5 - Canada

Summary

Canada is a federal system with jurisdiction shared between the federal government and the provinces. Patent law is a matter of exclusive federal jurisdiction and is based on the federal Patent Act. The federal nature of Canada is reflected in a bifurcated judicial system. The Federal Courts of Canada, a statutory court system with defined jurisdiction,¹ and the provincial superior courts, courts of inherent jurisdiction, corresponding to the traditional English common law courts, both have jurisdiction over patent infringement.² However, the Federal Court has exclusive jurisdiction to declare a patent invalid,³ and the very substantial majority of patent cases are decided by the Federal Court. Consequently, it is largely the case law of the Federal Courts which governs the grant of injunctive relief in patent cases, subject to the guidance of the Supreme Court of Canada.⁴

A. Overview

Canada is a federal system with jurisdiction shared between the federal government and the provinces. Patent law is a matter of exclusive federal jurisdiction and is based on the federal Patent Act. The federal nature of Canada is reflected in a bifurcated judicial system. The Federal Courts of Canada, a statutory court system with defined jurisdiction,¹ and the provincial superior courts, courts of inherent jurisdiction, corresponding to the traditional English common law courts, both have jurisdiction over patent infringement.² However, the Federal Court has exclusive jurisdiction to declare a patent invalid,³ and the very substantial majority of patent cases are decided by the Federal Court. Consequently, it is largely the case law of the Federal Courts which governs the grant of injunctive relief in patent cases, subject to the guidance of the Supreme Court of Canada.⁴

While the Federal Court jurisdiction extends well beyond patent law,⁵ there is a core of about half a dozen judges who are normally assigned to most major patent cases, as well as another half dozen who hear some patent issues, so these judges, particularly the core patent judges, have considerable specialized patent expertise. The court also uses specialized case management judges to manage complex patent litigation. Even complex cases may take as little as two years from the time an action is commenced until a trial decision is rendered, but it is not uncommon for litigation to take significantly longer.

In the Canadian system, validity and infringement are never bifurcated. A trial is often bifurcated into liability and monetary remedy, but any injunction is normally granted at the end of the liability phase.

Law firms involved in patent litigation in Canada comprise large national firms with a group specializing in intellectual property or patent litigation, as well as a number of smaller specialized firms. The bar that handles patent litigation in Canada is relatively small.

1. Permanent Injunctions

The Patent Act provides that a court “may … make such order as the court or judge sees fit” enjoining “further use, manufacture or sale of the subject-matter of the patent”.⁶ While this provision gives the courts authority and discretion to grant injunctive relief, it provides no substantive guidance. As a former colony of the United Kingdom, Canada has based its legal system on the English common law, and the grant of injunctive relief is based on the English legal tradition of equitable remedies.⁷ The discretionary nature of equitable remedies is consistent with the permissive mandate of the statute.

Thus it is perfectly clear, both on the basis of the Act and the traditional equitable nature of injunctive relief, that the grant of injunctive relief to a successful patentee is a matter of discretion, and not a matter of right, and the discretionary nature of injunctive relief is regularly acknowledged by the courts. Nonetheless, the Canadian courts are of the view that an injunction will normally follow a finding that a valid patent has been infringed, and a permanent injunction will be refused “only in very rare circumstances”⁸ with the caveat that an injunction will not normally be granted if there is no realistic prospect of future infringement.⁹ Indeed, there appears to be only one reported Canadian patent case in which a permanent injunction was refused entirely to a successful patentee.¹⁰ However, this historical pattern does not necessarily imply that Canadian courts would be unwilling to refuse a permanent injunction in appropriate circumstances. Cases which present the strongest argument for refusing injunctive relief, such as those involving patent assertion entities (PAEs), as in eBay v. MercExchange (US 2008), have seldom been litigated to judgment in Canadian courts.

As discussed in the next section, Canadian law implements a patent linkage regime when a generic pharmaceutical company seeks marketing authorization for a pharmaceutical which has patents listed against that pharmaceutical by the innovator company. This patent linkage regime is unique to pharmaceuticals. There are otherwise no apparent differences concerning injunctions across industries.

There is little specifically Canadian scholarship on the issue of injunctive relief in patent cases.

2. Interlocutory Injunctions

Like permanent injunctions, interlocutory injunctions (preliminary injunctions pending trial) are similarly authorized by the rules of the relevant court,¹¹ but again the legislation is merely permissive and the relevant principles are governed by the case law.

