X. Actions and Remedies
Haley MacLean and Lucie Guibault
A. Introduction
Ownership of intellectual property rights only means something if it can be enforced in practice. Without an effective enforcement mechanism, any benefit from the creation and exploitation of a work, trademark, or invention can be reaped wittingly or not by third parties. Rights holders must have the power to take action to stop ongoing or future acts of infringement and to recover the losses from actual infringement. As the only international instrument in the field of intellectual property law that deals with the issue of enforcement, Part III of the TRIPS Agreement lays down a comprehensive set of obligations in this regard. Generally speaking, Contracting Parties have agreed that “enforcement procedures as specified in this Part [must be] available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements”. The TRIPS Agreement further requires Contracting Parties to give rights owners an opportunity for review by a judicial authority of final administrative decisions, to make available civil judicial procedures concerning the enforcement of IP Rights – including injunctions, damages, etc. -, to offer the possibility to order prompt and effective provisional measures, as well as to establish border measures and criminal procedures.
While the Canadian legal system already provided a solid set of enforcement measures in support of the intellectual property regimes before the adoption of the TRIPS Agreement, its ratification in 1996 gave Parliament the opportunity to review and improve the measures available to ensure compliance with the international norms. The judicial system also contributes to the development of procedural law in this field. This chapter describes the various aspects relevant to the enforcement of IP rights in Canada. First, it discusses the issue of jurisdiction of the Canadian Courts, with a focus on the exclusive jurisdiction of the Federal Court, on matters of concurrent jurisdiction with the provincial superior courts and the standard of review of the final decisions of administrative bodies, like the Copyright Board, the Registrar of Patents or the Trademarks Opposition Board. Next, we examine the civil procedures available in Canada to stop and compensate acts of infringement of IP rights, including special orders available to plaintiffs for effective relief. Finally, we shortly describe existing criminal and border procedures designed to combat counterfeiting and other forms of large-scale illegal practices. It is worth noting that each intellectual property statute may contain specific actions and remedies in addition to those described in this chapter. The reader is advised to consult each act to gain a full picture of the extant enforcement measures related to a particular IP right.
B. Jurisdiction of the Canadian Courts
The Canadian federal system is such that disputes relating to intellectual property law can theoretically be heard by the Federal Courts, the provincial superior courts, or either of them depending on the nature of the issue at stake. In practice, the Federal Courts adjudicate most intellectual property matters (some estimate that approximately 95% of all IP cases in Canada are heard at the Federal Court). Nevertheless, depending on the circumstances of each case, the provincial superior courts may be in a better position to hear and make orders in urgent matters, assess infringement cases and interpret licensing agreements. Determining the appropriate jurisdiction to bring an intellectual property case can be done by consulting the relevant statute, or by following legal precedents. Choosing the proper jurisdiction for the adjudication of an IP issue is necessary to ensure effective relief for the plaintiff and consistency in the case law.
1. Jurisdiction of the Federal Court
As previous chapters of this book have highlighted, intellectual property rights fall, for the most part, within the legislative authority of the Parliament of Canada under ss. 91(2), (22) & (23) of the Constitution Act, 1867. The federal nature of the relevant statutes means that the Federal Court has been conferred jurisdiction to hear matters arising from the Copyright Act, the Trademarks Act, and the Patent Act as well as from other federally enacted pieces of legislation, like the Industrial Design Act or the Plant Breeders’ Rights Act. The Federal Court’s jurisdiction in the field of intellectual property law has indeed been a constant since the early days of the Exchequer Court of Canada and is now codified in the Federal Courts Act and in the individual IP statutes.
The Federal Court plays a key role not only in the adjudication of private disputes relating to IPRs, but also in the oversight of decisions rendered by the several administrative bodies in charge of their administration. Since the initial grant or continued existence of most IP rights is conditional on their registration, the validity of such registration is often raised as a defence to an infringement claim. Independently from any infringement proceeding, the Federal Court has jurisdiction to review decisions rendered for example by the Commissioner of Patent or the Trademark Opposition Board, as it does in relation to any voluntary entry in the Copyright Registry or the approval of copyright tariffs by the Copyright Board of Canada.
Federal Courts Act
Application for judicial review
18.1 (1) An application for judicial review may be made by the Attorney General of Canada or by anyone directly affected by the matter in respect of which relief is sought.
(2) An application for judicial review in respect of a decision or an order of a federal board, commission or other tribunal shall be made within 30 days after the time the decision or order was first communicated by the federal board, commission or other tribunal to the office of the Deputy Attorney General of Canada or to the party directly affected by it, or within any further time that a judge of the Federal Court may fix or allow before or after the end of those 30 days.
(3) On an application for judicial review, the Federal Court may
(a) order a federal board, commission or other tribunal to do any act or thing it has unlawfully failed or refused to do or has unreasonably delayed in doing; or
(b) declare invalid or unlawful, or quash, set aside or set aside and refer back for determination in accordance with such directions as it considers to be appropriate, prohibit or restrain, a decision, order, act or proceeding of a federal board, commission or other tribunal.
(4) The Federal Court may grant relief under subsection (3) if it is satisfied that the federal board, commission or other tribunal
(a) acted without jurisdiction, acted beyond its jurisdiction or refused to exercise its jurisdiction;
(b) failed to observe a principle of natural justice, procedural fairness or other procedure that it was required by law to observe;
(c) erred in law in making a decision or an order, whether or not the error appears on the face of the record;
(d) based its decision or order on an erroneous finding of fact that it made in a perverse or capricious manner or without regard for the material before it;
(e) acted, or failed to act, by reason of fraud or perjured evidence; or
(f) acted in any other way that was contrary to law.
Industrial property, exclusive jurisdiction
20 (1) The Federal Court has exclusive original jurisdiction, between subject and subject as well as otherwise,
(a) in all cases of conflicting applications for any patent of invention or for any certificate of supplementary protection under the Patent Act, or for the registration of any copyright, trademark, industrial design or topography within the meaning of the Integrated Circuit Topography Act; and
(b) in all cases in which it is sought to impeach or annul any patent of invention or any certificate of supplementary protection issued under the Patent Act, or to have any entry in any register of copyrights, trademarks, industrial designs or topographies referred to in paragraph (a) made, expunged, varied or rectified.
Section 18 of the Federal Courts Act grants jurisdiction in matters relating to the review of administrative decisions, while s.20(1) confers the Federal Court exclusive jurisdiction in matters directly affecting individual IP rights. The provisions of the Federal Courts Act are complemented by those of the relevant IP statutes which specify the matters that fall within the Courts’ exclusive jurisdiction. In short, any action that is likely to affect a right as it is registered, either as a result of a modification, impeachment or invalidation, will exclusively be heard by the Federal Court.
