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PATENTS - Remedies - Damages - Compensatory

Friday, May 08, 2020 @ 9:14 AM  

Lexis Advance® Quicklaw®
Appeal by the defendants from a Federal Court assessment of damages of $7,915,000 for patent infringement. The respondents’ 937 Patent provided an improved seal assembly for restraining oil leakage from oil well pumps. The Federal Court found that the 937 Patent was valid and was infringed by the appellants. The respondents sought their lost profits. The appellants argued that the loss would be properly remedied by the payment of a reasonable royalty in respect of the sales the appellants lost due to the sales of infringing drives by the appellants. The court found as a fact that there were lost sales due to the infringement by the appellants.

HELD: Appeal allowed in part. The damage award of $750,000 for lost profit on convoyed sales was set aside. The Federal Court did not err by finding there was a causal connection between the infringing sales and the lost sales suffered by the respondents. There was sufficient evidence to support the court’s finding that the appellants’ infringing product competed directly in the same market with the respondents’ product and that the respondents lost sales of their drives to the appellants’ competing infringing product. The respondents’ historical market share provided a reliable basis on which to calculate the respondents’ lost sales in the “but for” world. The Federal Court demonstrated an understanding of the value of the patented drive and the nature of the market, to be well-positioned to consider whether the respondents would have likely captured a proportion of the defendants’ sales and that they would have done so in proportion to their share of the market. The Federal Court accepted evidence about the product market, including expert evidence about the advantages of the respondents’ drive, the competitors in the market, and the factors that influenced consumer-buying choices. The expert’s view, based on his experience in the industry, was that there was no reason why the appellants’ customers would have preferred to buy a drive not manufactured by the respondents. The Federal Court erred by finding that the appellants’ infringing sales caused the respondents to lose convoyed sales or sales of non-patented products. While the Federal Court discussed the products commonly sold with the respondents’ drives, the Federal Court never analyzed whether the sale of an infringing drive caused the sale of other products. Simply because a non-infringing product appeared on the same invoice as a drive was not sufficient to establish causation. In relying on evidence that several products were commonly sold with the respondents’ drives and that unspecified associated products were often purchased with a drive to establish causation, the Federal Court erred in law. The respondents’ estimate of lost convoyed sales was also flawed as it relied on several items that were optional and ignored the requirement of causation. In circumstances where there was no standard package of add-ons and customers chose to buy some or no additional items, the respondents failed to demonstrate in the “but for” world customers who chose to buy the respondents’ drive would, because of that purchase, also purchase associated items. The respondents’ purported quantification of the loss of convoyed sales was so flawed that it did not reliably quantify any loss and so could not be relied upon for that purpose. No damages in respect of the claim of lost convoyed sales were awarded.

Grenke Estate v. DNOW Canada ULC, [2020] F.C.J. No. 357, Federal Court of Appeal, E.R. Dawson, D.J. Rennie and M. Rivoalen JJ.A., March 11, 2020. Digest No. TLD-May42020009