What Is the Evidentiary Threshold for Denying a Permanent Injunction on Public Interest Grounds?

AbbVie Corporation v JAMP Pharma Corporation 2023 FC 1520 McVeigh J

2,504,868 / 2,801,917 / 2,904,458 / adalimumab / HUMIRA / SIMLANDI

As discussed in a previous post, in this decision McVeigh J denied a permanent injunction to AbbVie even though she found that its 458 patent was valid and infringed. This is very unusual. While it is clear that an injunction is a discretionary remedy, it is also well-established that a permanent injunction will only be refused in “very rare circumstances” (Valence v Phostech 2011 FC 174 [240]), as McVeigh J acknowledged [642]. Indeed, I believe this is the only decision apart from Unilever (1993) 47 CPR(3d) 479 (FCTD) to entirely refuse a permanent injunction to a successful patentee. In Jay-Lor 2007 FC 358 [263], Snider J declined to grant a permanent injunction on the basis that it was unnecessary, as the defendant had not manufactured an infringing product for over two years; and in Janssen v Abbvie 2014 FC 489 Hughes J granted a partial injunction, for reasons I will return to. There have also been a few cases in which the permanent injunction was tailored with a short run-off period in which infringing sales or delivery was allowed: Janssen-Ortho v Novopharm 2006 FC 1234 and Weatherford 2010 FC 667; in the UK see similarly Virgin Atlantic v Premier Aircraft [2009] EWCA Civ 1513.

As a matter of law, property rights of all kinds are normally protected by injunctive relief. Why? That question was famously answered by Calabresi & Melamed in one of the most cited law review articles of all time: “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral” (1972) 85 Harv L Rev 1089. Calabresi & Melamed argued that when a right is protected by injunctive relief the owner of the right can set the price at which the right is purchased in a voluntary negotiation, whereas when a right is protected only by damages it is the court that determines the value of the right. The advantage of property rights is that the parties will always know the true value of the right better than the court; the advantage of liability rules is that transaction costs and related problems, such as holdout, may mean that a voluntary negotiation does not reflect the true value of the property.

With that in mind, we can divide cases in which an injunction is properly refused into two broad categories. One is where the grant of an injunction would allow the patentee to extract substantial sunk costs. The classic article is Lemley & Shapiro, “Patent Holdup and Royalty Stacking” (2007) 85 Tex L Rev 1991. This is well-recognized as the main issue in the FRAND context, as well as with patent assertion entities (PAEs) aka ‘patent trolls.’ As a result, injunctions are regularly refused to PAEs in the US. Tailoring of injunctions to allow a runoff period or to allow for redesign, such as in Janssen-Ortho v Novopharm and Weatherford, may be an appropriate partial solution to this problem: see generally Contreras & Husovec (eds), Injunctions in Patent Law: Trans-Atlantic Dialogue on Flexibility and Tailoring (Cambridge University Press, 2022) (and see my Canada chapter in that volume for a discussion of Unilever).

The second is a more amorphous category of cases turning on traditional equitable principles, such as clean hands, laches etc. Jay-Lor is an example of the application of the maxim that ‘equity does not act in vain.’ Sometimes these cases can be explained in sunk cost terms: for example, undue delay in bringing an action may give time for an innocent infringer to invest substantial sunk costs in the infringing goods; while the injunction might be refused on the basis of laches, the result would be the same on a sunk cost analysis. This case, in which the injunction was refused on public interest grounds, falls into the second category. While JAMP no doubt has incurred some sunk costs in developing its biosimilar, costs of that nature are regularly incurred by infringing pharmaceutical companies and are never in themselves grounds for refusing an injunction.

When should an injunction be refused on public interest grounds? The premise of the patent system is that the return to the patentee is beneficial to society by inducing innovation. So, on the one hand, the return to the patentee must be protected. Harm to the public interest may be taken into account on the other side of the balance. This does not include harm in the form of higher prices, which is inherent in the patent exclusivity: the premise of the patent system is that the harm from higher prices for a limited term is more than outweighed by the concomitant incentive to innovate. The harm to the public that might warrant refusing an injunction is typically more idiosyncratic, turning on the facts of the case. In the US, harm to medical patients for whom the patentee’s product is not an adequate substitute for the infringer’s product is one of the more common reasons for refusing a permanent injunction, particularly in the context of medical devices: see Seaman “Permanent Injunctions in Patent Litigation After eBay: An Empirical Study,” (2016) 101 Iowa Law Review 1949, 1991.

In Canada, the point is illustrated by Hughes J’s decision in Janssen v Abbvie 2014 FC 489 (discussed here), which also related to HUMIRA. Janssen’s infringing product was STELARA, a biologic used to treat psoriasis, which, in its severe form, can be disabling [17]. While HUMIRA is used to treat psoriasis, and has significant market share, it is not a perfect substitute for STELARA: STELARA operates by inhibiting IL-12, while HUMIRA targets TNF-α [21]. There were also two other TNF-α drugs on the market. A common treatment scenario was for the physician to switch the patient among the TNF-α drugs before going to the sole IL-12 drug (STELARA) [23]. A permanent injunction would therefore have allowed AbbVie to prevent the sale of a drug which AbbVie itself does not supply, and which for some patients is the only effective treatment for a disabling condition. On these unusual facts, AbbVie did not even seek a complete permanent injunction. Instead, AbbVie sought a tailored injunction with an exception for existing patients and restrictions on new patients. The basic idea was to ensure that any patient who could effectively be treated by HUMIRA would be, and STELARA could only be used for patients who responded better to it. This is a classic example of the kind of case in which a permanent injunction might properly be denied for public interest reasons.

In this case, there were two key reasons why McVeigh J refused the permanent injunction. First, AbbVie has licensing agreements with seven other pharmaceutical companies in Canada that offer adalimumab biosimilars [632], [638]; second, JAMP’s SIMLANDI is the only product available as a low-citrate high-concentration (80 mg/0.8 mL) formulation [633]–[636].

The first point goes to the need to preserve the incentive to innovate. In lieu of an injunction, McVeigh J granted a AbbVie a reasonable, running royalty on future sales of SIMLANDI, saying “[t]his rate should easily be determined given the licensing agreements it has with seven other biosimilar pharmaceutical companies” [643].

With respect, the matter is not quite so simple.

There are broadly two reasons that AbbVie might have licensed. First, it might not have wished to enter the Canadian market directly. It is very common for innovative patentees to exploit their inventions by licensing, especially in secondary markets. Royalty rates paid by a voluntary licensee in such a situation are not directly comparable to the reasonable royalty assessed by a court. A voluntary licensee normally performs some kind of value-added services for the patentee, such as product development, reverse tech transfer, clinical trials, marketing, manufacturing or distribution, and may also receive additional value from the licensor, such as supporting IP such as trademarks or trade secrets relevant to the patented technology, or ongoing technical support. The royalty paid by the licensee reflects the value of those services in both directions, as well as the value of the patented technology itself. A compulsory licensee under a running royalty will not generally perform all the same services, though it may perform some. This means the royalty paid by the voluntary licensee cannot simply be applied to the compulsory licensee. Instead, the royalty should be adjusted to account for differences in the services provided by the infringer as compared with those provided by the voluntary licensee. See generally my article with Professor Cotter, A New Framework for Determining Reasonable Royalties in Patent Litigation, (2016) 68 Florida Law Review 929, esp 954ff and Ch 1 Reasonable Royalties § 1.3.6 Comparable Licenses in Biddle, Contreras, Love & Siebrasse (eds), Patent Remedies and Complex Products: Towards a Global Consensus (Cambridge University Press, 2019).

