PUNITIVE DAMAGES


Punitive damages traditionally serve a dual purpose. Tey deter undesirable conduct while serving as a supplementary penalty to the defendant should compensatory damages be considered inadequate. In US patent infringement cases, the award of ‘triple damages’ is oſten granted specifically as a sanction against wilful infringement. Canadian courts, however, have traditionally been less inclined to award punitive damages in IP cases. Tis now appears to be changing. Eurocopter v Bell Helicopter Textron Canada Limited, a recent patent infringement case decided in the Federal Court of Canada, is the most recent case in a series confirming that Canadian courts are increasingly alive to the need for punitive damages to deter wilful and intentional infringement of IP rights.


Recent Canadian IP cases


Te court in Eurocopter anchored the award of punitive damages on the triple criteria of wilful infringement, a finding of outrageous conduct and deterrence. In so doing, the court was tightly in step with an identifiable line of IP decisions flowing from the Supreme Court of Canada’s holding in the leading case on punitive damages, Whiten v Pilot Insurance Co. Writing for the majority in that case, Justice Binnie identified the general objectives for punitive damages as those of punishment, denunciation and deterrence. In the decade following Whiten, Canadian courts have expanded upon these criteria and honed their application to IP cases.


A few years aſter Whiten, the Federal Court applied the criteria laid out by the Supreme Court to a pair of cases involving the sale of unlicensed Microsoſt soſtware. In the first case, a small Québec electronics distributor centred its business model on the purchase of unbundled Microsoſt products, which it then re-bundled for resale to retailers. Microsoſt successfully argued that this practice appropriated the premium Microsoſt earned by explicitly prohibiting the unbundling of soſtware packages via licensing agreements passed down through retailers to consumers. Te defendant’s business model therefore relied on violations of these licensing agreements. Te court found that the company knew, or should have known, it was engaged in persistent copyright infringement. Te defendants were also consistently evasive and contradictory under questioning. Suspicion that the company had profited from its infringement beyond the damages claimed by Microsoſt underlined the need for punitive damages as a deterrent.


Te second Microsoſt case was an ex parte decision involving copyright infringement at the retail level, with unauthorised versions of soſtware being installed on computers at the point of sale. Investigators from Microsoſt were bluntly informed


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by the retailer’s sales staff that they knowingly loaded unlicensed soſtware on to consumers’ computers to reduce prices. Considering the multiple cease and desist letters the retailer had received, the court concluded it had wilfully infringed Microsoſt’s copyright. As in the first Microsoſt case, the court discussed both the need for deterrence and how the defendant’s obstructive behaviour created difficulties in calculating loss of sales, as well as damages to Microsoſt’s goodwill.


The Louis Vuitton cases


Justice Binnie’s criteria also provided the foundation for punitive damages in a pair of cases involving counterfeit Louis Vuitton products in British Columbia. Te first judgment by the Federal Court involved wilful infringement of trademarks and copyrights at a fashion retail chain in Richmond. Te retailer had refused to amend its practices despite court orders and seizures of merchandise. Of particular importance in this ex parte decision was the length at which deterrence was addressed by the court, with particular reference to “the erosion of the market for which (Louis Vuitton) has worked very hard”. Finally, the court took note of the difficulty in establishing adequate damages, due largely to the uncooperative behaviour of the defendant.


Punitive damages was, therefore, a tool for ensuring that the defendant did not profit from its infringement. Te facts were similar in the second Louis Vuitton case, with the court expressing its displeasure at the additional time and money required of the plaintiff to enforce its IP rights against a recalcitrant defendant.


A recent Québec case demonstrated the emerging trends seen above while foreshadowing the subsequent decision in Eurocopter. In Robinson v Films Cinar Inc, a production company providing consulting services was held to have appropriated central elements of the work of an author who had, allegedly, submitted storyboards for a television programme. Te principals for the defendant maintained throughout the proceedings that they had never seen the original work in question. Convinced that Cinar had been inspired by the original works, however, the court characterised the defendant’s testimony as obstructive and misleading.


Punitive damages were awarded, according to the court, to communicate to the world that artists seeking to promote their work should be protected from its misappropriation and the ensuing legal battles necessary to assert their rights. However, the Quebec Court of Appeal reversed this in part, reduced the amount of punitive damages awarded at trial, and underlined the importance


World Intellectual Property Review Annual 2012 37


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