Patent Enforcement in North America: Canada or the U.S.?

“We have been surprised to find that some American patent owners have, over the last eight or nine years, chosen to initiate litigation in Canada first.” – Bob Sotiriadis

Due to the countries’ proximity and their shared common law roots and court systems, cross-border litigation involving parallel cases on equivalent or very similar patents is not uncommon in Canada and the United States (U.S.).

U.S. patent holders often opt to sue in Canada before initiating proceedings in their home country.

“We have been surprised to find that some American patent owners have, over the last eight or nine years, chosen to initiate litigation in Canada first even—as in one of Robic’s cases—where most of the company’s sales were south of the border,” says Bob Sotiriadis, an industrial and intellectual property (IP) law specialist at Robic in Montreal, a member of the IPH network.

But strategy is paramount where patent holders are contemplating enforcement in multiple jurisdictions.

Where and in which jurisdiction to initiate action, when and in what order to do so, and how to take advantage of or minimise the disadvantages of domestic procedural, evidentiary and substantive law and practice are but some of the complex considerations not only for counsel advising rights holders but also for local counsel instructing lawyers managing the overall litigation.

There are several reasons why parties may choose to sue in Canada first.

“Some U.S. counsel see Canadian litigation as a dress rehearsal for lawsuits in their jurisdiction, including getting a feel for the other party,” Sotiriadis says. “Otherwise, litigation in the U.S. tends to be more expensive and the remedies tend to be clearer in Canada, where the courts almost always order permanent injunctions after trial to a successful patentee.”

But whether the proceedings in the two countries proceed simultaneously or consecutively, the differences in the two systems mean that it’s always important to manage the expectations of U.S. counsel.

“American lawyers can be surprised to discover that they’re not automatically entitled to use information from the Canadian case in the U.S. proceedings,” says Sotiriadis, drawing on Robic’s experience, including as counsel for major technology developers. “That’s because we have an implied undertaking rule which dictates that the documents or information disclosed under compulsion during litigation can only be used for the proceedings in which it is disclosed, and not in separate lawsuits without the consent of the disclosing party or leave of the court.”

Other key differences relate to the manner of trial and the discovery process.

“There are no jury trials in patent cases in Canada, which are all heard by judges, mostly in the Federal Court of Canada,” Sotiriadis explains. “What that means is there’s little opportunity for forum shopping in Canada.”

The scope of discovery is also significantly different in the two systems.

“Discovery here is much more limited,” Sotiriadis says.

In Canada, examinations for discovery (called depositions in the U.S.) are limited of right to one representative per party and, in some cases, to the patent’s inventor. And there are no provisions for the discovery of experts in Canadian rules, meaning that the first opportunity to examine them occurs at trial.

“In general, there’s more management of experts in Canada, both to prevent abuse and to keep costs under control,” Sotiriadis says.

American lawyers may also be surprised to discover that “Markman” hearings, usually held after discovery but before trial in the U.S., don’t exist in Canada.

“Here, the trial judge determines claim construction at the same time as other issues, such as infringement and validity,” Sotiriadis says. “What that means is that the positions on claim construction are not divulged until expert reports are exchanged, often just a few months before trial.”

And because patent cases turn in large part on Expert evidence tendered at trial, and the credibility of the experts, summary judgment motions in Canada are rare in patent cases.

An important consideration is the remedies available, which vary between the two countries.

Treble damages are not available in Canada, although punitive damages can be awarded in cases involving egregious conduct (willful infringement is not sufficient). Liability accrues in Canada from the time a patent application is published, while U.S. law requires notice as a precondition to recovering damages.

Parties must also consider who pays the costs of the litigation. Canada is a “loser pays” jurisdiction where the loser must almost always pay a portion of the winner’s costs; in the U.S., some courts may award costs, but such instances are rare.

Finally, timing comes into play in cross-border proceedings.

“Cases get to the trial stage more quickly in the U.S., but trial adjournments are much more frequent,” Sotiriadis says. “In our Federal Court, you proceed on the date set for trial unless someone dies.”