Date:
20100806
Docket: A-314-09
A-315-09
Citation: 2010 FCA 207
CORAM: SHARLOW
J.A.
DAWSON J.A.
TRUDEL
J.A.
BETWEEN : A-314-09
CHARLES RIVETT
Appellant
and
MONSANTO CANADA INC. and
MONSANTO COMPANY
Respondents
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A-315-09
LAWRENCE JANSSENS, RONALD
JANSSENS
and ALAN KERKHOF
Appellants
and
MONSANTO CANADA INC. and
MONSANTO COMPANY
Respondents
REASONS FOR JUDGMENT
TRUDEL J.A.
Introduction
[1]
Once
infringement is established, the Patent Act, R.S.C. 1985, c. P-4, provides for two alternative
types of monetary remedy: damages and an accounting of profits.
[2]
Our Court
is seized with two appeals and cross-appeals arising from judgments by Zinn J. [the
Judge] of the Federal Court whereby he addressed the latter remedy and set the
total amount of profits to be disgorged by the appellants (Mr. Rivett [Rivett]
and Messrs. Lawrence Janssens, Ronald Janssens and Alan Kerkhof [together
Janssens][all together the appellants]) in favour of the respondents Monsanto
Canada Inc. and Monsanto Company. The reasons for judgment (Rivett’s reasons
or Janssens’ amended reasons are reported as Monsanto Canada Inc. v. Rivett,
2009 FC 317 (judgment issued on 10 July 2009, T-1515-05) and Monsanto Canada
Inc. v. Janssens 2009 FC 318 (judgment issued on 26 March 2009, T-1545-05).
[3]
On 22
October 2009, Sexton J.A. directed that these appeals be heard together. Therefore,
I shall address both files in these reasons. However, as each one presents its
own set of facts and, at times, unique issues, I shall highlight the
differences as required over the course of my discussion.
Background
[4]
Monsanto
Canada Inc. and Monsanto Company [together Monsanto] are the licensee and
owner, respectively, of Canadian Patent No. 1,313,830 (the ‘830 Patent), which
relates to an invention entitled “Glyphosate-Resistant Plants”. The patent does
not claim the whole plant, but rather the engineered genes that give the plant
its herbicide resistant qualities and the plant cells containing those genes. For
our purposes, we need only know that in Canada, glyphosate-resistant seeds and plants
protected under the ‘830 Patent are sold under the trademark ROUNDUP READY®
[RR]. Crops emerging from RR seeds and RR plants are therefore resistant to
glyphosate herbicides such as Monsanto’s product sold under the name ROUNDUP®.
[5]
The
appellants have all admitted infringement of the ‘830 Patent by growing,
harvesting and selling crops of soybeans which they knew contained genes and
cells as claimed in said Patent [RR soybeans]. As a result of the appellants’
admission, summary judgments were issued on consent providing that questions
relating to Monsanto’s remedies arising from the deliberate infringement were
to be dealt with after Monsanto’s election as between damages and an accounting
of profits. Monsanto chose accounting of profits as the remedy for the
appellants’ breach.
[6]
The
starting point in any method of accounting for profits is the determination of
the infringer’s revenues made from the acts of infringement of the patent. In
all cases, the party whose patent has been infringed need only prove these
revenues. Here, they were formally admitted. (See Agreed Statement of Facts,
Rivett’s appeal book, volume 1 , tab 8, page 158, at paragraph 21; Janssens’ appeal
book, tab 8, at paragraphs 20, 41-43.)
[7]
Then, it
is the infringer who has to reveal the costs incurred to derive the revenues and
who has to disgorge the profits (Reading & Bates Construction Co. v.
Baker Energy Resources Corp. (C.A.), [1995] 1 F.C. 483, at page 494, at
paragraph 16 (FCA) [Reading & Bates]. The profit to be disgorged is
the difference between the revenues and the costs. Of course, at times an
apportionment will be required as the patentee is only entitled to that portion
of the infringer’s profit which is causally attributable to the invention. (See
Lubrizol Corp. v. Imperial Oil Ltd., [1997] 2 F.C. 3 (C.A.); Celanese International Corp. v.
