Open Question on Applicability of Discoverability Rule to Patent Act Limitations Period

Google Canada Corporation v Paid Search Engine Tools, LLC 2021 FCA 63 de Montigny JA: Webb, Rennie JJA affg 2020 FC 992 McVeigh J

            2,415,167

This is an appeal of a order dismissing Google’s motion for a determination of a question of law pursuant to Rule 220(1)(a). The underlying action was brought by Paid Search against Google alleging infringement of its 167 patent. The patent was published in 2002 and granted in 2017, so a considerable portion of Paid Search’s claim would be for “reasonable compensation” for pre-issuance infringement pursuant to s 55(2). The question proposed by Google was whether the six-year limitation period in s 55.01 applies “such that in the present action no remedy, including no reasonable compensation, may be awarded for any act of infringement committed prior to January 12, 2012?” [5]. At first instance McVeigh J dismissed the motion. The FCA has now affirmed the result, but with a very important difference in the reasoning. In particular, as discussed here, McVeigh J had held that the discoverability rule does apply to the s 55.01 limitation period. de Montigny JA’s analysis did not require him to address this question at all, and consequently [12]:

I wish to express no view as to the substance of the legal question raised by the appellants on their motion, and these reasons should not be taken as an endorsement of the views expressed by the Motion Judge as to the application of the discoverability principle in the context of section 55.01 of the Patent Act.

Whether the discoverability rule applies to the Patent Act limitation period therefore remains an open question.

Rule 220(1)(a) provides that “A party may bring a motion before trial to request that the Court determine a question of law that may be relevant to an action.” This involves a two-step test: “the Court must first determine whether it is appropriate, in the specific circumstances of the case, for the proposed question to be addressed in a preliminary motion before trial. It is only when the Court answers that question affirmatively that it proceeds to the second stage to determine the legal question as set out and approved by the Court at the first stage” [6]. The first stage—whether court should address the question—itself involves three requirements: (1) that there is no dispute as to any material fact; (2) what is to be determined is a pure question of law; and (3) its determination will “eliminate the necessity of a trial or, at least, shorten or expedite the trial” [7].

In her decision at first instance, McVeigh J erred by conflating the two questions. She held that the discoverability rule applies to the limitation period in s 55.01, and consequently, the question at issue was not a pure question of law, and for that reason she dismissed the motion [11].

The FCA held that the proposed question was indeed a pure question of law that is not predicated on the assessment of facts [16]. But that only addresses parts (1) and (2) of the first stage. At the step (3), de Montigny JA held that Google had not established that there would be any substantial saving of time and expense at trial, partly because Google had not adduced sufficient evidence in support, partly because the trial preparations were already well underway, and partly because quantification of the remedy would still be required for the time within the limitation period, even on Google’s view of the effect of s 55.01 [21]–[26]. Thus, the FCA affirmed, but on the basis that the question was not suitable for determination on a Rule 220(1)(a) motion; consequently, there was no need to address the question of law itself.

One other point is worth noting. In Jay-Lor 2007 FC 358 [122] Snider J rejected the view that “reasonable compensation” under s 55(2) means the same as s 55(1) damages, and, instead equated it to a “reasonable royalty,” in the absence of any other alternatives presented to her. In Dow v Nova 2017 FC 350 Fothergill J held, in effect, that in some circumstances lost profits could be awarded under s 55(2): see here. In this decision, de Montigny JA agreed that when reasonable compensation is claimed under s 55(2), the remedy “is often” in terms of reasonable royalty” [23]. I take this careful language as signalling that the FCA considers the question of whether reasonable compensation is the same as a reasonable royalty to remain an open question.