The general test for an interlocutory injunction in Canadian law was set out by Lord Diplock in the House of Lords decision in American Cyanamid (HL 1975) and subsequently adopted by the Supreme Court of Canada.¹² It is a three-part test, requiring the applicant to establish that: (1) there is a serious question to be tried on the merits; (2) the applicant would suffer irreparable harm if the application were refused; and (3) the balance of convenience favours granting the injunction.¹³ Considerable jurisdictional variation has developed in the appellate case law. In Federal Court, the hurdle at the second stage, irreparable harm, is very high. As almost all patent actions are brought in Federal Court, this means that interlocutory injunctions are almost never granted in patent cases.¹⁴

However, the substantial majority of decided patent cases involve pharmaceuticals and Canada has a patent linkage system, based on the US Hatch–Waxman system. Marketing authorization in Canada is referred to as a Notice of Compliance¹⁵ or “NOC”, and the patent linkage system is known as the Patented Medicines (Notice of Compliance) (PM(NOC)) regime. Under the PM(NOC) regime, a drug manufacturer seeking marketing authorization for a generic drug product based on a comparison with a pharmaceutical which has already obtained authorization must first challenge the patents listed against the reference product. If the patentee responds to the challenge, an automatic twenty-four-month statutory stay of authorization is triggered, which is functionally equivalent to an interlocutory injunction. Consequently, while interlocutory injunctions as such are almost never granted, generic pharmaceuticals are routinely subject to the statutory stay.¹⁶

B. Drafting and Enforcing Injunctions

1. Drafting

In Canadian practice, reasons for judgment are distinct from the formal judgment. The reasons for judgment will state whether the patentee is entitled to injunctive relief, in terms that may be more or less precise, depending on the case. Injunctive relief is granted by way of an order made in the formal judgment and is effective from the time that it is endorsed by the judge.¹⁷ The formal judgment may be issued at the same time as the reasons for judgment, typically appended to the reasons; or, particularly when there is any uncertainty as to the precise terms of the order, it may be issued subsequently. When the formal judgment is issued subsequently, the parties may be directed by the court to prepare a draft order in accordance with the reasons for judgment, for endorsement by the court.¹⁸ If the parties cannot agree on the terms of the order, a motion may be brought for judgment so that the particulars of the order will be settled by the court.¹⁹ In some cases, the trial judge may draft a proposed judgment and ask for comment by counsel before issuing the final judgment.²⁰ Thus, regardless of who drafts the order, counsel for both sides will normally have an opportunity for input as to the precise terms of the injunction. If the order remains unclear, a party may move to have it clarified; however, the courts will not allow motions for clarification to be used to as means of reopening decided issues or litigating infringement by new products.²¹

2. Wording

Permanent injunctions are typically granted in broad terms, enjoining the adjudged infringer from infringing the patent or specific claims of the patent.²² This is sometimes combined with a prohibition on further manufacture or sale of a specific device or process that was adjudged to infringe, or similar variants that infringe, but narrower orders of this type are rarely the sole form of injunctive relief.²³ The claims specified in the order are not generally only the narrowest claims which cover the specific product at issue; the injunction will commonly extend to any claims which were at issue in the litigation.²⁴ If the infringement at issue includes inducement, the infringer will also be enjoined from inducing infringement in similarly broad terms.²⁵

In addition, when the adjudged infringer is in possession of infringing goods, the court will normally grant an ancillary order to ensure the injunction will be respected.²⁶ Typically, the ancillary order will be for delivery up or destruction of those goods.²⁷ The patentee does not get a property right in the infringing material, and if feasible, as when the patented invention is one removable component of a larger product, the court may order that the goods be rendered non-infringing.²⁸ The courts will avoid granting an order for delivery up when the goods have a substantial non-infringing use.²⁹ Occasionally a carve-out may be granted exempting certain infringing goods from delivery up or destruction, especially if this can be done without prejudice to the patentee’s rights during the term of the patent.³⁰

Preliminary injunctions are so rarely granted in patent cases that it is not possible to generalize regarding their language.

3. Enforcement

An injunction is enforced by a contempt action. The sanction for contempt is a fine or imprisonment,³¹ though imprisonment is almost never imposed for a single act of civil contempt. The fine should be sufficient to serve as a specific deterrent to future contempt by the contemnor, and as a general deterrent to dissuade others from breaching court orders.³² It is therefore appropriate to take into account the value of the sales of the offending product in determining the magnitude of the fine.³³ The presence or absence of good faith may be taken into account in determining the penalty to be imposed, but is not relevant to whether there was an act of contempt.³⁴ Exemplary damages may also be awarded as a sanction for breach of an injunction, in particular an interlocutory injunction, but this is unusual.³⁵