B.P. Chemicals Ltd., [1999] R.P.C. 203 (Pat. Ct.), at paragraph 37, cited in Monsanto
Canada Inc. v. Schmeiser, 2004 SCC 34, [2004] 1 S.C.R. 902 [Schmeiser],
at paragraph 101.) The controversy between the parties is in the approach to be
used in implementing the causation requirement in the accounting. What rules
should be used in determining “the costs that are to be deducted from [the
appellant’s] gross revenues from sales” (Rivett’s reasons, at paragraph
67)?
[8]
Monsanto
argues that there are three approaches to quantifying an award of profits in
patent infringement cases: the differential profit approach; the full
absorption or full cost approach; and the variable cost or differential cost
approach urged on this Court by it.
[9]
Having
considered the practical consequences of each approach (Rivett’s reasons,
at paragraphs 28-65), the Judge came to the conclusion “… that this Court must
apply the differential profit approach when conducting an accounting of profits
in this case” (ibidem, at paragraph 65).
[10]
The Judge
described the analysis required under this approach (ibidem, at
paragraph 29):
a. Is
there a causal
connection between the profits made and the infringement? If there is
none, then there are no profits that require an accounting.
b. If
there is a causal connection, then what were the profits made by the infringer
as a result of the infringement? This amount I shall describe as the
Gross Profits of Infringement.
c. Is there a
non-infringing option that the infringer could have used?
d. If
there is no non-infringing option, then the Gross Profits of Infringement are
to be paid over to the patentee.
e. If
there is a non-infringing option, then what profit would the infringer have
made, had he used that option? This amount I shall describe as the Gross
Profits of Non-Infringement.
f. Where
there was a non-infringing option available, the amount to be paid over to the
patentee is the difference between the Gross Profits of Infringement and the
Gross Profits of Non-Infringement. This sum is the profit that is directly
attributable to and that results from the infringement of the invention.
[11]
Item (c)
of the Judge’s formula asks whether there was a non-infringing option that the
infringer could have used. The Judge concluded that “… conventional soybeans
are a non-infringing alternative to [RR] soybeans”. As a result, the Judge went
on to item (e) of his formula and used the alternative product as a comparator
because it had none of Monsanto’s invention (ibidem, at paragraphs 63
and 57 of Rivett’s reasons).
[12]
The
appellants agree with the differential profit approach adopted by the Judge,
but allege that he erred in various respects in his calculations and when
deducting expenses from gross profits. In addition, they posit that the Judge
erred in determining too high a differential between the gross profits of
infringement and the profit the appellants would have made had they used the
next best non-infringing alternative.
[13]
Monsanto
challenges the Judge’s chosen approach and, in the alternative, his finding
that conventional soybeans were an appropriate comparator, and in the case of
Mr. Rivett, whether or not such conventional seed was in fact available to him
in 2004, as found by the Judge at paragraph 63 of his reasons.
[14]
In the
end, I conclude that the Judge made no error when he chose and applied the
differential profit approach to the cases at bar. I also conclude that
Monsanto’s arguments on the cross-appeals do not justify the intervention of
our Court. I would therefore dismiss Monsanto’s cross-appeals.
[15]
Conversely,
I would allow the appeals, in part, because I find that the Judge erred when
determining that the profit differential expected of RR soybeans when compared
to conventional soybeans was 31% instead of 18%. A chart prepared by Monsanto
to demonstrate the increased profit that could be realized by the use of its
product showed a profit differential of 18%. In the Rivett appeal, I also find
that the Judge erred in failing to have regard to a whole body of evidence
relating to costs for general maintenance and equipment repairs, which should
have lead to a further deduction from gross profits.
[16]
By arguing
that the Judge erred in not choosing the differential cost approach, Monsanto
attacks the very foundation of the Judge’s reasons. Therefore, I shall dispose
of this argument up front as all other issues are concerned with the differential
profit approach. Once done, I will continue on with my analysis of the
cross-appeals before turning to the appeals.
Analysis
A. Standard of review
[17]
On the
cross-appeals, Monsanto argues that the standard of review in respect of the
Judge’s identification and articulation of the legal test to be applied to the
facts is correctness (Monsanto’s memorandum in Rivett, at paragraph 53).
