Monsanto Canada Inc. et al. v. Rivett et al., (2010) 408 N.R. 143 (FCA)

• Judge: Sharlow, Dawson and Trudel, JJ.A.
• Court: Federal Court of Appeal (Canada)
• Case Date: June 16, 2010
• Jurisdiction: Canada (Federal)
• Citations: (2010), 408 N.R. 143 (FCA);2010 FCA 207

Monsanto Can. Inc. v. Rivett (2010), 408 N.R. 143 (FCA)

MLB headnote and full text

Temp. Cite: [2010] N.R. TBEd. OC.007

Charles Rivett (appellant) v. Monsanto Canada Inc. and Monsanto Company (respondents)

(A-314-09)

Lawrence Janssens, Ronald Janssens and Alan Kerkhof (appellants) v. Monsanto Canada Inc. and Monsanto Company (respondents)

(A-315-09; 2010 FCA 207)

Indexed As: Monsanto Canada Inc. et al. v. Rivett et al.

Federal Court of Appeal

Sharlow, Dawson and Trudel, JJ.A.

August 6, 2010.

Summary:

Monsanto Canada Inc. and Monsanto Company (together "Monsanto") were the licensee and owner, respectively, of Canadian Patent No. 1,313,830 (the '830 Patent), which related to an invention entitled "Glyphosate-Resistant Plants". In two separate actions by Monsanto, one against Rivett, and the other against two brothers (the Janssens) and Kerkhof, all the defendants admitted infringement of the patent by growing, harvesting and selling crops of soybeans which they knew contained genes and cells as claimed in the patent. Summary judgments were issued on consent. Monsanto chose accounting of profits as the remedy. Monsanto's action against Rivett was heard immediately before its action against the Janssens and Kerkhof.

The Federal Court set the total amount of profits to be disgorged by the defendants, using the differential profit approach. The reasons for judgment are reported at 343 F.T.R. 203; 2009 FC 317 (Rivett's reasons), and at 343 F.T.R. 234; 2009 FC 318 (Janssens' and Kerkhof's reasons). The defendants appealed, alleging that the judge erred in disallowing deductions of expenses, and in determining too high a percentage of the profit differential. Monsanto cross-appealed, arguing that the judge erred in not choosing the differential cost approach, and that profits to be disgorged should have been $129,477.21 for Rivett, rather than the $40,137.94 awarded; $16,258.08 for L. Janssens, instead of $5,040; $14,379.04 for R. Janssens instead of $4,457.50; and $16,258.08 for Kerkhof, instead of $5,040. The appeals were heard together.

The Federal Court of Appeal dismissed Monsanto's cross-appeals. The judge made no error when he chose and applied the differential profit approach. Monsanto's arguments on the cross-appeals did not justify the court's intervention. The court allowed the appeals of Rivett, and of Janssens and Kerkhof, in part. The judge erred in disallowing Rivett's costs associated with general maintenance and equipment repairs; a deduction of $3,217.62 should have been allowed. The court also agreed with Rivett that the percentage of the profit differential applied by the judge (31%) was too high, and should be equal to 18%, following Monsanto's own and unchallenged evidence. The Janssens' appeal failed on all issues, except the percentage of the profit differential.

Equity - Topic 1006

Equitable relief - General - Accounting of profits - [See second Patents of Invention - Topic 8163 ].

Patents of Invention - Topic 3827

Infringement actions - Damages - Profits - Accounting - The defendants infringed Monsanto Company's '830 patent - It chose accounting of profits as the remedy - On cross-appeal, Monsanto raised the issue that the judge erred when applying the differential profit approach to the accounting of profits - It denied any precedential authority to Monsanto Canada Inc. v. Schmeiser (2004) (S.C.C.) - The Federal Court of Appeal disagreed - Schmeiser and the defendants met the one condition precedent to an accounting of profits: infringement of the plaintiff's subject patent - "Once this is said, I find that the cases under appeal fit Schmeiser. Firstly, as stated by the judge: 'On this basis alone, one may reject [the plaintiff's] claim that Schmeiser has to be read as the Court fashioning a remedy to absolve the defendant of his innocent use of the patented seed' ... Also, the Supreme Court's statement in Schmeiser is unambiguous: the preferred means of calculating an accounting of profits ... is the differential profit approach ... The fact that the award of profits in Schmeiser is zero does not, in my opinion, taint that principle or narrow its application" - See paragraphs 34 to 36.