Another complication is that the value of a license will generally depend on the degree of exclusivity. The per unit rate the licensor charges to a single licensee will be higher than the rate it can ask if it licenses to two licensees who compete with each other in the same market. If the licensor does license to multiple licensees, it will typically provide some kind of territorial or product exclusivity to each. One way or the other, unless the market is already perfectly competitive, the entry of a new unrestricted competitor into the market will affect the rate that can be charged to voluntary licensees. So, even if the AbbVie now demands a royalty of $1/mg from its current licensees (to pick an arbitrary number), the entry of JAMP may reduce the value of the licence to those licensees, so future renewals may be at a lower rate due to the reduction in market power. This is a loss to AbbVie that must be compensated in the reasonable royalty paid by JAMP to AbbVie if the incentive to innovate is to be preserved. Further, it is not obvious that the current licenses will reflect some simple rate, such as $1/mg. The licenses may reflect individual bargaining power, or idiosyncratic advantages of the licensees, so that even if the voluntary licensees provide the same services, their royalties may be different.

Another possibility is that the current licenses were negotiated under the threat of litigation. In that case, the royalty rate would be discounted by the parties’ estimate that the patentee would prevail against the potential infringer / licensee in an infringement action. But after litigation, such as in this case, we know with certainty that the patent is valid and infringed, and the reasonable royalty must therefore be higher than the negotiated royalty to avoid the problem of double discounting. As we explained in Ch 1 of Patent Remedies and Complex Products at 22-23:

it is well established in U.S. law that the parties to the hypothetical negotiation are assumed to have known that the patent was valid and infringed, even though actual parties would not. This rule is required to achieve just compensation, because the opposite view – that the parties should be assumed to discount the royalty to allow for the probabilistic nature of the patent (as would presumably be done by parties to an actual negotiation) – would result in so-called double discounting; not only would the court-approved royalty derived from the hypothetical negotiation include a discount for the risk of nonliability, but then pre-litigation negotiations in which royalties were based on the expectation of such a court award occurring with a less than 100 percent probability would include a further discount for risk of non-liability.

Further, the rates in the various licenses might be quite idiosyncratic — there is no particular reason that each ‘generic’ would arrive independently at the same estimate of its probability of prevailing. And these royalties would also reflect the pricing issues with truly voluntary licenses, discussed above. It is also entirely possible that the current licensing situation is a combination, where AbbVie has entered into some licenses on a truly voluntary basis and others in contemplation of litigation.

There are some cases in which it is indeed easy to calculate an accurate reasonable royalty, such as when the patentee offers a licence to all comers on demand at a standard rate. This is clearly not such a case. With that said, it is possible that it will be easy to calculate an accurate reasonable royalty; not all of the difficulties described above will arise in every cases. But the mere fact that there are seven other licensees of similar products certainly does not give any guarantee that the reasonable royalty calculation will be easy.

The other side of the coin is the effect on patients of an injunction. McVeigh J relied on two points.

One is the potential that “non-medical switching” could negatively impact patients, through the “nocebo effect” which could result in a perception of increased injection site pain. It seems to me that if we give the nocebo effect any weight at all, a permanent injunction would never be granted against any infringing pharmaceutical that has actually been launched, as the effect, by definition, does not turn on any real difference in the product, but on the mere knowledge that the product is different [636].

The other point is that JAMP’s formulation is the only high-concentration / low volume, citrate-free product on the market. (It’s not clear to me whether YUFLYMA is on the market, but I’ll assume it’s not.) It is possible that the greater volume and / or the citrate could cause increased injection site pain for some patients, and “[t]hough the evidence is scant for those few patents, it could be very harmful” [635].

This raises two points of law. One is the threshold for the harm to the public interest. Though the point is not normally made explicitly, it is clear enough that we are willing to tolerate some degree of harm to the public beyond the increase in prices. For example, in Valence v Phostech 2011 FC 174, Gauthier JA refused to even tailor a permanent injunction by allowing a two year grace period for the completion of a new factory designed to use a non-infringing process. Presumably, requiring the infringing factory to shut down immediately would entail significant disruption to the workers, such as temporary or even permanent unemployment. (Moreover, in that case a strong argument can be made that tailoring would have been appropriate on substantive grounds, as the infringement appears to not have been intentional and the infringer had incurred very substantial sunk costs.) The question then is how much non-price harm to the public we are willing to allow.

It is not clear what McVeigh J meant by “very” harmful and “few” patients, but this seems to be a far cry from Janssen v AbbVie in which it was uncontested that there were a significant number of patients whose potentially debilitating psoriasis could only be effectively treated by the infringing product. In this case, as I understand it, it is not disputed that the non-infringing alternatives will treat the disorder just as effectively as SIMLANDI, and the harm is increased injection site pain. (Since there are several citrate-free alternatives [638], it seems that the main issue is the increased volume.) In principle, the issue is not the pain from the alternative as such that is important, but the incremental pain of the alternative over SIMLANDI. So, SIMLANDI is available in a 40 mg/0.4 mL pre-filled syringe where most of the alternatives are a 40 mg/0.8 mL — so, double the volume for a 40mg dose. As I understand the evidence (as well as from people I know), many people do not find the 0.8 mL dose to be at all painful or even uncomfortable, so presumably those who do are unusually sensitive to dose volume and might find a 0.4 mL dose to be painful as well, though presumably less so. The harm if the injunction is granted is not the pain to those patients from the 0.8 mL dose, but the additional pain as compared with the 0.4 mL dose. It is not clear to me from McVeigh J’s reasons whether the “very harmful” pain refers to the pain of the larger dose, or the incremental pain. (Perhaps the main harm is to those who are particularly sensitive to both citrate and injection volume, which would imply a smaller subset of affected patients.) Now, perhaps the harm is more significant than intuition suggests. It may be that there are some patients for whom the additional pain is so substantial that they would skip injections and impair their treatment rather than endure the injections with HUMIRA or one of the licensed alternatives. That would align this case more closely with Janssen.

Of course, the degree of harm is a matter for evidence. My point here is that it seems reasonable that there should be some substantive threshold for the nature of the harm suffered in order to warrant denying an injunction on public interest grounds. If evidence established that 10 patients in Canada would suffer arm soreness for two minutes after an injection rather than for one minute, I would suggest that should not be a sufficient harm to warrant refusing a permanent injunction on public interest grounds. From McVeigh J’s brief description, the harm in this case appears to be substantially less, both in its nature and its extent, than the harm at issue in Janssen v AbbVie.

As noted, the extent of the harm is not clear from McVeigh J’s reasons. This raises the second point: what is the proper evidentiary threshold for refusing injunctive relief on public interest grounds? In this case, we do not know how many patients would be affected and how serious the harm is, because the evidence is “scant” and “limited” [635]. All we know is that it “could” be very harmful. When evidence is scant, any degree of harm is possible. Suppose an expert witness was asked whether the injection site pain might dissuade some of patients from following the correct dosage schedule, and the answer was “Anything’s possible.” Would that be enough to warrant refusing the permanent injunction on public interest grounds? More generally, can a permanent injunction be denied on the basis of a speculative harm? Surely the presumption in favour of granting injunctive relief to a successful patentee is strong enough that more than mere speculation should be required to overcome it. The more difficult question is whether the standard should be something like the balance of probabilities, or a lower threshold, such as evidence which is clear and not speculative.

