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Punitive Damages and Patent Cases

The patent infringement action between Bell Helicopters and Eurocopter has been a topic of discussion among patent lawyers since the trial decision was released in January 2012. The Federal Court of Appeal recently dismissed the appeal and cross-appeal (Bell Helicopter Textron Canada Limitée v. Eurocopter, 2013 FCA 219) in a lengthy decision covering many hot topics in Canadian patent law.

While the decision has a number of interesting issues, including utility and sound prediction, I will focus on the award of punitive damages.

In general, punitive damages may be awarded when the defendant’s conduct is “in exceptional cases of high-handed, malicious, arbitrary or highly reprehensible misconduct”. Most patent cases are disputes between corporate entities where there are typically few facts supporting such a remedy and the Federal Court of Appeal was asked to determine if punitive damages could even be awarded in patent cases.

Besides than some comments suggesting that such remedies may be available in patent cases in a 1996 decision (Lubrizol Corp. v. Imperial Oil Ltd., 1996 CanLII 4042 (FCA)) and a grant of punitive damages for breach of an injunction (Apotex Inc. v. Merck & Co. Inc., 2002 FCT 626), I’m not aware of any recently patent cases where punitive damages were awarded other than the Eurocopter decisions.

In Eurocopter, Federal Court of Appeal referring to the reasons of the trial judge wrote:

[186] … [The trial judge] concluded (at para. 433) “that there is clear evidence of bad faith and egregious conduct on the part of Bell”, “willful blindness or intentional and planned misappropriation of the claimed invention” and “that the infringement of the ‘787 Patent by the making and use of the Legacy gear was not innocent or accidental.”

[187] This is strong language from a trial judge, which is however supported by the evidence.

The Federal Court of Appeal also considered whether it was appropriate to determine punitive damages when the quantum of the compensatory damages had not yet been determined. As is common in patent infringement actions, the quantum of damages was bifurcated (under Rule 153) to be determined at a later reference. The Federal Court of Appeal noted that:

[174] … Consequently, in appropriate circumstances and depending on the context, it may be sometimes possible to ascertain an entitlement (or a non-entitlement) to punitive damages before the exact quantum of compensatory damages has been established. Such would be the case where the compensatory damages, though not precisely quantified, will nevertheless be likely insufficient (or, conversely, likely sufficient) to accomplish the objectives of retribution, deterrence and denunciation. This is precisely the situation identified by the Judge in this case.

The court will determine the amount of compensatory damages and the amount of punitive damages in a subsequent reference, if the case is not settled now that liability has been determined.

Motions to Strike

Since few cases go through to trial, most of the arguments about punitive damages take place at the interlocutory stage. Motions to strike are frequently brought during the pleadings stage of patent infringement actions by defendants to narrow the issues in dispute. Attempts by defendants to remove claims for punitive damages are standard and very often successful.

In patent cases, knowledge of the patent and even wilful infringement have been held not to be sufficient to support a claim for punitive damages. In Wi-Lan Technologies Corp. v. D-Link Systems, Inc. et al. 2006 FC 1484, Justice von Finckenstein wrote:

[7] If we analyse paragraph 13 it becomes apparent that the Plaintiff alleges two things: a) that the Defendants callously, knowingly and wilfully infringed their patent, and b) that they failed to negotiate with the Plaintiff or seek a licence. I fail to see how any of the allegations of paragraph 13, if proven, would amount to “misconduct that represents a marked departure from ordinary standards of decent behaviour”.

In Dimplex North America Ltd. v. CFM Corporation, 2006 FC 586, the Court said that even “deliberate appropriation of intellectual property” did not amount to conduct attracting punitive damages since malice was not established in that case.

In contrast, in Eurocopter, the trial judge held that concerns were raised about the similarities of the technology, a sample of the plaintiff’s helicopter was tested by the defendant while developing their technology and the defendant advertised their product as being “designed for the first time by Bell Helicopter” ([438]). The Court of Appeal concludes that:

[192] Where a person infringes a patent which it knows to be valid, appropriates the invention as its own, and markets it as its own knowing this to be untrue, punitive damages may be awarded when an accounting for profits or compensatory damages would be inadequate to achieve the objectives of retribution, deterrence and denunciation of such conduct. Indeed, such conduct departs to a marked degree from ordinary standards of decent behaviour. It must be denounced in a manner that deters similar misconduct in the future and marks the community’s collective condemnation.

Plaintiffs will continue to include claims for punitive damages in patent cases and defendants will likely continue to try to strike these claims. In most cases, defendants will likely successfully remove such claims. It will be interesting to see if the grant of punitive damages in Eurocopter will open the door further to claims for punitive damages, at least during the interlocutory stages where Judges and Prothonotaries hearing such motions are hesitant to strike pleadings which may have a chance of success at trial.

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