Not always known for its blockbuster IP cases, Canada had a
spate of important rulings in June and July. These included the
scrapping of the controversial promise doctrine, the largest
ever patent damages award by far, the keenly anticipated Access
Copyright decision, the upholding of a ruling requiring Google
to de-index results from its global search engine, and a trade
mark dispute between two rum brands.
Supreme Court breaks promise doctrine
The Supreme Court of Canada on June 30 released its
eagerly-awaited ruling in AstraZeneca Canada v Apotex,
striking down the so-called "promise doctrine" and clarifying
the requirement for patent utility. The doctrine required
patent owners to establish arguable statements of utility in
the patent disclosure or risk losing their patents.
"The Promise Doctrine is not the correct method of
determining whether the utility requirement under s. 2 of the
Patent Act is met," said the Court in the ruling, released on
June 30. The Court said the doctrine is "unsound" and "not good
law", adding: "It is an interpretation of the utility
requirement that is incongruent with both the words and the
scheme of the Patent Act."
The doctrine is "excessively onerous", the Court said,
because it determines the standard of utility that is required
of a patent by reference to the promises expressed in the
patent and, where there are multiple expressed promises of
utility, it requires that all be fulfilled for a patent to be
valid. The Court laid out a two-step test to determine whether
a patent discloses an invention with sufficient utility:
"First, courts must identify the subject-matter of the
invention as claimed in the patent. Second, courts must ask
whether that subject-matter is useful – is it capable
of a practical purpose (ie an actual result)?"
The case involved AstraZeneca's patent covering the compound
esomeprazole in Nexium, a proton pump inhibitor drug that
reduces gastric acid. The patent was found novel and unobvious
at trial but invalid for lack of utility. The Supreme Court
found AstraZeneca's patent was valid. The trial judge had found
the claimed subject-matter of optically pure salts of the
enantiomer of omeprazole to be useful as a proton pump
inhibitor to reduce production of gastric acid. This was
sufficient for the Supreme Court to find utility to make the
The decision was welcomed by Pharmaceutical Research and
Manufacturers of America (PhRMA). "The 'promise' doctrine that
enabled Canada to invalidate Astra Zeneca's patents had
undermined Canada's stated goal of building an innovation
economy," said Robert Zirkelbach, executive vice-president at
PhRMA, in a statement. "With this decision Canada will rejoin
the rest of the world in terms of how it defines patent
utility." Zirkelbach said Canada has used this discriminatory
policy in 29 court decisions that invalidated 26 patents on 22
medicines over the past decade, targeting only pharmaceutical
But not all are happy with the end of the promise doctrine.
Richard Gold, law professor at McGill University in Montreal,
says: "Drugs patented in Canada may not be patented in the US
because we have lower standards. That means we're paying more
[for name brand drugs] and getting nothing." Gold worries that,
without the promise doctrine, the Canadian market will be
flooded with "junky" patents leaving innovators less freedom to
operate and that even if a patent is granted in Canada it may
not hold up to US scrutiny.
The emergence of the promise doctrine came with the
Bristol-Myers Squibb Co v Apotex case in 2005.
According to many practitioners, scholars and now the Canadian
Supreme Court, the Canadian promise doctrine is unique and sets
the bar too high. Other countries such as the UK and US have
other measures that ensure a patent's utility is properly
In 2013, Eli Lilly brought an arbitration suit against the
Canadian government under the North American Trade Agreement
(NAFTA), claiming that the promise doctrine violated the
agreement. Eli Lilly argued that the invalidation of its
patents under the promise doctrine qualified as a confiscation
of the company's investments. The arbitration tribunal
disagreed, ruling that the doctrine was not discriminatory nor
was it in violation of Chapter 11 of the NAFTA agreement.
"In contrast, "the Supreme Court decided [AstraZeneca v
Apotex] on a narrow legal basis. It did not talk about
policy, but just an imminently debatable question of law," says
Gold. The Court decided that a patent only needs to disclose
some "scintilla" of utility (a word that received a lot of buzz
in the decision's aftermath).
The Supreme Court's ruling on the promise doctrine could
also affect the upcoming NAFTA negotiations. "We expected
Canada to go in and say we can compromise on this rule a bit,
perhaps it was too harsh, let's find a middle ground," says
Gold. "They would've gotten something in return. The Supreme
Court has basically robbed the federal government of being able
to bargain about this."
Mark Schultz, a co-founder and co-director of George Mason
University's Center for the Protection of Intellectual
Property, says that this is the wrong way to look at the
decision and IP rights as a whole. "If a country treats them as
a bargaining chip, rather than a domestic economic development
policy, they're really impoverishing themselves and depriving
their own citizens of the protections they deserve," he says.