Because the sanction for contempt is punitive in nature, the alleged contemnor must have had adequate notice as to the acts that would constitute contempt. Accordingly, contempt is inappropriate if the original order was lacking in detail or otherwise insufficiently particularized.³⁶ Contempt may therefore be inappropriate when the order incorporates overly broad or unclear language.³⁷

While there can be no breach of an injunction before the order granting the injunction is formally made, it will nonetheless be a contempt of court to contravene the prohibitions set out in the reasons for judgment, even before the formal order is issued,³⁸ provided the party had knowledge of the prohibitions in the reasons for judgment³⁹ and the reasons are clear.⁴⁰

The question therefore arises as to whether a broad “do not infringe” injunction is sufficiently clear to support a finding of contempt.⁴¹ There are few reported decisions relating to contempt of an injunctive relief order in a patent case, and the issue has not often been raised, but it would appear that broad “do not infringe” injunctions will normally be effective according to their terms. The issue arose tangentially in Weatherford (FC 2010). After a trial on the merits that focused on one of the defendant’s product lines, the defendant was broadly enjoined from infringing the patent at issue.⁴² The defendant then brought a motion amending the order to limit the scope of the injunction to the particular product line which had been at issue in the litigation, out of concern that another product line might be subject to the injunction even though those products were not in evidence at trial.⁴³ The motion was refused, on the basis⁴⁴ that it is standard practice to make orders restraining sale and distribution of infringing products generally,⁴⁵ and the scope of the order was not unclear: “The Court has provided a claims construction for the relevant claims; the injunction is directed at the Defendants’ conduct in infringing the claims as interpreted whether it uses the named products or not”, and “The Defendants are in the best position to know their products and whether they infringe”.⁴⁶ While this was a motion to amend, and not a contempt hearing, this holding strongly suggests that a broad do-not-infringe order would not be held so vague as to preclude enforcement by way of contempt. With that said, there may be some cases in which such an injunction would be too vague on the particular facts.

It is in any event clear that the scope of the injunction will not be limited simply to the products at issue and equivalents. The point arose in Merck v. Apotex (enalapril No. 4) (FCA 1999).⁴⁷ The specific product at issue was generic enalapril maleate. Claim 1 was a claim to a genus of chemical compounds, including enalapril maleate, while Claims 2–5 were directed at enalapril maleate specifically. The injunction granted after trial enjoined Apotex from infringing any of Claims 1–5, as well as specifically enjoining the sale of enalapril maleate tablets.⁴⁸ Subsequent to that judgment, Apotex became aware of other compounds that fell within the scope of Claim 1 alone.⁴⁹ Apotex therefore brought an application to vary the injunction, essentially by removing the references to Claim 1, so that it would be able to make and sell these new compounds, presumably thereby triggering new litigation in which it could challenge the validity of Claim 1. The application was refused on the basis that Apotex had had the opportunity to challenge the validity of Claim 1 at trial and had failed to do so.⁵⁰ Note that Claim 1 was not unclear by virtue of its breadth; Apotex acknowledged that the new products would infringe Claim 1.

An injunction granted in AbbVie v. Janssen (injunction) (FC 2014) also received a broad interpretation.⁵¹ As discussed in more detail Section C.6, the products at issue were drugs for the treatment of psoriasis, and AbbVie had been granted an injunction with a carve-out permitting the infringer, Janssen, to continue to supply the infringing product, STELARA, to patients who were not responsive to AbbVie’s product. However, the injunction prohibited Janssen from promoting or making any representations or claims respecting the use of STELARA for the treatment of psoriasis. Janssen prepared a “script” to be used to inform dermatologists about STELARA, which contained the following language: “It is important to note that this court order does not impact your ability to prescribe STELARA to your patients. The product itself has not changed and there are no changes from a safety and efficacy standpoint.”⁵²

Both sentences in this statement were held to constitute prima facie contempt, because they sought to influence the physician’s treatment decisions.⁵³ This is a broad interpretation of the injunction; it is not clear what language might be used to convey basic factual information about STELARA, while avoiding contempt. This suggests that Canadian courts will not be inclined to construe the terms of an injunction narrowly.

C. Alternatives and Modifications

1. Overview

As discussed in Section A.1, it is clear that the grant of a permanent injunction is discretionary in principle and so may be refused entirely. By the same token, it is clear that the court has the authority to tailor or modify the grant of an injunction. Such modifications are occasionally implemented, though they are not common. Cases departing from the standard practice of granting an injunction against all forms of infringement, effective immediately, can be divided into three broad categories.

