding continues to develop; however, to date, decisions have generally favoured plaintiffs and funders.

What avenues of appeal are available following an adverse decision in a patent infringement lawsuit? Is new evidence allowed at the appellate stage?

Appeals are possible from both interlocutory orders (eg, orders on motions) and final orders resolving the issues in the action. Interlocutory decisions made by a prothonotary (or case management judge) may be appealed first to a judge of the Federal Court and then to the Federal Court of Appeal. Appeals from the Federal Court to the Federal Court of Appeal are available as of right, except in PM(NOC) cases.

Appeals of decisions of the Federal Court of Appeal can only be made to the Supreme Court of Canada, which requires an application for leave to appeal.

As a general rule, new evidence is not allowed at the appellate stage.

To what extent can enforcement of a patent expose the patent owner to liability for a competition violation, unfair competition or a business-related tort?

Good faith enforcement of patent rights in and of itself (even if that patent is subsequently invalidated) is not considered anticompetitive and does not generally expose a patentee to liability in Canada. The Competition Bureau has jurisdiction to enforce against anticompetitive market behaviour, including through the use of administrative monetary penalties.

The Competition Bureau has issued the Intellectual Property Enforcement Guidelines, which outline circumstances in which patents intersect with competition law issues. Although patent enforcement per se is not considered anticompetitive under the Guidelines, using a patent as leverage to extend rights beyond the term or scope of a patent may be viewed by the Competition Bureau as behaviour that causes competitive harm.

Another way in which patent enforcement may intersect with competition law is in the drafting of public statements and demand letters. The Federal Court has held that sending threatening letters or press releases to a competitor or their customers demanding cessation of sales owing to alleged infringement may be actionable against the patentee under unfair competition or false advertising provisions in the Competition Act and Trademarks Act, particularly if the patent is later deemed to be non-infringed or invalid. Generally, demand letters are permissible in Canada, but they should be informative (using statutory language) rather than threatening.

To what extent are alternative dispute resolution techniques available to resolve patent disputes?

The Canadian legal system supports and encourages the use of alternative dispute resolution (ADR) mechanisms, including private arbitration and mediation, to resolve patent disputes in a cost-effective manner. ADR is typically governed by a private agreement between the parties.

There are a number of senior patent practitioners and retired judges in Canada who offer services as adjudicators in ADR proceedings. Canadian courts also encourage the use of ADR, including through judicially managed mediation between parties before trial.