• Reasonable Royalty and Accounting of Profits Determinations Made
  • May 24, 2017 | Authors: Jillian Brenner; Adrian J. Howard; Beverley Moore; Chantal Saunders
  • Law Firm: Borden Ladner Gervais LLP - Ottawa Office
  • Dow Chemical Company v. Nova Chemicals Corporation, 2017 FC 350

    In a previous decision, which was affirmed, the Court found that Dow's patent was valid and infringed by Nova. Once a finding of liability was made, Dow was entitled to elect between an accounting of profits or damages. The quantum was to be determined following discovery, if required. Dow elected recovery of Nova's profits. This decision relates only to the assumptions that inform the calculation of damages and profits and the experts will determine the amount owed based on these conclusions.

    The parties agreed that a reasonable royalty is the proper measure of damages from the time that the product was launched in 2002 until the patent issued in 2006, although the limitation period operates to prevent recovery earlier than 2004. The Court set out that the "reasonable royalty is to be determined using a hypothetical negotiation between Dow and Nova for a licence authorizing Nova's use of the patented technology. The object of the exercise is to identify the royalty rate that would result from a negotiation between a willing licensor and a willing licensee" [citations omitted].

    The Court set out that the hypothetical negotiation occurs at the time of the first infringement. The Court considered Dow's minimum willingness to accept as well as Nova's maximum willingness to pay. The Court also considered non-infringing alternatives in its determination. Based on these considerations, the Court found that the rate of the reasonable royalty is 8.8%.

    Dow elected an accounting of profits. The Court noted the general principles of an accounting of profits. The Court determined that the accounting of profits includes a "springboard period" from April 20, 2014 to December 31, 2015, following the expiry of the patent. The Court then assessed deductible costs and made a number of determinations based on the evidence. The Court also determined the rate of interest for the period of the accounting of profits compounded annually, the rate of pre-judgment interest not compounded, and determined that the amount to be paid to Dow is to be converted to Canadian dollars as of the date of the Judgment.