Wednesday, November 9, 2016

The Patentee, Not the Infringer, Elects an Accounting

Bayer Inc v Cobalt Pharmaceuticals Co 2016 FC 1192 Fothergill J
            2,382,426 / ethinylestradiol & drospirenone / YAZ YASMIN

After Fothergill J held in 2016 FC 1013 that Bayer’s 426 patent was valid and infringed by Apotex and Cobalt, he asked for submissions regarding Bayer’s entitlement to elect between damages and an accounting of profits [1]. Apotex made the “novel” argument that it, rather than Bayer, should be entitled to make the election, and that Bayer should be restricted to an accounting of profits [2]. The statutory basis for this argument was evidently that s 57(1) provides that in the court “may, on the application of the plaintiff or defendant, make such order as the court or judge sees fit. . .for and respecting inspection or account. . . .” The equitable argument was that Apotex had prevailed in the prior NOC proceeding [2], the implication being that its subsequent launch was justifiable, and so it should be subject to the more modest sanction of an accounting of its own profits. The insurmountable difficulty with the statutory argument, as pointed out by Fothergill J, is that pursuant to s 55(1) the successful patentee is statutorily entitled to damages, and the court has no discretion with respect to that remedy [4], [9]. The question then arises as to why s 57(1) specifies that the defendant may apply for an order. I suspect that this is targeted at the final phrase of the provision, which allows the court to make orders “generally, respecting the proceedings in the action.” Such general orders might be sought by either party.

Fothergill J’s analysis of whether Bayer should be allowed to elect between damages and an accounting was brief. He noted that “[t]he fact that a defendant has taken a business risk and has obtained authority to market an infringing product pursuant to the NOC Regulations will not deprive a successful plaintiff of an election between damages and profits ,” citing 2008 FC 825 [509]-[510] (Snider J) and 2009 FC 991 [655], [663] (Gauthier J).

As discussed here and here, there has been something of a debate as to whether a succcessful patentee will normally be permitted to elect an accounting unless there is some reason why that remedy should be denied, or, on the other hand, an accounting will be denied unless the plaintiff can show some positive reason why it should be granted. The more recent tendency seems to be towards generally allowing an election. Fothergill J’s conclusion was consistent with this tendency: “Given that Bayer is entitled to damages pursuant to s 55(1) of the Patent Act, and all parties agree that an accounting of profits may also be an appropriate remedy, I see no reason to deny Bayer an election between damages and profits” [11]. However, given that Apotex did not oppose Bayer’s entitlement to an accounting, but rather insisted on it, not too much can be read into this.

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