Dow Chem patent fight reaps big reward

TORONTO • Dow Chemical Co. is in line to collect the largest patent infringement damage award in Canadian history following a courtroom victory against Nova Chemicals Corp.

A federal judge last week issued a written decision that spells out how much Dow can claim from an estimated $1 billion in revenue Nova collected while infringing on Dow’s Canadian patent 2,160,705, which sets out a method to make the thin plastic packaging used in things such as garbage bags and food wrappings.

Dow actually proved its infringement case in federal court in 2014, but litigation continued on how the parties should calculate the damages. A 17-day damages trial was heard in Toronto last December and January. Justice Simon Fothergill issued the public version of his 78-page written decision on April 19.

Justice Fothergill ordered Nova to disgorge profits it made during the infringement. The companies must now use the judge’s methodology to figure out how much those profits should be.

“The parties’ accountants will calculate the sums owed by Nova to Dow based on the conclusions reached by the Court in this stage of the reference,” Justice Fothergill wrote.

Steve Garland, a lawyer with property law boutique Smart & Biggar, which represented Dow, said the result could be the largest reported monetary award to date in a Canadian patent infringement case.

“I’ve been litigating IP cases and patent cases for 25 years,” Garland said. “This, without a doubt, has been the most complex and interesting case that I’ve been involved in and our team here has been involved in.”

Indeed, the litigation involved several hearings and levels of the court.

An initial round of litigation focused solely on whether there was any infringement at all.

Justice John O’Keefe ruled in September 2014 that Nova products called “SURPASS” polymers infringed Dow’s patent. That ruling was reviewed by the Federal Court of Appeal, which upheld the trial decision in 2016. Nova sought leave to appeal the case to the Supreme Court of Canada, but that application was dismissed last Thursday.

Meanwhile, Justice Fothergill heard evidence from several experts on how to assess the value of the infringement damages. His resulting formula takes into account not just how to determine the profits that must be disgorged, but also the timing during which Nova sold products.

In particular, the decision takes into account socalled “springboard” profits. “I think it’s the first time in Canadian patent history where a springboard award on an accounting of profits has been awarded,” Garland said.

Dow’s Canadian patent expired in April 2014. Had Nova waited until the Dow patent expired, it would have still needed a stretch of time to “ramp up” sales of products made using the technology. By using the technology while it was still under Dow’s patent, Nova had already established sales.

“Springboard damages are nothing more than a type of loss to be proven with evidence, and I see no reason why this principle should operate differently to a plaintiff’s gains in the context of an accounting of profits,” Justice Fothergill wrote.