Consider the following examples taken from the different acts:
| Patent Act | Trademarks Act | Copyright Act | |
| Enforcement of rights | 54 (1) An action for the infringement of a patent may be brought in that court of record that, in the province in which the infringement is said to have occurred, has jurisdiction, pecuniarily, to the amount of the damages claimed and that, with relation to the other courts of the province, holds its sittings nearest to the place of residence or of business of the defendant, and that court shall decide the case and determine the costs, and assumption of jurisdiction by the court is of itself sufficient proof of jurisdiction.(2) Nothing in this section impairs the jurisdiction of the Federal Court under section 20 of the Federal Courts Act or otherwise. | 55 The Federal Court has jurisdiction to entertain any action or proceeding, other than a proceeding under section 51.01, for the enforcement of any of the provisions of this Act or of any right or remedy conferred or defined by this Act. | 41.24 The Federal Court has concurrent jurisdiction with provincial courts to hear and determine all proceedings, other than the prosecution of offences under sections 42 and 43, for the enforcement of a provision of this Act or of the civil remedies provided by this Act. |
| Challenge of individual rights | 60 (1) A patent or any claim in a patent may be declared invalid or void by the Federal Court at the instance of the Attorney General of Canada or at the instance of any interested person. | 18.1 The registration of a trademark may be expunged by the Federal Court on the application of any person interested if the Court decides that the registration is likely to unreasonably limit the development of any art or industry | |
| Rectification of register | 52 The Federal Court has jurisdiction, on the application of the Commissioner or of any person interested, to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged. | 57(1) The Federal Court has exclusive original jurisdiction, on the application of the Registrar or of any person interested, to order that any entry in the register be struck out or amended on the ground that at the date of the application the entry as it appears on the register does not accurately express or define the existing rights of the person appearing to be the registered owner of the trademark. | 57(4) The Federal Court may, on application of the Registrar of Copyrights or of any interested person, order the rectification of the Register of Copyrights by(a) the making of any entry wrongly omitted to be made in the Register,(b) the expunging of any entry wrongly made in or remaining on the Register, or(c) the correction of any error or defect in the Register,and any rectification of the Register under this subsection shall be retroactive from such date as the Court may order. |
| Appeal from admin body | 41 Every person who has failed to obtain a patent by reason of a refusal of the Commissioner to grant it may, at any time within six months after notice as provided for in section 40 has been mailed, appeal from the decision of the Commissioner to the Federal Court and that Court has exclusive jurisdiction to hear and determine the appeal. | 56 (1) An appeal lies to the Federal Court from any decision of the Registrar under this Act within two months from the date on which notice of the decision was dispatched by the Registrar or within such further time as the Court may allow, either before or after the expiration of the two months.(5) On an appeal under subsection (1), evidence in addition to that adduced before the Registrar may be adduced and the Federal Court may exercise any discretion vested in the Registrar. |
Second, is the fact that since the Federal Court traditionally hears the majority of IP related cases, the case law emanating from this Court show greater efficiency and better predictable outcomes. The volume of cases and the expertise developed by the bench are at the root of the Federal Court’s pilot project announced in March 2023 of the creation of a specialized IP and Competition Law Chamber. The primary goal of this pilot project is to streamline assignments among the justice of the Court.
Finally, the appeal of filing a case before the Federal Courts also lies in the fact that the Court’s jurisdiction extends to all provinces. Specifically, this means that court orders and rulings from the Federal Courts are directly enforceable in every province at once. For example, the Federal Court can grant injunctions enforceable across Canada.
2. Concurrent Jurisdiction Between Courts
As the language of s.20(2) of the Federal Court Act indicates, the Federal Court and provincial courts have concurrent jurisdiction for the enforcement of IP rights. This provision should be read in conjunction with the relevant provisions in the Patent Act (s. 54), the Trademarks Act (s.55) and the Copyright Act (s. 41.25).
Federal Courts Act
Industrial property, concurrent jurisdiction
20(2) The Federal Court has concurrent jurisdiction in all cases, other than those mentioned in subsection (1), in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention, certificate of supplementary protection issued under the Patent Act, copyright, trademark, industrial design or topography referred to in paragraph (1)(a).
Concurrent jurisdiction simply means that two different courts have the authority to hear the same case. In IP matters, the Federal Courts and the provincial superior courts have concurrent jurisdiction both in civil and criminal matters. An example of concurrent jurisdiction in intellectual property law is an action for infringement, which can be adjudicated by either the federal or superior provincial courts.
Should a defendant in an infringement action filed before a provincial superior court raise the issue of invalidity by way of defence, the court may conclude, inter partes, that the patent or trademark in suit is invalid. However, such a finding of invalidity would not be enforceable erga omnes and would not lead to the expungement or impeachment of the right from the register. Only the Federal Court has jurisdiction to modify or strike an entry from the Patent or Trademark Register.
Provincial superior courts have inherent jurisdiction in at least two important aspects of the enforcement of IPRs: 1) the assessment of what constitutes infringement, akin to tort law; and 2) the interpretation of contracts relating to IPRs. However, as the case reproduced below demonstrates, the provincial superior court’s jurisdiction in contractual matters does not take away the Federal Court’s capacity to adjudicate a contract dispute relating to an IPR. Ultimately, the choice between filing an action before the superior court or the Federal Court in a case of infringement or contract is one of convenience and expected outcome for the plaintiff.
In 2018, the Federal Court had ruled in Farmobile, LLC v Farmers Edge Inc. that, in order to determine jurisdiction for IP contractual disputes, one must determine whether the contractual issue at hand is an essential element of the claim, or if it is ancillary or incidental to it. If the contractual issue is the centre issue at trial, then the superior provincial courts will have jurisdiction. However, if the contractual issue is simply one aspect of a broader issue then the Federal Courts can (and often always will) have jurisdiction. In the Farmobile case, the defendant argued that the essence of the claim was a contractual issue and therefore the provincial courts had jurisdiction. However, the Federal Court reasoned instead that the essential nature of the issue was that of patent infringement and therefore unquestionably fell within its jurisdiction.
Two years later, the Federal Court of Appeal reversed this line of reasoning in the case Salt Canada Inc. v. Baker 2020 FCA 127. In first instance, the Federal Court had dismissed an application brought by the appellant for an order directing the Commissioner of Patents to vary the records of the Patent Office to reflect it as owner of Canadian Patent No. 2,222,058. The question on appeal was whether the Federal Court had jurisdiction to hear the application, which required it to adjudicate a contractual dispute, a matter reserved to the provincial superior courts. After a review of numerous decisions in matters of federal jurisdiction (tax, intellectual property, administrative law, maritime law, privacy and access to information), the Federal Court of Appeal ruled that when dealing with an application under section 52 of the Patent Act, the Federal Court remains free to carry out the task Parliament has given to it—to determine who should be reflected on the records of the Patent Office as the owner of a patent—even if that involves interpreting agreements and other instruments. In reaching its decision, the Federal Court of Appeal emphasized:
“primarily a case in contract”or whether contractual interpretation will
“dictate”the end result.
3. Administrative Standard of Review
A large portion of the Canadian intellectual property system functions on the basis of decisions rendered by various administrative bodies, the most prominent of which are the Commissioner of Patents, the Registrar of Trademarks, the Trademark Opposition Board and the Copyright Board. Patents would not be granted on inventions, trademarks would not be registered and tariffs for the use of copyrighted works would not be issued without the involvement these bodies. Whether at the grant stage or at the enforcement stage, or in defence of an infringement action or as strategic move against a competitor, decisions from these public bodies may be subject to judicial review in accordance with s.18 Federal Courts Act and in conjunction with the provisions of the relevant statute.
In all the possible instances of judicial review in the field of IP, the question of determining the proper standard of review periodically arises. How much deference should the Federal Court lend to the administrative body whose decision is being attacked? Does the standard developed by the Supreme Court in the 2019 case of Canada (Minister of Citizenship and Immigration) v Vavilov apply to IP decisions? Is the answer the same notwithstanding the circumstances of each case? As demonstrated below, the Federal Court of Appeal (FCA) plays a key role in providing guidance in the matter.
Following Vavilov, the generally applicable standard of review on questions of fact and of mixed fact and law is the standard of palpable and overriding error. Accordingly, except on questions of law, the Federal Courts will not intervene in a decision unless there is an error that is both palpable (obvious) and overriding (going to the very core of the outcome of the case). By contrast, the judicial review on questions of law demand the application of the standard of correctness.
In the area of patent law, courts apply the standard set out in Housen v. Nikolaisen, 2002 SCC 33, whereby issues of law are reviewed on a standard of correctness and issues of fact or of mixed fact and law from which no legal error is extricable are reviewed on a standard of palpable and overriding error. A palpable and overriding error is one that is obvious and goes to the very core of the outcome of the case. The determination of utility (Apotex Inc. v. Janssen Inc., 2021 FCA 45), novelty (Western Oilfield Equipment Rentals Ltd. v. M-I L.L.C., 2021 FCA 24) and obviousness (Halford v. Seed Hawk Inc., 2006 FCA 275) qualify as questions of mixed fact and law subject to the standard of palpable and overriding error.
Claims construction raises issues of law that are reviewable for correctness. The applicable standard of review is complicated by the fact that patent claims are interpreted from the point of view of a POSITA (Whirlpool at para. 48), and expert evidence is often considered in determining how such a person would have understood certain terms in a claim at the relevant date. The weighing of expert evidence is a question of mixed fact and law. Note however that while claims construction is a matter of law, the question of whether a defendant’s activities fall within the scope of the monopoly thus defined is a question of fact.
