Especially in high tech industries, it is possible to observe awards of damages that seem disproportionate to the infringement that occurred. A team of engineers at work on a problem may find many solutions to it. Is it reasonable to expect them to scour the patent registry to ensure every solution that is implemented does not fall within a claim in some obscure patent? With so many patents with so many broad claims on the register, a solution that a team independently arrived at may randomly overlap such a claim. The scenario is like buying a lottery ticket where patents are the winning numbers. If one buys enough tickets, the winning (or rather losing) number will likely come up. Chances are less for high quality inventions that represent a real advance in the art and that may be difficult to duplicate accidentally, but may be greater for lower quality patents that represent more modest advances or variants.

The way United States courts calculate damages in this situation is instructive. In and subsequent cases, the court adopted a “but-for” test where the damages are the profits the patentee would have made “but for” the infringement, having due regard to acceptable non-infringing alternatives (NIAs). In essence, the court calculates what the patentee would have lost if the infringer had not infringed, but instead had used a NIA. So in our example, had the engineers unwittingly stumbled on a patented technology by independent research where NIAs were also available, they would be liable only for the incremental damages the patentee suffered had the defendant used an NIA instead of the patented invention.

Recently in Canada, this approach was summarily rejected by the Federal Court in . The court acknowledged the US NIA principle, but held that in Canada NIAs were irrelevant in calculating damages. One merit of this approach is to remove the incentive a potential infringer may have to infringe on purpose, knowing that his damages liability from lost profits will be limited to the incremental lost profits.  What some might think would be a flagrant abuse of the patent system is thus prevented.

Both the US and Canadian approaches have their merits. Can they be reconciled while maintaining their respective advantages? One way, inspired by such cases as , is to have regard to the intention of the infringer. While Qualcomm had infringed, the court’s finding that the infringement was not wilful significantly reduced the amount of damages awarded. The divergent US and Canadian approaches on NIAs may therefore be reconciled by making the infringer’s intention a threshold test in calculating damages: if infringement is innocent, NIAs may be considered as a more accurate assessment of damages; if wilful, they should not be considered. Deterrence is a legitimate aim of compensation schemes, and deterring wilful wrongdoers more than innocent ones seems logically justifiable.

One concern with this approach is that an infringer’s intention may actually serve to change the method of calculating damages. But, from an economic viewpoint, any assessment of the actual damages suffered by a patentee must inherently consider the availability of NIAs. From this perspective, the unavailability of an “NIA defence” may simply be considered as a punitive measure that is awarded to deter abuse of the patent system, instead of a different method of calculating damages.

Even though punitive damages have rarely been awarded in patent infringement cases in Canada, in the Federal Court of Appeal affirmed their availability, while noting that not every deliberate infringement case necessitates punitive damages. In cases where the court feels that the high standard of bad conduct required to award punitive damages is not present, it may still achieve a similar punitive effect by being “less generous” with the NIA deductions, as was done with the deductions in the US copyright case involving deliberate infringement. In such cases, upon wilful infringement, the strength of the NIA deductions may be lowered, even if the defence may still be technically available.

The interesting question remains: may this result be achieved judicially or is legislative action first required?

Pasan Hapuarachchi is a JD Candidate at Osgoode Hall Law School and is enrolled in Osgoode’s Intellectual Property Law Intensive Program. As part of the program requirements, students were asked to write a blog on a topic of their choice.

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For each semester, the author of the best blog is awarded a $500 cash prize, as well as a notation on their official Osgoode Transcript and an official prize announcement during convocation. There is also an award for the best comment made on a blog on the IP Osgoode Website each semester. Blogs can be found at . Commenting on blogs is a great way to keep up to date on relevant IP and Tech issues and join in the discussion with the rest of the IP Osgoode community.

Anyone wishing to be considered for the Gowlings Prize must submit their blog or comment, and be published on the IP Osgoode website, by the last day of classes (Friday April 12, 2013). Blogs must be Approx. 750 words and of publishable quality (i.e. no spelling/grammatical errors). It is recommended that blogs cite sources in the form of embedded hyperlinks, where appropriate.

Blogs can be submitted to iposgoode@osgoode.yorku.ca. Comments can be made directly on the website. All topics related to IP or Technology law are welcome. For more information on the Gowlings Prize, as well as a list of past winners, please visit

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Three issues were argued before Justice Koh: (1) whether the damages awarded by the jury were appropriate; (2) whether additional Samsung products should be added to the injunction order; and (3) whether the jury decision should be thrown out because of alleged misconduct from the jury foreman.