The substantive threshold and the evidentiary threshold are distinct issues. It might be uncontested that 1% of the patients would suffer soreness for two minutes instead of one minute; or one expert might provide unsupported opinion evidence that large numbers of patients would fail to comply to their injection schedule dosage. Given McVeigh J’s explicit acknowledgment of the limited nature of the evidence, it might be easier for the FCA to address evidentiary threshold. It will be difficult to address the question of whether the substantive threshold has been met when the extent of the harm is not actually established in the evidence.

On the whole, the reasons given by McVeigh J strike me as very tenuous grounds for denying a permanent injunction. Further, even if some kind of significant harm to some patients could be established on a non-speculative basis, this does not strike me as a good case for denying a permanent injunction entirely. A tailored injunction, along the lines of that granted in Janssen v AbbVie, which would allow the use of SIMLANDI by the specific patients who cannot tolerate HUMIRA or one of the other licensed biosimilars, would seems to me to strike a better balance.

Accounting and Injunction Denied Due to Patent Holdup

Rovi Guides, Inc v BCE Inc 2022 FC 1388 Lafrenière J

2,336,870 / 2,339,629 / 2,425,482 / 2,514,585 / Interactive Television Program Guide / Internet Protocol Television

In this decision Lafrenière J held that all of the asserted claims of Rovi’s patents were invalid for anticipation and / or obviousness in an analysis that turned entirely on the facts. Infringement was largely conceded [142]. The most import aspect of the decision was Lafrenière J’s discussion of remedies, though it was strictly obiter given his holding on validity [578]. Lafrenière J held that even if the patents had been valid and infringed, he would have denied both an accounting of profits and injunctive relief, expressly on the basis that “the present case exemplifies the patent holdup problem” [652]. In my view, Lafrenière J was right in both his analysis and his conclusions.

The trial in this case took place shortly after completion of the trial of the infringement action brought earlier by Rovi against Videotron, also before Lafrenière J, resulting in Rovi v Videotron 2022 FC 874* [36]. Rovi v Videotron involved two of the same patents, namely the 629 and 870 patents, as well as two additional patents, 2,337,061 and 2,730,344. (I’ve counted a total of 12 different Rovi patents that have popped up in various motions and other litigation, and no doubt this is only a selection from a large portfolio.) As discussed here, the result in Rovi v Videotron was much the same as in this case: Lafrenière J held all of Rovi’s asserted claims to be invalid, and he would have denied an accounting. Lafrenière J’s remedial analysis was also very similar in Videotron, though this decision is somewhat more explicit in discussing the holdup problem.

It is fortunate for the development of the law that this was a particularly clear case of holdup on the facts; it sets out the principle that an accounting and injunctive relief can be denied to address holdup, while leaving it to future cases to address more difficult borderline cases. I can’t say that the principle is now established, given that the remedial holdings in BCE and Videotron were obiter decisions at the trial level. But I hope they will be influential nonetheless, as Lafrenière J’s decisions strike me as a sound basis for further development of the law of patent remedies in the context of patent holdup and patent assertion entities.

A couple of preliminary points. This post is much too long, but to paraphrase Pascal, I didn’t have time to write a shorter one. I am going to blame Covid brain fog for the length and delay. Second, this is a very long decision, dealing with multiple patents and issues, and it would be very helpful if Lafrenière had asked his clerk to create a hyperlinked table of contents to go at the start of the decision. The decision is well-structured with headers (like most FC decisions), so all that would be required is to generate the ToC. I’ve seen this done in a number of decisions, and I’d like to see it become routine, at least for long decisions.

Anti-Suit Injunction Refused

 Seismotech Safety Systems Inc v Forootan 2021 FC 773 McHaffie J

2,199,189 / 2,364,081 / 2,551,847 / 2,551,854 / 2,552,603 / 2,621,287

Anti-suit injunctions, anti-suit injunctions and even anti-anti-suit injunctions, are a hot topic these days in the context of global SEP / FRAND proceedings: see eg Jorge Contreras, The New Extraterritoriality: FRAND Royalties, Anti-Suit Injunctions and the Global Race To The Bottom In Disputes Over Standards-Essential Patents, 25 BU J Sci & Tech L 251 (2019). On the other hand, Canadian anti-suit injunctions related to patents are rare—I think this is the first I’ve seen in the decade that I’ve been writing this blog. This adds interest to McHaffie J’s decision refusing Seismotech’s motion for an anti-suit injunction that would have prevented Mr Forootan from litigating a patent settlement agreement in California, though the circumstances of this case are very far removed from SEP / FRAND litigation.

Seismotech is owned by Reza Baraty, who invented disaster management technology that eventually gave rise to several Canadian and US patents. Mr Baraty is a BC resident and Seismotech is a BC company [8]. For convenience, I’ll refer to them collectively as Seismotech. Seismotech entered into a Purchase and Sale Agreement [PSA] with Mr Forootan under which Mr Forootan was to raise capital to assist in commercializing the technology [12]. The PSA includes a choice of law clause stating that the agreement “shall be governed by and construed in accordance with the laws of Canada, without giving effect to conflict of laws” [13]. As part of the PSA, Seismotech assigned the patents to Mr Forootan’s company [11].

The relationship soured and the parties began litigation. In 2015, Mr. Forootan filed a complaint in the California State Court [2015 California Action]. This was then settled by a Settlement Agreement in 2017, after mediation which took place in California [15], [16], [49]. Then things got messy. In January 2020, Mr Forootan filed a complaint in California District Court [the 2020 District Court Action] alleging breach of the Settlement Agreement, and seeking remedies including a transfer of the US and Canadian patents back to Mr. Forootan [21]. Five months later, Seismotech started an action against Mr Forootan in the Supreme Court of British Columbia [2020 BC Action], seeking a declaration that the US and Canadian patents belong to Seismotech. (So at this point we have parallel actions in US federal court and BC provincial superior court.) Now, as readers are aware, in Canada provincial superior courts have exclusive jurisdiction over purely contractual matters, though the Federal Court has jurisdiction over patent law. Contractual disputes involving patents are on the borderline, and cannot necessarily be heard in Federal Court. The US has a similar division, with state courts having jurisdiction over contractual disputes and the federal court system having jurisdiction over patent matters. Six months after Seismotech started the BC action, the 2020 District Court Action brought by Mr Forootan was dismissed for lack of jurisdiction, without prejudice to refiling in state court [23]. (Now we’re down to just the BC action.) As it turns out, just three weeks after Seismotech brought the 2020 BC Action, SALT v Baker 2020 FCA 127 was decided, holding that the Federal Court jurisdiction to hear contractual matters related to patents was broader than had previously been understood. Consequently, two weeks after Mr Forootan 2020 District Court Action was dismissed, Seismotech started an application in the Federal Court seeking declarations similar to those in the 2020 BC Action, though without formally discontinuing the BC action. (Now we have two Canadian actions, no US actions.) Two weeks after that, Mr Forootan started an action in the California state court [the 2021 California Action.] (Two Canadian actions, one US state court action.)

Seismotech then brought the present motion for an anti-suit injunction, seeking to prohibit Mr Forootan from pursuing the 2021 California Action as it pertains to the Canadian patents [48].

