In this case the SCC, in a 7-2 decision, affirmed an order requiring Google “to globally de-index the websites of a company which, in breach of several court orders, is using those websites to unlawfully sell the intellectual property of another company” [1]. The case is not directly patent related, so I won’t go through all of it (though I did blog here on the BCSC decision). This post will consider only a statement in the dissent of Côté and Rowe JJ that, if accurate, has implications for patent law.
The order was formally interlocutory, in that it was was effective “until the conclusion of the trial of this action” [51]. As it turned out, by the time it reached the SCC, Equustek had still not taken any action to proceed with the action, even by way of obtaining a default judgment, in the five years since the order was made [61]. The dissent was of the view that the order was, "in effect, a permanent injunction," [64], and consequently it should have been – or at least, it should now be – treated as one. (I must say that this whole line of reasoning strikes me as strange. I don't see why Fenlon J in the BCSC would have had any reason to believe that the effect of the order would be final, so she didn't make any error in treating as interlocutory. Nor did the dissent explicitly say that she had erred; the opinion avoided the question by using the passive voice. But it would seem very odd for an appellate court to reverse a decision for having applied the wrong test, if the application judge, when she made her decision, hadn't actually applied the wrong test. I would have thought that if the defendant was aggrieved by the effectively final nature of the interlocutory order, it should have applied to Fenlon J to have the order lifted.)
In any event, that reasoning led the dissent to the following statement:
[66] The Google Order also does not meet the test for a permanent injunction. To obtain
a permanent injunction, a party is required to establish: (1) its legal rights; (2) that
damages are an inadequate remedy; and (3) that there is no impediment to the court’s
discretion to grant an injunction (1711811 Ontario Ltd. v. Buckley Insurance Brokers
Ltd., 2014 ONCA 125, 371 D.L.R. (4th) 643, at paras. 74-80; Spry, at pp. 395 and 407-8).
This statement of law, if correct, would be potentially revolutionary. Compare the test introduced by the USSC in eBay (2006) 547 US 388, 391:
[A] plaintiff seeking a permanent injunction must satisfy a four-factor test before a court
may grant such relief. A plaintiff must demonstrate: (1) that it has suffered an irreparable
injury; (2) that remedies available at law, such as monetary damages, are inadequate to
compensate for that injury; (3) that, considering the balance of hardships between the
plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest
would not be disserved by a permanent injunction.
The key point is that under eBay there is in principle no presumptive entitlement to injunctive relief, and, under the first and second factors the plaintiff faces the hurdle of showing irreparable harm / inadequacy of damages before a permanent injunction will be granted. (The first two factors are generally seen as being indistinguishable, both conceptually and empirically: see Gergen et al, The Supreme Court’s Accidental Revolution? The Test for Permanent Injunctions, 112 Colum L Rev 203 (2012), discussing conceptual equivalence, and Seaman, Permanent Injunctions in Patent Litigation After eBay: An Empirical Study, 101 Iowa L. Rev. 1949, 1994 (2016), showing the factors are strongly correlated empirically.) The consequence of eBay in the US is that permanent injunctions are often denied to successful patentees on the basis that irreparable harm has not been established: see generally Seaman, Permanent Injunctions After eBay. The same structure as in eBay, and indeed the same language, is reflected in the second factor of the dissenters putative test in Equustek. Moreover, the test for an interlocutory injunction in Canada also has a requirement that the applicant show it would suffer irreparable harm if the application were refused ( RJR-MacDonald [1994] 1 SCR 311, 347, following American Cyanamid [1975] UKHL 1), and the Federal Court effectively invariably refuses to order an interlocutory injunction in patent cases, on the basis that this requirement has not been satisfied. Unless there is some distinction to be drawn between “damages are an inadequate remedy,” and “irreparable harm,” it seems that if the test for a permanent injunction stated by the dissent in Equustek really was the law, permanent injunctions should no longer be granted to a successful patentee in Canada.
Fortunately, the putative test stated by the dissent is not the law. First consider the cited case, 1711811 Ontario v Buckley Insurance 2014 ONCA 125 [74]-[80]. That passage addresses whether the test for a permanent injunction is different than the test for an interlocutory injunction, and concludes that they are indeed different. In this, the decision supports the dissent’s basic point. But as to the test itself, the relevant paragraph is 79, quoting Cambie Surgeries 2010 BCCA 396, [27]-[28], which notes that “irreparable harm and balance of convenience are relevant to interlocutory injunctions,” and then continues:
In order to obtain final injunctive relief, a party is required to establish its legal rights.
The court must then determine whether an injunction is an appropriate remedy.
Irreparable harm and balance of convenience are not, per se, relevant to the granting of a
final injunction, though some of the evidence that a court would use to evaluate those
issues on an interlocutory injunction application might also be considered in evaluating
whether the court ought to exercise its discretion to grant final injunctive relief.
Well, that’s embarrassing. This passage stands for exactly the opposite proposition from that for which it is cited.
Consider then Spry, The Principles of Equitable Remedies (2014). The only relevant passage at 395 states that “Before the discretionary considerations according to which perpetual injunctions are granted or refused are considered, it is necessary to set out the circumstances in which the court declines to intervene because a remedy at law, such as that of damages, is considered to be adequate.” This is very far indeed from saying that adequacy damages is the second stage of a four-factor test, particularly as Spry goes on to provide 6+ pages of nuanced discussion, including the observation that “gradually there has developed a tendency not to regard damages as constituting adequate remedy for prospective injury to existing property of the plaintiff or his person,” and “it must now be accepted as settled ‘the rule that where the plaintiff has established the invasion of a common law right, and there is ground for believing that without an injunction there is likely to be a repetition of wrong, he is, in the absence of special circumstances, entitled to an injunction against such repetition.’” (397). This, he explains, is the source of what is effectively a strong presumption in favour of injunctive relief for violation of property rights in land. The same reasoning extends to property rights generally, hence the traditional position, still observed in Canada, that a permanent injunction will normally be granted to a successful patentee. Pages 406-07 are even further from stating a four-part test. Rather Spry emphasizes the need for a risk balancing exercise to assess “whether it is just, in all the circumstances, that an injunction should be granted.” And this considers only the authorities cited by the dissent itself. Much the same point is made by Sharpe JA in his authoritative treatise on Injunctions and Specific Performance, where he notes, for example, that “when the plaintiff complains of an interference with property rights, injunctive relief is strongly favoured. . . . [I]n practical terms, the conventional primacy of common law damages over equitable relief is reversed” [§4.10].
The fact is that, contrary to the statement by the dissent, there is no general test for a permanent injunction. There are general principles of equity, which have themselves evolved over time, particularly in light of the functional change wrought by the fusion of law and equity, and which have also been elaborated differently in various contexts, so that the approach to trespass is different from nuisance, is different from positive contractual covenants, is different from negative contractual covenants.
I was of half a mind not to write this post at all. The statement that concerns me was made almost in passing, in the dissent, and what was important for the dissent’s argument was not the precise test, but the fact that the approaches to interlocutory and permanent injunctions are different, which is true. But sometimes passing comments by the SCC have an outsized influence (see R v Henry 2005 SCC 76 [57], discussing when the Court’s statements are binding). My own view is that it would be a mistake for the Canadian courts to follow the eBay approach to permanent injunctions in the patent context: I much prefer the proportionality approach used by the English courts: see eg HTC v. Nokia (No. 2)[2013] EWHC 3778 (Pat). But If the Canadian courts do follow eBay, it should be as a result of a considered decision, and not on the basis of this tangential and poorly considered statement in Equustek.
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