[18]
The
appellants argue that their appeals raise questions of law or questions of
mixed fact and law. Although statutory in nature, the monetary remedies, they
say, are equitable in origin. When the Judge disallowed some of their expenses,
he erred in law because he misapplied “the principle of equity”.
[19]
I disagree
with both Monsanto and the appellants. While I agree that a standard of
correctness applies to the question of whether the Judge applied an appropriate
test, in this case, the Judge chose between a number of legally acceptable
tests. When a judge chooses between a set of legally acceptable tests, his or
her choice, and the results of his or her application of the test, must be
accorded deference.
[20]
The
jurisprudence dictating the standard of review of damages awards is founded in
large part on the speech of Viscount Simon in Nance v. British Columbia
Electric Railway Company Ltd. [1951] A.C. 601, at 613 (P.C.) [Nance]:
Whether the assessment of damages be by a judge or a jury, the appellate
court is not justified in substituting a figure of its own for that awarded
below simply because it would have awarded a different figure if it had tried
the case at first instance. Even if the tribunal of first instance was a judge
sitting alone, then, before the appellate court can properly intervene, it must
be satisfied either that the judge, in assessing the damages, applied a wrong
principle of law (as by taking into account some irrelevant factor or leaving
out of account some relevant one); or, short of this, that the amount awarded
is either so inordinately low or so inordinately high that it must be a wholly
erroneous estimate of the damage […]
[21]
This rule
has been adopted repeatedly by the Supreme Court. (See, for example, Naylor
Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2
S.C.R. 943, at paragraph 80; Laurentide Motels Ltd. v. Beauport
(City), [1989] 1 S.C.R. 705, at paragraph 280; Woelk v. Halvorson,
[1980] 2 S.C.R. 430; Industrial Teletype Electronics Corp. v. Montreal
(City), [1977] 1 S.C.R. 629; Stewart Estate v. Dyck, [1953] 1
S.C.R. 244) and this Court (Northeast Marine Services Ltd. v. Atlantic
Pilotage Authority, [1995] 2 F.C. 132, at paragraph 60 (F.C.A.); The
Queen v. CAE Industries Ltd. and CAE Aircraft Ltd., [1986] 1 F.C. 129, at
173 (F.C.A.).)
[22]
The
“wholly erroneous estimate” standard is in turn comparable to the “palpable and
overriding error” standard articulated by the Supreme Court in Housen v.
Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 [Housen]. (See Moskaleva
v. Laurie, 2009 BCCA 260, 94 B.C.L.R. (4th) 58, at
paragraph 117; Abbott v. Sharpe, 2007 NSCA 6, 250 N.S.R. (2d) 228,
at paragraph 110; Litwinenko v. Beaver Lumber Co. (2008) 237
O.A.C. 237, at paragraph 57.)
[23]
While Nance
refers to damages specifically, the rule can also be applied to an accounting
of profits. In this case, an incorrect principle would mean that the trial
judge used an unacceptable method to calculate profits attributable to the
infringement and therefore subject to disgorgement. As is discussed below, the
jurisprudence does not indicate that there is only one accepted method for the
calculation of profits of damages; in truth, there may be many. While the
differential profit approach may be the preferred method in many circumstances,
it is not the only method. Indeed, an accounting of profits, unlike damages, is
an equitable remedy (Teledyne Industries Inc. v. Lido Industrial
Products Ltd. (1979), 45 C.P.R. (2d) 18 (FC) [Teledyne]; see also Colburn
v. Simms (1843) 12 L.J. Ch.
388). As such, an accounting of profits should be flexible in order to make the
injured party whole. Therefore, as long as the trial judge selected an
acceptable method and followed it, his calculation cannot be overturned absent
a “wholly erroneous estimate of the damage.”
B. Monsanto’s cross-appeals
[24]
The
following questions are put to this Court:
1)
Did
the Judge err when applying the differential profit approach to the accounting
of profits?
2)
Were
conventional soybeans a non-infringing alternative?
3)
Were
conventional soybeans an available option to Mr. Rivett in 2004?
(1) The differential profit
approach v. the differential cost approach
[25]
Despite
the fact that, in Schmeiser, at paragraph 102, the Supreme Court of
Canada called the differential profit approach the “preferred means of
calculating an accounting of profits”, Monsanto argues that Canadian courts
have consistently declined to apply the differential profit approach.