In trademark law, decisions of the Registrar of Trademark and the Trademark Opposition Board can be appealed to the Federal Court, pursuant to s.56(1) Trademarks Act. The FCA confirmed in Industria de Diseno Textil, S.A. v. Zara Natural Stones Inc., 2021 FCA 231, that the standard of correctness is to apply to questions of law, and the standard of palpable and overriding error applies to questions of fact or of mixed fact and law in which there is no extricable issue of law. This appellate standard should apply going forward to appeals from the Board, at least on issues in which no additional evidence has been introduced before the Federal Court.
Where new evidence is presented on appeal, pursuant to s.56(5) TMA, the FCA determined in Clorox Company of Canada, Ltd. v. Chloretec S.E.C., 2020 FCA 76, that the Supreme Court’s decision in Vavilov has no bearing on the standard of review. The FCA reiterated that “the applicable standard of review depends on whether there is new evidence on appeal that would have affected the Registrar’s decision materially. If there is, the Court undertakes a de novo review of issues that would have been affected by such evidence and is entitled to substitute its opinion for that of the Registrar“. “In assessing whether new evidence would have materially affected the Registrar’s decision, the Court considers whether the evidence is “sufficiently substantial and significant” and of probative value. New evidence may be material if it fills gaps or remedies a deficiency in the evidence before the Registrar”. Since s.56(5) of the Act states that the Federal Court “may exercise any discretion vested in the Registrar”, it ensues that the nature of this proceeding is an appeal de novo and that the applicable standard is that of correctness. This approach was recently followed in Smooth Payment Inc. v. Klarna Bank Ab, 2024 FC 1274.
In the context of copyright law, the Supreme Court discussed the applicable standard of review of a decision of the Copyright Board in Society of Composers, Authors and Music Publishers of Canada v. Entertainment Software Association, 2022 SCC 30. In this case, the Supreme Court explained that
“[w]hen courts and administrative bodies have concurrent first instance jurisdiction over a legal issue in a statute is one of those rare and exceptional circumstances where it is appropriate to recognize a new category of correctness review. Applying correctness accords with legislative intent — by conferring concurrent first instance jurisdiction to courts and administrative bodies, it should be inferred that the legislature wanted to subject those decisions to appellate standards of review. Applying correctness also promotes the rule of law. First, when there is concurrent first instance jurisdiction, the legislature has expressly involved the courts in the interpretation of a statute, which necessarily carries with it the implication that, absent legislative direction to the contrary, courts will operate by their settled standards. Second, it avoids conflicting statutory interpretations, and it provides a way to manage differing decisions between courts and tribunals. Third, this correctness category can be defined with precision, as it will apply only when courts and administrative bodies have concurrent first instance jurisdiction over a legal issue in a statute.”
This specific case involved the interpretation of s.2.4(1.1) Copyright Act, to determine whether the statutory provision created a separate right of making available to the public, apart from the right of communication to the public by telecommunication under s.3(1)(f) CA. The Supreme Court ruled that the standard was correctness, since the interpretation of this provision should be uniform between the courts and the Copyright Board. In other matters administered by the Copyright Board, that may not be subject to concurrent jurisdiction, the proper standard of review would be that of palpable and overriding error.
C. Civil Remedies
While criminal remedies for intellectual property infringement do exist (and will be explored below), the vast majority of IP cases are civil and require owners of intellectual property to enforce their rights against infringers in private civil actions through civil remedies. Examples of civil remedies for intellectual property enforcement include injunctions, award of costs, damages or an account of profits, delivery up, destruction of infringing items (and possibly the items used to make them), and Norwich orders.
1. Injunctions
Injunctions are very common in the world of IP law, and are legally defined as a warning or order by the courts that restrains or prevents a person from undergoing or continuing an action that would threaten or infringe upon the legal right of another person. They are often used as remedies when it’s determined monetary damages are insufficient to fully remedy the damage for the intellectual property holder. For example, if a person is infringing a trademark and disparaging the goodwill of a brand in the process, issuing monetary damages would only account for the harm that has already been committed. A prohibitive injunction would prevent continued infringement from causing irreparable harm to the company in the future. Prohibitive/permanent injunctions are extremely common in IP proceedings and help IP holders protect their exclusive rights.
Injunctions are expressly permitted as a remedy to infringement in s.57 of the Patent Act, s.34(1)(2) of the Copyright Act, and s.53.2(1) of the Trademarks Act.
Interlocutory injunctions function similarly to prohibitive injunctions but differ in that they are court orders prohibiting or enforcing activities that are issued before the final determination of the case and remain in effect until trial. If there is a fear that damage will be caused even in the time before an interlocutory injunction can be awarded, a rights holder can seek an interim injunction which is a short and expedient procedure that can be obtained ex parte. They are used strictly for the short interim time before both parties can attend court for the formal application of an interlocutory injunction. However, under federal law interim injunctions cannot be maintained for a period longer than 14 days and they are used for only extremely urgent matters.
Other ex parte injunctions that can be requested alongside interim injunctions include a Mareva injunction that prevents a defendant from liquidating or moving their assets in case the plaintiff might be entitled to those funds and an Anton Piller seizure order that prevents a defendant from destroying evidence before the trial.
The test for the granting of an interlocutory injunction comes from the 1994 case of R.J.R Macdonald Inc. v Canada (Attorney General) and requires a plaintiff to prove irreparable harm would occur if not for the application of an interlocutory injunction. The three-part tests asks
(1) whether there is a serious issue to be tried,
(2) will the applicant suffer irreparable harm if the injunction is not granted; and
(3) often called the balance of conveniences, asks which of the two parties which would suffer the most harm from granting or receiving the remedy pending a decision on the merits?
The first step has a low threshold, where it is accepted that so long as an application is not ‘vexatious nor frivolous’ the judge will move onto step two even if the plaintiff seems unlikely to succeed at trial. The second step requiring proof of evidentiary harm is a much higher bar to meet and is the step where most applications fail. While there is no specific legal definition for irreparable harm under this test, an applicant must essentially show that harm cannot be compensated with monetary value and an interlocutory injunction is the only possible process to prevent the harm. The final balance of conveniences step is determined based on the facts of the case, with instances where there is a greater potential harm to be suffered by the plaintiff pointing towards the necessity for an interlocutory injunction.
Exercise: Applying the interlocutory injunction test from R.J.R. MacDonald
Using the test outlined in R.J.R. Macdonald, determine whether the courts granted an interlocutory injunction in the 2017 case of Sleep Country Canada v Sears based on the facts.
Facts: Sleep Country Canada is a mattress retailer that is quite well known in Canada for its trademarked slogan, “Why buy a mattress anywhere else?” complete with a commercial jingle. The defendant Sears, which also sells mattresses, began using a slogan “There is no reason to buy a mattress anywhere else” for its own marketing purposes. Sleep Country commenced a trademark infringement action, and sent in an application for an interlocutory injunction alleging the slogan will cause irreparable harm to its company by causing confusion for its customers, a depreciation the goodwill of brand of Sleep Country, and a loss of distinctiveness of its own trademark. A motion for an interim injunction was dismissed. Additional facts include:
- At the time, Sleep Country had 234 stores and 17 distribution centres in Canada
- Sleep Country had used the slogan for TV, radio, print, and online advertising
- Sleep Country noted that its slogan, which is sometimes in a musical jingle, has national recognition and has reached iconic proportions
- The jingle was ranked as one of Canada’s 25 catchiest jingles by the Huffington Post
- Sears has sold mattresses for at least the past 40 years
- Sears used its slogan in online flyers on Instagram and Facebook, in printed flyers for a period of two months, in radio advertisements, and in Black Friday advertisements in November 2016
2. Award of Costs
Litigation can be extremely expensive, so the Canadian courts have developed an award of costs system that seeks to compensate the winning party for costs incurred during the process. All provinces in Canada have adopted this system. Commercial litigation lawyer Grant Vogeli states in his blog that historically, successful litigants were awarded approximately 40-50% of their actual legal expenses under this English system. It is uncommon for a successful party to be awarded full indemnity or solicitor-client costs, which would cover all legal expenses, unless the losing parties’ actions were especially dishonest, scandalous, or outrageous.
