No Entitlement to Punitive Damages for Infringing Compatible Products

Angelcare Canada Inc v Munchkin, Inc, 2023 FC 1111 deals with the Plaintiffs’ entitlement to remedies arising from a successful patent infringement action relating to diaper pail cassettes (2022 FC 507).  In the prior decision, the Federal Court found the Defendants’ cassettes and assemblies of cassettes and diaper pails had infringed the Plaintiffs’ patents. One of the issues before the Court was whether the Plaintiffs are entitled to punitive damages for the Defendants’ infringement.

Our blog posts on the other topics covered by this decision can be found here (entitlement to injunctive relief), here (entitlement to accounting of profits), and here (plaintiffs’ entitlement to remedies).

The Plaintiffs argued they were entitled to punitive damages because:

• The Defendants had identified an obvious business opportunity in launching cassettes compatible with the Plaintiffs’ diaper pail system.
• The Defendants instructed their product designer to “avoid copying one aspect of the [Plaintiffs’] cassette’s cover due to a potential patent issue”. However, later generations of the Defendants’ cassettes had chamfers adjusted to fit the Plaintiffs’ diaper pails.
• A design change in the Plaintiffs’ diaper pails made the Defendants’ generation 1 cassettes incompatible. The Defendants reacted by communicating with a large retailer to suggest that removing a snapped-in ring on the Plaintiffs’ diaper pails would allow the Defendants’ generation 1 cassettes to be used. The Defendants also developed generation 2 cassettes, which where compatible with the Plaintiffs’ new diaper pails.
• The Defendants’ cassettes were sold with labels that indicated their compatibility with the Plaintiffs’ diaper pails and were sold at a discount in the same retail outlets as the Plaintiffs’ products.

The Court found that “there is nothing inherently wrong with developing compatible products” if there is no patent infringement; in fact, “seeing an opportunity to profit from a successful system may legitimately be seen as a business opportunity.” The Defendants believed their products were not covered by the Plaintiffs’ patents and gave instruction to their product designer to avoid infringing the patents. The adjustment of the angle of the chamfer “simply constitute[d] an attempt to adjust to the new circumstances.”

The Court explained that the bar to punitive damages is high, such that punitive damages are not available simply because patent infringement has been shown. The Defendants’ actions in this case do not rise to the level necessary for entitlement to punitive damages and did not compare to those in Bell Helicopter Textron Canada Limitée v Eurocopter, société par actions simplifiée, 2013 FCA 219, the only patent case where punitive damages have been awarded for behaviour that did not involve litigation misconduct or abuse of process. In that case, Bell Helicopter employees had raised concerns about the similarities between its landing gear and the patented landing gear; in addition, Bell Helicopter had not only infringed the patent, but also promoted the invention as its own.

Finally, the Federal Court rejected the Plaintiffs’ argument pertaining to “strategic commercialization” by the Defendants. The Court took no issue with displaying the Defendants’ products in the same large-surface retail stores where the Plaintiffs’ products were being sold. According to the Court: “I cannot see anything wrong with a retailer displaying like products with like products. This is merely common sense.”

The Federal Court concluded that the Plaintiffs were not entitled to punitive damages.

A copy of the decision is available here.