[26]
Basically,
Monsanto relies on the courts’ application of the variable cost approach, in
which “the sale revenues are first ascertained and the only deductions permitted
are the variable expenses directly attributable to those infringing products,
and any increases in fixed expenses directly attributable to the infringing
products” (Monsanto’s memorandum in Rivett, at paragraph 103). It refers to Teledyne,
Reading & Bates, Wellcome Foundation Ltd. v. Apotex
Inc. (1998), 82 C.P.R. (3d) 466; [2001] 2 F.C. 618 (F.C.A.) [Wellcome],
and Bayer Aktiengesellschaff v. Apotex Inc. (2002), 16
C.P.R. (4th) 417 (O.C.A.) [Bayer], four pre-Schmeiser
decisions, and suggests that the variable cost approach is the preferred means
in situations of deliberate and intentional infringement.
[27]
Under that
approach, Monsanto adds, “no part or proportion of any expenditures which would
have been incurred had the infringing operation not taken place, is to be
considered as deductible” (ibidem). Therefore, the amount on account of
profits to be disgorged should have been $129 477.21 for Mr. Rivett,
rather than the $40 137.94 awarded by the Judge. In the Janssens’ case,
which covers years 2004 and 2005, it should have been $16 258.08 instead
of $5 040.00 for Lawrence Janssens; $14 379.04 instead of
$4 457.50 for Ronald Janssens; and $16 258.08 instead of $5 040.00
for Alan Kerkhof. (See conclusions of Monsanto’s memoranda.)
[28]
As
acknowledged by the judge, in Schmeiser, the Supreme Court endorsed the
differential profit approach to an accounting of profits in five short
paragraphs:
101 It
is settled law that the inventor is only entitled to that portion of the
infringer’s profit which is causally attributable to the invention: Lubrizol
Corp. v. Imperial Oil Ltd., [1997] 2 F.C. 3 (C.A.); Celanese
International Corp. v. BP Chemicals Ltd., [1999] R.P.C. 203 (Pat. Ct.), at para.
37. This is consistent with the general law on awarding non-punitive remedies:
“[I]t is essential that the losses made good are only those which, on a common
sense view of causation, were caused by the breach” (Canson Enterprises Ltd.
v. Boughton & Co., [1991] 3 S.C.R. 534, at p. 556, per McLachlin J. (as
she then was), quoted with approval by Binnie J. for the Court in Cadbury
Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142, at para. 93).
102 The
preferred means of calculating an accounting of profits is what has been termed
the value-based or “differential profit” approach, where profits are allocated
according to the value contributed to the defendant’s wares by the patent: N.
Siebrasse, “A Remedial Benefit-Based Approach to the Innocent-User Problem in
the Patenting of Higher Life Forms” (2004), 20 C.I.P.R. 79. A comparison is to
be made between the defendant’s profit attributable to the invention and his
profit had he used the best non-infringing option: Collette v. Lasnier,
(1886), 13 S.C.R. 563, at p. 576, also referred to with approval in Colonial
Fastener Co. v. Lightning Fastener Co., [1937] S.C.R. 36.
103 The
difficulty with the trial judge’s award is that it does not identify any causal
connection between the profits the appellants were found to have earned through
growing Roundup Ready Canola and the invention. On the facts found, the
appellants [referred to as Mr. Schmeiser in my reasons] made no profits as
a result of the invention.
104 Their
profits were precisely what they would have been had they planted and harvested
ordinary canola. They sold the Roundup Ready Canola they grew in 1998 for feed,
and thus obtained no premium for the fact that it was Roundup Ready Canola. Nor
did they gain any agricultural advantage from the herbicide resistant nature of
the canola, since no finding was made that they sprayed with Roundup herbicide
to reduce weeds. The appellants’ profits arose solely from qualities of their
crop that cannot be attributed to the invention.
105 On
this evidence, the appellants earned no profit from the invention and Monsanto
is entitled to nothing on their claim of account.