In deciding whether the anti-suit injunction should be granted, McHaffie J applied Amchem [1993] 1 SCR 897 and subsequent cases developing its principles. The first question is whether the Federal Court has personal jurisdiction over Mr. Forootan. McHaffie J held that requirement is satisfied. The underlying question in this litigation is who owns the Canadian patents on the basis of the Settlement Agreement. In light of SALT v Baker, McHaffie J was satisfied that the Federal Court has jurisdiction to hear such a matter, and that satisfies the “real and substantial connection” test [51].

At the next step, according to Amchem 931–32 (emphasis added):

the domestic court as a matter of comity must take cognizance of the fact that the foreign court has assumed jurisdiction. If, applying the principles relating to forum non conveniens outlined above, the foreign court could reasonably have concluded that there was no alternative forum that was clearly more appropriate, the domestic court should respect that decision and the application should be dismissed.

In this case, “[t]he question is thus whether the California State Court could reasonably have concluded there was no alternative forum (here, the Federal Court) that was clearly more appropriate” [54]. The California State Court has not yet actually made such a determination, so the question for McHaffie J was whether it could reasonably have done so.

While the Settlement Agreement does relate to some Canadian patents [58], there are many aspects which relate to the US. The Settlement Agreement arose from and resolved the 2015 California Action. “The parties to the Settlement Agreement agreed the California State Court ‘shall retain jurisdiction over the action for all purposes to enforce the terms of this Agreement.’ . . . Mr. Forootan is a California resident and SDRT, the registered owner of the majority of the patents, is a (suspended) California company” [56]. This was enough for McHaffie J to conclude that the California court might reasonably conclude that the Federal Court was not a clearly more appropriate forum [57].

McHaffie J also recognized that only the Federal Court can order records of the Canadian Patent Office to be varied, pursuant to s 52 [60]. However, he pointed out that “this does not mean the Federal Court is the only court that can address contractual issues relevant to title” [60]. The 2021 California Action Mr Forootan was seeking a declaration conferring all rights and title in the US and Canadian patents to Mr. Forootan [21], [62]. Prior to SALT, in the purely Canadian context, the Federal Court would often refuse to hear contractual matters related to title. As I understand it, the parties would seek a declaration of ownership in the provincial superior court, and then would take this declaration to the Patent Office, which would rectify the title accordingly, without an order being required. If the Patent Office declined to do so, the prevailing party could then apply to the Federal Court to have the register rectified in light of the judgment of the provincial superior court: see Lawther (1995), 60 CPR(3d) 510 (FC) 511–12. This is all to say that a purely declaratory remedy would be effective in practice.

McHaffie J also noted that the effect of granting the anti-suit injunction would not be to rationalize the litigation, but rather to divide it in two, as it would be litigated in the US in respect of the US patents and in Canada in respect of the Canadian patents [92]. This is even though ownership of both sets of patents is determined by the same Settlement Agreement.

McHaffie J also noted the importance of seeking a stay from the foreign court before seeking an anti-suit injunction: “a Canadian court should only rarely pre-empt a foreign court’s opportunity to address whether an action before them is properly brought: Amchem at pp 930–931. Either a stay should have been unsuccessfully brought in the foreign jurisdiction or there should be compelling reasons for not having done so” [82]. McHaffie J provided a thorough discussion of the caselaw illustrating what might constitute “compelling reasons”: [83]–[87]. He concluded that a compelling case had not been made out on the facts, but it was unnecessary for him to decide whether this was in itself sufficient reason to deny Seismotech’s request, given his conclusion on the main elements of the Amchem analysis.

Finally, there are some general comments that I’d like to highlight [citations omitted]:

[59] Contractual agreements pertaining to intellectual property will frequently cover rights in multiple jurisdictions, and even globally. Contrary to Seismotech’s submission, there is no requirement that the same provisions in the same contract be litigated separately in every jurisdiction in the world in which those intellectual property rights arise. I note that courts in Canada have been willing to interpret contracts as they pertain to international intellectual rights, even where those contracts are made under foreign law. A Canadian court may also be considered forum conveniens in respect of a transborder intellectual property dispute, even where relief is sought pursuant to the laws of the United States. As Professor Vaver summarizes, “IP-related activity that has a real and substantial connection with a country, province, or state can be handled by a court that is a convenient forum, whether or not the defendant accepts or is present within the jurisdiction.”

This is all very reasonable, but it goes considerably beyond the facts at hand. I’ll point out that the UKSC decision in Unwired Planet v Huawei [2020] UKSC 37, holding that a UK court may enjoin the sale of infringing products that incorporate an industry standard if the parties do not enter into a global license for patents covering that standard, has been very controversial: see eg here and here. There is a fear that there will be a race to the bottom, as patentees, and particularly patent assertion entities, will seek a global judgment from a patentee-friendly court. This may be exacerbated by the possibility of “forum selling”, in which courts compete to attract high-stakes litigation by making themselves increasingly patentee friendly. At some level these concerns call into question whether the strong presumption of comity that is reflected in Amchem is sound. There are also many differences between the SEP / FRAND litigation and this case—the validity of the patents is not at issue; infringement is not at issue; global licensing terms are not at issue—though these all go to substantive issues rather than the issues relating to the connection to the forum which are the focus of the Amchem anti-suit injunction analysis.

While I’m not an expert in this area, Seismotech strikes me as a relatively easy case; given the strength of the connection to California and the nature of the dispute, the California court is arguably more appropriate than the Canadian Federal Court. More contentious patent cases, such as the SEP / FRAND litigation, raise issues that may pose more of a challenge.

Variation of Injunction Refused

 Bombardier Recreational Products Inc v Arctic Cat, Inc 2020 FC 946 Roy J

          2,350,264

After protracted litigation and a couple of trips to the FCA, Bombardier Recreational Products (BRP) finally prevailed in its patent litigation against Arctic Cat and was granted a permanent injunction. In this motion Arctic Cat and its dealers sought to vary that injunction using Rule 399. This is Arctic Cat’s third attempt to avoid the injunction. The final substantive decision in this litigation was the 15 June decision of Roy J in 2020 FC 691: see here. After prevailing on the merits of the 264 patent (one of several that had been asserted), BRP had requested the usual permanent injunction, which would have the effect of prohibiting Arctic Cat and all its dealers from selling Arctic Cat’s current model year snowmobiles. Arctic Cat had resisted vigorously, arguing that the injunction should not be granted at all. Roy J rejected Arctic Cat’s arguments [178-94], and granted a permanent injunction “to restrain the Defendants, their . . . distributors and dealers having knowledge of the injunction” from “selling or offering for sale, making, using or distributing in Canada any [infringing] snowmobile.” BRP notified all the dealers after the injunction was granted, [12]-[13], so there was no dispute that the inventors had knowledge of the injunction. Arctic Cat then sought a stay pending appeal, which was refused: 2020 FCA 116, discussed here and here.

In this motion Arctic Cat, as well as some of its dealers (who had not previously been directly involved in the litigation), tried again, bringing motions under Rules 399(2) and 399(1), respectively, seeking an order to vary the injunction [1]. The effect of the variation would be to allow dealers to sell infringing snowmobiles that they held in stock as well as pre-ordered snowmobiles. The motions were unsuccessful, largely because Rule 399 isn't a vehicle for varying an injunction that has been granted after full argument on the merits.

