Canadian Patentees are Presumptively Entitled to the Remedies of an Accounting of Profits and a Permanent Injunction

August 23, 2024

Written By Vincent de Grandpré and Jasmine Godfrey

In two companion appeals relating to patents over television interactive programming guides, the Federal Court of Appeal clarified that a successful patent plaintiff is entitled to an accounting of the defendant’s profits linked to the infringement, unless the defendant shows why the court should not award this remedy. The Court of Appeal also reiterated that a permanent injunction is the expected remedy flowing from the infringement of a Canadian patent, even where the patented invention forms only a small part of the relevant commercial product, and even when the patentee is in the business of licensing, rather than practicing, its invention in Canada. 

Background

In Rovi Guides, Inc. v Videotron Ltd., 2024 FCA 125, and Rovi Guides, Inc. v Telus Corporation, 2024 FCA 126 (collectively, the Rovi appeals), Rovi (now Adeia) launched patent infringement claims against Canadian interactive television providers Videotron, TELUS, and Bell Canada. The Federal Court ultimately rejected Rovi’s claims and held that the asserted patents were invalid for anticipation and obviousness. Before dismissing the actions, however, the Federal Court commented on remedies it would have awarded Rovi had it been successful.

The Trial Judge would have denied Rovi an accounting of the defendants’ profits arising from a hypothetical infringement because of Rovi’s “hard-ball legal tactics to pressure third parties to license its patent portfolio”, “apparently deliberate strategy of delaying the prosecution of its patents”, which created a “patent holdup”, and of the complexity of calculating an accounting of profits (see 2022 FC 874 at paras 586, 590 and 607, and 2022 FC 1388 at paras 598 and 625-27). He would have also denied Rovi a permanent injunction in favour of a reasonable royalty because the claimed invention formed only a small part of complex interactive television systems, which Rovi itself did not supply in Canada. The Trial Judge wrote that it would be inequitable to allow Rovi to create a patent holdup in such circumstances (i.e., taking advantage of a potential infringer by opportunistically trying to extract an unreasonably large licensing fee under threat of an injunction), and that it was appropriate to follow the principles articulated in the US Supreme Court’s 2006 decision in eBay Inc v MercExchange, LLC, 547 US 388.

The Federal Court Erred in Discussing Patent Remedies

In the Rovi appeals, the Federal Court of Appeal affirmed the Trial Judge’s conclusion that Rovi’s patents were invalid. Although this would have been enough to decide the matter, the Court of Appeal went on to review the Federal Court’s discussion of equitable patent remedies.

In Canada, an accounting of profits is discretionary, but the Court of Appeal clarified that a successful plaintiff could expect to be granted such a relief in the absence of proof barring it. The exercise of judicial discretion requires that the award of equitable remedies be guided by “reasoned regularity” based on established principles applied to particular facts. Therefore, the Court of Appeal observed that the Trial Judge had erred in referring to certain factors as being “neutral” in deciding whether to grant the requested accounting of profits. In fact, those considerations would have supported the grant of an accounting. 

The Court of Appeal also commented on factors the Trial Judge had cited to deny Rovi an accounting of profits. That Rovi had chosen to licence its patents, rather than itself practice the inventions, should have been “afforded no weight”. It was immaterial that Rovi had not sent cease and desist letters before initiating its lawsuits, or that it had not specifically identified which patent claims the defendants infringed. The Court of Appeal saw nothing problematic about Rovi’s licensing practices, or its firm assertion of its patent rights. While strategically delaying the prosecution of one’s patents might impact entitlement to equitable remedies, the Trial Judge had no evidence about normal practice and delays in prosecuting patents, or about Rovi’s intent in prosecuting the patents as it did. Nonetheless, the Court of Appeal affirmed the lower court’s conclusion that an accounting of profits was not reliable or appropriate in the circumstances given the complexity involved in the experts’ proposed methodologies.

The Court of Appeal also distanced itself from the Federal Court’s application of the U.S. eBay case. It reiterated that permanent injunctions remain the principal preventive remedy of Canadian patent law, perhaps because Canadian law does not require any demonstration of irreparable harm before a permanent injunction can issue. The Federal Court of Appeal did not accept that a patent holdup problem should lead Canadian courts to abandon the rule that permanent injunctions should be refused “only in very rare circumstances” in patent cases.

The remedies discussion in the Rovi appeals are obiter dictum, but make no mistake: the Court made it clear that Canadian patentees are entitled to the broadest remedies in case of infringement, including an accounting of profits and a permanent injunction, unless sound reasons and cogent evidence are marshalled to the contrary.

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