[29]
Monsanto
denies any precedential authority to Schmeiser and moves away from its
comparative approach, taking the position that the Supreme Court’s statement in
Schmeiser was made in the context of the unique and particular facts of
that case. It sees significant differences between the Schmeiser case
and the ones at bar, emphasizing why Schmeiser and the cases at hand
must be distinguished and treated differently:
1.Schmeiser was a test
case where Mr. Schmeiser, in good faith, was also attacking the validity of
the ‘830 Patent (Monsanto’s memorandum in Rivett, at paragraph 104);
2.Mr. Schmeiser was found
to be a “non-benefiting intentional infringer”, because the RR canola seed were
inadvertently carried onto his land (Monsanto’s memorandum in Rivett, at
paragraphs 105-107 and 115-116); and
3.Mr. Schmeiser never took
advantage of the invention because he did not spray his crops with ROUNDUP
herbicide.
[30]
Monsanto
submits that “ … the differential profit approach ought to be restricted to
those circumstances in which the infringer is … found to be a non-benefiting
intentional infringer … [who] does not adjust his farming practices to take
advantage of the technology” (Monsanto’s memorandum in Rivett, at paragraph
116). Monsanto adds that the appellants’ wilful infringement should have led
the Judge away from the differential profit approach; a method that allegedly
offers insufficient deterrence to infringement. (See Wellcome, at
paragraph 20, where it was found that “… adopting the comparative approach
would have the further disadvantage of providing no incentive to individuals to
take measures to avoid infringing others’ patents”.)
[31]
On a fair
reading of Schmeiser, I am unable to see how the factual matrix in that
case is materially different from the one in the cases at hand. Monsanto’s
statement as to Mr. Schmeiser’s innocent use of the patent was obviously not
reflected in the evidence accepted by the courts. Rather, it was found that
Mr. Schmeiser
“… actively
cultivated canola containing the patented invention as part of their business
operations. Mr. Schmeiser complained that the original plants came onto his
land without his intervention. However, he did not at all explain why he
sprayed Roundup to isolate the Roundup Ready plants he found on his land; why
he then harvested the plants and segregated the seeds, saved them, and kept
them for seed; why he next planted them; and why, through this husbandry, he
ended up with 1030 acres of Roundup Ready Canola which would otherwise have
cost him $15 000.” (Schmeiser, at paragraph 87).
[32]
As
mentioned by the judge, “the findings of fact regarding Mr. Schmeiser and the
[RR] canola growing on his farm remove him from the innocent user category. He
planted the crop knowing what it was and he took active steps to ensure that
most of the crop he planted was from [RR] seed” (Rivett’s reasons, at
paragraph 43).
[33]
On these
facts, the Supreme Court upheld the finding of our Court that Mr. Schmeiser “used
Monsanto’s patented gene and cell and hence infringed the Patent Act” (Schmeiser,
supra, at paragraph 97). Therefore, the majority of the Court addressed
and rejected the argument that Mr. Schmeiser did not use the invention because
he did not use ROUNDUP as an aid to cultivation, and therefore never took
commercial advantage of the special utility of the invention. That argument,
seen as “a way of attempting to rebut the presumption of use that flows from
possession” failed because it ignored "the stand-by or insurance utility
of the properties of the patented genes and cells. Whether or not a farmer
sprays with Roundup herbicide, cultivating canola containing the patented genes
and cells provides stand-by utility. The farmer benefits from that advantage
from the outset: if there is reason to spray in the future, the farmer may
proceed to do so” (Schmeiser, supra, at paragraphs 83-84). In the end,
Mr. Schmeiser’s intention, as determinative as Monsanto would want it to be,
became irrelevant to the finding of infringement. It only came into play in the
accounting for profits.
[34]
So, no
matter how they came to it, wilfully or not, after a trial or upon admissions,
Mr. Schmeiser and the appellants were all found to have infringed a
biotechnology-based patent. Mr. Schmeiser and the appellants all met the one
condition precedent to an accounting of profits: infringement of the ‘830
Patent.
[35]
Once this
is said, I find that the cases under appeal fit Schmeiser. Firstly, as
stated by the judge: “On this basis alone, one may reject [Monsanto’s] claim
that Schmeiser has to be read as the Court fashioning a remedy to
absolve the defendant of his innocent use of the patented seed” (Rivett,
supra, ibidem).