Instead, he sees the Supreme Court's handling the question of
the promise doctrine as "removing a sticking point" from the
NAFTA and other future trade talks.
The Federal Court of Canada on July 5 awarded damages of
C$645 million ($506 million) to Dow Chemical in its suit
against Nova Chemicals. The calculation of the award stems from
some of the peculiarities of Canadian patent law. It is based
on a combination of three factors: a reasonable royalty for the
pre-grant publication period of the patent; an accounting of
profits for the post-grant period; and an accounting of
"springboard profits" for a period of time following expiry of
The award more than triples the previous record awarded to
Merck against Apotex. The Supreme Court of Canada last April
upheld the Federal Court's July 2013 award in that case of
C$119 million plus pre-judgment and post-judgment interest,
which by some estimates put the total value at more than C$180
The Dow award highlights the broad and flexible nature of
monetary remedies available in Canada for patent infringement.
These include pre-grant compensation of a reasonable royalty,
post-grant damages or an accounting of an infringer's profits,
and post-expiry springboard damages or springboard profits.
Actual or constructive notice to an infringer is not required,
with compensation remedies accruing automatically as of the
date of patent application publication.
The Patent Act allows for the recovery of "reasonable
compensation" for the period between the publication of a
patent application and the actual grant of the patent, in
addition to the period of infringing activity after the patent
was granted. In this case, Dow's patent was issued in 2006, but
Nova was still liable for reasonable compensation between 2004,
when Dow's patent application was published, and 2006. The
Court decided on a reasonable royalty rate of nearly 9%.
Plaintiffs in Canadian patent cases also have a unique
strategic choice over whether they would like to recover
profits they lost due to the infringing activity or to have the
infringer disgorge the profits it made based on the infringing
product. For Dow, the choice to pursue Nova's profits paid
Dow was asserting a patent for polyethylene materials used
in wide range of packaging, such as food packaging, pallet
wrapping and heavy duty bags such as are used for fertilizer.
The infringement took place for a decade, between the 2004
publication of Dow's patent application and the 2014 expiry of
the patent, so Dow had many years of profits to recover. In
addition, Justice Simon Fothergill awarded "springboard"
damages to Dow, allowing Dow to collect profits that Nova made
on the infringing product even after the patent's
Like many large damages awarded in Canada, the infringing
product here was also manufactured in Canada, which bumped up
the recoverable damages another notch, as did the cost award of
C$6.5 million, including nearly C$3 million in attorney's fees.
Nova is appealing the decision.
Access Copyright's big win
The Federal Court of Canada on July 12 ruled in favour of
The Canadian Copyright Licensing Agency (Access Copyright) in
an action brought against York University. IP observers in
Canada believe this important case is far from over,
In Access Copyright v York University, the Court
determined that York University was required to pay the interim
tariff established by the Copyright Board of Canada in 2010.
The Court also ruled that York University's fair dealing
guidelines were unlikely to result in actual fair dealings, and
furthermore that the university had not adequately followed
Access Copyright is a collective that represents the
creators and publishers of printed and digital works. York
University and a number of institutions that formed the
Association of Universities and Colleges of Canada (AUCC) had
opposed the tariff, but withdrew its opposition and instead
took the position that they were exempt from the proposed and
interim tariffs, under expanded fair dealings protections,
while the government considered the tariff.
Access Copyright hailed the ruling as "a big win for
creators and publishers". University of Ottawa professor
Michael Geist commented on his blog that "the immediate
implications of the decision are significant: royalty payments
to Access Copyright (that will likely be kept in escrow pending
any appeals) and the prospect of other universities re-thinking
their current copyright policies".
While the litigation and ruling was limited to a judgement
of York University's particular uses and guidelines for
copyrighted material, it will likely have an impact for other
universities, particularly York's peers in the AUCC, forcing
them to look carefully at their approaches to using copyright
In his blog, Geist said the decision will also have an
impact on the copyright review scheduled for later this year.
He added, however, the decision means there will be little
reason to revisit the inclusion of the "education" purpose in
fair dealing as it had no discernible impact on the court's
legal analysis." Geist noted that, while Access Copyright is
celebrating the decision, it is not the end of a longer legal
process. He said there are "very strong grounds for appeal" and
the case is surely headed to the Federal Court of Appeal and
possibly the Supreme Court of Canada.
Supreme Court upholds Google de-indexing decision
The Supreme Court of Canada on June 28 upheld a ruling by
the British Columbia Court of Appeal that requires Google to
de-index results from its global search engine.