The first category is refusal to grant injunctive relief entirely. The second category is decisions involving appeals, either granting a grace period to allow the infringer to bring an appeal or a stay pending the disposition of an appeal. The third category can be divided into two sub-categories, namely cases tailoring the injunction and those granting a stay for reasons unrelated to an appeal.

2. Refusing Injunctive Relief

There appears to be only one reported Canadian case refusing injunctive relief as a remedy for infringement of a valid patent, namely Unilever (FCTD 1993).⁵⁴ The patent at issue related to a method of softening damp clothing in a laundry dryer. The defendant was Procter & Gamble and its product, which was held to infringe, was Bounce dryer sheets. Though Unilever’s patent was held to be valid and infringed, the court refused to grant a permanent injunction, instead awarding “a generous, but non-confiscatory, rate of royalty”,⁵⁵ which was somewhat increased over the reasonable royalty that was payable for the pre-judgment infringement.⁵⁶

The court’s discussion of the refusal to award an injunction in favour of the patentee was relatively brief, but two factors were the main basis for the decision:⁵⁷

• the patentees did not practise their patented invention in Canada, nor did they have a competitive product on the Canadian market;⁵⁸

• the patentees “brandish[ed] their patent as a bargaining tool with P & G”.⁵⁹

While the patentees did not practise the invention in Canada, they were an operating company, not a patent assertion entity or non-practising entity. The patentee and the defendant were two of the leading global firms in the relevant market, and it appears the Canadian litigation was part of a global litigation strategy. The reference to the patentee “brandishing” their patent as a bargaining tool with P & G appears to have been a reference to offers to settle the Canadian litigation as part of a global settlement;⁶⁰ there is certainly no suggestion that the patentee exploited the patented technology solely by licensing in other jurisdictions, or that it was not concerned with its own global market share. In this context, it is difficult to see why the first two factors should be sufficient grounds for refusing an injunction. The basic argument in favour of injunctive relief is that it allows the parties, rather than the courts, to determine the value of the technology. That is what the parties were attempting to do in the settlement.

A third factor was also mentioned, namely “the hardship which an injunction would inflict on the infringer’s employees in difficult economic times, and the absence of a competing workforce engaged by the patentee”.⁶¹ There are two difficulties with this factor. First, there is no particular reason to believe that it is likely that the injunction would have been enforced. As noted, the parties were seeking a global settlement, and the main effect of the injunction would probably have been simply to give the patentee greater bargaining power. In principle, one would have expected the patentee to want to license in the Canadian market, given that it did not have a competing product, so that enforcing the injunction rather than licensing would not have generated compensating profits. Second, while the patentee did not have a Canadian workforce, it did have a global workforce, and the decision implicitly prefers the infringer’s Canadian workforce over the patentee’s foreign workforce. While this may be understandable on the part of a Canadian court, it may be doubted whether it is wise for a court to use injunctive relief as a tool of industrial policy in a global economy.

While Unilever has never been disapproved, neither has it been followed. It does clearly establish the proposition, which was not really in doubt, that the court does have the discretion to refuse injunctive relief to a successful patentee, but it has not otherwise been influential. The refusal of a permanent injunction in Unilever is best seen as an idiosyncratic decision by the trial judge, which was upheld as not being an abuse of discretion, rather than on the basis that refusal of the injunction was correct in the circumstances. It would be unwarranted to draw any general lessons from Unilever as to when a Canadian court is likely to deny injunctive relief in future cases.

3. Damages in Lieu

In the only patent case to refuse a permanent injunction, Unilever (FCTD 1993), the trial court instead awarded a royalty in lieu on a “generous, but non-confiscatory, rate”,⁶² which was somewhat increased over the reasonable royalty that was payable for the pre-judgment infringement.⁶³ The enhancement was not based on notions of wilfulness, as is sometimes the rationale for awarding an enhanced royalty in lieu of an injunction in the US context, since wilfulness as such does not play any role in damages in Canadian law.⁶⁴ The reasoning behind the enhancement was very brief: “In return for avoidance of an injunction now, it would be equitable for the defendants to enhance the damages payable by means of an increased rate of royalty from and after the date of these reasons.”⁶⁵ Thus, the enhanced damages were the price the infringer had to pay as compensation for being relieved of the burden of the injunction.

This award was appealed specifically on the basis that the royalty in lieu should have been confined to the same reasonable royalty that would have been payable for pre-judgment infringement. In Canadian practice, an accounting of profits is commonly awarded as a remedy for patent infringement.⁶⁶ In this case, the trial judge refused to grant an accounting. The Court of Appeal held that in awarding damages in lieu of an injunction, the trial judge “chose a middle ground” between an accounting and a reasonable royalty and he was entitled to do so.⁶⁷ Thus, the enhanced damages were awarded essentially as a middle ground between a reasonable royalty, and the other two remedies, an accounting or an injunction, which a successful patentee might normally expect.