[36]
Also, the
Supreme Court’s statement in Schmeiser is unambiguous: the preferred
means of calculating an accounting of profits [in French « la méthode
privilégiée de calcul des profits»] is the differential profit approach
[emphasis added]. The fact that the award of profits in Schmeiser is
zero does not, in my opinion, taint that principle or narrow its application. It
is simply the result of the non-existence of “any causal connection between the
profits [Mr. Schmeiser was] found to have earned through growing [RR] Canola
and the invention” (Schmeiser, at paragraph 103). Because Mr. Schmeiser
had not sprayed the crops, no profits were causally attributable to the
invention. As a result, an apportionment was neither necessary nor possible as
there were no profits from the infringement to oppose to those that were not
caused by the infringement.
[37]
As
stressed by the appellants, Monsanto did not invent soybeans. The differential
profit approach can properly account for this fact by affording Monsanto “the
portion of the appellant’s profits which equals the profit differential
expected of [RR] soybeans when compared to conventional soybeans” (Rivett’s
responding memorandum, at paragraph 22). This was also the opinion of the Judge
who wrote at paragraph 53 of his reasons:
“…the
differential profit approach … isolates and identifies the profit that was
generated because of the patented invention. In short, it looks to those
profits that result from the invention that is protected and eliminates those
profits that may be earned but that have no causal link to the invention. Profits
that are made that are not attributable to the invention may be retained by the
wrong-doer.”
[38]
In my
view, Schmeiser is a complete answer to Monsanto’s first issue in these
cross-appeals. An in-depth analysis of Teledyne, Reading & Bates,
Wellcome and Bayer is neither necessary, nor useful.
[39]
In Schmeiser,
the Supreme Court characterized the differential profit approach as the
“preferred” means, not the “only” means of accounting for profits. Therefore, I
do not read Schmeiser as closing the door definitely on the use by trial
judge of other valuation methods better suited to a different set of facts.
[40]
It may be
that the majority had intended that this method of determining an accounting of
profits was to apply in the context of biotechonology-based inventions, or that
the parties in Schmeiser had styled their arguments in terms of
apportionment, as some authors have suggested. (See: Case Comment by A. David
Morrow & Colin B. Ingram, “Of Transgenic Mice and Roundup Ready Canola; The
Decisions of the Supreme Court of Canada
in Harvard College v. Canada and Monsanto v. Schmeiser”
(2005) 38 U.B.C.L. Rev. 189-222.)
[41]
It could also
be that the majority Judges, who had already taken support from Professor
Siebrasse’s article, as cited at paragraph 102 of Schmeiser, also agreed
with him that the results in Reading & Bates and Wellcome “are
arguably consistent with the differential profit approach” (Rivett’s book of
authorities, volume 2, tab 19, at page 16); or that the majority Judges’
intention “was to take the law on the remedy of the account of profits in a new
direction” Ronald G. Dimock, Intellectual Property disputes: Resolutions
& Remedies, looseleaf (Toronto: Carswell, 2004, p. 18-29 and f.).
[42]
In any
event, all these considerations are better left for another day. On the facts
of this case and, on the record, I conclude the Judge was right in his approach.
He understood Monsanto’s position and thoroughly canvassed and analysed
Monsanto’s arguments in his reasons. The Judge was obviously aware of other
valuation methodologies, prior court cases dealing with them and the scholarly
debate amongst intellectual property practitioners as to their relevance and
applicability. He was not convinced that the Supreme Court’s stated preference
for the differential profit approach should be as narrowly construed as suggested
by Monsanto (Rivett’s reasons, at paragraph 44). Based on the factual
evidence presented to him, and taking support from Schmeiser, the Judge
exercised his discretion, and applied the differential profit approach in
situations very similar to the one in Schmeiser. I have not been
persuaded that the Judge erred in applying the differential profit approach to
Messrs. Rivett, Janssens and Kerkhof. As I stated above, the Judge was required
to choose an acceptable remedy. I am of the view that he devised the best
monetary remedy to address the infringement cases before him and therefore
committed no reviewable error in respect of this issue.
(2) Conventional soybeans as a
non-infringing alternative
[43]
As the
Judge found, “… it will always be an issue when applying the differential profit
approach whether there is a non-infringing alternative that can be used as a
comparator” (Rivett’s reasons, at paragraph 54). In the cases at bar,
the Judge held that “(t)he comparison is to the profit that would have been earned
from using the next best product that is not the patented product itself, with
the latter acting as a baseline from which to calculate added value. That
results in a true reflection of the profits made from the invention – the
necessary causal link” (ibidem, at paragraph 56).