Patents of Invention - Topic 3827

Infringement actions - Damages - Profits - Accounting - The defendants infringed Monsanto Company's '830 patent by growing, harvesting and selling crops of soybeans which they knew contained genes and cells as claimed in the patent - Monsanto chose accounting of profits as the remedy - On cross-appeal, Monsanto raised the issue that the judge erred by applying the differential profit approach - The Federal Court of Appeal concluded that the judge was right in his approach - "The Judge was obviously aware of other valuation methodologies, prior court cases dealing with them and the scholarly debate amongst intellectual property practitioners as to their relevance and applicability. He was not convinced that the Supreme Court's stated preference for the differential profit approach should be as narrowly construed as suggested by Monsanto ... Based on the factual evidence presented to him, and taking support from Schmeiser, the Judge exercised his discretion, and applied the differential profit approach in situations very similar to the one in Schmeiser. ... [T]he Judge was required to choose an acceptable remedy. ... [H]e devised the best monetary remedy to address the infringement cases before him and therefore committed no reviewable error in respect of this issue" - See paragraph 42.

Patents of Invention - Topic 3827

Infringement actions - Damages - Profits - Accounting - The defendants (Rivett, Janssens and Kerkhof) infringed Monsanto Company's '830 patent - Monsanto chose accounting of profits as the remedy - On their appeals, the defendants agreed with the differential profit approach adopted by the judge, but alleged that he erred in various respects in his calculations and when deducting expenses from gross profits - In addition, they posited that the judge erred in determining too high a differential between the gross profits of infringement and the profit the defendants would have made had they used the next best non-infringing alternative - The Federal Court of Appeal allowed the appeals in part - The judge erred when determining that the profit differential was 31% instead of 18% - A chart prepared by Monsanto to demonstrate the increased profit that could be realized by the use of its product showed a profit differential of 18% - In the Rivett appeal, the court also found that the judge erred in failing to have regard to a whole body of evidence relating to costs for general maintenance and equipment repairs, which should have lead to a further deduction from gross profits - See paragraphs 12, 15, 60 to 102.

Patents of Invention - Topic 8163

Practice - Appeals - Questions of law, fact or mixed fact and law (incl. applicable standard of review) - The defendants admitted infringement of the plaintiff's patent - The plaintiff chose accounting of profits as the remedy - The plaintiff, on its cross-appeals, challenged the trial judge's differential profit approach, and argued that the standard of review was correctness - The defendants, on their appeals, agreed with the approach adopted by the judge, but alleged that he erred in his calculations and when deducting expenses - They argued that their appeals raised questions of law or questions of mixed fact and law - The Federal Court of Appeal disagreed with both the plaintiff and the defendants - "While I agree that a standard of correctness applies to the question of whether the Judge applied an appropriate test, in this case, the Judge chose between a number of legally acceptable tests. When a judge chooses between a set of legally acceptable tests, his or her choice, and the results of his or her application of the test, must be accorded deference" - See paragraph 19.

Patents of Invention - Topic 8163

Practice - Appeals - Questions of law, fact or mixed fact and law (incl. applicable standard of review) - The defendants admitted infringement of the plaintiff's patent - The plaintiff chose accounting of profits as the remedy, rather than damages - The trial judge adopted the differential profit approach - The Federal Court of Appeal stated that "In this case, an incorrect principle would mean that the trial judge used an unacceptable method to calculate profits attributable to the infringement and therefore subject to disgorgement. ... [T]he jurisprudence does not indicate that there is only one accepted method for the calculation of profits or damages; in truth, there may be many. While the differential profit approach may be the preferred method in many circumstances, it is not the only method. Indeed, an accounting of profits, unlike damages, is an equitable remedy ... As such, an accounting of profits should be flexible in order to make the injured party whole. Therefore, as long as the trial judge selected an acceptable method and followed it, his calculation cannot be overturned absent a 'wholly erroneous estimate of the damage.'" - See paragraph 23.

Cases Noticed:

Reading & Bates Construction Co. v. Baker Energy Resources Co. et al., [1995] 1 F.C. 483; 175 N.R. 225, refd to. [para. 7].

Lubrizol Corp. v. Imperial Oil Ltd., [1997] 2 F.C. 3; 206 N.R. 136 (F.C.A.), refd to. [para. 7].

Celanese International Corp. v. BP Chemicals Ltd., [1999] R.P.C. 203 (Pat. Ct.), refd to. [para. 7].

Monsanto Canada Inc. et al. v. Schmeiser et al., [2004] 1 S.C.R. 902; 320 N.R. 201; 2004 SCC 34, appld. [para. 7].