4. Stay Pending Appeal

The trial court which grants an injunction has broad discretion to tailor its timing and implementation,⁶⁸ including the ability to delay the effect of its grant of injunctive relief until the determination of any appeal.⁶⁹ However, this is seldom done. Instead, the trial court will sometimes provide a “grace period” by delaying the effect of the order for a limited period to allow the adjudged infringer to decide whether to appeal and to seek a stay of the injunction pending appeal.⁷⁰ The Court of Appeal may similarly stay the effect of its own orders pending the disposition of an application for leave to appeal to the Supreme Court of Canada.⁷¹

A motion for a stay pending appeal may also be brought in the Court of Appeal itself. The granting of a stay is a discretionary remedy, with the ultimate basis of doing justice to all the parties.⁷² Stays pending the disposition of an appeal are granted on the same basis as interlocutory injunctions. In the Federal Court of Appeal, this means that the party seeking the stay “must establish that there is an arguable issue to be decided on the appeal, adduce clear evidence that it will suffer irreparable harm if the stay is not granted, and demonstrate that the balance of convenience favours the grant of a stay”.⁷³ This test, and particularly the requirement of irreparable harm, puts a significant burden on the party seeking the stay, so that there is effectively a presumption against granting the stay. Apart from the effect of the irreparable harm requirement, it has also been said explicitly that there is a presumption against granting a stay: “[W]here an injunction has been granted by a final judgment, prima facie, it should remain in force until that judgment has been found, on appeal, to be wrong.”⁷⁴ This presumption is not particularly strong, but it does mean that if all the factors are equally balanced, the stay will be refused.

If the stay is granted by the Court of Appeal, it may be granted subject to conditions intended to protect the patentee from adverse effects of the stay in the event that the infringer’s appeal is unsuccessful. Such protections are often aimed at ensuring the adjudged infringer will be able to pay any damages for infringement arising during the period of the stay.⁷⁵ The Court of Appeal may order the hearing of the appeal expedited, either instead of granting a stay or in addition to doing so.⁷⁶ The Court of Appeal may also tailor the stay to permit only some infringing activity.⁷⁷

Turning to the three-part test, the threshold for a serious question to be tried on appeal is low and is rarely determinative of the decision to refuse a stay.⁷⁸

The need for the adjudged infringer to establish irreparable harm is a significant hurdle to obtaining a stay pending appeal. If a stay is refused and the adjudged infringer is ultimately successful on appeal, the infringer will have suffered harm, such as lost sales, from having been kept off the market while the injunction was “erroneously” in effect.⁷⁹ Because the adjudged infringer is kept off the market by the injunction, and not as a result of any wrong done to it by the patentee, it has no legal cause of action to recover those losses. This uncompensated loss, if substantial, will normally constitute irreparable harm satisfying the second branch of the test, and will carry significant weight in the balance of convenience, favouring a stay.⁸⁰ Consequently, the patentee seeking to resist a stay may choose to give an undertaking to indemnify the adjudged infringer against such irrecoverable financial loss that it may suffer in the event that its stay is not granted and its appeal is successful.⁸¹ If the patentee is financially able to pay any loss which might arise, such an undertaking will be a complete answer to this concern.⁸² The undertaking may extend to “springboard” damages⁸³ arising after the disposition of the appeal.⁸⁴ While an undertaking to pay any loss incurred by the adjudged infringer is perhaps the most common type of undertaking, undertakings may be used flexibly to address any specific concerns arising on the facts of a particular case.⁸⁵

If such an undertaking is granted, the adjudged infringer must therefore establish some other form of irreparable harm in order to obtain a stay.⁸⁶ The administrative burdens of complying with the injunction will not suffice.⁸⁷ Nor is the fact that a defendant to a patent infringement action would suffer some other financial harm during the time of appeal in itself a sufficient basis for a stay, as this would make the stay effectively automatic.⁸⁸ For example, injury to reputation or permanent loss of market share may constitute irreparable harm, but must be established on the facts.⁸⁹ The clearest form of irreparable harm arises when the adjudged infringer can establish that it has insufficient funds to pay the award and would be put out of business if the stay were not granted.⁹⁰

An important consideration is the effect of the injunction on the operations of the adjudged infringer. If the infringing product is one of many, so that the injunction will have little effect on the infringer’s overall business, the loss of business will not normally constitute irreparable harm.⁹¹ Conversely, if the effect would be to shut down all or a substantial part of the adjudged infringer’s business, as contrasted with causing lost sales in one product line of many, this will normally constitute irreparable harm, and will also weigh heavily in the balance of convenience.⁹² This scenario is perhaps the most common reason for a stay being granted.

