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Top five reasons to consider patent litigation in Canada




Steve Garland and Jean-Sébastien Dupont of Smart & Biggar consider five reasons why carrying out patent litigation in Canada is preferable to US proceedings, including no opportunity for forum shopping, no jury trials and no inter partes reviews

Canada has historically been a much less active jurisdiction for patent litigation than the United States. This can be explained in part by the simple fact that the United States' market is almost 10 times the size of the Canadian market. However, there are a few notable differences in the procedure and substantive law applied in both jurisdictions that have resulted in Canada becoming an increasingly attractive option for high-stakes patent litigation in recent years.

No forum shopping

There is essentially no issue with forum shopping in Canada as the vast majority of patent infringement proceedings are brought before the Federal Court, a specialised and bilingual Court of single, national jurisdiction across Canada. The jurisdiction of the Federal Court is limited by federal legislation to matters of intellectual property, immigration, admiralty and judicial review of decisions of federal governmental bodies and tribunals. As a result, a number of judges (including a few who were intellectual property litigators before their appointment) hear a significant number of intellectual property cases and have thus developed an in-depth knowledge of the area.

The Federal Court is said to be an "itinerant court". All judges are appointed and reside in Ottawa but travel across Canada to sit in all major business centres such as Vancouver, Calgary, Toronto and Montreal. There are also no districts or circuits. As such, in practice, where proceedings are initiated has no impact on who the ultimate trial judge will be, or where the trial will be held. A plaintiff could initiate proceedings in the Montreal office of the Federal Court against a party located in Toronto. The trial could eventually be heard in either city or, if the parties cannot agree, in a neutral location such as Ottawa. In all cases it will be the same judge, without any jury as discussed below, who will decide on the matter and whose decision (for example, a permanent injunction) will apply throughout Canada.

While the Federal Court has concurrent jurisdiction with the provinces' courts over matters of infringement, the Federal Court has exclusive jurisdiction to hear patent impeachment proceedings (similar to US declaratory judgment actions). As such, irrespective of which party may start the proceeding, patent infringement/validity proceedings will usually end up in the same court in front of the same judge. Accordingly, there is typically little concern about sending cease-and-desist letters to infringers in Canada as it does not open the door to a potential defendant pre-emptively starting an impeachment proceeding in a more favourable jurisdiction.

The fact that most intellectual property cases are heard by the Federal Court has given the Court the ability over the years to develop procedural rules and practices that are specifically designed for complex patent litigation. For instance, the Federal Court offers a very robust case management system that allows for added flexibility over the rules and ensures that cases proceed to trial in a diligent fashion. This is similar to what is found in the United States, with the difference that in Canada, the case management judge is usually not the trial judge. Furthermore, the Federal Court will endeavour to hear intellectual property cases within two years of filing where sophisticated parties are determined to bring the matter to the Court expeditiously and request an early assignment of trial dates.

Forum shopping has long been a hurdle for litigants in the United States where some districts (and their juries) are known to be more or less patentee-friendly than others and different circuits may apply different lines of case law. Until recently, a third of all patent cases in the United States were brought before the Eastern District of Texas, the forum of choice for patentees. This was made possible by a 1990 Federal Circuit decision that gave a broad interpretation to the jurisdictional test of "where the defendant resides" as essentially being anywhere a corporation makes sales. This resulted in parties rushing to court to be the first to file in the forum of choice and the parties wasting precious time and money challenging jurisdiction of the court at the outset of the case.

However, forum shopping in the US is likely to be more difficult following the 2017 decision of the Supreme Court in TC Heartland. This overruled the 1990 Federal Circuit precedent and reinstated the standard established in a 1957 Supreme Court decision that held that a domestic corporation "resides" only in its state of incorporation. The number of patent cases filed in the District of Delaware has since then doubled. This does not necessarily mean that litigants have stopped arguing over jurisdiction altogether and it is still open, in some cases, to the alleged infringer to bring pre-emptive proceedings for declaratory judgment.

Discovery is less invasive and less expensive

While the Canadian legal system has a documentary and oral discovery process (unlike most European jurisdictions), it is usually much less invasive for the parties and therefore much less expensive than the discovery for a patent case in the United States. In the Federal Court, each party has a duty to disclose to the other party all relevant documents it intends to rely on at trial or that could be detrimental to its own case. Although the Federal Courts Rules do not specifically provide for requests for production of additional documents, the practice has developed over the years to exchange such requests in advance of oral examinations for discovery in order to streamline the process. In our experience, the exchange of documents is usually more focused in Canadian patent cases than it can be in the United States, resulting in fewer documents to be reviewed by the parties and their counsel.

Oral examinations for discovery (or depositions) are much more limited in Canada than they are in the United States. The general rule is that a party is only entitled to depose one representative of the other party and is not able to decide who that representative is (similar to Rule 30(b)(6) corporate depositions). Exceptionally, a defendant in a patent case is also allowed to depose the inventors of the patent(s) at issue but cannot use the depositions at trial unless the inventors are called to testify. The rules do not generally allow experts to be deposed as part of the discovery process. Moreover, the Federal Court has issued practice notices in recent years to limit the duration of depositions as well as refusals motions to compel parties to answer questions.

No jury trials

Another notable difference between Canada and the United States is that there is no jury trial for patent infringement cases in Canada. All factual and legal issues are decided by a single judge, usually at the same time (apart from questions of monetary compensation which are often bifurcated in intellectual property cases to be determined only after a plaintiff has succeeded on the trial on liability). The merits of juries for civil cases have long been debated and could be the subject of a separate article in itself, but it is the authors' view that the outcome of a complex patent case may be more predictable when the trial is heard by a single experienced judge than a jury. There are also fewer fluctuations in Canada between damages awarded by the trial judge and any subsequent revision by the Federal Court of Appeal in comparison with damages awarded by juries in the United States. These can sometimes be significantly reduced by the appellate court.

