Canada Federal Court of Appeal Affirms Punitive Damages Award

Canada Federal Court of Appeal Affirms Punitive Damages Award

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Airbus Helicopters S.A.S. v Bell Helicopter Textron Canada Limited, 2019 FCA 29

Caution must be exercised when challenging punitive award ordered by the trial judge in patent infringement proceedings. Trial judges are entitled to a high degree of deference as it is their task to consider all the specific circumstances of each case in order to properly apply the principles underlying punitive damages. Appellate courts may only intervene to vary the damage if the award is so grossly out of disproportion as to amount in an error of law.

In this decision, the Federal Court of Appeal (“FCA”) upheld the trial judge’s award of punitive damages and dismissed the cross-appeal.  Moreover, the appellate court agreed with the trial judge as it found the award to be proportional and consistent with the objectives of punitive damages – retribution, deterrence and denunciation.

Background

The two parties are major manufacturers of helicopters, which they sell worldwide. Airbus Helicopter S.A.S (the “appellant”) is the owner of the Canadian patent at issue, Patent No. 2,207,787 (the ‘787 Patent). The patent comprises a landing gear, the Moustache, that addresses issues of ground resonance instability. Bell Helicopter Textron Canada Limited (the “respondent”) leased a helicopter containing the patented landing gear from the appellant to study the performance and conducted tests to produce its own landing gear. [4-5]

Proceeding an infringement action commenced by the appellant for the Bell 429 helicopter containing the infringed landing gear, the respondent modified the Legacy landing gear, and quarantined 21 units of Legacy produced so far. Consequently, the trial judge found that, by using the Legacy gear, the respondent had infringed the ‘787 Patent and awarded the appellant damages, including punitive damages. [12-14]

In the cross-appeal in front of the FCA, the appellant argues the awarded punitive damage is insufficient to satisfy the objective of damages and that the trial judge was limited to a two million dollar ceiling, whereas the respondent argues the excessive nature of the $1,000,000 award in punitive damages.

Six considerations identified in Whiten v. Pilot Insurance Co., 2002 SCC 18

The FCA concurred with the Federal Court (“FC”) in assessing the quantum of the punitive damages of $1,000,000 by identifying the six considerations set out in Whiten v. Pilot Insurance Co., 2002 SCC 18. The six considerations are listed below:

  • The first factor the FC considered, the blameworthiness of the respondent’s conduct: the respondent’s misconduct was “planned and deliberate”, and that the “infringement continued for a number of years”. [19]
  • The second factor, vulnerability of the appellant: this factor was more or less neutral. [21]
  • Third factor, the harm or potential harm directed at the appellant: a small financial loss resulted from the respondent’s “outrageous misconduct” and no sales of the Bell 429 have occurred. [22]
  • The fourth factor, deterrence, the FC stipulated that in determining an amount of damages “sufficiently important so as to attract the attention of the respondent and the community”, and the duration of the infringement must be considered. However, the court went on stress that mitigating factors must be considered. In the case at present, this includes the good reputation of the respondent, the respondent had never been condemned for intellectual property violations. [24]
  • The fifth factor, other civil or criminal sanctions imposed: the FC found it to be neutral.
  • The last factor, the FC found that there were a number of advantages wrongfully gained by the respondent. [26]

Federal Court of Appeal upholds award 

To reiterate, the appellate court will intervene in regard to punitive damages when warranted by an error of law and if the award is so grossly out of proportion.

The appellant argued that the FC was constrained by a $2,000,000 ceiling and put forward precedent where courts have granted punitive awards up to $25,000,00 as in the decision in Lubrizol Corp v. Imperial Oil Ltd., [1994] F.C.J. No. 1441 (Lubrizol). Although the FCA stated that there is nothing inappropriate in using a range of previous awards as a guide to assess the amount of punitive damages, the FCA did not find the trial judge being limited by the factors when assessing the award. This said, the appellant did not convince the FCA with the decision of Lubrizol, as the present case cannot be comparable. [38-43]

Additionally, the FCA agreed that $1,000,000 satisfies the purposes of retribution, deterrence, and denunciation. Under blameworthiness of the conduct factor and deterrence, the amount awarded to the appellant properly demonstrates the seriousness of the respondent’s conduct, these two factors militate for higher punitive damages. Nonetheless, the unwarranted damages greater than $1,000,000 is due to a number of emphasized mitigating factors from the respondent. [47-52]

Lastly, to address the argument put forward by the respondent, the FCA upheld with the trial judge’s reasoning as to the awarded damages is the minimum amount of punitive damages that can be awarded to achieve the goal of deterrence. The FCA restated the infringement of the ‘787 Patent is a deliberate and an outrageous conduct that persisted over a lengthy and it is a marked departure from ordinary standards of decent behavior. As well, the executives were ignorant of the appellant’s intellectual property rights. Nevertheless, the appellant was awarded the minimum proportionate punitive damages taking the conduct above and the mitigating factors into consideration. [72-76]

Commentary

Patent infringement is not tolerated by the courts and it is infrequently intervened by the appellate courts. The trial courts will often use the six consideration identified in Whiten v. Pilot Insurance Co., 2002 SCC 18 to determine the amount of punitive damages. This said, the award ordered is unpredictable as demonstrated in the above case. However, the court will often order the minimum amount in order to satisfy the objectives of damages and deterrence.

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