The 7-2 Google v Equustek decision is the first
time Canada's highest court has considered the power of
Canadian courts to issue global injunctive relief against a
no-party as a remedy for infringement on the internet.
The case involves technology company Equustek. Its former
distributer Datalink re-labelled Equustek's products as its
own, and also acquired Equustek's confidential information and
trade secrets to make a competing product. Datalink left Canada
but continued to sell infringing products on the internet.
Equustek asked Google to remove infringing results from its
search results, eventually seeking a worldwide interlocutory
injunction directly against Google.
The Supreme Court said the issue in the case is whether
Google can be ordered, pending a trial, to globally de-index
Datalink's websites which, in breach of several court orders,
is using those websites to unlawfully sell the intellectual
property of another company. The court upheld the worldwide
interlocutory injunction against Google.
"The decision to grant an interlocutory injunction is a
discretionary one and entitled to a high degree of deference,"
said the court. "Interlocutory injunctions are equitable
remedies that seek to ensure that the subject matter of the
litigation will be preserved so that effective relief will be
available when the case is ultimately heard on the merits.
Their character as 'interlocutory' is not dependent on their
duration pending trial. Ultimately, the question is whether
granting the injunction is just and equitable in the
circumstances of the case."
It continued: "The test for determining whether the court
should exercise its discretion to grant an interlocutory
injunction against Google has been met in this case: there is a
serious issue to be tried; [Equustek] is suffering irreparable
harm as a result of [Datalink]'s ongoing sale of its competing
product through the Internet; and the balance of convenience is
in favour of granting the order sought."
The case had 11 interveners. One of them, OpenMedia, is
worried governments and commercial entities will see this
ruling as justifying censorship requests. OpenMedia's interim
communications and campaigns director David Christopher said
the ruling was disappointing. "The internet is a global
phenomenon, and there is great risk that governments and
commercial entities will see this ruling as justifying
censorship requests that could result in perfectly legal and
legitimate content disappearing off the web because of a court
order in the opposite corner of the globe. That would be a
major setback to citizens' rights to access information and
express ourselves freely," said Christopher. Other interveners
expressing disappointment included the Canadian Civil Liberties
Association and the Electronic Frontier Foundation.
Music Canada welcomed the decision, however. It and the
International Federation of the Phonographic Industry acted as
interveners supporting Equustek in the case. "Today's decision
confirms that online service providers cannot turn a blind eye
to illegal activity that they facilitate; on the contrary, they
have an affirmative duty to take steps to prevent the Internet
from becoming a black market," said Graham Henderson, president
and CEO of Music Canada. "Today's decision provides a vital
remedy to address illegal online activities and enforce the
rights of creators."
Concerns are being raised about courts in other countries
making similar rulings. University of Ottawa professor Geist
said in a blog post that "the decision will ultimately grant
Google more power, not less". "[W]hat happens if a Chinese
court orders it to remove Taiwanese sites from the index?"
Geist asked. "Or if an Iranian court orders it to remove gay
and lesbian sites from the index? Since local content laws
differ from country to country, there is a great likelihood of
conflicts. That leaves two possible problematic outcomes: local
courts deciding what others can access online or companies such
as Google selectively deciding which rules they wish to
The Supreme Court of Canada limited its reasoning to the
need to address the harm being sustained by a Canadian company,
the limited harm or burden to Google, and the ease with which
potential conflicts could be addressed by adjusting the global
takedown order. "In doing so, it invites more global takedowns
without requiring those seeking takedowns to identify potential
conflicts or assess the implications in other countries," said
Captain Morgan defeats liquor look-alike
On June 12, the Federal Court of Canada ruled for Captain
Morgan over Admiral Nelson in a trade mark dispute between the
two rum brands.
The 99-page Diageo Canada v Heaven Hill
Distilleries decision found Heaven Hill liable for passing
off Admiral Nelson's rum products as those of Diageo and for
infringing and depreciating the goodwill attaching to Diageo's
Captain Morgan character and label trade marks.
The Federal Court granted Diageo's request for a permanent
injunction, demanding that Heaven Hill destroy all bottles or
other merchandise bearing the Admiral Nelson's marks in Canada.
The Court ordered Heaven Hill to pay Diageo the damages
previously determined, as well as the interest and costs
incurred by Diageo as a result of Heaven Hill's counterclaims,
which the court dismissed.
The case highlights the importance of the survey. The
Supreme Court of Canada in its Masterpiece v Alavida
Lifestyles decision in 2011 made it clear that the use of
expert testimony was not to be encouraged by courts. This
underlined the importance of surveys in trade mark cases.
Heaven Hills brought a motion to exclude Diageo's survey on
technical grounds a month before the February trial, but was