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The high cost of bringing intellectual property cases to trial means lawyers in the field are lucky to see a trial every couple of years

If you’ve ever wondered why the Canadian intellectual property bar is so small, and its subset of intellectual property litigators even smaller, wonder no more. It’s all in the numbers.

Despite the 205,775 or so patent applications pending at the Canadian Intellectual Property Office (CIPO) at any given time, and some 115,600 patents in force, as well as prolific trademark and copyright rights, a Canadian IP litigator is lucky to see a trial – a real trial – every two or three years.

“I don’t expect a trial every year,” said Brian Isaac, a partner with Smart & Biggar/Fetherstonhaugh in Toronto, whose practice focuses on trademark, patent, trade secret and copyright issues. “I’m probably looking at one every other year.”

“We see three to six patent trials a year in Canada, and have over the last five, 10 years,” agreed Patrick Kierans, an IP litigator with the Toronto office of Ogilvy Renault. “There almost aren’t enough cases to create a statistically valid body of data.”

Canadian IP litigation took off in the 1970s and ’80s, with a steady increase in the number of cases going to trial until 1989, which saw 10 patent cases. Since then, the average has been three to six a year.

Copyright trials in Canada are even “fewer and farther between,” said Christopher Van Barr, a partner with Gowling Lafleur Henderson LLP in Ottawa and co-chair of the firm’s IP litigation national practice group. That’s partly because copyright cases are difficult to find.

“They can be immersed in a trade secret or fiduciary-duty type of conflict and the copyright issue may be secondary,” Mr. Van Barr said. Isolated “true” copyright proceedings make it to trial at a rate of about one or two a year.

Given that more IP rights are being granted, the question is, shouldn’t there be more cases? In 2005, for example, the CIPO granted 15,331 Canadian patents; in 2007, the tally was 18,554. Copyright rights also increased: 9,254 were granted in 2007 compared with 8,251 in 2005. But fewer than 2 per cent of trademark cases make it to trial, with a high percentage settling or simply petering out.

What’s keeping IP litigation flat?

“Cost,” said Bruce Stratton, a litigator with Toronto IP boutique firm Dimock Stratton LLP, which is involved in about 25 per cent of all patent trials in Canada.

Canadian litigators estimate that it takes about $500,000 of a client’s money to bring a patent case to trial, and another million or two to see it through to end-game, though it can be done for less. But in patent battles between pharmaceutical companies, however, much more is at stake.

“In pharma cases, the cost of litigation is not that significant in the grand scheme of things, because there is so much money at stake,” Mr. Isaac said.

Battles between Big Pharma – Canadian subsidiaries of companies such as Pfizer Inc., GlaxoSmithKline Inc. and Sanofi-Aventis – and Canadian generic drug manufacturers dominate the country’s IP docket. By some estimates, they take up 60 per cent of court time and 75 per cent of legal fees billed, nationally, under the umbrella of IP litigation.

But most of the conflict takes place through the Patented Medicines (Notice of Compliance) Regulations (PMNOCs), under which generic companies file for necessary market approvals upon the expiry of relevant patents belonging to the Big Pharma companies. Generics often move to obtain the approvals earlier by challenging the unexpired patents on various grounds.

PMNOCs are the only type of IP litigation that has experienced an upward trend over the past decade, from fewer than 20 proceedings in 2000 to about 80 annually by 2008.

Such proceedings are not trials, however, and Glen Bloom, an IP litigator with the Ottawa office of Osler Hoskin & Harcourt LLP, says that raises troubling issues. “These are applications and not trials, and that’s unfortunate, because there are a lot of legal issues there that are of jurisprudential value but are not based on a full trial. That has raised some concerns.”

Some pharma cases do proceed to trial – though usually it takes lots of lead time to get there. Canadian courts are making clear efforts to speed up the process; the objective now at Federal Court is 18 to 24 months to trial. Other improvements include summary trials and summary judgments, meant to bring court-decreed clarity to litigants as quickly as reasonably possible.

“I think there may be significant improvements in the IP trial landscape in Canada,” Mr. Isaac said. “The Federal Court has improved in a number of ways of late. They got a bunch of new judges, they got rid of a lot of the backlog, and clearly, there are efforts by the courts to taking a hands-on approach to trying to move cases along.”

This full version of this article appears in the current issue of Lexpert magazine.

Credit: SPECIAL TO THE GLOBE AND MAIL

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