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Plaintiff’s Lost Profits Relevant to Reasonable Royalty Analysis

Bauer Hockey Ltd. v. Sport Maska Inc. (c.o.b. CCM Hockey), 2020 FC 212 dealt with various motions seeking to exclude expert reports in a patent infringement action. Of note, CCM objected to an expert report that offered opinion on Bauer’s lost profits. CCM argued that  Bauer was trying to introduce evidence of its profits despite refusing to answer such questions during discovery, contrary to Rule 248 of the Federal Courts Rules.

Rule 248 states: “Where a party examined for discovery… has refused…  to answer a proper question and has not subsequently answered the question, the party may not introduce the information sought by the question at trial without leave of the Court.” Bauer refused to answer discovery questions about its profits and consistently said that its claim to damages or a “reasonable compensation” would be limited to a reasonable royalty and would not include a claim for its lost profits.

The Court dismissed the motion and allowed the expert report. Bauer’s expert based its assessment on two documents that were in fact produced during discovery. Since Dr. Berkman did not rely on any other information, there was no breach of Rule 248. Moreover, the Court held that Bauer’s undertaking to not claim lost profits did not prevent consideration of lost profits in establishing a reasonable royalty. A potential licensor’s expectation of losing profit is a relevant consideration in assessing its maximum willingness to accept (a factor considered the reasonable royalty analysis).

The Court also dealt with multiple motions seeking to strike reply expert reports on the basis that the evidence did not constitute proper reply. The analysis was specific to the circumstances of  the individual reports, but reinforced the law applicable to reply evidence as set out in Janssen Inc v Teva Canada Limited, 2019 FC 1309:

  1. Evidence which is simply confirmatory of evidence already before the court is not to be allowed.
  2. Evidence which is directed to a matter raised for the first time in cross examination and which ought to have been part of the plaintiff’s case in chief is not to be allowed. Any other new matter relevant to a matter in issue, and not simply for the purpose of contradicting a defence witness, may be allowed
  3. Evidence which is simply a rebuttal of evidence led as part of the defence case and which could have been led in chief is not to be admitted.

A copy of the decision can be found here