While I agree with Roy J’s holding in the context of Rule 399, I would suggest that Canadian courts should be more willing to consider staying or tailoring a permanent injunction (eg by carving out certain products) in appropriate circumstances. As I discussed in a recent post on Nova v Dow, sunk costs and the difficulty of doing full patent pre-clearance means that the patent system can hinder rather than advance innovation. In Patent Remedies and Complex Products: Towards a Global Consensus § 4.4.3, p155-56, we argue that tailoring of injunctive relief in appropriate circumstances can mitigate some of the worst effects. This case was arguably appropriate for tailoring. I must acknowledge that in my post on Roy J’s decision granting the injunction, I noted that “Roy J’s analysis was brief and I agree entirely.” However, because the analysis was brief I didn’t fully grasp the issues, and moreover, the argument was framed as denying the injunction rather than staying or otherwise tailoring it. After blogging on the more recent proceedings, I have a better handle on the issues, and while I won’t say that the injunction in this case should necessarily have been stayed or tailored, I will say that the possibility should have been taken more seriously.

I am the author of the Canada chapter in a forthcoming book on the comparative law of tailoring injunctions, Contreras & Husovec (eds) Injunctions in Patent Law: a Trans-atlantic Dialogue on Flexibility and Tailoring (Cambridge U Pr) (expected release in spring 2021). In their synthesis chapter, Professors Contreras and Husovec divide countries into four groups. In Group A injunctions are granted essentially as of right, while in Group B injunctions are in fact discretionary. There are two subgroups in each category: A1 with automatic issuance upon a finding of infringement, most prominently Germany; A2, with automatic issuance upon a finding of infringement owing to attitudes of judges, despite the fact that that the law gives them some discretion eg Poland; B1, in which injunctions generally issue, but there is an individualized assessment in some cases, most prominently the UK; and B2, with individualized assessment in all cases, comprising only the US. While injunctions are clearly discretionary in principle in Canada, the suite of decisions in the Bombardier v Arctic Cat litigation, as well as decisions such as Valence v Phostech 2011 FC 174 (see here) indicate that Canada belongs in Group B2. I would like to see Canada move closer to the UK position, where injunctions are normally granted, but there is a real possibility of tailoring after a principled analysis in appropriate cases.

This point is only tangential to the main holding in the decision at hand. The thrust of Roy J’s decision was that if the injunction was to be tailored, it should have been done at first instance or on the application for a stay pending appeal; the opportunity has now passed. That seems right to me. 

However, I raise the point because some of Roy J’s obiter remarks suggest tailoring or staying injunctive relief is almost never appropriate. I recognize that Roy J’s remarks are broadly consistent with those of Rivoalen JA in the stay application in this litigation, and also with Gauthier J’s brief analysis in Valence v Phostech. It is because precisely because this series of decisions from different judges indicates a general view in the FC/FCA that I feel the point is worth pursuing. At the same time, I should also point out that Roy J’s original decision does show the possibility of tailoring, as Roy J deliberately refused to order delivery up of infringing snowmobiles in possession of the dealers, so as to allow them to sell those machines after the expiry of the patent. It is just this kind of flexibility that I suggest should be more often considered.

With that long preface, I’ll turn to the decision itself.

The main substance of Roy J’s decision dismissing both motions was fairly straightforward. Rule 399(2), relied on by Arctic Cat itself, allows the Court to set aside or vary an order “by reason of a matter that arose or was discovered subsequent to the making of the order.” There simply wasn’t any new matter [30]. Arctic Cat tried to argue that the scope of the injunction was unclear and this was discovered after the order was made [31], but this argument failed because any lack of clarity did not arise subsequent to the making of the order, so Rule 399(2) was not applicable [30]. In any event, the order wasn’t actually unclear at all [31]. Citing Abbvie 2014 FCA 176 [43], Roy J noted that Rule 399 is applicable “[o]nly if there is specific, particularized evidence of significant, unforeseen difficulty in following the terms of an injunction” [27]. The motion sought to allow the dealers to sell infringing snowmobiles that they owned and that were in their possession, but this was clearly prohibited by the express terms of the order restraining “dealers having knowledge of the injunction” from “selling or offering for sale” any infringing snowmobile. This could hardly be clearer [41]. Moreover, the scope of the injunction was not a mistake. Roy J noted that dealers had not been ordered to deliver up infringing snowmobiles in their possession. Roy J made this order deliberately, so as to allow dealers to retain those snowmobiles and sell them after the expiry of the patent [33]. But this reinforces the point that Roy J intended that dealers be prohibited from selling during the term [41]. Arctic Cat also argued that the pre-ordered sleds were already sold to the final customers, or at least that there was ambiguity on this point. Roy J had no difficulty concluding that the title to the pre-ordered sleds—which had not yet even been manufactured—had not passed to the customers [21].

The motion made by the dealers raised essentially the same issues. It was brought under Rule 399(1), which allows the court to set aside or vary an order that was made “(a) ex parte; or (b) in the absence of a party who failed to appear by accident or mistake or by reason of insufficient notice of the proceeding.” Again, the motion did not fit within the scope of the rule as the order was not made ex parte, and the dealers were not parties who failed to appear by mistake, as they were not parties at all [53]-[54].

With that said, the motion by the dealers raises an interesting issue precisely because they were not parties and they are now bound by the injunction even though they never had a chance to argue its merits. As Roy J pointed out, non-parties may be bound by an injunction: MacMillan Bloedel [1996] 2 SCR 1048. But that being the case, it would seem all the more reason why third parties who are bound by an injunction should have the chance to challenge the injunction after it has been granted, as they will not be in a position to argue the merits before the fact. Roy J remarked that “the issues raised by the Dealers were defended by Arctic Cat with a great deal of vigour. In essence, the Dealers seek to litigate that which has already been litigated” [53]. In a practical sense there is a great deal of force to that observation. But in our legal system parties normally have a right to be heard, and I am not very comfortable by dismissing this right by saying “Don’t worry, someone else argued your case for you without telling you about it, and we think they did a pretty good job”—even if it is true that the case was well argued. Given that breach of an injunction may be sanctioned by contempt, it seems to me that there is a strong prima facie argument that any party bound by an injunction should have the opportunity to challenge it on the merits. I doubt that such an opportunity would be abused. If indeed the original party did argue the case well, then the third party seeking to re-argue the injunction would face an uphill battle; it would probably lose and then would have to bear its costs as well as some part of the plaintiff’s costs. None of this is to criticize Roy J’s holding. Even if such a mechanism is desirable, it seems clear that Rule 399 isn’t the right vehicle. I have to wonder whether there is a procedural gap in the law in this respect, though I have not researched the point thoroughly.

Thus, I do agree with Roy J’s analysis and holding in respect of Rule 399. But Roy J also indicated that he would not have been inclined to vary the order in any event [36]-[37]. In part, this was because doing so would be tantamount to a compulsory licence: “The monopoly conferred by a patent is gone: moral hazard is a thing of the past, as there is an incentive to increase one’s exposure to risk by infringing on a patent because the infringer will not bear the whole cost. The infringer does not have to abide by an injunction as it can be substituted for a compulsory royalty” [38]. To repeat a point I made in an earlier post, this litigation has been ongoing since 2011, and BRP has been in effect subject to a compulsory licence for that entire period, as we now know that Arctic Cat was infringing the entire time, with the only consequence that it is liable in damages. The reason for this is that the Federal Court will never grant an injunction in patent cases, on the view that damages are an adequate remedy. If an interlocutory injunction was refused because damages are an adequate remedy, how can we then say that a permanent injunction must be granted because damages are inadequate? Certainly, there is a stronger case for a permanent injunction because we now have a substantive holding on the merits that the patent was valid and infringed; but this is a separate consideration from the adequacy of damages.

