Law Times

Law Times • December 2, 2013 Page 13 BRIEF: INTELLECTUAL PROPERTY LAW IP lawyers take note of punitive damages finding in patent case BY MICHAEL McKIERNAN For Law Times I ntellectual property lawyers expect a flood of punitive damage claims after the Federal Court of Appeal confirmed they were available in patent infringement cases during a dispute between helicopter manufacturers. Upholding last year's trial decision in Bell Helicopter Textron Canada Limitée v. Eurocopter, a threejudge appeal court panel agreed punitive damages were necessary to denounce Bell Helicopter's behaviour in knowingly copying the landing-gear design of its competitor and claiming it as its own in marketing materials. Although previous patent infringement cases had resulted in punitive damage awards, Grant Tisdall, a partner in the Toronto office of Gowling Lafleur Henderson LLP, says they all involved breaches of interlocutory injunctions or other court orders associated with the disputes. "Technically, the punitive damages in those cases were not for the infringement but for the breaches," says Tisdall, who also heads the firm's patents group. "Now the door has been opened to having punitive damages available for pure patent infringement. . . . You can bet your bottom dollar more people will try claiming it." Marek Nitoslawski, who appeared for Eurocopter at both the trial and the appeal, says he was happy to see the court overturn the "conventional wisdom" that punitive damages were unavailable in patent infringement cases. But it wasn't all good news for his client, Eurocopter, in its lawsuit over a patent filed in the late 1990s related to the Moustache landing gear on its lightweight helicopter. While the appeal court confirmed Bell Helicopter's Legacy landing gear infringed on Eurocopter's patent, it never actually sold a craft with the offending product. Instead, it had developed a new design the court found didn't infringe on the patent. In addition, the appeal court confirmed 15 of the patent's 16 claims were invalid, a finding that severely limited Eurocopter's potential compensatory damages. Courts usually address entitlement to punitive damages after deciding the quantum of general damages, but the appeal court ruled it could award them in cases like this one where the general damages would likely be too small "to accomplish the objectives of retribution, deterrence, and denunciation." "Where a person infringes a patent which it knows to be valid, appropriates the invention as its own, and markets it as its own knowing this to be untrue, punitive damages may be awarded when an accounting for profits or compensatory damages would be inadequate to achieve the objectives of retribution, deterrence, and denunciation of such conduct," reads the Sept. 24 judgment. "Indeed, such conduct departs to a marked degree from ordinary standards of decent behaviour. It must be denounced in a manner that deters similar misconduct in the future and marks the community's collective condemnation." While Nitoslawski, a partner with Fasken Martineau DuMoulin LLP, expects an increase in claims for punitive damages in future patent disputes, he says the case hasn't "opened the floodgates" for actual awards by judges. "I think there's enough language in the decision that confirms it's not going to be available in all cases. The circumstances here are a little bit unique," he says. Judith Robinson, the Montreal-based partner at Norton Rose Fulbright Canada LLP who acted for Bell Helicopter, says she doesn't believe this was a case for punitive damages. "As soon as Bell became aware of the suit, they immediately redesigned the landing gear, they quarantined the 21 prototype landing gears, which were never sold, they collaborated for an expedited trial, and were successful in invalidating 15 of the 16 patent claims," she says. "The fact of Eurocopter having brought the action was itself sufficient deterrent by reason of the conduct of Bell after that, which was beyond reproach." Robinson expressed concern with the appeal court's finding that it "defies belief" that "a large and sophisticated corporation" such as Bell Helicopter wouldn't verify its intellectual property rights before embarking on its landing-gear research program. Although there was no evidence Bell Helicopter was aware of Eurocopter's patent before the lawsuit, the trial judge found it "knew or should have known" about it. "The view of the court that if you are a large and so-called sophisticated company, this means you must be aware of the patent landscape or considered wilfully blind, with respect, doesn't fit with our experience in the real world with clients," she says. "I'd suggest there is a lack of clarity as regards what is now expected of them. It's difficult to say what affirmative evidence a company would have to bring to show that it either did not have knowledge of a patent or else that it had a reasonable belief the patent was invalid or that its design was non-infringing." Tisdall says companies potentially considered to be "sophisticated" entities may need to take a more proactive approach. "Any sane corporate entity should be managing their risk by doing investigations. Even if you don't find patents because you're looking in the wrong spot, it's going to help mitigate some award of punitive damages if there's an infringement down the road," he says. LT Untitled-2 1 1/26/11 3:59:49 PM "The vitality of thought is in adventure. Ideas won't keep. Something must be done about them." Alfred North Whitehead (1861–1947) This is where we come in. Intellectual Property and Information Technology Law 150 York Street, Suite 400, Toronto, Canada M5H 3S5 Tel 416.941.9440     Fax 416.941.9443     E-mail info@dww.com twitter.com/DWW_IPandITlaw Practical. Experience. www.lawtimesnews.com Untitled-1 1 www.dww.com 13-11-25 6:54 PM

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