The impact on the patentee’s business will also be considered in the balance of convenience. If sales lost to the infringer will cause substantial harm to the patentee’s business, or if the infringer is unlikely to be able to satisfy a damages judgment, this will be given significant weight in the balance of convenience.⁹³ However, an adjudged infringer’s inability to pay must be established on the facts.⁹⁴ Conversely, the balance of convenience is more likely to favour a stay if the parties do not compete in the same market, so that the only harm to the patentee is a longer period during which it will be entitled to damages in the form of a reasonable royalty.⁹⁵

It is sometimes suggested that a stay is less likely to be granted when the adjudged infringer knew of the patent and that its product would likely infringe and took a calculated risk that a validity challenge would be successful. This suggestion has had a mixed reception in the Court of Appeal.⁹⁶ As a matter of policy, many granted patents are ultimately determined to be invalid, and a knowing infringer who successfully attacks the validity of a patent is doing a public service, which should not be discouraged by unduly harsh sanctions.⁹⁷ This suggests that known assumption of risk should be irrelevant. On the other hand, it might be said that even so, the infringer should only be excused if it had a good-faith belief in the invalidity of the patent. However, establishing a good-faith belief in invalidity as a condition for various remedies raises significant difficulties in establishing subjective motivation, as illustrated by the US experience with enhanced damages for wilful infringement,⁹⁸ and it would seem unwise to import such considerations into a motion for a stay.

If the adjudged infringer has been selling the product at issue for a lengthy period of time, this will weigh in favour of granting a stay. Whatever impact the infringing competition will have on the patentee’s market share has already occurred, so the main effect of the stay is only to extend the period for which the patentee will be owed damages.⁹⁹ Also the infringer will often have invested substantially in the product lines, so that the implementation of the injunction is likely to cause loss of reputation and other sunk costs, as well as permanent loss of market share due to unreliability of supply to purchasers.¹⁰⁰

When the public interest lies only in the reduced prices that will result if the adjudged infringer is permitted to continue selling its product, this will not play any role in the balance of convenience, because the premise of the patent system is that this is more than offset by increased innovation; the public interest lies only in allowing competition after the patent has expired.¹⁰¹ Some more specific impact on the public must be alleged for the public interest to be relevant. In one case, a stay pending disposition of the appeal was granted and upheld, in part because of the potential effect of the injunction on a third-party supplier to the adjudged infringer. The third party was “a charitable organization employing some physically handicapped persons as well as others, many of whose ability to earn a livelihood would be jeopardized by the injunction”.¹⁰² However, in upholding the stay, the Court of Appeal remarked that “great care must be exercised in widening the ambit of factors to be taken into account in the determination of the question of irreparable harm” when determining whether a stay should be granted.¹⁰³ In effect, the trial court is permitted to take such considerations into account, but is not encouraged to do so.¹⁰⁴

In summary, the Canadian courts are of the view that the patentee is entitled to the enforcement of an injunction granted at trial, and there is in effect a presumption against a stay, which is reflected in the doctrinal test requiring the party seeking the stay to establish irreparable harm. However, a stay will be granted in unusual circumstances, especially when the injunction threatens the adjudged infringer’s entire business operations.

5. Stays Other than Pending Appeal

A stay pending appeal is the most common reason for a stay of a permanent injunction to be granted. Aside from that scenario, there are a few cases in which the grant of a permanent injunction has been made subject to a short runoff period, during which the infringer can dispose of existing stock. The infringer will still be monetarily liable for those sales, either in damages or for an accounting of profits.¹⁰⁵ The practice does not appear to be common.¹⁰⁶ Presumably it does not appeal to the patentee, which would rather make its own sales, and it does not appeal to the infringer, which will be denied part or all of the profit on the sales made in the runoff period.