Roy J also remarked as follows (my emphasis):

[38] In the context of an infringement of the Copyright Act (RSC, 1985, c C-42), the Federal Court of Appeal found in R. v James Lorimer & Co. [1984] 1 FC 1065 [77 CPR(2d) 262] [James Lorimer], that “the copyright owner is prima facie entitled to an injunction restraining further infringement” (p. 1073). The Court goes on to “find no authority for requiring a copyright owner to acquiesce in a continuing infringement against payment of a royalty. That is tantamount to the imposition of a compulsory licence. In the absence of legislative authority, the court has no power to do that”. There is no reason to depart from the principle described in James Lorimer.

With due respect, to the extent that the emphasized statement suggests that the court has no power to refuse an injunction, it is wrong. In the first place, the provision of the Patent Act authorizing injunctive relief, s 57(1), provides that a court “may. . . make such order as the court or judge sees fit.” This expressly gives legislative authority to grant or refuse an injunction. Moreover, as a matter of general principles, injunctive relief is inherently discretionary as being an equitable remedy: “The traditional rule is that an injunction will be granted only where damages would provide an inadequate remedy” Sharpe on Injunctions and Specific Performance § 1.60. Now, it is true that “[w]here the plaintiff complains of an interference with property rights, injunctive relief is strongly favoured,” and “the conventional primacy of common law damages over equitable relief is reversed. Where property rights are concerned, it is almost that damages are presumed inadequate and an injunction to restrain continuation of the wrong is the usual remedy.” However, “as always with equity, this must be understood to be a principle rather than a rule” Sharpe § 4.10. Thus it is perfectly clear that a court has the inherent jurisdiction to refuse injunctive relief. It is true that there is only one Canadian case refusing to grant a permanent injunction to a successful patentee, namely Unilever (1993), 47 CPR(3d) 479 (FCTD)(1995), 61 CPR(3d) 499 (FCA) (though injunctive relief was moot on appeal as the patent had expired). But the fact that injunctive relief is normally granted does not mean the courts do not have the authority to refuse it. Indeed, in the UK at least, injunctive relief has been refused even in the case of trespass to land: see Jaggard v Sawyer [1995] 2 All ER 189 (EWCA).

I hope I have not been unfair in dwelling unduly on an issue that was not central to Roy J’s holding. But his views, coming on the heels of those of Rivoalen JA, suggest there may be a widespread view in the Federal Courts that a permanent injunction should always be granted. I do agree that an injunction should normally and presumptively be granted, but it is quite clear that the courts do have the authority to tailor or stay a permanent injunction, in appropriate circumstances, and I would welcome a more rounded discussion of when tailoring might be appropriate.

Stay of Judgment Pending Appeal Granted

Evolution Technologies Inc v Human Care Canada Inc 2019 FCA 11 Webb JA granting motion for stay of judgment of 2018 FC 1304 Elliott J

At trial, Elliott J held that Human Care’s 392 patent was valid and infringed by Evolution Tech: see here. In this decision from January of 2019, only recently posted to the FCA website, Evolution sought a stay pending appeal. The applicable test is the same American Cyanamid test used in interlocutory injunctions, requiring a serious question to be tried on the merits, whether the applicant would suffer irreparable harm and and assessment of the balance of convenience [21]. The serious question threshold is low and was satisfied in this case [24].

Interlocutory injunctions are almost never granted by the FC in patent matters because of the very high threshold for establishing irreparable harm that is applied by the Federal Courts. However, irreparable harm was made out in the unusual circumstances of this stay application, for two reasons. First, Evolution established on the balance of probabilities it did not have enough money to pay the major part of the judgment and would be put out of business if required to pay [29]. This is well-recognized as perhaps the clearest type of irreparable harm: [29]. Second, normally a party seeking an interlocutory injunction will undertake to compensate the other party for any losses suffered as a result of the injunction if the injunction turned out to be ‘wrongly’ granted, in the sense that the other party ultimately prevailed on the merits. In this case, however, Human Care declined to give an undertaking to pay any amount to Evolution for any loss sustained by Evolution if the stay was not granted and Evolution was ultimately successful in its appeal [31]. Without such an undertaking, Evolution would be entirely uncompensated for its losses suffered as a result of being enjoined from selling the goods in question prior to the appeal decision, and that would clearly be a form of irreparable harm. The balance of convenience analysis followed largely from the irreparable harm issues. It is worth noting that Webb JA only stayed payment of the largest amount ordered, relating to the accounting of profits itself; the award of reasonable compensation, pre-judgment interest and costs were not stayed.

Human Care also raised two variants of an unclean hands argument, which, if successful would have meant that the stay would be denied without the need to consider the Cyanamid test. First, Human Care argued that Evolution had breached court orders by previously failing to disclose the financial documents which it has now tendered as part of its motion record [10], and so the documents should be inadmissible, following White v E B F Mfg 2005 NSCA 103 . Webb JA rejected this, and distinguished White, on the basis that a breach of the court orders had not been established [15]. Human Care also argued that Evolution had not fully disclosed its assets [16]. While Webb JA considered that Evolution had not been entirely forthcoming, this fault was not sufficiently related to the question of whether a stay should be granted [20].

In the end, Human Care’s refusal to give an undertaking was wise, as Evolution’s appeal was ultimately successful; see 2019 FCA 209, blogged here.

A Three-part Test for a Permanent Injunction?

Google Inc. v. Equustek Solutions Inc. 2017 SCC 34

In this case the SCC, in a 7-2 decision, affirmed an order requiring Google “to globally de-index the websites of a company which, in breach of several court orders, is using those websites to unlawfully sell the intellectual property of another company” [1]. The case is not directly patent related, so I won’t go through all of it (though I did blog here on the BCSC decision). This post will consider only a statement in the dissent of Côté and Rowe JJ that, if accurate, has implications for patent law.

The order was formally interlocutory, in that it was was effective “until the conclusion of the trial of this action” [51]. As it turned out, by the time it reached the SCC, Equustek had still not taken any action to proceed with the action, even by way of obtaining a default judgment, in the five years since the order was made [61]. The dissent was of the view that the order was, "in effect, a permanent injunction," [64], and consequently it should have been – or at least, it should now be – treated as one. (I must say that this whole line of reasoning strikes me as strange. I don't see why Fenlon J in the BCSC would have had any reason to believe that the effect of the order would be final, so she didn't make any error in treating as interlocutory. Nor did the dissent explicitly say that she had erred; the opinion avoided the question by using the passive voice. But it would seem very odd for an appellate court to reverse a decision for having applied the wrong test, if the application judge, when she made her decision, hadn't actually applied the wrong test. I would have thought that if the defendant was aggrieved by the effectively final nature of the interlocutory order, it should have applied to Fenlon J to have the order lifted.) 

