No Strict Rule that an NPE Cannot Elect an Accounting

Pfizer Canada ULC v Seedlings Life Science Ventures, LLC 2021 FCA 154 Locke JA: Gleason, Laskin JJA affg 2020 FC 1 Grammond J

2,486,935 / FCA Sufficiency / FCA Overbreadth / FC accounting / FC reasonable royalty / FC novelty and utility / FC claim construction / FC Overbreadth

My prior posts on Seedlings dealt with insufficiency and overbreadth. This one considers the issue of entitlement to an accounting. My prior posts were long, but I’ll keep this one short, given that I agree entirely with Locke JA’s discussion on this issue.

As discussed here, Grammond J at first instance indicated in obiter that a non-practising entity cannot be entitled to an accounting of profits: “where the patentee does not itself manufacture, distribute or sell the invention, it cannot be entitled to the profits made by the infringer with respect to those activities” [FC 252]. While Locke JA’s conclusion that the claims were invalid made it unnecessary to address the question of remedies, he nonetheless took the opportunity to do so, stating that there is no authority for a strict rule of that type: “none of the cited decisions provides firm support for the broad principle that a patentee that makes (or intended to make) profits by selling licenses to its patent should not be entitled to elect an accounting of profits” [78].

Moreover, a strict rule prohibiting a non-practising entity from electing an accounting would not be sound policy, particularly given that an entity that does not practice the invention is not necessarily a patent troll:

[79] I am particularly concerned about the potential effect of such a broadly defined principle on inventors who recognize that their specialty lies in inventing, and that production and marketing of their inventions are better left to different specialists. Such inventors will seek to license third parties to take their inventions to market as a matter of business efficiency. The broadly defined principle would force such inventors to choose between business efficiency and retaining a potential remedy for infringement of their patent rights. The value of a patent would therefore be reduced for specialist inventors. I see no reason to force such a choice. In my view, business efficiency should be encouraged.

This is not to say that it is irrelevant whether the patentee practices the invention itself, but only that it is not determinative.

[81] Certainly, a patentee’s decision to license its invention may be a factor for a court to weigh when considering whether to permit a patentee to elect an accounting of profits. However, I disagree that such a decision should necessarily deny a patentee the right to elect.