Nance v. British Columbia Electric Railway Co., [1951] A.C. 601 (P.C.), refd to. [para. 20].

Naylor Group Inc. v. Ellis-Don Construction Ltd., [2001] 2 S.C.R. 943; 277 N.R. 1; 153 O.A.C. 341; 2001 SCC 58, refd to. [para. 21].

Laurentide Motels Ltd. et al. v. Beauport (Ville) et al., [1989] 1 S.C.R. 705; 94 N.R. 1; 23 Q.A.C. 1, refd to. [para. 21].

Woelk v. Halvorson, [1980] 2 S.C.R. 430; 33 N.R. 232; 24 A.R. 620, refd to. [para. 21].

Industrial Teletype Electronics Corporation v. Montreal (City), [1977] 1 S.C.R. 629; 10 N.R. 517, refd to. [para. 21].

Stewart Estate v. Dyck - see Proctor v. Dyck.

Proctor v. Dyck, [1953] 1 S.C.R. 244, refd to. [para. 21].

Northeast Marine Services Ltd. v. Atlantic Pilotage Authority, [1995] 2 F.C. 132; 179 N.R. 17 (F.C.A.), refd to. [para. 21].

CAE Industries Ltd. and CAE Aircraft Ltd. v. Canada, [1986] 1 F.C. 129; 61 N.R. 19 (F.C.A.), refd to. [para. 21].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 22].

Moskaleva v. Laurie (2009), 272 B.C.A.C. 164; 459 W.A.C. 164; 94 B.C.L.R.(4th) 58; 2009 BCCA 260, refd to. [para. 21].

Sharpe v. Abbott (2007), 250 N.S.R.(2d) 228; 796 A.P.R. 228; 2007 NSCA 6, refd to. [para. 22].

Litwinenko v. Beaver Lumber Co. (2008), 237 O.A.C. 237 (Div. Ct.), refd to. [para. 22].

Teledyne Industries Inc. et al. v. Lido Industrial Products Ltd. (1979), 45 C.P.R.(2d) 18 (F.C.T.D.), refd to. [para. 23].

Colburn v. Simms (1843), 12 L.J. Ch. 388, refd to. [para. 23].

Wellcome Foundation Ltd. et al. v. Apotex Inc. (1998), 151 F.T.R. 250; 82 C.P.R.(3d) 466 (T.D.), affd. [2001] 2 F.C. 618; 267 N.R. 109 (F.C.A.), refd to. [para. 26].

Bayer Aktiengesellschaft et al. v. Apotex Inc. (2002), 155 O.A.C. 117; 16 C.P.R.(4th) 417 (C.A.), refd to. [para. 26].

Monsanto Canada Inc. et al. v. Schmeiser et al., [2003] 2 F.C. 165; 293 N.R. 340; 2002 FCA 309, refd to. [para. 63].

Allied Signal Inc. v. Du Pont Canada Inc. and Complax Corp. (1998), 142 F.T.R. 241 (T.D.), refd to. [para. 63].

Monsanto Canada Inc. et al. v. Schmeiser et al. (2002), 202 F.T.R. 78 (T.D.), refd to. [para. 68].

Authors and Works Noticed:

Dimock, Ronald E., Intellectual Property Disputes: Resolutions and Remedies (2004 Looseleaf Supp.), p. 18-29 ff. [para. 41].

Morrow, A. David and Ingram, Colin B., Case Comment Of Transgenic Mice and Roundup Ready Canola: The Decision of the Supreme Court in Harvard College v. Canada and Monsanto v. Schmeiser (2005), 38 U.B.C. L. Rev. 189, generally [para. 40].

Siebrasse, Norman, A Remedial Benefit-Based Approach to the Innocent-User Problem in the Patenting of Higher Life Forms (2004), 20 C.I.P.R. 79, generally [para. 41].

Counsel:

Donald Good and Kurtis Andrews, for the appellant (in both action nos.);

Arthur B. Renaud and L.E. Trent Home, for the respondents (in both action nos.).

Solicitors of Record:

Bennett Jones LLP, Toronto, Ontario, for the appellant (in both action nos.);

Donald R. Good A Professional Corporation, Ottawa, Ontario, for the respondent (in both action nos.).

These appeals and cross-appeals were heard at Ottawa, Ontario on June 16, 2010, before Sharlow, Dawson and Trudel, JJ.A., of the Federal Court of Appeal. In reasons for judgment written by Trudel, J.A., the Court of Appeal delivered the following judgment at Ottawa, Ontario, dated August 6, 2010.