Download Things to Consider When Considering Seeking an Accounting of

Patents Part II - New(?) Things to Consider When Considering
Seeking an Accounting of Profits Arising from Patent Infringement
Prepared For: Legal Education Society of Alberta
Intellectual Property Law Update
Prepared By:
D. Doak Horne
Gowling Lafleur Henderson LLP
Calgary, Alberta
For Presentation In:
Edmonton – February 8, 2011
Calgary – February 10, 2011
Patents Part II - New(?) Things to Consider When Considering Seeking an Accounting of
Profits Arising from Patent Infringement
D. Doak Horne1, LLB., P.Eng., Gowling Lafleur Henderson LLP, Calgary, Alberta
INTRODUCTION
Three (3) “accounting of profits” cases have relatively recently been decided, commencing with the
Supreme Court of Canada’s 2004 decision in Monsanto v. Schmeiser2, followed by the pair of
simultaneously-decided cases of Monasanto v. Rivett3 and Monsanto v. Janssens4, the latter two
cases being both decided by Justice Zinn of the Federal Court of Canada (Trial Division) and
subsequently recently upheld on appeal to the Federal Court of Appeal (August, 2010).
In the course of deciding the above trilogy of “accounting of profits” cases the Courts have
elaborated on this equitable remedy and the basis on which an accounting of profits will (or will not)
be awarded, and the manner of determining the quantum. Equitable considerations are now
“brought to the fore” more so than was arguably previously the case in the prior 30 year body of
“accounting of profits” cases from Teledyne v. Lido5 onwards which applied a differential cost
accounting. These recent three (3) cases have put a further “gloss” on the manner of calculating the
quantum owing under the “accounting of profits” remedy.
All patent litigators should accordingly be acutely aware of the “gloss” placed on the approach to be
take in an accounting of profits case and that the approach in determining profits is now a
differential profit approach which is slightly more involved than a differential cost approach, in that
it must now be extensively considered (when determining whether to seek such equitable form of
relief) whether there were (either theoretically or practically speaking) other non-infringing options
available to the infringer, since the answer to such question will greatly impact on the quantum of
potentially recoverable monies from the infringer under this equitable remedy, and if a non-infringing
route was available and the incremental profit between non-infringing and infringing is small, an
accounting of profits remedy may be less favourable than electing damages. As noted by Justice Zinn
in concluding the Monsanto v. Rivett decision, after determining that the remedy of an accounting of
profits on the circumstances of that case provided little recompense to the Plaintiff/Patentee,
stated: “The Court is aware that the quantum of disgorgement [ordered to be paid by the defendantinfringer] may not be seen by the plaintiffs to carry with it the severe deterrent effect they had
hoped; however the choice of remedy was the plaintiffs.”
© January 18,2011 D. Doak Horne, a patent litigator and registered patent agent in the intellectual property group of
Gowling Lafleur Henderson LLP, Calgary Office, tel. 403-298-1994, email: [email protected]
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Monsanto v. Schmeiser [2004] S.C.J. No. 29
Monsanto v. Rivett 2009 FC 317 (FCTD) per Zinn,J, aff’d Monsanto v. Rivett [2010] F.C.J.No. 1236 (FCA)
4 Monsanto v. Janssens 2009 FC 317 (FCTD) per Zinn, J aff’d [2010] F.C.J. No. 1236 (FCA)
5 Teledyne v. Lido [1982] F.C.J. No. 1024 (FCTD), per Addy, J
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OVERVIEW
The foregoing trilogy of cases provide that, in appropriate circumstances and if certain conditions
exist, an accounting of profits remedy is obtainable to the extent necessary to reimburse the
plaintiff/patentee for the increase in profit that the defendant infringer made using the invention
over what the defendant would have made had her/she not used /manufactured/sold the invention
but instead used/manufactured/sold a non-infringing method/product.
The difference in the quantum of profits determined under this differential profit approach as
compared to those determined using a pure differential cost approach, however, can be significant.
For example, in Rivett the defendant Rivett would have made up to 82%6 of the profit he made
selling infringing soybeans had he instead simply grown and sold non-infringing soybeans.
Accordingly, the profit which the defendant was required to deliver up to the plaintiff/patentee was
merely the difference in profit that would have been made if a non-infringing alternative had been
used, namely only 18% (ie 100%-82%) of the profit actually made.
Faced with this new “gloss” on the approach to an accounting of profits now put into play by the
foregoing trilogy of cases, an election of a remedy of damages may in some scenarios result in
greater monetary recovery for plaintiffs than an accounting of profits. However, in other situations,
where no sales/infringement would have occurred otherwise than through use of the infringing
product/method, or where the use of the infringing product/method as opposed to an available noninfringing method was substantially more profitable, the accounting of profits remedy may still
maximize monies recovered from a defendant more so than would the remedy of damages.
However, factors which may disentitle a plaintiff to elect an accounting of profits should also be
considered7 by plaintiff counsel, as this may also bear relevance as to whether a patentee should
seek to have an accounting of the defendant’s profits as opposed to seeking instead to recover
damages caused by the defendant’s actions.
DISCUSSION
A. Accounting of Profits Generally
Unlike in the United States where the equitable remedy of an accounting of profits has been
legislated out of existence back in 1946, plaintiff/patentees in Canada continue to be able to elect
to recover a defendant’s profits arising from infringement of a patent owned by the patentee as an
alternative to seeking to recover damages suffered due to the defendant’s infringing actions.
Indeed, in Canada, although an “accounting” of a defendant patent infringer’s profits is an equitable
remedy, a statutory basis for such recovery is expressly provided under the Patent Act, R.S.C. c. P-4,
(“the Act”), namely in s. 57(1)(b) of the Act which permits a Court when there has been an
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originally determined at trial to be 69%, but amended on appeal to be 82%
see Merck & Co Inc. v. Apotex Inc. 2010 FC 1265 (FCTD) per Snider, J, at para.’s 619-624
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