PUNITIVE DAMAGES


of distinguishing between frivolous and legitimate defences in such awards. While accepting the trial court’s general conclusions, the appeal court emphasised that Cinar’s arguments, although ultimately rejected, were not baseless.


Punitive damages in Eurocopter


Te facts in Eurocopter align the case firmly with the jurisprudence flowing from Whiten in which Canadian courts have awarded punitive damages. Te plaintiff Eurocopter held a Canadian patent for its design of skid-type helicopter landing gear. Shaped like a sleigh (or, some would say, a moustache), this innovative gear absorbs energy from the craſt, efficiently distributes its weight, and avoids ground resonance upon landing, a key concern for helicopter design. Bell Helicopter is Eurocopter’s long-time competitor in the civilian and parapublic helicopter industry.


For its new Bell 429 helicopter, Bell’s Canadian division developed landing gear which was strikingly similar to Eurocopter’s moustache design. Upon discovering Bell’s competing product, Eurocopter launched an infringement suit in Canada, alleging that Bell had made false and misleading claims to the effect that its landing gear design was Bell’s innovation. Bell made changes to its design aſter the lawsuit was launched.


Te first key factor in awarding punitive damages was the court’s rejection of Bell’s claims of having been unaware of its likely infringement of Eurocopter’s patent. Bell’s developers had studied the performance of Eurocopter’s design, leased and operated a Eurocopter EC120 equipped with the moustache landing gear, performed tests and received training on it. Te result, according to the court, was “no more than a slavish copy” of Eurocopter’s patented gear. Bell’s testing of Eurocopter’s design was found to have far exceeded simple industry benchmarking practices. Furthermore, the project manager at Bell had specifically instructed engineers to “carry on” when he was informed of potential similarities with Eurocopter’s design. Bell was therefore found to have wilfully developed its product in contravention of Eurocopter’s patent.


A second aspect of the case supporting punitive damages was Bell’s conduct during the proceedings. In light of Bell’s refusal throughout to acknowledge any infringement, the court found that its quarantining of the infringing gears was best interpreted as an attempt to mitigate damages rather than a demonstration of good faith. Forestalling an admission of infringement through multiple legal strategies was held by the court to be “vindictive” behaviour. Finally, the court drew a negative inference from the fact that


Bell declined to present witnesses who would have been able to support Bell’s contention that it was unaware of Eurocopter’s patent.


Te need for deterrence provided a final justification for punitive damages. Awarding an accounting of profits was difficult since the landing gear is only one component of a helicopter. Te court held that Bell had nevertheless gained a significant reputational benefit in a tightly knit industry by falsely claiming to have developed an innovative product. Tis deprived Eurocopter of the fruits of its investments in time and research. Protection of market recognition, a theme in the Louis Vuitton cases, therefore emerged again here.


Canadian courts are increasingly relying upon the Supreme Court’s keystone decision in Whiten for a response to the wilful infringement of IP rights. Justice Binnie’s rejection of categories and favouring of principles over stock terminology has been echoed in jurisprudence during the decade since the decision. Courts are adapting Justice Binnie’s original criteria to confront a specific behavioural cocktail.


Te essential ingredients include wilful infringement of IP rights and a dismissive, or overly aggressive, approach to the legal process. Appropriation of IP can require the plaintiff to assume burdensome expenses to reclaim it; moreover, the precise determination of damages may be difficult, if not impossible. Te fruit is therefore not only seized just as it ripens, it is also immediately consumed and its prior existence insistently denied. Faced with compelling evidence of wilful infringement and obstructionist behaviour during the legal process, courts are using punitive damages to both express their concern and deter similar future behaviour.


Possible solutions for avoiding wilful infringement may reside in a practice already well established in the US: a potential infringer should obtain a freedom-to-operate opinion from counsel upon receiving notice of the patent. An opinion of non- infringement, invalidity or unenforceability may demonstrate to the court that the defendant takes the plaintiff’s patent rights seriously and that the infringement was unintentional. n


Marek Nitoslawski is a partner at Fasken Martineau Dumoulin LLP. He can be contacted at: mnitoslawski@fasken.com


David Turgeon is an attorney and patent agent at Fasken Martineau Dumoulin LLP. He can be contacted at: dturgeon@fasken.com


38 World Intellectual Property Review Annual 2012 www.worldipreview.com


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