Injunctions in cases of infringement of IPRs Michael Crinson, Heather Watts, Steve Garland (Chair), Bruce Morgan, Jason Markwell & Jamie Mills

Transcription

1 Question Q219 National Group: Title: Contributors: Reporter within Working Committee: Date: March 28, 2011 Canadian Group Injunctions in cases of infringement of IPRs Michael Crinson, Heather Watts, Steve Garland (Chair), Bruce Morgan, Jason Markwell & Jamie Mills Questions: I. Analysis of current law and case law Availability: 1. Are injunctions for infringement of an IPR available on a provisional/preliminary basis? In Canada the terms provisional/preliminary are not generally used to describe types of injunctions. Instead the terms used are interim, to describe an injunction for a very short term usually measured in days, and interlocutory, to describe an injunction granted until a final determination on the merits can be made. In this report, when we use the terms provisional/preliminary we mean interim/interlocutory as described above. In Canada, injunctions are available on a provisional and/or preliminary basis. The Court has indicated that in appropriate circumstances it is willing to grant both interim injunctions and interlocutory injunctions. In this context an interim injunction is one granted for a short term (typically a matter of days) and an interlocutory injunction which if granted usually lasts until the Court can determine substantively and finally the issues of infringement (and usually invalidity) of the relevant intellectual property right. Interim and interlocutory injunctions are available for all intellectual property rights. 2. Are injunctions for infringement of an IPR available on a permanent basis? The enabling Canadian statutes for each of the intellectual property rights (patent, trademark, copyright and industrial design) makes provision for the grant of a permanent injunction for the term of the relevant intellectual property right. The Patent Act (section 57(1)(a)) provides: (1) In any action for infringement of a patent, the court, or any judge thereof, may, on the application of the plaintiff or defendant, make such order as the court or judge sees fit (a) restraining or enjoining the opposite party from further use, manufacture or sale of the subject-matter of the patent, and for his punishment in the event of disobedience of that order

2 - 2 - To similar effect though with slightly different language the Trade-Marks Act (section 53.2) provides: 53.2 Where a Court is satisfied, on application of any interested person, that any act has been done contrary to this Act, the court may make any order that it considers appropriate in the circumstances, including an order providing relief by way of injunction The Copyright Act has several provisions addressing permanent injunctions. However, section 34 is the general provision stating that an owner of copyright is entitled to the grant of a permanent injunction for infringement of copyright: 39(1) Where copyright has been infringed, the owner of copyright is, subject to this Act, entitled to all remedies by way of injunction For infringement of moral rights (droits moral) under the Copyright Act, section 34(2) states that the Court may grant an injunction. To similar effect the Industrial Design Act (section 15.1) permits the Court to grant an injunction where there has been infringement of that Act. Criteria: 3. If yes to question 1, what are the criteria for the grant of an injunction on a provisional/preliminary basis? Almost two decades ago, in RJR MacDonald v. Canada (AG), Canada s Supreme Court adopted the test set out in the British American Cyanamid (American Cyanamid Co. v. Ethicon Ltd., [1975] A.C. 396 (U.K.H.L.)) case for the granting of an interlocutory or interim injunction. This test has been applied stringently by the Courts in relation to IPRs, and comprises consideration of the following three questions: i. Has the plaintiff (rights holder) demonstrated that there is a serious issue to be tried? ii. Will that plaintiff suffer irreparable harm that is not compensable in damages if the interlocutory injunction is not granted? iii. Does the balance of convenience favour the granting of the injunction? The standard to satisfy the first element is low (Pfizer Ireland Pharmaceuticals v Lilly Icos LLC (2004), 30 C.P.R. (4 th ) 317 at 326 (F.C.A.)); typically only requiring that the applicant demonstrate that the application is neither frivolous nor vexatious (RJR Macdonald, supra). In general, neither the merits of the case nor their likelihood of success are considered (RJR Macdonald, supra). However, where the grant of an interlocutory injunction will in essence result in a final determination of the action, the limited review of the merits approach does not apply (Dole Food Co. v. Nabisco Ltd. (2000), 8 C.P.R. (4 th ) 461 (F.C.T.D.)). The irreparable harm element is typically the most difficult element to satisfy. Irreparable harm refers to a nature of harm that cannot be quantified or cured (RJR Macdonald, supra). To satisfy this element, an applicant must demonstrate that a refusal to grant injunctive relief could so adversely affect the applicant s own interests that the harm could not be remedied through an