 In any event, that reasoning led the dissent to the following statement:

[66] The Google Order also does not meet the test for a permanent injunction. To obtain a permanent injunction, a party is required to establish: (1) its legal rights; (2) that damages are an inadequate remedy; and (3) that there is no impediment to the court’s discretion to grant an injunction (1711811 Ontario Ltd. v. Buckley Insurance Brokers Ltd., 2014 ONCA 125, 371 D.L.R. (4th) 643, at paras. 74-80; Spry, at pp. 395 and 407-8).

This statement of law, if correct, would be potentially revolutionary. Compare the test introduced by the USSC in eBay (2006) 547 US 388, 391:

[A] plaintiff seeking a permanent injunction must satisfy a four-factor test before a court may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.

The key point is that under eBay there is in principle no presumptive entitlement to injunctive relief, and, under the first and second factors the plaintiff faces the hurdle of showing irreparable harm / inadequacy of damages before a permanent injunction will be granted. (The first two factors are generally seen as being indistinguishable, both conceptually and empirically: see Gergen et al, The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions, 112 Colum L Rev 203 (2012), discussing conceptual equivalence, and Seaman, Permanent Injunctions in Patent Litigation After eBay: An Empirical Study, 101 Iowa L. Rev. 1949, 1994 (2016), showing the factors are strongly correlated empirically.) The consequence of eBay in the US is that permanent injunctions are often denied to successful patentees on the basis that irreparable harm has not been established: see generally Seaman, Permanent Injunctions After eBay. The same structure as in eBay, and indeed the same language, is reflected in the second factor of the dissenters putative test in Equustek. Moreover, the test for an interlocutory injunction in Canada also has a requirement that the applicant show it would suffer irreparable harm if the application were refused ( RJR-MacDonald [1994] 1 SCR 311, 347, following American Cyanamid [1975] UKHL 1), and the Federal Court effectively invariably refuses to order an interlocutory injunction in patent cases, on the basis that this requirement has not been satisfied. Unless there is some distinction to be drawn between “damages are an inadequate remedy,” and “irreparable harm,” it seems that if the test for a permanent injunction stated by the dissent in Equustek really was the law, permanent injunctions should no longer be granted to a successful patentee in Canada.

Fortunately, the putative test stated by the dissent is not the law. First consider the cited case, 1711811 Ontario v Buckley Insurance 2014 ONCA 125 [74]-[80]. That passage addresses whether the test for a permanent injunction is different than the test for an interlocutory injunction, and concludes that they are indeed different. In this, the decision supports the dissent’s basic point. But as to the test itself, the relevant paragraph is 79, quoting Cambie Surgeries 2010 BCCA 396, [27]-[28], which notes that “irreparable harm and balance of convenience are relevant to interlocutory injunctions,” and then continues:

In order to obtain final injunctive relief, a party is required to establish its legal rights. The court must then determine whether an injunction is an appropriate remedy. Irreparable harm and balance of convenience are not, per se, relevant to the granting of a final injunction, though some of the evidence that a court would use to evaluate those issues on an interlocutory injunction application might also be considered in evaluating whether the court ought to exercise its discretion to grant final injunctive relief.

Well, that’s embarrassing. This passage stands for exactly the opposite proposition from that for which it is cited.

Consider then Spry, The Principles of Equitable Remedies (2014). The only relevant passage at 395 states that “Before the discretionary considerations according to which perpetual injunctions are granted or refused are considered, it is necessary to set out the circumstances in which the court declines to intervene because a remedy at law, such as that of damages, is considered to be adequate.” This is very far indeed from saying that adequacy damages is the second stage of a four-factor test, particularly as Spry goes on to provide 6+ pages of nuanced discussion, including the observation that “gradually there has developed a tendency not to regard damages as constituting adequate remedy for prospective injury to existing property of the plaintiff or his person,” and “it must now be accepted as settled ‘the rule that where the plaintiff has established the invasion of a common law right, and there is ground for believing that without an injunction there is likely to be a repetition of wrong, he is, in the absence of special circumstances, entitled to an injunction against such repetition.’” (397). This, he explains, is the source of what is effectively a strong presumption in favour of injunctive relief for violation of property rights in land. The same reasoning extends to property rights generally, hence the traditional position, still observed in Canada, that a permanent injunction will normally be granted to a successful patentee. Pages 406-07 are even further from stating a four-part test. Rather Spry emphasizes the need for a risk balancing exercise to assess “whether it is just, in all the circumstances, that an injunction should be granted.” And this considers only the authorities cited by the dissent itself. Much the same point is made by Sharpe JA in his authoritative treatise on Injunctions and Specific Performance, where he notes, for example, that “when the plaintiff complains of an interference with property rights, injunctive relief is strongly favoured. . . . [I]n practical terms, the conventional primacy of common law damages over equitable relief is reversed” [§4.10].

The fact is that, contrary to the statement by the dissent, there is no general test for a permanent injunction. There are general principles of equity, which have themselves evolved over time, particularly in light of the functional change wrought by the fusion of law and equity, and which have also been elaborated differently in various contexts, so that the approach to trespass is different from nuisance, is different from positive contractual covenants, is different from negative contractual covenants.

I was of half a mind not to write this post at all. The statement that concerns me was made almost in passing, in the dissent, and what was important for the dissent’s argument was not the precise test, but the fact that the approaches to interlocutory and permanent injunctions are different, which is true. But sometimes passing comments by the SCC have an outsized influence (see R v Henry 2005 SCC 76 [57], discussing when the Court’s statements are binding). My own view is that it would be a mistake for the Canadian courts to follow the eBay approach to permanent injunctions in the patent context: I much prefer the proportionality approach used by the English courts: see eg HTC v. Nokia (No. 2)[2013] EWHC 3778 (Pat). But If the Canadian courts do follow eBay, it should be as a result of a considered decision, and not on the basis of this tangential and poorly considered statement in Equustek.

Interlocutory Injunctions Update Part III: Trade-marks

Sleep Country Canada Inc v Sears Canada Inc 2017 FC 148 Kane J

Reckitt Benckiser LLC v Jamieson Laboratories Ltd 2015 FC 215 Brown J aff’d 2015 FCA 104 Noël CJ: Gauthier, Webb JJA

This is the third in a series of three posts looking at some more-or-less recent interlocutory injunction decisions. Last Thursday’s post considered some patent cases, Friday’s post discussed copyright cases, and today’s post focuses on a couple of trade-mark decisions. As discussed in Thursday’s post, most Canadian jurisdictions use a risk-balancing approach to interlocutory injunctions. In contrast, for about the last 25 years, the Federal Courts have used a high-threshold approach to irreparable harm, with the result that interlocutory injunctions have been very difficult to get in IP cases. Sleep Country and Reckitt are two trade-mark cases in which interlocutory injunctions have been granted. The question is whether the approach used in these cases can be reconciled with the high-threshold approach.