An adjudged infringer will be ordered to destroy infringing material in its possession at the time the injunction becomes effective, or to deliver such material to the patentee for destruction. These ancillary orders, like the injunction itself, are discretionary, and they may occasionally be modified to allow the adjudged infringer to retain the infringing material until the expiry of the patent, particularly when the remaining term of the patent is short.¹⁰⁷

The use of a stay to allow the infringer to design around the patent or otherwise mitigate the effect of injunctive relief is notable by its absence in Canadian law. An illustration, in a negative sense, is provided by Valence v. Phostech (FC 2011). The invention in question related to a process for making lithium mixed metal (LiFePO₄) cathodes for lithium ion batteries. It was known that lithium mixed metal was a good cathode material, but it had not been commercially adopted, apparently because of the cost of production.¹⁰⁸ Both the plaintiff, Valence, and the defendant, Phostech, had independently developed new processes for making lithium mixed metal cathodes at about the same time. The validity of Valence’s patents at issue was conceded,¹⁰⁹ but infringement was strongly contested and presented a very difficult issue on the facts.¹¹⁰ The court ultimately held that Valence had established on the balance of probabilities that the Phostech process infringed.¹¹¹ While the court did not say so expressly, the factual issue was closely decided, and it would have been reasonable for Phostech to have believed that its process did not infringe. There was no copying or any other form of bad faith on the part of Phostech.¹¹² The infringing process was being used by defendant Phostech in its existing facility. After it had become aware of the patent, it began constructing a new facility designed to produce the cathodes using a non-infringing process.¹¹³ The court delivered its judgment in early 2011 and at that time construction of the new plant was underway and it was scheduled to be ready in 2012. Phostech asked the court to give it a two-year grace period before giving effect to the injunction, to allow the new plant to be completed.¹¹⁴ As well as the business disruption to Phostech, employees at the existing plant would presumably have been affected as well. Given independent invention, good faith, high sunk costs and the substantial business disruption to the adjudged infringer, this would appear to be a situation in which a short stay to allow design around might have been appropriate as a matter of policy. Nonetheless, the court refused to grant a stay, saying simply that a permanent injunction should be refused “only in very rare circumstances”, and it was not satisfied that the facts warranted an exception.¹¹⁵

6. Tailored Injunction

There is one recent example of a tailored injunction, granted in AbbVie v. Janssen (injunction) (FC 2014).¹¹⁶ The litigation concerned treatments for psoriasis, which, in its severe form, can be disabling.¹¹⁷ At the time, there were four biologics¹¹⁸ available on the market for the treatment of psoriasis, including AbbVie’s HUMIRA and Janssen’s STELARA. AbbVie’s patent at issue was ultimately held to be infringed by Janssen’s STELARA, but none of the other products on the market, including AbbVie’s own HUMIRA, were covered by the patent.¹¹⁹ While AbbVie did not practise the patent, by keeping STELARA off the market AbbVie sought to preserve the largest possible “footprint” for HUMIRA in the market for psoriasis treatments.¹²⁰ However, the products are not perfect substitutes. STELARA had a different mechanism from the other products on the market, and while many patients would respond to either HUMIRA or STELARA, there were some patients for whom only STELARA was effective.¹²¹

Thus, a permanent injunction would in principle have allowed AbbVie to prevent the sale of a drug that AbbVie itself did not supply and that, for some patients, was the only effective treatment for a disabling condition. In the circumstances, AbbVie did not even ask for a broad permanent injunction prohibiting sale of STELARA. One might speculate that this is because AbbVie did not want to be responsible for depriving some patients of the only effective treatment for a serious disorder, either for moral reasons, or because of fear of bad publicity. It is also possible that AbbVie anticipated that it would not have been granted a broad injunction. In any event, AbbVie instead sought an injunction with an exception for existing patients and restrictions on new patients, with all the sales permitted under the exception subject to a continuing royalty.¹²² The issue in the decision on injunctive relief was therefore not whether there should be a carve-out, but rather the precise terms of the carve-out.¹²³

On its face, this seems like a compelling case in which a carve-out should be granted and, given the court’s concern over the details of the carve-out, it seems likely that a request for a broad injunction without a carve-out would have been refused. However, there is an argument to be made to the contrary. In principle, granting AbbVie a complete injunction, prohibiting any sales of STELARA without AbbVie’s permission would not necessarily mean that patients who need STELARA would be forced to go without. If a patient is not responding to AbbVie’s HUMIRA, and does respond to STELARA, it would be in AbbVie’s own interest to allow Janssen to sell the STELARA, subject to a royalty negotiated with AbbVie. The only difference is that AbbVie would decide the royalty instead of the court. On the facts, it seems possible, or even likely, that something like this would have happened.

On this view, the real problem with granting a broad injunction is that AbbVie would determine the terms of access. AbbVie sought to require physicians to formally certify that new patients had a medical need for STELARA that could not be met by HUMIRA before prescribing STELARA. The court refused to impose this requirement.¹²⁴ The case against a broad injunction, therefore, is not necessarily that it would result in STELARA being taken off the market, but rather that the court is in a better position than AbbVie to determine the terms of access.