3 - 3 - award of damages in the main action (RJR Macdonald, supra). An applicant must bring clear and non-speculative evidence to demonstrate irreparable harm (Nintendo of America Inc. v. Camerica Corp. (1991), 34 C.P.R. (3d) 193 (F.C.T.D.)). Canadian courts will not issue a quia timet injunction unless the future harm is probable (Operation Dismantle v. The Queen, [1985] 1 S.C.R. 441, at para. 36). The statement of claim must allege a deliberate expressed intention to engage in activity the result of which would raise a strong possibility of infringement; the activity to be engaged in must be alleged to be imminent and the resulting damage to the plaintiff must be alleged to be very substantial if not irreparable; and, finally, the facts pleaded must be cogent, precise and material. It is not sufficient that they be indefinite or speak only of intention or amount to mere speculation (Connaught Laboratories Ltd. v. Smithkline Beecham Pharma Ltd. (1998), 86 C.P.R. (3d) 36 (F.C.T.D.), at para. 20). The final requirement of the RJR Macdonald test is the balance of convenience, which involves a consideration of whether the irreparable harm that would be suffered by the applicant if the injunction is refused is greater than the irreparable harm that would be suffered by the defendant if the injunction is granted. The factors considered by the court when conducting a balance of convenience analysis vary depending on the facts of the case. Factors that have been considered by the courts for IPR infringement cases include: the ability of each party to recover damages; the length of time each party has been on the market; the relative strength of each party s case; and the effect that an injunction would have on each party. 4. If yes to question 2, what are the criteria for the grant of an injunction on a permanent basis? In respect of Canadian patents, industrial designs and trademarks the relevant statutes do not provide criteria for the Court to apply in considering whether to grant a permanent injunction. The threshold question for the Court is simply whether or not there has been an infringement of the relevant IPR. If yes, then the Court has the discretion whether or not to grant a permanent injunction. While the above IPRs permit the Court to grant an injunction if there has been infringement, for infringement of copyright the rights holder appears from the statute to be entitled to an injunction. However, Courts have made clear (e.g. in CCH Canadian Ltd. v. Law Society of Upper Canada, and B.C. Automobile Association v. O.P.E.I.U. Local 378) that even for infringement of copyright the Court has discretion whether to grant any form of injunctive relief. In general, the Court will grant a permanent injunction unless there is a real public interest why that injunction should not be granted. For example, the Court has considered equitable principles such as delay in bringing an action for infringement and other principles such as the imminent expiry of the right as factors against the granting of a permanent injunction.