Interlocutory Injunctions Update Part II: Copyright Cases

Unilin Beheer BV v Triforest Inc 2017 FC 76 Gascon J
            2,475,076 2,522,321 / glueless locking laminate flooring

As discussed in yesterday’s post, most Canadian jurisdictions use a risk-balancing approach to interlocutory injunctions. The Federal Courts, in contrast, use a high-threshold approach to irreparable harm, with the result that interlocutory injunctions have been very difficult to get in IP cases. However, a series of copyright cases have held that in cases of blatant copying, the threshold for irreparable harm is much lower, and perhaps even nonexistent. These include the following copyright cases in which an interlocutory injunction was granted: IBM v Ordinateurs Spirales Inc (1984), 80 CPR (2d) 187 (FCTD), Reed J; Universal City Studios (1983), 73 CPR (2d) 1 (FCTD), Walsh J; Jeffrey Rogers Knitwear 6 CPR (3d) 409, Dubé J; 75490 Manitoba (1989) 29 CPR(3d) 89, Rouleau J; Diamant Toys 2002 FCT 384 Nadon J; Bell Canada 2016 FC 612 Tremblay-Lamer J. The question is whether these copyright cases can be reconciled with the patent cases, such as Unilin, and TearLab 2016 FC 606 J aff’d 2017 FCA 8 (discussed in yesterday’s post).

Interlocutory Injunctions Update Part I: Patent Cases

TearLab Corp v I-Med Pharma Inc 2016 FC 606 Manson J aff’d 2017 FCA 8 Scott JA: Boivin, de Montigny JJA

2,494,540 / TearLab System / i-Pen System

Unilin Beheer BV v Triforest Inc 2017 FC 76 Gascon J
            2,475,076 2,522,321 / glueless locking laminate flooring

In TearLab and Unilin v Triforest, interlocutory injunctions were refused in two patent cases. This is not very surprising, as this result is line with the restrictive approach adopted by the Federal Courts, as discussed in my article on "Interlocutory Injunctions and Irreparable Harm in the Federal Courts," (2010) 88 Can Bar Rev 517. TearLab was a particularly strong case for granting an interlocutory injunction, and, unusually, the decision was appealed, and affirmed; but otherwise these cases serve mainly to affirm the established restrictive approach to interlocutory injunctions in patent cases. However, there have also been some more or less recent cases that have granted interlocutory injunctions in copyright and trade-mark cases. This invites the question of whether all of these cases can be reconciled, particularly as Gascon J addressed the copyright cases at length in his Unilin decision. Today’s post will provide some background, and discuss the patent cases, and the next couple of posts will discuss the copyright and trade-mark cases.

Worldwide Interim Injunction Against Google

Equustek Solutions Inc v Jack, 2014 BCSC 1063

In Equustek Solutions, Fenlon J of the BCSC granted a worldwide interim injunction against Google Inc, ordering it to cease indexing or referencing in search results on its internet search engines certain specified websites operated by the defendants in the underlying action. While this isn’t a patent case, it’s interesting enough that I’ve decided to post on it. Given that the subject is outside my main expertise, this post is largely descriptive, but I will say that Fenlon J’s decision struck me as well reasoned. While this type of order has apparently never before been made by a Canadian court [107], I didn’t see any obvious gaps of law or logic. The result seems surprising, but it is important to recognize that “Google acknowledges that it can do what is being asked of it. Google does not assert that it would be inconvenienced in any material way or that it would incur expense to do so” [153].

Google is not a party to the underlying dispute, which related to passing off and the defendants’ use of the plaintiffs’ trade secrets. The defendants had failed to comply with various court orders made against them and continued to sell their product in violation of these court orders, including an order prohibiting the defendants from carrying on business through any website [7]. After that last order, Google voluntarily complied with the plaintiffs’ request to remove specific webpages or URLs from its Google.ca search results (ie from searches originating in Canada), but it was unwilling to block an entire category of URLs from its search results worldwide [9].

The bulk of the decision concerns jurisdictional questions. Justice Fenlon held that the British Columbia courts have territorial competence, in large part because Google does business in the jurisdiction by selling advertising to British Columbia clients, including to the defendants [50]. Google argued that this analysis would give every state in the world jurisdiction over Google’s search services, but Fenlon J noted that this “flows as a natural consequence of Google doing business on a global scale, not from a flaw in the territorial competence analysis” [64]. She then held that the BC courts were an appropriate forum as compared with the California courts. Google’s primary contention on this point was the difficulty of enforcing a Canadian judgment in California, which is the location of Google’s head office. Fenlon J noted that while Canadian courts are reluctant to grant injunctive relief against extra-territorial parties for this reason, the law did recognize exceptions to this general rule; there were some sanctions which the BC court could take in relation to Google’s activities in BC; Google had not established that the Canadian order would be unenforceable under California law; and in any event, Google had not shown that a California order (assuming one could be obtained) would be more appropriate than a BC order, as Google had not shown that the technical steps needed to carry out the order would be carried out in California. Fenlon J also noted that even though Google was not actively aiding the defendant’s contempt, that is not the sole ground for making orders against a non-party, including those outside the jurisdiction, as Norwich orders and particularly Mareva injunctions illustrate.

On the question of whether the injunction could be granted on the facts of the case, Google made four main arguments. First, Google argued that it cannot, as a practical matter, monitor content or arbitrate disputes over content. Fenlon J responded by noting that Google was not being required to monitor the content of the defendants’ websites, or the content of other websites that might provide information about the defendants’ products, but only to block the particular URLs which were specified in the order itself [137].

Second, Google submitted that de-indexing entire websites without regard to content of the specific URLs would constitute undue censorship. Fenlon J responded by noting that “Google acknowledges that it alters search results to avoid generating links to child pornography and ‘hate speech’ websites. It recognizes its corporate responsibility in this regard, employing 47 full-time employees worldwide who . . . take down specific websites, including websites subject to court order” [139].

Third, Google argued that an order affecting searches might “put Google in the impossible situation of being ordered to do something that could require it to contravene a law in another jurisdiction” [140]. Fenlon J noted that this concern could be addressed in appropriate cases by inserting a so-called Baltic proviso, such as was recognized in Bank Of China v NBM LLC & Ors [2001] EWCA Civ 1933, excusing the non-party from compliance with the order if to do so would breach local laws [143]. In any event, in this case, Fenlon J noted that most countries recognize the importance of protecting trade secrets, and Google did not suggest that the order sought would in fact offend California law, or the law of any other specific state or country in which a search could be conducted [144].

Fourth, Google argued that no court should make an order that has a reach that extends around the world. Fenlon J noted that the order need only be enforced in the particular jurisdiction from which the search engine is controlled. The effect of the order might be felt around the world, but that might also be true of any order relating to physical goods. " For example, a non-party corporation that warehouses and ships goods for a defendant manufacturing company might be ordered on an interim injunction to freeze the defendants’ goods and refrain from shipping them. That injunction could affect orders received from customers around the world" [147].

Finally, with all these preliminaries out of the way, the question remained as to whether the order should be granted on the facts of the case. This turned on whether the plaintiffs had made out a good arguable case, and then on a balance of the interests of the parties. On the first point, “the plaintiffs have not only raised an arguable claim; two of the defendants’ defences have been struck and they are presumed to have admitted the allegations” [151]. As for the balance of interests, the plaintiffs established that they are suffering irreparable harm by the defendants’ ongoing sale of the disputed product on the internet, and they had also established that blocking the defendant’s use of Google’s search services would cripple the defendants’ sales. On the other hand, “Google acknowledges that it can do what is being asked of it. Google does not assert that it would be inconvenienced in any material way or that it would incur expense to do so. The balance of convenience thus favours granting the injunction” [153].

Fenlon J therefore ordered that

Within 14 days of the date of this judgment, Google Inc. is to cease indexing or referencing in search results on its internet search engines the websites contained in Schedule A to the notice of application.

UPDATE: Leave to appeal granted 2014 BCCA 295