One disadvantage of the carve-out is the need for detailed judicial supervision of the terms of access. The carve-out order did give rise to a subsequent contempt hearing over the precise words that Janssen was permitted to use in its communications with physicians.¹²⁵

D. Procedural Issues

1. Types of Parties

To date, the types of plaintiffs and defendants do not appear to have any influence on the grant and tailoring of injunctions. The bulk of decided patent cases in Canada involve pharmaceutical companies and, in particular, litigation between branded pharmaceutical companies and generics, but successful patentees in all fields are routinely granted a permanent injunction, and similarly, patentees in all fields are routinely denied interlocutory injunctions.

However, very few decided cases have involved PAEs and there are even fewer, if any, in which a PAE has been successful in establishing infringement.¹²⁶ It is therefore premature to conclude that the Canadian courts would routinely grant injunctions to PAEs. Canadian courts would probably apply traditional principles to cases involving a successful PAE, without drawing a formal distinction based on the nature of the patentee.¹²⁷ However, it is entirely possible that the courts would find that the circumstances typically attending the assertion of patent rights by a PAE would justify refusing injunctive relief on the basis of traditional principles.¹²⁸

The Canadian Patent Act had long granted the government the unrestricted right to use any patented invention, subject only to an obligation to pay reasonable compensation, as determined by the Commissioner of Patents, a civil servant.¹²⁹ This provision was invoked by Crown corporations using patented inventions in the ordinary course of their operations.¹³⁰ This was changed in 1993 with the advent of the North American Free Trade Agreement Implementation Act.¹³¹ Under current law, Canadian patents are binding on the government, and there is no immunity from injunctive relief.¹³² The modified provisions on “Use of Patents by Government” permit the government to apply for what amounts to a compulsory licence; that is, on application by the Crown, the Commissioner of Patents may authorize the use of a patented invention by the government,¹³³ though only for specific purposes and a limited time,¹³⁴ and subject to a requirement to pay “adequate remuneration” as determined by the Commissioner.¹³⁵ Further, use by the Crown may only be authorized if the Crown establishes that it has made efforts to obtain a licence from the patentee on reasonable commercial terms and those efforts to obtain a licence were unsuccessful within a reasonable period,¹³⁶ although those conditions do not apply in the case of a national emergency.¹³⁷ To my knowledge this modern provision has not been used, presumably because the conditions are such that it is normally simpler to obtain a commercial licence.

2. Effect of Validity

Ex ante uncertainty as to patent validity has no influence on the tailoring of injunctions. If the patent is found to be valid and infringed, injunctive relief is routinely granted. That the infringer might reasonably have believed the patent to be invalid or not infringed has not, to date, factored into a decision to refuse or tailor injunctive relief.¹³⁸

3. Public Interest

The public interest may in principle be taken into account, but it is rarely considered in practice.¹³⁹

4. Follow-on Innovation

The courts do not explicitly take into account follow-on innovation. As discussed earlier, permanent injunctions are routinely granted. Whether this implicitly takes account of follow-on innovation depends on one’s view of the implications of blocking patents for follow-on innovation. On one view, refusing injunctions is good for follow-on innovation because follow-on innovators will then be able to use the invention without paying any licence fee. On the other hand, an injunction that encompasses follow-on innovation is arguably good for that innovation because it encourages pioneer invention and follow-on innovation cannot occur without the original pioneer invention. To optimally encourage invention, the scope of protection should be commensurate with the value of the invention. In many cases, a substantial part of the value of the pioneer invention is embodied in the follow-on innovation which the pioneer invention enables. Presumably there is some balance to be struck between these effects, but it is not clear that the courts are in a good position to make such an assessment.

E. Conclusion

In summary, preliminary injunctions as such are never granted in patent cases in Canadian law, but the statutory stay under the patent linkage system has the same effect in cases involving patented pharmaceuticals. Permanent injunctions are routinely granted to a prevailing patentee as a remedy for patent infringement, but it is clear that grant of an injunction is discretionary. In some circumstances a permanent injunction may be modified, stayed or, rarely, even refused entirely, but on the whole Canadian courts are disinclined to make such adjustments. Valence v. Phostech in a noteworthy example where a stay to allow design around was summarily refused, even though the facts appeared to provide a good prima facie case for such a stay. The sole case to deny a permanent injunction to a successful patentee has not been influential. With that said, the Canadian courts have seen very little litigation involving patent assertion entities, and it remains an open question as to what course the Canadian courts will take when faced with the prospect of granting injunctive relief to a patent assertion entity in circumstances where the injunction would allow the patent assertion entity to hold up a practicing entity and extract an excessive royalty.