4 If not addressed in answering questions 3 and 4, does the criteria for the grant of an injunction differ depending on whether the injunction sought is on a provisional/preliminary or permanent basis? If so, how? The criteria for the granting of an injunction do vary between a permanent injunction and provisional/preliminary injunctions based on the criteria set out above. The result is that permanent injunctions following a trial are rarely refused. Recently the Federal Court of Canada in Valence Technology Inc. v. Phostech Lithium Inc. (Court file No. T ) did say in the context of a patent infringement trial decision, The Court should refuse to grant a permanent injunction where there is a finding of infringement, only in very rare circumstances. In that case the only factor militating against the issue of a permanent injunction was that the defendant would be required to close its manufacturing facility (as it only used the infringing process) and would not be able to switch to a non-infringing alternative before the injunction was effective. In contrast, interlocutory and interim injunctions are rarely awarded in the context of alleged infringement of IPRs. The most frequent reason for refusal to grant an interlocutory injunction is the failure of the rights holder to establish it will suffer irreparable harm, i.e. harm that is not compensable in damages. Evidence of future irreparable harm that would be suffered is subject to great scrutiny and is vulnerable to being rejected as speculative. In addition, the Court usually considers that most forms of harm that are likely to be suffered as a result of infringement are compensable in damages. In this regard, the inability of an infringer to satisfy an award of damages if an injunction is not granted has been considered important in consideration of irreparable harm. Other examples of irreparable harm are when the alleged infringer was the plaintiff s former distributor and was the dominant player in the market or when the plaintiff can establish it would have been able to leverage sales of other products from the sales of the product incorporating the IP and would not be compensated in damages for those other sales. 6. Are the criteria for the grant of an injunction equally applicable to infringement of all IPRs? Generally, the criteria for the exercise of discretion in granting an injunction are the same regardless of the nature of the IPR being infringed. There is some evidence that courts require that a higher threshold be met to satisfy the irreparable harm requirement in trade-mark cases. In Centre Ice Ltd. v. National Hockey League 1, the Federal Court of Appeal ruled that evidence of confusion was not sufficient to demonstrate irreparable harm and subsequently, the Federal Court has required evidence of loss of goodwill or reputation or of distinctiveness, and that such losses could not be compensated by damages. 2 One exception is found in the Canadian Copyright Act which permits the Court to grant what are termed wide injunctions. A plaintiff copyright owner who has established infringement of 1 (1994), 53 C.P.R. (3d) 34 (F.C.A.). 2 Ibid; Toronto Cricket Skating and Curling Club v. Cricket Club Townhouses Inc. (2003), 27 C.P.R. (4 th ) 417 (Ont. Div. Ct.).

5 - 5 - copyright in one work may ask the court to grant an injunction against the defendant infringer to enjoin that defendant from infringing any other work in which the copyright owner has an interest (including a license) provided the plaintiff can satisfy the court that, unless the injunction is granted, the defendant will likely infringe the copyright in those other works. 7. If no to 6, are there any specific criteria or considerations for the grant of an injunction for particular IPRs? If so, what criteria apply and to which IPRs? The same criteria apply for the grant of an injunction for all IPR s, except as referred to above for wide injunctions. 8. Are there any specific criteria or considerations for particular subject matter, for example, pharmaceutical patents? If so, what criteria or considerations apply to what subject matter? The Patented Medicines (Notice of Compliance) Regulations link the regulatory approval of generic pharmaceutical products to the patent system. They provide a mechanism whereby an innovator with a patented drug product may make an application to prevent the Minister of Health from granting marketing approval to a generic drug manufacturer. During the pendency of these proceedings (which may last up to 24 months), there is an administrative stay that prevents the Minister of Health from granting marketing approval to the generic drug manufacturer. This administrative stay has been likened to an interlocutory injunction by generic interests and even the Courts on occasion. 9. Are there any specific considerations relevant to particular IP holders, for example, NPEs? If so, what considerations are relevant and to what IPR holders? There are no specific criteria for NPEs. However, it will be apparent that the existing criteria may have more impact upon NPEs. For example, in order to obtain an interlocutory injunction the rights holder will have to give an undertaking to cover the damages suffered by the alleged infringer if it turns out the injunction should not have been granted. An inability of an NPE to provide such an undertaking would be a factor militating against the grant of an interlocutory injunction. Discretion: 10. Is there any element of judicial discretion in relation to the grant of an injunction for infringement of IPRs? Is so, how does the discretion apply? The Canadian courts always have discretion whether to grant an injunction unless they are barred by statute from granting an injunction. Also, because injunctions are equitable remedies, judges are entitled to consider equitable factors when deciding whether or not to grant injunctions.