As previously discussed, the federal courts hear most IP cases in Canada and Part 11 of the Federal Court Rules lays out the process of granting award of costs in the federal jurisdiction. If an IP related case were to be considered at a provincial level (for tort or contract related disputes for example), you would consider the processes laid out in the province’s respective Civil Procedure Rules. Specifically, in Nova Scotia, Rule 77 of the Nova Scotia Civil Procedure Rules dictates the appropriate calculations to determine cost awards for the winning party under Tariffs A-F.
3. Damages or Account of Profits
Damages are awarded are compensation for the loss incurred by the rights holder caused by the infringement by the defendant’s actions. Since a rights holder has a monopoly on their work and the profits it may incur during a defined period of time allotted by the respective acts for each right (20 years for patents, 50 years after the death of an author for copyright, 10 years for trademarks with the option to renew), any infringement of that right within that time frame warrants monetary compensation for a loss of that monopoly. The onus to prove damages lies with the plaintiff and is assessed based on the facts of the case.
Damages are expressly permitted as a remedy to infringement in s.55 of the Patent Act, s.34, 35, 38 and 38.1 of the Copyright Act, and s.53.2 of the Trademarks Act.
IP holders can also be entitled to an account of profits based on the circumstances, which requires the infringer to hand over all profits made by the process of infringement. S.35(1) of the Copyright Act allows for an account of profits while s.35(2) lays out the shifting onus wherein the plaintiff must first prove the receipts or revenues derived from the infringement and then the defendant must prove every element of cost that the defendant claims. If a defendant refuses to be cooperative with the court and prove every element of cost, the plaintiff may still obtain the information elsewhere to all the court to make a fair judgement in the evaluation of total profits.
In trademark law, it is more difficult to make an evaluation of lost profits since the profits gained by infringement could arguably have gone to another competitor in the same market besides the trademark holder in question. However, an account of profits can still be granted if the circumstances allow for a fair assessment of net profits loss. For example, if the trademark which was infringed has a monopoly in the market or if the product it represents is unique in its appearance, quality, or price compared to all other competitors, then an evaluation of lost profits could be determinable.
For patent law, the timeline of when the right was granted to the patent holder plays a bigger role in the determination of an account for profits compared to trademark and copyright law. According to s.55(2) of the Patent Act if an infringement occurs in the period between the publication and granting of a patent, then the holder is only compensated for damages accounting for infringement and not any account of profits simply because the patented invention has not yet formally entered the market. However, after the granting of a patent a case of infringement can allow for an account of profits if the courts deem it appropriate. To determine the profits lost the court would consider the position of the patent holder if the defendant had not infringed their work.
In Colonial Fastener Co. Ltd. v Lightning Fastener Co. Ltd., the Supreme Court affirmed that only royalties can be awarded for patent infringement if the patent holder either does not manufacture or sell the patent-protected item, normally grants licences under the patent, or cannot prove the loss of a sale due to the activity of the infringer. In those instances, the patent holder would not be awarded lost profits and instead would receive a figurative royalty with the amount granted based on the price the infringer would have paid if they had taken the proper channels and entered into a licensing agreement with the patent holder.
4. Delivery Up and Destruction of Infringing Items
Delivery up is defined as the act of giving a piece of property back to its original owner. In intellectual property law, this often means with the intention of destroying the item if it was made as a result of the infringement of an IP right. The purpose of delivery up is to aid prohibitive injunctions in their application, with the effect allowing the rights holder to avoid continued infringement issues in the future. Delivery up and destruction of items are remedies that apply to all types of intellectual property including patents, trademarks, and copyright. An order for the destruction of goods is granted only after a finding of infringement has occurred.
Delivery up is expressly permitted as a remedy to infringement in s.34, 41.1(2), and 41.22(2) of the Copyright Act, and s.53.2(1) of the Trademarks Act. There is no specific provision in the Patent Act that references delivery up, but it is still often used as a remedy in the recognition of the exclusive rights granted to the patent holder under s.42.
The TRIPS Agreement contains two provisions relating to this remedy under Article 46 and 59. Article 46 is a general application remedy that relates to the destruction of infringing goods in general. It also applies to items whose primary purpose was/is to make the infringing goods in question, stating the judicial authorities have the authority to, “…order that materials and implements the predominant use of which has been in the creation of the infringing goods be…disposed of outside the channels of commerce in such a manner as to minimize the risks of further infringements.” Whereas Article 59 specifically relates to the destruction of imported counterfeit goods in the possession of customs authorities under the same principles of Article 46. Article 59 also specifies that in regards to trademarks, “…the authorities shall not allow the re-exportation of the infringing goods in an unaltered state or subject them to a different customs procedure, other than in exceptional circumstances.”
5. Norwich Orders
Norwich orders are used to force an infringer to tell the courts where they received their supplies of infringing goods in order to track further infringement cases. Norwich orders are granted in specific circumstances, including: (1) where the information sought is necessary to identify wrongdoers; (2) to find and preserve evidence that may substantiate an action or determine whether an action exists against known or unknown wrongdoers; and (3) to trace and preserve assets.
A Norwich order on the other hand if a pre-trial remedy that is commonly used in copyright infringement cases against intermediaries like internet service providers to force them to provide their private information in order to identify infringers online. Norwich orders are a very intrusive remedy and must be used only in certain circumstances. They are also commonly used in cases of online defamation, like in the 2009 case of York University v Bell Canada Enterprises wherein York was requesting an order requiring Bell and Rogers to disclose info necessary to obtain the identity of anonymous authors of allegedly defamatory emails. This case laid out the requirements for an allowance of a Norwich order including sufficient evidence to show a bona fide reasonable claim, the applicant must establish the third-party is somehow involved in the acts, the third-party is the only practical source of info, the third-party can be indemnified for costs, and the interests of justice favour obtaining the disclosure. In York University, the Norwich order was granted because the internet service providers offered the platform for the defamatory emails to be sent, there were little to no costs associated with providing the information, and there was no other practical source to determine the identifies of the defendants in this instance.
Prior to 2015, ISPs could charge a fee against the copyright holder for the work associated with the compliance of a Norwich order. The 2018 case of Rogers Communications Inc. v Voltage Pictures addressed the issue of whether fees should still be required (as per common law) or if ISPs should be exempt from charging fees for their services in identifying users on their platforms (as per the notice and notice provisions under s. 41.25 and s.41.26 in the Copyright Act). Film production company Voltage Pictures requested a Norwich order on ISP Rogers to disclose the identities (including personal and contact information) of unidentified Internet subscribers who were sharing their films online using peer to peer file-sharing networks. The order was allowed and the federal court decided for Rogers stating it was able to recover all costs associated with identifying the individuals. However, the Federal Court of Appeal disagreed and stated the Copyright Act already requires ISPs to collect user identification information regardless of the presence of a Norwich order, so there should be no fees associated with requirements already existing under the act. However, Rogers did take on additional steps when collecting information on its users that was not required under the Act, and it could be compensated with fees for any additional steps taken to collect information that are not expressly required under the notice and notice regime. In this case, those additional steps included connecting the IP address to the person’s real-life identity and sharing that specific person’s identity with the copyright owner.
Another example of a request for a Norwich order during an intellectual property infringement case the 2019 case of ME2 Productions, Inc. v Doe, wherein the plaintiff companies were seeking a Norwich order against TekSavvy Solutions Inc. to obtain the names and addresses of some of TekSavvy’s users who were allegedly illegally downloading and sharing ME2’s films. TekSavvy questioned the motion stating ME2 had not produced sufficient evidence to warrant a Norwich order to obtain the identities of the alleged infringers. The courts decided there was not sufficient evidence to warrant a Norwich order calling it an “…equitable, discretionary and flexible remedy…an intrusive and extraordinary remedy that must be exercised with caution”, with Teksavvy being awarded partial costs. ME2 was still free to file a new Norwich order after this decision so long as it was filed with sufficient evidence to warrant its use.
Norwich orders may also be requested in patent related matters, subject to meeting the requirements for issue.