This also means judges are not required to hold a pretrial hearing (referred to as a Markman hearing in the United States) to construe the claims of the patent in advance of the trial, which can have both advantages and disadvantages. On the one hand, experts in Canadian patent cases are required to provide their opinion at trial on validity and infringement of the patents without knowing how the Court will ultimately construe the patent. On the other hand, there can be benefits in having the judge decide all of the issues in a case at the same time having heard all of the factual and expert evidence presented by the parties. Although not common in the Federal Court in Canada, there is nevertheless the option for a party to bring a motion early in a proceeding for a determination of claim construction issues if an early preliminary ruling would be seen by the Court as appropriate under the circumstances.

No inter partes reviews (IPRs)

Since 2012, it has become very common for a defendant in a patent infringement lawsuit in the United States to initiate an inter partes review (IPR) before the Patent Trial and Appeal Board (PTAB) to challenge the validity of the patent at issue. This is a cause of concern for patent owners contemplating litigation for many reasons. The burden on the petitioner to invalidate a patent is lower in the PTAB in comparison with the district courts as there is no presumption of validity and the claims of the patent are to be interpreted in the broadest reasonable sense without any consideration of infringement issues. In addition, district courts will often, but not always, stay the court proceedings pending resolution of the IPR, which takes between 12 and 18 months, resulting in increased costs, delays and uncertainties. In two recent decisions, Oil States Energy Services and SAS Institute, the Supreme Court upheld the constitutionality of IPR proceedings, but the PTAB is now required to decide the patentability of all challenged claims, which could result in further delays and costs.

The Canadian Patent Act does provide for re-examination proceedings before the Patent Office, but the scope of the procedure is very narrow compared to IPRs and is therefore very seldom used in practice, especially not in the context of litigation. The most important difference is that re-examination in Canada is not inter partes; the requesting party is not involved in any way in the proceedings beyond filing the initial request for re-examination. It cannot respond to the arguments and/or amended claims submitted by the patentee and cannot appeal the decision of the Re-examination Board. A re-examination is also limited to a consideration of prior art; the Re-examination Board cannot rely on any factual or expert evidence and will not consider invalidity attacks other than those based on prior art (i.e. anticipation and obviousness). Lastly, a defendant in a pending patent infringement case cannot request re-examination in an attempt to delay the court proceedings. On the contrary, the Federal Court can order a stay of the re-examination proceedings pending determination of the broader validity issues that are before the Court based on a full consideration of the factual and expert evidence.

Canadian courts tend to be patent friendly

Statistically speaking, the Federal Court tends to be patentee friendly, especially with regard to maintaining the validity of patents. A 2009 study presented by Smart & Biggar Montreal partner François Guay to the Intellectual Property Institute of Canada showed that patentees in Canada were successful in maintaining the validity of their non-pharma patents in approximately 65% of cases (compared to 52% in the United States and 42% in the United Kingdom). An analysis of the decisions reported since 2010 shows a slight decline in the validity success rate in Canada down to approximately 60% (the overall success rate for validity and infringement combined being approximately 50%) but it is expected that this rate could go up in the next few years following the 2017 decision of the Supreme Court, AstraZeneca Canada Inc v Apotex Inc (2017 SCC 36) that struck down the so-called "promise of the patent" doctrine. This judge-made doctrine that held patentees to a higher standard of utility was used to attack several patents successfully (especially pharmaceutical patents) in the last 10 years.

All these differences, and others, can explain why patent litigation is usually less expensive in Canada than it can be in the United States and can be as fast if not faster, especially now that the Federal Court is prepared to hear patent cases within two years without any of the delays caused by IPR-type proceedings.

While damages awards have traditionally been lower in Canada (mostly because the extent of infringement is more limited in a smaller market), we have seen very substantial awards from Canadian courts in the recent years. One major advantage of patent litigation in Canada is that the successful patentee can elect, in most cases, between a recovery of its damages (either by way of a reasonable royalty or lost profits damages or a combination of both) or an accounting of the infringer's unlawful profits. The latter option presents a number of tactical and procedural advantages, and can be very appealing in situations where the infringer has been very successful and/or is selling a Canadian-made infringing product in jurisdictions in addition to Canada.

In summary, patent litigation in Canada can be affordable, fast and patentee-friendly. Patent owners ought to consider this option, especially in situations where the infringing products are manufactured in Canada to be sold in the US (for example, in the automotive industry). Even if not manufactured in Canada, our experience over the years has been that in situations where the same infringing goods are sold in Canada and in the United States, resolving the matter in Canada, either by way of a settlement or favourable judgment, can often assist in solving the situation in the United States as businesses will not necessarily design different products for these two closely related markets.

Steve Garland
garland
  Steven Garland is Smart & Biggar’s managing partner and chair of the executive committee. He has over 25 years of trial and appellate experience in intellectual property litigation of all types, including issues relating to patents, trade marks, copyrights, industrial designs, trade secrets and competition law. He has acted in many patent litigation matters that have involved a wide variety of subjects, including chemical, electrical, biochemical, pharmaceutical, biotechnological, telephony, mechanical and computer/internet subject matter. Several recent decisions in which Steven has acted as successful counsel have become leading cases and have been lauded by national and international legal publications.

Jean-Sébastien Dupont
dupont
  Jean-Sébastien Dupont is a partner in Smart & Biggar’s Montreal office. He is an accomplished IP litigator whose practice includes finding and working with technical and financial experts, preparing and arguing various motions, and preparing and presenting evidence, witnesses and submissions at trial before the Federal Court and Quebec Superior Court. Jean-Sébastien also has significant experience in appeals before the Federal Court of Appeal.


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