6 Are there any circumstances in which a court must grant an injunction for infringement of an IPR? Is so, in what circumstances? In general Canadian courts have made clear that an injunction of any kind is an equitable remedy and is always in the discretion of the Court. Thus, there are no circumstances in which a court must grant an injunction for infringement, though it is rare for the court not to grant a permanent injunction following a determination of infringement. In the context of proceedings under the Patented Medicines (Notice of Compliance) Regulations (the Regulations), a successful innovator obtains an order preventing the Minister of Health from granting marketing approval to a generic company. The effect is to prevent the generic company from entering the marketplace in light of the patent rights of the innovator. Although no injunction is granted in such circumstances, the effect is similar in that infringement of an IPR is used to prevent generic competition. In addition, the administrative stay discussed above under Article 8 has been likened to injunctive relief and has effect during the pendency of proceedings brought by the innovator under the Regulations. 12. Are there any circumstances where infringement of an IPR is proved and no permanent injunction is available? If so, in what circumstances? The Canadian Copyright Act (section 40) bars the issue of an injunction even though there has been infringement of copyright where the injunction would prevent the completion of a building or structure that had already been commenced when the proceeding was started. Also in some contexts of copyright infringement the court has exercised its discretion against a permanent injunction. In those contexts the Court refused to issue a permanent injunction as, while some of the copying was an infringement, a lot of the copying fell within a fair use exception to copyright, e.g. private study or research. In the context of a patent infringement action a permanent injunction has been refused where there was a culmination of several factors against the issue of such an injunction. The factors included: (1) the patent holder had never practised the patent in Canada; (2) the impact the injunction would have on the defendant; (3) the impact the injunction would have on the defendant s employees in the middle of the then existing recession; and (4) the patent only had about 18 months left until it expired. Also, equitable defences such as laches, acquiescence and estoppel, can always be invoked to argue against the grant of an interlocutory or permanent injunction. Thus, a permanent injunction will be refused where prohibited by statute or there are substantial convenience reasons for not granting such an injunction. Scope: 13. Is an injunction granted only against named parties to the infringement proceeding, or is an injunction available more broadly against potential infringers such as customers or manufacturers who are not parties to the proceeding?

7 - 7 - An injunction is only granted against the named parties to the infringement proceeding. However, where the rights holder does not know the name of the infringer or infringers but is able to prove infringement an action can be started against unnamed parties in the form of a John/Jane Doe infringement lawsuit. However, an injunction will not issue against an entity that could have been made a party to the lawsuit by name. While only parties to an action may, in a strict sense, be liable to breaches of injunctions, the Supreme Court of Canada has held that any non-parties with knowledge of the injunction who disobey the order or interfere with its purpose may be held in contempt for obstructing the orderly administration of justice. 14. Is there a specific form of words used by your courts to describe the scope of the grant of an injunction? If so, what is the formula? There is no specific form of words used but the injunction will usually be phrased by reference to the alleged infringed right, e.g. an injunction against infringing specific claims of a patent. However, the injunction can also be directed to specific products. 15. Is the grant of an injunction referable to the item(s) alleged to infringe the relevant IPR, or may the grant of an injunction be broader in scope? If it may be broader, what is the permissible scope of the injunction? The injunction can be broader than the exact items alleged to infringe. In fact, injunctions are usually cast in terms of the right that has been infringed rather than limiting it to specific named products only. In addition, under the Copyright Act, as noted above in response to question 6, an injunction may issue against a copyright infringer to prevent infringing any other work in which the copyright owner has an interest (including a license) provided the plaintiff can satisfy the court that, unless the injunction is granted, the defendant will likely infringe the copyright in those other works. However, it is worth noting that to date, no Canadian court has awarded a wide injunction. Judicial trends and practice: 16. Is there any discernible trend in your country as to the willingness or otherwise of courts to grant or refuse injunctions for particular IPRs or in relation to particular subject matter? No, there has been no discernible trend in Canadian courts to indicate a willingness to change the manner in which injunctions are dealt with for IPRs. However, given the infrequency that interim or interlocutory injunctions are granted, the Federal Court has recently given informal indications that it may be prepared to reconsider the test for the granting of injunctions for infringement of IPRs, and in particular the level or type of irreparable harm that may be sufficient to support such an order.