Seismotech IP Holdings Inc. v John Doe and Apple Canada Inc., 2023 FC 1649
[1] Seismotech wishes to sue consumers who bought, installed and used intelligent thermostats in their homes, because it alleges that these devices infringe certain patents it owns. To that end, it seeks a Norwich order to force Apple to disclose the names and addresses of consumers who downloaded the apps controlling such devices from the App Store.
[2] I am dismissing the motion. Seismotech has not shown that it has a bona fide claim. Moreover, the public interest does not favour the granting of a Norwich order. Given the inherent complexity of a patent infringement action and the nature of the technology at issue, individual consumers would be ill equipped to defend the action.
I. Background
[3] The plaintiffs, which I will refer to as Seismotech, own four patents, broadly related to methods, apparatuses, media and signals for the management, monitoring, controlling or billing of public utility usage. They allege that several brands and models of intelligent thermostats infringe their patents.
[4] Seismotech brought four actions in this Court in respect of such infringement. The action in court file no T-1147-23 is a simplified action against a category of as of yet unidentified persons, described as “John Does,” who purchased intelligent thermostats made by Canadian manufacturers. The defendants include persons residing in either Canada or the United States. Seismotech claims damages and an accounting of profits from each individual defendant, the “profits” being the savings made by each defendant on their public utility bills by using the allegedly infringing technology.
[5] The action in court file no T-1148-23 is similar, except that it targets purchasers of intelligent thermostats made by foreign manufacturers. The defendants reside in Canada only.
[6] Seismotech also brought two “reverse class actions,” that is, actions against a category of defendants comprising legal persons who manufactured, distributed or sold allegedly infringing intelligent thermostats in Canada. One of these actions pertains to thermostats made by Canadian manufacturers and the other, those made by foreign manufacturers. In both cases, the proposed representatives of the defendant class are Rona Inc. and Home Depot of Canada Inc.
[7] One of the Canadian manufacturers of intelligent thermostats, Ecobee Technologies ULC [Ecobee], sought leave to be added as a defendant in action no T-1147-23. I granted Ecobee’s motion in October 2023: Seismotech IP Holdings Inc v John Does, 2023 FC 1335. Seismotech appealed my order, but no decision regarding the appeal has been rendered yet.
[8] When the motion to add Ecobee as a defendant was being heard, Seismotech amended its statements of claim to assert only certain independent patent claims, which it describes as “method claims.”
[9] Seismotech now brings motions to obtain a Norwich Order against Apple Inc. and Apple Canada Inc. [collectively, Apple] in each of files T-1147-23 and T-1148-23 [the “John Doe actions”]. Seismotech alleges that the operation of an intelligent thermostat requires end-users to download an app designed by the manufacturer from an online commerce platform such as Apple’s App Store. Apple possesses its customers’ personal information, including their names, e-mail addresses or Apple IDs, IP addresses, credit card billing addresses and the date they downloaded the app. Seismotech asks the Court to order Apple to provide this information with respect to users who have downloaded the apps designed to control the intelligent thermostats at issue in both John Doe actions.
II. AnalysisA. Test for a Norwich Order
[10] In simple terms, a Norwich order requires a person who is not a party to a proceeding to provide information to assist a plaintiff in bringing an action, typically, but not always, by revealing the identity of potential defendants. It owes its name to Norwich Pharmacal Co v Customs and Excise Commissioners, [1974] AC 133 (HL), which has become the landmark case on this issue in the common law world. It is rooted in equity and finds its origins in what is known as the equitable bill of discovery.
[11] In this Court, a plaintiff who seeks a Norwich order may rely on rule 238 of the Federal Court Rules, SOR/98-106, which provides for the examination on discovery of non-parties, or they may seek an equitable bill of discovery. In BMG Canada Inc v John Doe, 2005 FCA 193 at paragraph 30, [2005] 4 FCR 81 [BMG], the Federal Court of Appeal noted that the test would be the same in either case.
[12] Adopting language from BMG, the Supreme Court of Canada recently summarized the factors usually taken into consideration for granting a Norwich order in Rogers Communications Inc v Voltage Pictures, LLC, 2018 SCC 38 at paragraph 18, [2018] 2 SCR 643 [Rogers]:
(a) [a bona fide claim] against the unknown alleged wrongdoer;
(b) the person from whom discovery is sought must be in some way involved in the matter under dispute, he must be more than an innocent bystander;
(c) the person from whom discovery is sought must be the only practical source of information available to the applicants;
(d) the person from whom discovery is sought must be reasonably compensated for his expenses arising out of compliance with the discovery order in addition to his legal costs;
(e) the public interests in favour of disclosure must outweigh the legitimate privacy concerns. [Emphasis omitted]
[13] Two elements of this test need to be further elucidated.
[14] First, to obtain a Norwich order, a plaintiff need not show that the claim is likely to succeed: BMG, at paragraphs 32–34; 1654776 Ontario Limited v Stewart, 2013 ONCA 184 at paragraphs 49–50 [Stewart]. Some evidence is typically required to satisfy the Court that there is a legitimate basis for the proposed claim. However, plaintiffs are not required to negate potential defences at this stage, for example allegations of invalidity in patent cases: Glaxo Wellcome PLC v Minister of National Revenue, 1998 CanLII 9071 (FCA), [1998] 4 FC 439 (CA) at 464 [Glaxo]. This relatively low threshold “is intended to ensure that actions for a bill of discovery are not brought frivolously or without any justification:” Glaxo at 461. The contrast between this threshold and the higher bar of a likelihood of success is often illustrated by the Latin expressions bona fide and prima facie.
[15] To suggest that no evidence is needed, Seismotech relies on a quote from BMG, at paragraph 34, where the Court states:
It is sufficient if [the plaintiffs] show a bona fide claim, i.e. that they really do intend to bring an action for infringement of copyright based upon the information they obtain, and that there is no other improper purpose for seeking the identity of these persons.
[16] This is a misreading of BMG. The Court denied a Norwich order in that case precisely because the evidence was lacking. In addition, Seismotech relied on a number of British cases, including Stanford Asset Holdings Ltd v AfrAsia Bank Ltd, [2023] UKPC 35 [Stanford Asset Holdings]. In that case, at paragraph 36, the Privy Council stated that a “good arguable case” was needed to issue a Norwich order. This shows that the mere assertion of a cause of action, without any factual foundation, is insufficient.
[17] The second issue pertains to the last criterion of the test. In BMG and Rogers, it is framed as a balance between the public interest in favour of disclosure and privacy concerns. This is because the main ground for opposing the motion in BMG was the privacy rights of Internet users. However, the fifth prong of the test is not limited to privacy concerns. As the Ontario Court of Appeal explained in Stewart, at paragraph 77:
The fifth Norwich factor is whether the interests of justice favour the obtaining of disclosure. This factor is broad and encompasses the interests of the applicant, the respondents, the alleged wrongdoers and the administration of justice.
[18] Indeed, this Court considers the interests of the alleged wrongdoers when it oversees the disclosure process and regulates the information that is provided to them: Voltage Pictures LLC v John Doe, 2014 FC 161, [2015] 2 FCR 540 [Voltage 2014]. The UK courts also appear to engage in a review of all the relevant circumstances, to determine whether the issuance of a Norwich order is “an appropriate and proportionate response”: Stanford Asset Holdings, at paragraph 36.
[19] Moreover, at this stage, the Court may take into account the apparent strength of the plaintiff’s case in the overall balance: Stewart, at paragraphs 59, 75 and 145.
[20] The breadth of the range of factors that may be considered is compatible with the principle that equitable remedies, such as a Norwich order, are discretionary in nature. This means that the Court is not bound by a rigid formula and can consider any relevant factor in deciding whether to issue the remedy. Discretion remains even where the power to grant relief has been codified in statute. See, for example, Strickland v Canada (Attorney General), 2015 SCC 37 at paragraphs 37–38, [2015] 2 SCR 713; Google Inc v Equustek Solutions Inc, 2017 SCC 34 at paragraph 25, [2017] 1 SCR 824.
