Canadian Supreme Court confirms record infringement award

12 Dec 2022 | Newsletter

Fraser RowandRowand LLP, Canada

On November 18, 2022, the Supreme Court of Canada confirmed the largest patent infringement award in Canadian history in Nova Chemicals Corp. v. Dow Chemical Co., 2022 SCC 43 (“Nova”). At trial, Dow had elected an accounting of profits and won a judgement of over $640 Million. The Supreme Court decision clarifies the differential profits test and confirms that springboard profits are available.

The Nova case related to sales of plastics. Dow had a patent on a certain low-density polyethylene. Nova infringed the patent by making and selling that plastic. When it came to assessing Nova’s profits, Nova argued that, although there was no direct non-infringing option, it could have used the main input ingredient (ethylene) to make some other type of plastic, like a high-density polyethylene, that it would have sold for non-infringing profits by selling pails and crates made from that plastic. Nova argued that the court should deduct those theoretical profits from their actual profits from infringement. The Supreme Court disagreed. Where it is possible to limit the attribution of profits associated with a patented invention to a subcomponent or part of the infringing product, it may be possible to deduct theoretical profits associated with the non-infringing version of the product. That approach cannot be used where there is no “non-infringing option”, as the infringer is not permitted to deduct theoretical profits that it could have made from using its efforts and capacity to  pursue some other product.

The Supreme Court also confirmed that springboard sales are included in the accounting of profits. An infringer starts building sales capacity and market share for the patented product at a time when the patentee should have a monopoly on that activity. This can have a lasting impact beyond expiry of the patent. On that basis, if post-expiry profits can be shown to be tied to infringing activity during the life of the patent, such that they would not have been made otherwise, then they can be included in the accounting of profits.

The Nova decision will be welcomed by patentees as it confirms that accounting of profits can be a powerful remedy to fight patent infringement in the right circumstances.