8 What, if any, has been the impact of the ebay v Merc-Exchange decision or any tendency of the courts in your jurisdiction to treat final injunctions as discretionary? Please explain whether the ebay v Merc-Exchange decision has been relied on or cited by your courts, and in what circumstances. Alternatively, or in addition, has there been any legal commentary on any potential implications of the ebay v Merc-Exchange decision in your jurisdiction? The ebay v. Merc-Exchange has had no discernible impact on the decisions of Canadian courts in their jurisdiction to treat final injunctions as discretionary. Canadian courts have maintained for many years that all injunctions are in the discretion of the court. The decision of ebay v. Merc-Exchange has not been relied upon by the Canadian courts. While there has been some discussion in legal publications, the general expectation is that the decision will not noticeably change the way in which Canadian courts approach injunctions. II. Proposals for harmonisation Availability of provisional/preliminary injunctions: 18. Should there be a test or criteria for the grant of a provisional/preliminary injunction for the infringement of an IPR? If yes, what should that test or those criteria be? AIPPI Canada is satisfied with the flexible approach to injunctions applying the common law and guiding principles of equity as set out in RJR MacDonald. This approach is preferable to a rigid test. 19. If no, what principles should be considered in determining whether to grant a provisional/preliminary injunction? The guiding principles of equity as set out in RJR MacDonald are satisfactory generally. However, the area of concern is really in the Courts approach to the meaning of irreparable harm as a criteria which currently makes it extremely difficult to obtain a provisional or preliminary injunction in the context of IPRs. Availability of permanent injunctions: 20. Should there be a test for the grant of a permanent injunction for the infringement of an IPR? If yes, what should that test be? No, the current approach is satisfactory. 21. If no, what principles should be considered in determining whether to grant a permanent injunction?

9 - 9 - As an equitable remedy the current principles, i.e. equitable considerations should be considered. Discretion: 22. In what circumstances, if any, should the grant of an injunction automatically follow a finding of infringement of an IPR? The Courts should always have discretion in whether or not to grant an injunction. 23. In what circumstances, if any, should the grant of an injunction be denied notwithstanding a finding of infringement of an IPR? The current balancing of equities should be applied. This balance will include consideration whether there has been a full hearing (usually a trial) to assess the infringement of the IPR but will also consider the convenience of granting or not granting the injunction. Thus, after a full trial proving infringement it will only be in exceptional circumstances that an injunction would not be granted. Differences between IPRs: 24. Should the above test/principles apply equally to all IPRs? Yes. 25. If no, what should any difference be and why? Scope: 26. Should an injunction be granted only against named parties to the infringement proceeding, or should an injunction be available more broadly against potential infringers such as customers or manufacturers who are not parties to the proceeding? Yes, an injunction should only be granted against parties to the infringement proceeding. However, as with the current system, any non-parties with knowledge of the injunction who disobey the order or interfere with its purpose should be liable for sanctions for obstructing the orderly administration of justice. 27. What is the appropriate scope of an injunction prohibiting an infringer from committing further infringing acts? For example, should the injunction relate simply to the IP the subject of the allegation of infringement, or should the injunction be broader in scope? If broader, what is the permissible or desirable scope?