B. Application to the Facts
[21] Seismotech’s motion for a Norwich order fails for two reasons. First, it has not shown a bona fide claim. Second, it would not be in the public interest to allow the action to proceed in a manner that will effectively deprive defendants of access to justice and any meaningful manner of defending the action. In my view, each of these two grounds, standing alone, is sufficient to deny relief. It follows that I need not consider the other parts of the test for issuing a Norwich order. Neither do I need to address the jurisdictional issues flowing from Seismotech’s attempt to bring a lawsuit in Canada against consumers in the United States.
(1) Lack of a Bona Fide Claim
[23] The only allegations pertaining to infringement in each amended statement of claim are the following:
[translation]
Each of the defendants employed methods, and in doing so reaped the benefits of the monopoly that was conferred upon the Plaintiffs through the Patents, by using the Products described in Schedule A which are manufactured and/or designed by the following companies located in Canada: [the manufacturers are listed]
The Defendants employed methods (below) by using the Products listed above and the methods employed by the Defendants contain all the elements of, and therefore infringe: [the asserted claims of the four patents are listed].
[24] In his affidavit in support of the present motions, Seismotech’s owner, Mr. Baraty, does not provide any particulars of the allegations of infringement. He merely tries to link the alleged infringement to the use of the apps downloaded from the App Store. He states:
Based on my understanding of my Patents and the smart thermostat devices listed in Schedule A of the Statement of Claim, I believe that use of the mobile applications listed in Schedule A of the Notice of Motion are covered by the claims in the Patents. I also believe that the mobile applications would be used to operate features of those smart thermostat devices that would be covered by the claims in the Patents.
[25] In cross-examination, Mr. Baraty was asked to explain the basis for this belief. Counsel for Seismotech objected to the question, alleging that it was not relevant. I am of the view that the question was indeed relevant and that the refusal to answer gives rise to the adverse inference that there is no factual basis for this assertion beyond Mr. Baraty’s subjective belief.
[26] Moreover, Mr. Baraty’s affidavit attaches information downloaded from the Internet regarding the intelligent thermostat manufacturers listed in the statements of claim. This information shows that these manufacturers offer apps on Apple’s App Store that, broadly speaking, allow users to control their heating systems remotely. Some of the advertisements contain promises of energy savings. There is no indication in the affidavit that Mr. Baraty, or anyone else on behalf of Seismotech, obtained or examined these devices or performed any analysis beyond a summary Internet search.
[27] I also note that Seismotech had been aware of Apple’s contention that there is no bona fide claim for at least three months before the hearing of this motion. Its only reaction has been to amend the statement of claim to narrow the asserted claims to those that it describes as “method claims.” It has not provided any additional basis for its allegations of infringement. Rather, it resisted attempts to obtain more clarity in this regard. This is simply not the behaviour of someone who has a bona fide claim.
[28] In my view, this evidence is wholly insufficient to establish a bona fide claim justifying the issuance of a Norwich order.
[29] A useful way of looking at the matter is to ask whether the statement of claim, together with Mr. Baraty’s evidence, would withstand a motion to strike. The test for striking out a claim does not have the exact same purpose as the requirement for a bona fide claim in the test for a Norwich order. Nevertheless, it is difficult to contemplate the issuance of a Norwich order where the statement of claim is so deficient that it is liable to be struck.
[30] A claim will be struck “if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action” or, in other words, if “the claim has no reasonable prospect of success”: R v Imperial Tobacco Canada Ltd, 2011 SCC 42 at paragraph 17, [2011] 3 SCR 45. According to rule 174 of the Federal Courts Rules, a statement of claim must contain “a concise statement of the material facts.” As the Federal Court of Appeal noted in Mancuso v Canada (National Health and Welfare), 2015 FCA 227 at paragraph 17:
The proper pleading of a statement of claim is necessary for a defendant to prepare a statement of defence. Material facts frame the discovery process and allow counsel to advise their clients, to prepare their case and to map a trial strategy. Importantly, the pleadings establish the parameters of relevancy of evidence at discovery and trial.
[31] In actions for patent infringement, the statement of claim must allege “(a) facts by virtue of which the law recognizes a defined right as belonging to the plaintiff, and (b) facts that constitute an encroachment by the defendant on that defined right of the plaintiff”: Dow Chemical Co v Kayson Plastics & Chemicals Ltd, [1967] 1 ExCR 71 at 80–81 [Dow Chemical]. Here, the difficulty lies with the latter component.
[32] In Mostar Directional Technologies Inc v Drill-Tech Corp, 2017 FC 575 at paragraph 25, my colleague Justice Mandy Aylen stated that
A defendant is entitled to understand clearly and precisely the exact nature of the invention, as well as . . . the precise manner in which, according to the plaintiff, the defendant has infringed the claims of the patent . . .
[33] In that case, the plaintiff alleged that it was sufficient to identify the name or model number of the accused devices and to identify the patent claims that were allegedly infringed. At paragraph 33 of her decision, Justice Aylen found that this was entirely insufficient:
I reject the Plaintiff’s assertion that the identification of the Defendants’ model names and the enumeration of the claim numbers comprising the Asserted Claims are sufficient to enable the Defendants to know how they have allegedly infringed the Asserted Claims. In doing so, I note that the Plaintiff has failed to provide the Court with any case law that has recognized such a level of material facts as being sufficient to support a claim for patent infringement.
[34] The statement of claim in the present case suffers from the same defects. It merely names infringing devices and asserts, without any explanation, that these devices infringe certain patent claims, or that the use of these devices by the defendants infringes those claims. The defendants are left to guess how the claims are construed and which of the devices’ components infringe them. The words of President Jackett of the Exchequer Court in Dow Chemical, at 75, are apposite:
If, however, the plaintiff has no ground for asserting that the defendant had done any particular act that, according to him, constituted an infringement of his rights, I should have thought that he has no basis for institution of proceedings for such an infringement. If the plaintiff does not know what the claim is, “he has no right to make a statement of claim at all”. A bare assertion that the defendant has infringed the plaintiff’s rights is not an allegation of facts constituting a cause of action and a statement of claim in which that is the only assertion of infringement could be struck out as being an abuse of the process of the Court. [emphasis in original]
[35] Moreover, the evidence put forward in support of the motion does very little to remedy the deficiencies of the statement of claim. The only evidence concerning these devices consists of Internet research performed by counsel and Mr. Baraty’s unsupported belief. As previously mentioned, there is no indication that Seismotech obtained these devices, examined them or sought to understand how they work. Given the evidentiary record before me, I find the claim to be purely speculative. Hence, it can hardly be bona fide.
[36] It is useful to compare the evidence in this case to the evidence submitted in support of motions for Norwich orders in copyright infringement cases, such as BMG, Voltage 2014 or ME2 Productions, Inc v Doe, 2019 FC 214. Typically, the plaintiff provides a forensic investigation report showing that a person using a certain IP address downloaded a file containing music or a movie, in which the plaintiff holds the copyright. In such a case, the report provides a plausible basis for assuming that there was a copyright infringement, as the very act of unlawfully downloading the copyrighted work is the infringing act. The investigator is able to report that the work downloaded by the user and the copyrighted work are the same. In contrast, the mere fact that consumers downloaded the apps in this case does not give any indication that the apps, the devices or their use by the consumers infringe Seismotech’s patents.
[37] Seismotech seeks to distinguish these cases by saying that expert evidence is needed to tell the Internet service provider which IP addresses are involved in the illegal downloading of copyrighted works. Apple, in contrast, readily knows which App Store users have downloaded apps made by the intelligent thermostat manufacturers named in Seismotech’s statement of claim. In my view, however, the evidence tendered in the copyright cases is not simply meant to identify the potential defendants. It also provides the Court with the assurance that the claim is bona fide, in the sense that there is a plausible factual basis for the allegation of infringement. As explained above, this evidence is entirely lacking in this case.
[38] To summarize, Seismotech has not shown that it has a bona fide claim that the proposed defendants have infringed its patents. Its assertions of infringement are merely speculative. This is sufficient to dismiss Seismotech’s motion for a Norwich order. If there is no bona fide claim to begin with, the issuance of a Norwich order cannot be justified by the other four factors mentioned in BMG.