Damages: Willful Infringement v Reverse-Engineering

On the first issue, Apple is seeking to add another $770 million to the damage award based on the jury’s finding of willful infringement in August. “Hopefully after an injunction they will be deterred from getting this close to the line and we will not be back in front of you in the future,” Apple attorney Michael Jacobs told Judge Koh.  Samsung wishes to have the damages re-examined by Justice Koh given a number of calculations it found to be anomalous. “You should reverse-engineer (the damages), make sure jury verdict is causally related to the evidence based on legal theory,” Samsung lawyer Kathleen Sullivan submitted.

Injunction: An Interesting Legal Question

On the second issue, Apple is seeking to have 26 additional Samsung products added to the original injunction ordered in August.  Apple is arguing that the additional products are not more than "colourably different" from the ones already banned. Samsung of course opposes this.  Although only three of Samsung's products at issue in the original verdict  are still on the market, a sweeping ban such as the one argued by Apple would substantially hurt the Korean company’s image with retailers and leave open the possibility of a ban on many more of its devices that are not more than "colourably different" from Apple's patents.

This raises a couple of interesting legal questions: if Justice Koh accepts Apple's argument, could it mean that innovators could go after products that have been "designed around" existing patents if they are not colourably different?  Moreover, if a product only infringes one out of  thousands of possible features on a device, should a court ban the entire product? Justice Koh may set an interesting legal precedent with her answer to these questions.

Re-Trial: Jury Misconduct

On the third issue, Samsung is seeking to have the original verdict thrown out and a new trial granted, arguing by jury foreman, Velvin Hogan. Hogan had failed to disclose that he was once sued by his former employer, Seagate, which has a strategic relationship with Samsung. Apple maintains that Samsung should have raised this issue at the voir dire for jury selection. Samsung responded that it did not know of Hogan’s previous law suit at that time.

Justice Koh stated that she would issue separate rulings based on subject matter in the coming weeks.

Why this Matters to Canadians

Thus far, the Canadian market has been left largely untouched by Apple’s legal strategy.  However, on August 7, 2012, the Canadian Intellectual Property Office issued Apple Inc. the of its infamous “bounce-back” patent, patent no (“‘381”). With this foothold in the Canadian patent system, Canadian companies and taxpayers may be the next to get dragged into this global dogfight.

Like its American cousin, Canadian patent no (“’177”) teaches a method for “intuitively” communicating to a touch-screen user that he or she has scrolled to the edge of an electronic document.  It allows a user to “pull past” the edge of a document when he or she has reached its end, then snaps the displayed content back to the edge of the display area when the user releases the screen.  The specifications between these two patents are nearly identical and the first independent claims are very, very similar. 

As a commercial tool, the “bounce-back” patent has been used in many of Apple’s legal and commercial maneuvers to keep its competitors out of touchscreen markets.  For example, just this past year:

1. The ‘381 patent was the only utility patent asserted by Apple against Samsung in its recent infringement against Samsung in California;
2. The ‘381 patent was one of five patents Apple asserted against HTC in a to the United States International Trade Commission of tariff violations; and
3. The Australian version of the ‘381 patent (, "'283") is currently one of the patents Apple is asserting in for a preliminary injunction against Samsung's Galaxy Tab 10.1 in that country.

According to the CIPO patent database, Apple Inc. has been since August – bringing the total number of active Canadian patents owned by Apple to . While there is no guarantee that Apple will bring the next battle to Canada, with due for release and the Canadian government’s recent to encourage home-grown entrepreneurship, one wonders if the Canadian market and patent office are prepared should Apple begin flexing its exclusive rights this side of the border.

For companies looking to defend themselves from possible infringement suits, it may be helpful to follow the being conducted by the USPTO on the ‘381 patent to determine if a similar re-examination request can be filed with the Canadian patent office against the ‘177.  For those representing Apple’s interest in Canada, it may be worth considering how the absence of file-wrapper estoppel and jury trials in Canada would affect a Canadian strategy against potential infringers. For lawmakers and benchers, it may be worth considering, more broadly, whether for computer-based patents outlined in the really provide sufficient disclosure of claimed subject-matter to qualify as the patentee’s “quid” for the state’s “quo” of an exclusive monopoly as in the recent SCC decision in .

Prospect for Peace? All Eyes on San Jose

As Justice Koh urges both tech giants to work towards a settlement, one thing is clear: all eyes will be on San Jose in the coming weeks.  The legal community will be waiting to see how Justice Koh rules on the above legal questions just as the business community will be watching to see whether or not Apple and Samsung do in fact make peace. According to statements made by  just after the hearing-- the ball is in Apple's court.

Beatrice Sze is a JD Candidate at Osgoode Hall Law School

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