LEXPERT MAGAZINE
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JULY/AUGUST 2017 31
BIG SUITS
THE DOW CHEMICAL COMPANY,
DOW GLOBAL TECHNOLOGIES INC.
AND DOW CHEMICAL CANADA ULC
V. NOVA CHEMICALS CORPORATION
On April 19, Justice Fothergill of the
Federal Court issued his public judgment
and reasons addressing various issues in
the calculation of the compensation to be
paid as a result of earlier patent infringe-
ment action between e Dow Chemical
Company ("Dow") and NOVA Chemicals
Corporation ("Nova") (2014 FC 844). On
July 5th Justice Fothergill issued a Supple-
mental Judgment and Reasons providing
the final amount of compensation to be
paid (2017 FC 637).
THE LIABILITY PHASE
e proceedings before the Federal Court
were commenced in 2010. During the lia-
bility phase, the Federal Court upheld the
validity of Dow's Canadian Patent No.
2,160,705 (the '705 Patent) and found that
Nova's SURPASS polymers infringed. e
polymers are polyethylene compositions
used in packaging applications including
heavy duty bags, pallet wrapping and food
packaging. Dow sells such compositions
under the name ELITE.
As a result of the findings of infringe-
ment, the Federal Court awarded Dow vari-
ous remedies, including an election between
damages and an accounting of Nova's profits,
reasonable compensation for infringement
that occurred between the publication date
of the '705 Patent and its date of issuance,
interest and costs. Dow subsequently elected
for an accounting of Nova's profits.
Nova's appeal of the liability decision to
the Federal Court of (2016 FCA 216), and
application for leave to appeal to the Supreme
Court of Canada, were both dismissed.
THE REMEDIES PHASE
>
"Springboard" profits
Dow claimed that Nova's infringement of
the '705 Patent provided it with a "spring-
board" into the market, which resulted in
Nova continuing to profit from its infringing
activity aer the expiry of the '705 Patent.
Justice Fothergill concluded that Nova's post-
expiry profits resulting from its pre-expiry in-
fringing activities should be included in the
accounting of profits for a period of approxi-
mately 20 months post-expiry.
>
Accounting of profits
and the deduction of costs
Two important issues were before the court.
e first issue related to the appropriate
measure of the cost of ethylene, a key com-
ponent used to make the infringing SUR-
PASS products. Nova claimed that it should
be entitled to deduct an "economic value"
of the ethylene as measured by Nova's aver-
age selling price of ethylene to third parties.
Dow claimed that because Nova itself pro-
duced the ethylene used to make SURPASS,
it was entitled to deduct only its actual costs
incurred to manufacture the ethylene. Jus-
tice Fothergill agreed with Dow's position,
noting that Nova's position would result in
deduction of a "theoretical cost that [Nova]
did not incur."
e second issue was whether Nova's non-
incremental fixed costs and capital deprecia-
tion expenses could be applied against in-
fringing revenue. Nova contended that its
incremental costs would be negligible, and a
"full cost approach" (permitting deduction
of certain non-incremental fixed and capital
costs) was appropriate to avoid an inequit-
able outcome.
Justice Fothergill concluded that Nova
should be entitled to deduct a proportion of
certain of its claimed fixed costs and capital
depreciation expenses related to the produc-
tion and sale of the infringing products.
>
Currency conversion
e issue of the timing of currency conver-
sion was also before the court. While Nova's
profits from the sale of infringing SURPASS
products were mostly earned in US dollars,
the Currency Act requires that a judgment
be expressed in Canadian dollars. Justice
Fothergill found that the evidence supported
that Nova's profits were primarily retained in
US dollars such that the date of conversion
into Canadian dollars should be the date of
the judgment.
>
Inclusion of additional product
grades in the calculation of profits
Also at issue were four grades of Nova's SUR-
PASS product that Dow claimed were iden-
tical or nearly identical to those that were
specifically identified in Dow's original state-
ment of claim, but were sold by Nova under
slightly different names at various times.
Nova conceded that these grades infringed
the '705 Patent, but argued defences of res
judicata, abuse of process and the application
of a limitation period because they had not
been specifically identified in the statement
of claim during the liability phase of the pro-
ceeding. Justice Fothergill sided with Dow,
finding that the additional grades were with-
in the scope of the liability judgment.
FINAL AWARD
Based on Justice Fothergill's initial judg-
ment, the parties exchanged calculations of
damages and profits payable by Nova to Dow
and provided the court with a list of three
further issues relating to the appropriate ac-
counting methodologies to apply to arrive at
the final judgment.
Dow was ultimately successful on two of
the three issues. e final award totals over
$645 million (including prejudgment inter-
est), which is the largest reported award in a
Canadian patent infringement case.
Nova has filed an appeal of Justice Fother-
gill's initial decision.
Steve Garland, Jeremy Want. Colin In-
gram, Daniel Davies and Kevin Graham of
Smart & Biggar, with Ryan Evans of DLA
Piper (Canada) LLP acted for the plaintiffs,
e Dow Chemical Company, Dow Global
Technologies Inc. and Dow Chemical Can-
ada ULC.
Robert MacFarlane, Michael Charles,
Andrew McIntosh, Adam Bobker, Michael
Burgess and Jerry Chen of Bereskin & Parr
LLP acted for the defendant, Nova Chem-
icals Corporation.
A LOOK AT THE FEDERAL COURT OF CANADA'S FINAL JUDGMENTS CONCERNING THE PATENT INFRINGEMENT ACTION
BETWEEN DOW CHEMICAL CO. AND NOVA CHEMICALS CORP., INVOLVING NOVA'S SURPASS POLYMERS AND DOW'S
ELITE PATENT AND RESULTING IN THE LARGEST REPORTED AWARD IN A CANADIAN PATENT INFRINGEMENT CASE
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