[39] I would simply add that I reach this conclusion without any need to consider the defences that the defendants might raise, in particular with respect to the validity of Seismotech’s patents.
(2) Public Interest
[41] It is useful to explain the public interest considerations that may favour the disclosure of information pursuant to a Norwich order. These considerations can be broadly linked to access to justice. As the Ontario Court of Appeal wrote in Stewart, at paragraph 58, Norwich orders aim at “facilitat[ing] access to justice by victims of wrongdoers whose identity is not known.” More specifically, they favour the correct disposal of litigation by revealing the defendant’s identity or other information needed to establish the rights of the parties. Simply put, a Norwich order facilitates the search for the truth.
[42] This, however, works both ways. Access to justice is important not only for plaintiffs, but also for defendants. Civil litigation is an adversarial process. Truth is expected to emerge from the process because assertions made by one party are subject to challenge by the other. For this to happen, both parties must have a genuine opportunity to put their cases forward. There is a serious risk that a matter will not be correctly adjudicated if the defendant is deprived of access to justice or is ill equipped to assert available defences.
[43] Concerns for the defendants’ access to justice were front and centre when the Court set the terms of Norwich orders in cases where the defendants were individuals or consumers. For example, in Voltage 2014, this Court regulated the manner in which the plaintiff was to communicate with potential defendants.
[44] Special considerations arise when a party proposes bringing an action in patent infringement against a large number of individual consumers, each having a relatively modest amount at stake. Patent infringement cases are inherently complex. Patents are intended to be read by a person of skill in the art, not by persons who lack technical skills, such as judges and lawyers and, a fortiori, individual consumers. For this reason, prosecuting or defending an action in patent infringement almost always requires the presence of expert witnesses. In a large proportion of such cases, the validity of the patent is challenged on a number of grounds, which reinforces the need for expert evidence. The quantification of damages also often raises complex issues. For all these reasons, patent litigation is costly. Costs awards made by this Court provide a glimpse of the magnitude of the financial resources needed to defend such an action, which are often measured in millions of dollars: see, for example, Nova Chemicals Corporation v Dow Chemical Company, 2017 FCA 25; Apotex Inc v Shire LLC, 2021 FCA 54; Seedlings Life Science Ventures, LLC v Pfizer Canada ULC, 2020 FC 505; Bauer Hockey Ltd v Sport Maska Inc (CCM Hockey), 2020 FC 862.
[45] The nature of the technology at stake in this case compounds the difficulty of defending the claim. Very broadly, Seismotech’s patents involve the use of information technology to provide sophisticated manners of controlling devices such as heaters, gas fireplaces and the like. End-users of intelligent thermostats cannot be expected to read the patents at issue and to construe their claims. Moreover, they do not have access to the inner workings of the device they own or the app they downloaded. Without the assistance of the manufacturer, it would require considerable effort and expertise to disassemble the device and its code to ascertain whether it infringes the claims of Seismotech’s patents. This is unlike simpler mechanical inventions that a layperson may more easily understand: see, for example, Fromfroid SA v 1048547 Ontario Inc, 2023 FC 925.
[46] It is obvious that meaningfully defending Seismotech’s action is entirely out of reach for the individual consumer. Even accepting Seismotech’s theory that it is entitled to recover each consumer’s utility bill savings, the amount at stake for each defendant is unlikely to exceed a few thousand dollars. The Court is not aware of any realistic manner of providing individual consumers with adequate legal representation in the defence of such an action that would be proportionate to their own potential liability. Seismotech explicitly declined to attempt to certify this action as a reverse class action. Seismotech’s suggestion that defendants could pool their resources to defend the action appears out of touch with reality, given the number of individual consumers involved and the amount at stake for each of them.
[47] Given the practical impossibility of defending the action, it is foreseeable that many defendants will feel compelled to accept an offer to settle regardless of the merits of the case. It is also foreseeable that many others will simply not respond and that Seismotech will bring a motion for default judgment against them. In this regard, Seismotech argues that the rules regarding default judgment provide sufficient safeguards and cites Voltage Holdings, LLC v Doe #1, 2023 FCA 194 as an example. It is true that on a motion for default judgment, the plaintiff must prove all the elements of its claim on a balance of probabilities. It is not the role of the Court, however, to raise defences that the absent defendant could have raised: Trimble Solutions Corporation v Quantum Dynamics Inc, 2021 FC 63 at paragraphs 35–37. Thus, the Court could conceivably grant default judgment without any discussion of the validity of the patents nor any challenge to the plaintiff’s proposed construction of the claims or theory of infringement. I have great concerns that such a situation will not be conducive to a correct disposal of the matter. Moreover, a default judgment obtained under these conditions could be used to pressure other defendants into accepting a settlement.
[48] The complexity of mounting a defence sets this case apart from copyright infringement cases in which a Norwich order was issued to identify a large number of individual defendants. In those cases, there is rarely any debate about the plaintiff’s copyright over the musical or cinematographic work that was copied or downloaded by the defendants. It appears that the defence is usually that the owner of the IP address is not the person who illegally copied the work. It stands to reason that the factual and legal complexity of such a defence bears no relationship to a patent infringement action.
[49] Seismotech also relied upon Wobben Properties GmbH v Siemens Public Ltd Co, [2014] EWHC 3173 (Pat), to argue that a Norwich order can properly be used to reveal the identity of the end-users of patented technology. It is obvious, however, that the proposed defendants in that case were large businesses that, one can assume, had the resources to defend a patent infringement action involving complex technology. If anything, this case shows that the character of the parties and the manner in which the proposed litigation is likely to unfold are relevant factors for deciding whether a Norwich order should be issued.
[50] In its reply submissions at the hearing of this motion, Seismotech suggested that manufacturers of intelligent thermostats would likely assist individual consumers in defending the action. This is doubly ironic, firstly because Seismotech structured its proceedings in a manner that does not afford the manufacturers any direct opportunity to defend the claim, and secondly because in response to Ecobee’s motion to be joined as a party, Seismotech argued that manufacturers had no obligations toward end-users. It is disingenuous for Seismotech to suggest the manufacturers bankroll the individual consumers’ access to justice, when it strenuously opposed the intervention of one of them, Ecobee, and appealed my order adding Ecobee as a party.
[51] Thus, issuing the proposed Norwich order will give rise to a situation in which the proposed defendants will be denied meaningful access to justice. It is not in the public interest to grant a Norwich order in these circumstances.
[52] I have not found it necessary to factor the apparent strength of Seismotech’s case into my assessment of the public interest. Having found earlier that Seismotech has not succeeded in satisfying the low threshold of a bona fide claim, this would only reinforce my conclusion that granting a Norwich order would run counter to public interest.
III. Disposition
[53] For these reasons, Seismotech’s motions for a Norwich order will be dismissed.
[54] Apple and Ecobee each claim their costs on an elevated basis. I agree with this request. This motion became particularly complex, largely because of the scope of Seismotech’s submissions. Moreover, Apple is not a party to the proceeding and has no interest in the outcome of the action. For these reasons, I am awarding costs in the amount of $8,000 to Apple and $4,000 to Ecobee.
6. Bifurcation Orders
It can sometimes be in the best interest of the IP holder to seek an order for a bifurcation, or splitting, of the issues at trial. If a defendant is found not liable, then there is no need to continue the trial in the assessment of damages, saving time and money not just for the parties but for the judicial system as well. This is permitted under Rule 107 of the Federal Court Rules, and in IP cases this would make the determination of liability and the determination of remedies/damages become separate issues at trial instead of being determined together as one issue. In 2011 the Federal Court also posted similar order solely for matters relating to intellectual property called the ‘model bifurcation order’.
The court will allow a bifurcation order if it satisfies the following factors from the 2003 case of Realsearch Inc. v Valone Kone Brunette Ltd listed in paragraph 10, including:
- Whether issues for the trial are relatively straightforward;
- The extent to which the issues proposed for the first trial are interwoven with those remaining for the second;
- Whether a decision at the first trial is likely to put an end to the action altogether, significantly narrow the issue for the second trial or significantly increase the likelihood of settlement;
- The extent to which the parties have already devoted resources to all of the issues;
- The timing of the motion and the possibility of delay;
- Any advantage or prejudice the parties are likely to experience; and
- Whether the motion is brought on consent or over the objection of one or more of the parties.
