Friday, September 29, 2023

Nova v Dow: Rivett on the Facts

Nova Chemicals Corp v Dow Chemical Co 2022 SCC 43 Rowe J: Wagner CJ, Moldaver, Karakatsanis, Brown, Martin, Kasirer and Jamal JJ concurring; Côté J dissenting affg Nova Chemicals Corporation v Dow Chemical Company 2020 FCA 141 Stratas JA: Near, Woods JJA affg Dow Chemical Co v Nova Chemicals Corp 2017 FC 350, 2017 FC 637 Fothergill J

2,160,705 / film-grade polymers / ELITE SURPASS

The Intuition / The Legal Background / Causation as a Matter of Fact / The Concession / What Role for “But For” Causation in Identifying the NIO? / Summary of the Summary / Causation Concept in the Absence of an NIO / What is the NIO? / The Value of the Invention

In my last post on Nova v Dow I argued that Rowe J’s rejection of “but for” causation was driven by his commitment to the use of conventional seed as the appropriate NIO in Rivett 2009 FC 317 aff 2010 FCA 207, even though, as Rowe J specifically noted, conventional seed was in fact unavailable and so could not have been the appropriate comparator on strict “but for” causation. I suggested that the central intuition driving Rowe J’s decision is that the value of the patented invention is the difference between the profit that was made with the patented soybean and the profit that could have been made with conventional soybean, whether or not conventional soybean was actually available. In that post I critiqued that intuition, arguing that an accounting must distinguish between the profits attributable to the use of the invention and the profits attributable to the special attributes of the infringer.

But what about Rivett itself? Of course, the SCC is not bound by Rivett, and a single decision does not constitute a strong line of authority. But nonetheless, if Rivett was correctly decided on its facts, this seems to present a challenge for the “but for” approach to an accounting.

While Rowe J characterized Rivett as being inconsistent with “but for” causation [64], Zinn J in Rivett [24] expressly endorsed “but for” causation. If Zinn J accepted “but for” causation, how could he have assessed the accounting based on a comparator that Rivett could not in fact have used?

The answer is that the use of conventional soybean as a comparator in Rivett was not a matter of principle, but rather a matter of evidence. Rivett was the first decision after Schmeiser to address the question of an accounting. Monsanto argued that the differential profit approach only applied to an “innocent infringer,” and Rivett should therefore be required to disgorge his entire actual profit. This was the main legal issue at trial. Zinn J held that the differential profit approach should indeed be used: [42]–[56].

The next question was as to the comparator. Rivett failed to establish what he would in fact have done but for the infringement. It seems that he simply assumed that the appropriate comparator was conventional soybean, presumably in reliance on Schmeiser. It’s not clear whether he even led evidence as to what he would in fact have done: that conventional soybean was unavailable was elicited only in cross-examination [60]. Monsanto argued that since conventional soybean was unavailable, Rivett should be required to disgorge his entire accounting profit, without any deduction. It is perfectly clear that this would not properly apportion the profit; as Zinn J noted, this would be tantamount to making the unreasonable assumption that but for the infringement, Rivett would have left his fields fallow [59]. It is now clear that the onus is on the infringer to establish the availability of the non-infringing alternative. But the doctrine was just developing at this time, and it would have been very harsh to require disgorgement of the full profits, knowing that is grossly excessive, on the basis that Rivett had failed to discharge an onus that was not yet clearly established in law. Moreover, as the Court of Appeal pointed out, it was Monsanto’s own evidence comparing conventional and patented soybean which established that the profit differential was 18%: [FCA 47, 56]. And Rivett had actually grown a substantial crop of conventional soybeans [FCA 57]; the lack of availability must have been temporary or otherwise idiosyncratic. In the circumstances, Monsanto should not be permitted to put Rivett to the strict proof of the NIO in order to extract a disgorgement that was shown to be excessive by Monsanto’s own evidence.

No comments:

Post a Comment