The Dow Chemical Company v Nova Chemical Corporation, 2017 FC 637
Patent infringement cases are increasing in both complexity and in the quanta of damages being awarded.
In this supplemental judgment, the Federal Court (“FC”) awarded Dow Chemical Company, Dow Global Technologies Inc. and Dow Chemical Canada ULC (collectively, “Dow”) $644,623,550.00, inclusive of pre-judgment interest. On April 19, 2017, the FC had issued its Public Judgment and Reasons for the decision in Dow Chemical Company v Nova Chemicals Corporation, 2017 FC 350 [Dow v Nova] (the PCK Reporter summary for which is available here).  Pursuant to that decision, Dow and Nova Chemicals Corporation (“Nova”) were directed to exchange calculations of damages and profits that would be payable by Nova to Dow and to identify any issues requiring resolution by the FC.  This decision addressed three outstanding issues, and, as a result, determined the quantum of damages and profits payable by Nova to Dow. 
While the parties were substantially in agreement regarding sums payable by Nova to Dow, they were unable to resolve three issues,  namely:
- Whether Nova would be permitted to deduct capital costs and certain fixed costs relating to the ethylene used to produce the infringing products,
- What the basis would be for allocating fixed costs of Nova’s PE2 plant between the infringing and non-infringing products made at the facility, and
- When the capital expenditures reported in Canadian dollars relating to the construction of the PE2 plant should be converted to US dollars, in order to calculate annual capital depreciation. 
The FC dealt with each of the three issues in turn.
The judgment in Dow v Nova stated that Nova may deduct the costs it actually incurred to obtain the ethylene used to manufacture the infringing products, from the revenues derived from the infringing sales from August 22, 2006 to December 31, 2015, after deducting the costs of producing the ethylene.  Nova sought to deduct capital depreciation expenses for one of its divisions and argued that this approach would be consistent with the FC’s finding that Nova may deduct the costs incurred to manufacture the ethylene “using a full cost or absorption approach.”  The FC, however, agreed with Dow’s approach,  in that the Judgment in Dow v Nova permitted Nova to deduct only those costs that were actually incurred to produce the ethylene used to make the infringing products, not capital expenditures. 
Allocation of PE2 Plant Fixed Costs
The FC also agreed with Dow’s accountant  in that the fixed costs of the PE2 plant should be allocated based on relative production volumes of the infringing products.  Dow’s accountant had reasonably relied on the evidence provided by Nova on discovery to conclude that the appropriate basis for fixed cost allocation would be “billed volume.”  Nova’s experts had unsuccessfully proposed a number of different approaches based on advice from Nova’s economist. 
Timing of Conversion
The Dow v Nova judgment also provided Nova with the option to deduct a proportional amount of annual capital depreciation expenses for the PE2 plant and ongoing capital costs for the PE2 plant against revenues obtained from the infringing product sales between a specified time.  Dow argued that the appropriate date of conversion for initial PE2 plant construction costs should be 2001, the year the expenditure was incurred.  Nova responded that the approach taken by its accountant was not challenged by Dow on cross-examination,  something that the FC found reasonable and supported by the evidence well enough to agree with Nova. 
Nova was ordered to pay Dow $644,623,550.00, inclusive of pre-judgment interest to the Dow v Nova judgement, together with pre-judgment interest calculated in accordance with the FC’s decision in Dow v Nova, from that judgment to the date of this judgment.
This decision perfectly illustrates two very important points about patent infringement lawsuits. The first is that they are becoming increasingly complex, with minute aspects being taken into account at every step of the way. The second is that the damages awards being granted are also increasing significantly. To date, this decision is the largest patent infringement damages award in Canadian history, but it likely won’t be long before it is outdone.