While there are some notable benefits to model bifurcation orders, some have rightly critiqued the issues they can sometimes create for the plaintiff’s wishing for a speedy resolution to IP infringement. Splitting up the issues might save the parties’ costs and time if the defendant is found non-liable in the first issue, but if they are found liable the plaintiff does not have to engage in a second proceeding with its own time constraints.
Exercise – When should you use a bifurcation order?
Should you request a model bifurcation order for the following situations? Yes/no, and why?
- The order may affect the ability of a party to prove or defend liability.
- It is later in the proceedings and the affidavits of documents have already been exchanged.
- You are representing the defendant and they have expressed to you they hope to publicly release as little information regarding their financial situation as possible.
- You are representing the plaintiff who is suffering irreparable harm from infringement and is hoping to have a speedy trial to stop it from damaging their business as quickly as possible. However, they expressed interest in splitting the issues because they want to make sure they don’t waste legal costs on accessing damages if the defendant is found not liable. Could they ‘have their cake and eat it too’?
E. Criminal Sanctions
In Canada there are criminal sanctions for specific actions relating to trademarks and copyright, but there are no criminal sanctions for infringement of patents in any manner.
1. International Requirements
Article 61 of the TRIPS agreement states, “[m]embers shall provide for criminal procedures and penalties to be applied at least in cases of wilful trademark counterfeiting or copyright piracy on a commercial scale.” For deterrence purposes the penalties must include monetary fines and/or imprisonment “… consistent with the level of penalties applied for crimes of a corresponding gravity.” The agreement then leaves it to the discretion of the members to decide whether criminal sanctions will be used for other forms of intellectual property infringement.
Trademark counterfeiting differs from trademark infringement under TRIPS as it requires, as Article 61 specifics, a ‘wilfulness’ to deceive or confuse the consumer with an identical or fairly indistinguishable trademark. For basic trademark infringement in Canada, a wilfulness to infringe a trademark is not a requirement for a plaintiff to collect the profits made by an infringer as an equitable remedy.
2. Trademark Criminal Sanctions
Sections 406-410 of the Criminal Code reference criminal offences of trademark forgery, passing off, and other more specific offences. s.406 lays out the preconditions for the forgery of a trademark, which includes (a) making or reproducing, without the consent of the proprietor of a trademark, a trademark or a mark so nearly resembling it as to be calculated to deceive or (b) falsifying, in any manner, a genuine trademark. To do either of these actions would make you liable for an offence under s. 407.
S. 408 references the common law tort of passing off. It seeks to target persons who are attempting to convey a false sense of origin, likely to trick the consumer into thinking their product is of equal quality to the trademarked product they are attempting to pass off. The provisions states that a person commits an offence who, with intent to deceive or defraud the public or any person, whether ascertained or not:
- (a) passes off other wares or services as and for those ordered or required; or
- (b) makes use, in association with wares or services, of any description that is false in a material respect regarding
- (i) the kind, quality, quantity or composition;
- (ii) the geographical origin; or
- (iii) the mode of the manufacture, production or performance of those wares or services.
The remaining provisions in the Criminal Code relating to trademarks reference the forbiddance of instruments used to forge trademarks, defacing, concealing or removing a trademark without consent, and manufacturing bottles of liquid using a trademark for the purposes of sale or traffic.
3. Copyright Criminal Sanctions
Under the TRIPS act, copyright piracy differs from copyright infringement in that it is for commercial purposes and requires the infringer to make an ‘illicit copy’. In Canada this was implemented into the Copyright Act under s.42(1) stating every person is guilty of a criminal offence who knowingly:
- (a) makes for sale or rental an infringing copy of a work or other subject-matter in which copyright subsists
- (b) sells or rents out, or by way of trade exposes or offers for sale or rental, an infringing copy of a work or other subject-matter in which copyright subsists;
- (c) distributes infringing copies of a work or other subject-matter in which copyright subsists, either for the purpose of trade or to such an extent as to affect prejudicially the owner of the copyright;
- (d) by way of trade exhibits in public an infringing copy of a work or other subject-matter in which copyright subsists;
- (e) possesses, for sale, rental, distribution for the purpose of trade or exhibition in public by way of trade, an infringing copy of a work or other subject-matter in which copyright subsists;
- (f) imports, for sale or rental, into Canada any infringing copy of a work or other subject-matter in which copyright subsists; or
- (g) exports or attempts to export, for sale or rental, an infringing copy of a work or other subject-matter in which copyright subsists.
s.42(2) lists the possession and performance offences and punishment for every person who knowingly, “…makes or possesses any plate for the purpose of making infringing copies of any work in which copyright subsists [or] for private profit causes to be performed in public, without the consent of the owner of the copyright, any work in which copyright subsists is guilty of an offence and liable.”
Under these provisions, the accused is liable either on summary conviction to a fine not exceeding twenty-five thousand dollars or to imprisonment for a term not exceeding six months or to both. Or on conviction on indictment, to a fine not exceeding one million dollars or to imprisonment for a term not exceeding five years, or to both. The final provisions under s.42(3) states that the court has full discretion to determine the infringing copies or plates for the purpose of making infringing copies be destroyed or delivered up to the copyright owner or dealt with in other methods as the court sees fit.
The 2014 case of R v Strowbridge saw a conviction for both the criminal sanctions within the Copyright Act and within the Criminal Code for trademark infringement. The accused was selling counterfeit brand-name car products from a van when $500 worth of product was seized. He plead guilty and was sentenced to 15 months in prison, six of which were for copyright and trademark infringement while the remaining nine were for fraud.
F. Border Measures
Canada has developed measures to ensure people and businesses can protect their IP rights both inside and at the Canadian borders. In January 2015, Canada adopted a new border enforcement system under the Combating Counterfeit Products Act that amended the copyright and trademark acts. It empowers officials of the Canada Border Services Agency (CBSA) to detain suspected counterfeit or pirated products as per s. 101 of the Customs Act. CBSA officials work with the RCMP at the border to prevent infringing importation.S. 44.04(1) of the Copyright Act lays out the prohibitions for import and exportation of copyrighted works. It states that copies of a work or other subject-matter in which copyright subsists shall not be imported or exported if, “(a) they were made without the consent of the owner of the copyright in the country where they were made; and (b) they infringe copyright or, if they were not made in Canada, they would infringe copyright had they been made in Canada by the person who made them.” An exception to this provision under s.44.01(2) states it does not apply to “…copies that are imported or exported by an individual in their possession or baggage if the circumstances, including the number of copies, indicate that the copies are intended only for their personal use.”
S. 51.03(1) of the Trademarks Act also sets prohibitions regarding the import and exportation of goods bearing protected trademarks stating, “[g]oods shall not be imported or exported if the goods or their labels or packaging bear — without the consent of the owner of a registered trademark for such goods — a trademark that is identical to, or that cannot be distinguished in its essential aspects from, that registered trademark.”
Exceptions for this provision under s.51.03(2) state it does not apply if (a) the trademark used had the consent of the owner of the trademark in the country where it was applied. (b) the sale or distribution of the trademarked goods in association with the labels or packaging would not be contrary to this Act, or (c) the individual who is importing or exporting the trademarked good(s) indicate that they are only intended for their personal use.
Under this section, there are also provisions that specify it is a violation of the act to import or export a wine, spirit, food, or agricultural product that bears a geographical indication if that product is not from the territory indicated by the indication or is from that territory but was not produced or manufactured in accordance with the law applicable to that territory.
S. 51.06 then empowers a CBSA officer who has reasonable grounds to suspect that the importation or exportation of the goods is prohibited under s.51.03 to provide the trademark owner with a sample of the goods and with information about the goods that could assist them in pursuing a remedy under the Trademarks Act.
There are no express provisions under the Patent Act (or the Industrial Design Act) that empower CBSA officials to act on allegations of infringement during the process of import and exportation. However, a trademark owner can still obtain a final order declaring unlawful importations by specific defendants to prevent them from doing so.
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