10 The scope of an injunction should be tied directly to an IPR. This would always include the IPR that is actually infringed but as is the current situation in our Copyright Act, in appropriate circumstances may extend to other IPRs. For example, where an infringer has demonstrated a pattern of infringing a particular party s IPRs or is threatening to infringe other IPRs of that party and injunction to protect against that threat would be appropriate provided it specifically tied to the IPRs of concern. Summary In Canada, one may obtain interim, interlocutory, and permanent injunctions for all IP rights. Typically, injunctions are cast in terms of the right that has been infringed rather than limiting it to specific named products of a defendant that have been found to infringe. Interim and interlocutory injunctions are typically difficult to obtain in view of the applicable legal test, wherein a plaintiff must show that: a) there exists a serious issue to be tried; b) irreparable harm (harm that is not readily quantifiable) will result if the injunction is not granted; and c) the balance of convenience favours the granting of an injunction. Permanent injunctions are available for the infringement of all IP rights and are usually granted if there is a finding of infringement at trial, unless there is a real public interest why an injunction should not be granted. They are an equitable remedy such that the Court has discretion in all cases, and have been refused in cases such as laches, acquiescence and estoppel, delay in bringing an action for infringement, and other principles such as the imminent expiry of the right as factors against the granting of a permanent injunction. Résumé Il est possible pour tous, au Canada, d'obtenir une injonction temporaire, interlocutoire et permanente en matière des droits de PI. Normalement, les injonctions sont émises selon le droit qui aurait été enfreint plutôt que de les limiter aux produits spécifiquement nommés d'un défendeur qui sont l'objet de la violation. Les injonctions temporaires et interlocutoires sont normalement plus difficiles à obtenir à cause du test juridique applicable, selon lequel le demandeur doit démontrer que : a) un problème sérieux méritant procès a été découvert ; b) des dommages irréparables (qui ne sont pas facilement évaluables) seront causés si l'injonction n'est pas accordée; et c) la comparaison entre la commodité des parties est en faveur de l'accord d'une injonction. Il est possible d'obtenir une injonction permanente dans le cas de la violation de tous les droits de PI et elles sont habituellement accordées si la preuve d'une violation est établie lors d une audience, sauf s'il y a un réel intérêt public justifiant de ne pas accorder l'injonction. Il existe un recours équitable selon lequel le tribunal peut agir à sa discrétion dans tous les cas, et qui a été refusé dans des cas de négligence, de consentement et d'effet d'estoppel, de retard pour amener la cause en justice, de même que dans le cas d'autres principes tels que l'expiration

11 imminente du droit, tous des facteurs qui peuvent jouer contre l'accord d'une injonction permanente. Zusammenfassung In Kanada kann man einstweilige Verfügungen, Zwischenbescheide und endgültige gerichtliche Verfügungen für alle Rechte des Geistigen Eigentums erlangen. Einstweilige Verfügungen ergehen typsicherweise bezogen auf ein Recht, das verletzt wurde, anstatt dass sie auf bestimmte genannte Produkte eines Beklagten begrenzt werden, die als rechtsverletzend erkannt wurden. Einstweilige Verfügungen und Zwischenbescheide sind angesichts der anzuwendenden Rechtsprüfung typischerweise schwierig zu erlangen, in der ein Kläger darlegen muss, dass; a) ein schwerwiegender Grund besteht, der zu verhandeln ist; b) irreparabler Schaden (Schaden, der nicht ohne Weiteres bezifferbar ist) die Folge ist, wenn die einstweilige Verfügung nicht gewährt wird; und c) die Ermessensabwägung zugunsten der Gewährung einer einstweiligen Verfügung ausfällt. Endgültige gerichtliche Verfügungen stehen für die Verletzung aller Rechte des Geistigen Eigentums zur Verfügung und werden im Allgemeinen gewährt, wenn in der Verhandlung eine Rechtsverletzung festgestellt wird, es sei denn, es besteht ein echtes öffentliches Interesse daran, dass eine Verfügung nicht gewährt werden sollte. Sie stellen einen Rechtsbehelf nach equity-recht dar derart, dass dem Gericht in allen Fällen ein Ermessen zusteht und wurden versagt in Fällen wie z.b. fahrlässiger Verzug, stillschweigende Billigung und prozesshindernde Einrede, Verspätung der Erhebung einer Klage wegen Rechtsverletzung und sonstige Grundsätze, wie das unmittelbar bevorstehende Erlöschen eines Rechtes, als Umstände gegen die Gewährung einer endgültigen gerichtlichen Verfügung.