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Top 10 business decisions of the past year, part one

Tuesday, January 10, 2023 @ 1:29 PM | By Julius Melnitzer


Julius Melnitzer %>
Julius Melnitzer
What follows is our third annual list of the Top 10 business decisions in Canada for the just-ended year. This is a two-part series, which begins below with numbers 6-10, in ascending order.

10. Nova Chemicals Corp. v. Dow Chemical Co., 2022 SCC 43

This Supreme Court of Canada decision affirmed the largest reported Canadian patent infringement award ever by ordering Nova to pay Dow some $645 million for infringement of Dow’s patent on novel polyethylene blends. In doing so, the majority set out the principles governing recovery under the accounting of profits remedy.  

“The decision reinforces the strength and value of the accounting of profits remedy, and therefore strengthens patent protection as well,” said Daniel Davies, an Ottawa-based principal on the Smart & Biggar team that represented Dow.  

The court’s most impactful findings are found in its conclusion that springboard profits — those that infringers continue to accrue after a patent expires because the infringement occurred while the patent was in force — were available to patent holders; and in rejecting Nova’s argument that the profits it could have made from a non-infringing option (like using its manufacturing capacity to produce non-infringing product) should be deducted from the profits payable to Dow as a result of the infringement (the differential profits argument).

“If the court had accepted the defendant’s argument, we would have been left with a much weaker remedy that militated against electing the accounting of profits remedy,” Davies said. “And the court’s approach to differential profits is important because it focuses on the value of the invention and whether there was actually a substitute to the invention itself, as opposed to any substitute at all.”

9. Urban Mechanical Contracting Ltd. v. Zurich, 2022 ONCA 589

Bonds are a critical component of the securities involved in major construction projects in Ontario, including public infrastructure projects, where surety bonds must secure at least 50 per cent of the contract price for public contracts exceeding $500,000.

“That’s why the Court of Appeal sent alarm bells through the construction industry when it ruled that a bond issuer could rescind a bond on the basis of fraud, even if the recission affected innocent third parties,” said Sahil Shoor, a litigation and dispute resolution partner in Gowling WLG’s Waterloo Region office. “The decision reduces the reliability of surety bonds in an industry that depends on these assurances.”

Still to be determined on a full record is whether recission is appropriate in this case, as the decision only confirms its availability. One of the factors in determining whether the equitable remedy — one that’s focused on practical justice — is appropriate is whether restitution can occur in other ways.

“Meanwhile, subcontractors and suppliers on the project have unpaid claims, and lenders who relied on the guarantees remain unpaid,” Shoor said.

8. Merck Canada Inc. v. Attorney General of Canada, 2022 QCCA 240

The highly contentious regulations that represent the first time in 30 years that the federal government has overhauled the framework that controls excessive pricing for patented medicines probably wouldn’t look quite the way they do had it not been for this Quebec Court of Appeal decision.

“What came into force on July 1, 2022, is very different than what was originally proposed because of this ruling and earlier rulings from the Federal Court of Appeal,” says Nyrie Israelian, an intellectual property litigator in Bereskin & Parr LLP’s Toronto office. “To my mind, it’s significant that the court released its decision in February and the government announced the corresponding changes to its proposals in April.”

The Quebec Court of Appeal unanimously found that new price regulatory factors and patentee reporting requirements that formed part of what were then proposed amendments to the Patented Medicines Regulations were unconstitutional.

The proposed amendments sought to introduce new economic factors into the Patented Medicine Prices Review Board’s determination of whether prices were excessive. These included pharmacoeconomic value, market size in Canada, and GDP as well as GDP per capita.

These factors were unconstitutional and beyond the jurisdiction of the federal government, the court ruled, because they represented arbitrary and significant price reductions based solely on affordability and applied to prices previously determined not to be excessive.

“The court recognized that the PMPRB’s mandate was to control patent monopolies and not general consumer protection,” Israelian said.

Also invalid were the requirements that patentees report price and revenues net of all adjustments, including their confidential rebates and other agreements with insurers.

“Again, the QCCA saw these amendments as unconstitutional because they were aimed at reducing prices rather than controlling excessive prices,” Israelian said.

7. Association des cadres de la société des casinos du Québec c. Société des casinos du Québec, 2022 QCCA 180

A decade-old labour relations saga has culminated in a Quebec Appeal Court ruling that could significantly upend the face of labour relations in Quebec.

The case arose when the first level managers at the Casino de Montréal, also known as “operations supervisors” or “table managers,” applied for certification. In 2016, the Administrative Labour Tribunal decided that the general exclusion of management personnel from the definition of “employee” in the Labour Code was inoperative with respect to the association. The Appeal Court agreed, concluding that the exclusion constituted a “substantial interference” with the employees’ freedom of association that was not justified because it was not as minimal as possible.

In September, the Supreme Court of Canada granted leave to appeal.

6. Benjamin Moore & Co. v. Canada (Attorney General), 2022 FC 923

This Federal Court decision brings the prospect of much-needed clarity to the assessment of the patentability of computer-implemented inventions. Much of the confusion is directly attributable to the Canadian Intellectual Property Office’s (CIPO) refusal to follow previous instructions from the courts.

Historically, CIPO used a “problem-solution” approach to determining the issue. But although the Federal Court’s 2020 ruling in Choueifaty v. Canada (Attorney General), 2020 FC 837, rejected this approach and replaced it with a “purposive construction” approach, CIPO persisted.

The issue crystallized when CIPO, again resorting to the problem-solution approach, rejected Benjamin Moore’s application for patents related to using a computer to help customers make paint selections on the basis that they were not patentable subject-matter.

As the commissioner of patents saw it, there was “no computer problem to be solved, the computer and associated components were not part of the solution.” Stripped of the computer elements, the commissioner concluded, the claims failed because they were no more than scientific principles or abstract concepts.

On appeal to the Federal Court, Benjamin Moore, the attorney general and the intervener, the Intellectual Property Institute of Canada (IPIC), agreed that the commissioner had erred and that the matter should revert to CIPO for redetermination. But the parties could not agree on the proper approach.

The upshot was that the Federal Court for the first time articulated its own analysis, adopting the IPIC proposal: a three-step process requiring CIPO to determine whether a claim comprises “a practical application that employs a scientific principle or abstract theorem.” If the claim does comprise a practical application, it is patentable.

Generally speaking, patent practitioners have welcomed the Federal Court analysis as consistent with existing Supreme Court  jurisprudence, alleviating confusion and making the system simpler and more favourable to applicants.

This is the first of a two-part series. Read the second article: Top 10 business decisions of the past year, part two.

Julius Melnitzer is a Toronto-based freelance legal affairs journalist and communications and media consultant to the legal profession. He can be reached by e-mail directly at julius@legalwriter.net or at his website, www.legalwriter.net.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients,
The Lawyer’s Daily, LexisNexis Canada, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

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