Canada’s top Court affirms Dow’s ‘record’ patent award
Amount is reported as the largest award handed down in a Canadian patent lawsuit | Final award based on an accounting of the profits made by the infringer | Smart & Biggar | Gowling WLG.
The Canadian Supreme Court has upheld the largest ever monetary award by a Canadian court for patent infringement in a dispute between competitors Nova Chemicals Corporation and Dow Chemical Company.
In an 8-1 majority ruling, issued last week, the Supreme Court dismissed Nova’s appeals against earlier decisions which had concluded that Nova had infringed Dow’s patent on metallocene linear low‑density polyethylenes (thin but strong plastics) and should pay approximately $644 million.
According to Smart & Biggar—who acted as co-counsel on behalf of Dow— the final award, which totals over $645 million (including prejudgment interest), is the largest reported award in a Canadian patent infringement case.
Gowling WLG also reports it was the largest award awarded in Canada to date in a case centring on a patent infringement.
The dispute began when Nova manufactured and sold products covered by Dow’s patent, which Dow had been using to produce products such as garbage bags and food wrappings.
Dow sued for patent infringement and the Federal Court of Canada found in favour of this argument.
Accounting of profits
As a remedy, Dow asked the court for an accounting of profits, where the court calculates its award based on the profits Nova made by violating the patent.
The court calculated the revenues Nova had earned by selling the infringing plastics and then deducted what Nova had paid to produce the patented plastics.
Nova’s request that the court use the market cost of ethylene (the main ingredient in the plastics) when calculating how much to deduct from its revenues, instead of its actual cost, which Nova produces for less, was rejected by the court.
The court also awarded ‘springboard’ profits, profits earned from the ‘springboard’ into the market enjoyed by Nova as a result of its infringement.
Dow was awarded approximately $644 million, an award that was upheld on appeal by the Federal Court of Appeal.
Last week, the Supreme Court dismissed Nova’s appeal, concluding that the lower courts didn’t make errors in calculating the award.
A three-step approach
Justice Malcolm Rowe, writing for a majority of the judges, set out a three step approach for calculating an account of profits:
Step 1: calculate the actual profits earned by selling the infringing product (revenue minus full or differential costs).
Step 2: determine whether there is a non‑infringing option that can help isolate the profits causally attributable to the invention from the portion of the infringer’s profits not causally attributable to the invention (differential profits). It is at this step that judges should apply the principles of causation.
Step 3: if there is a non‑infringing option, the court should subtract the profits the infringer could have made had it used the non‑infringing option from its actual profits, to determine the amount to be disgorged.
Applying this approach, the court found that the Federal Court judge didn’t err in refusing to deduct the market price of ethylene nor when concluding that all the profits Nova earned by selling the patented plastics were causally attributable to Dow’s invention.
The majority also held that Dow was entitled to springboard profits.
Rowe said: “By infringing Dow’s patent, Nova entered the market created by the invention early, built market share, and used that market advantage to earn profits post‑patent‑expiry that were causally attributable to infringement of the invention, during the period of patent protection.
“The reference judge found no support for Nova’s argument that its springboard profits were already accounted for by its payment of pre‑grant reasonable royalties, and Nova conceded that there were no non‑infringing options that would reduce the springboard profits award.”
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