[44]
Having
said this, the Judge concluded that conventional soybean was the appropriate
comparator. Monsanto argues that the Judge’s finding ignores the undisputed
evidence of the enduring agricultural, lifestyle and environmental benefits
which the uniqueness of the patented technology provides to farmers. These very
attributes, it adds, render conventional soybean seeds an inappropriate
candidate as a non-infringing alternative because none of these benefits accrue
to the users of ordinary seeds. (See Monsanto’s memoranda, at paragraph 127 in
Rivett, and 144 in Janssens.)
[45]
Monsanto’s
argument is not convincing. In his reasons, the Judge discusses the testimony
of Mr. McGuire who attested, on behalf of Monsanto, to the value of the invention
from a farmer’s viewpoint, relying on a chart prepared by Monsanto and
published on its website. That chart shows how a farmer “can potentially earn a
$40.00/acre advantage on Roundup Ready vs. conventional bin run soybeans” (exhibit
P-1, Rivett’s appeal book, volume 1, tab 9, at pages 160 and f.).
[46]
Having
heard the evidence, the Judge agreed with the appellants that the motivation
for a grower to choose RR soybeans is financial. Presumably, as submitted by
the appellants, any alleged agricultural benefits enjoyed by the farmer will
translate into a measurable financial benefit – such as increased yields or
cost of production savings – of which the court duly accounted for when
assessing the profit differential of RR soybeans (Rivett’s responding memorandum,
at paragraph 31).
[47]
It seems
that while Monsanto alleges an error in the Judge’s finding that the profits
derived which are attributable to the invention relate to the extra yield
reaped as a result of the RR system, it was Monsanto’s pleadings and evidence
that established exactly that (See Monsanto’s compendium (cross-appeal), tab 7B,
at pages 97-98; Rivett’s appeal book, volume 1, tab 5, at paragraph 12; see
also Agreed Statement of Facts, ibidem, page 156, at paragraph 7).
[48]
Moreover,
in Schmeiser, the Supreme Court addressed, as we know, the same patent
and a very similar situation, and found that ordinary canola was an appropriate
comparator for RR canola. Monsanto has failed to explain how this finding was
wrong.
[49]
The record
shows that there was a clearly non-infringing alternative available for
comparison: conventional soybean seeds. Monsanto has not persuaded me that the
Judge erred in his finding.
(3) Availability of
conventional soybeans to Mr. Rivett in 2004
[50]
This last
question concerns Mr. Rivett only. His testimony was that in the spring of
2004, there was a shortage of ordinary soybeans. In cross-examination, he said:
“We checked
with our local co-op and they were sold out of conventional beans. Our co-op in
Alliston and Beeton – that’s our closest co-op – they own seven or eight
different locations, and all they have to do is punch it up on the computer,
and it goes to all locations to tell you there what they have in inventory. …
We used our own bin run conventional beans first, and, when they ran out, these
other RR beans were in a trailer and wagon and we opted to use them”
(Monsanto’s compendium (cross-appeal), tab 8(B), at pages 216-217).
[51]
The Judge
concluded that market availability of the best non-infringing alternative was not
determinative. He was of the view that “(i)f one uses a comparator only if it
is actually physically available for use, but not when it exists but is
physically unavailable, the fact that the resulting crop has a value apart from
the invention will be ignored” (Rivett’s reasons, at paragraph 62).
[52]
Monsanto
argues that this statement is a clear error and cites paragraph 30 of Reading
& Bates for the proposition that Mr. Rivett had the onus of proving the
availability of conventional soybean seeds. Having failed, the Judge could not
conclude that there was a non-infringing option that Mr. Rivett could have
used.
[53]
Once
again, I disagree with Monsanto. Reading & Bates must be distinguished
from the Rivett case. The accounting in Reading & Bates concerned
the profits made by the appellant from the infringement of the respondents’
patented method for installing a pipeline. Counsel for the infringer expressly
argued that the differential profit approach should be used. Our colleague,
Létourneau J.A., distinguished cases applying the differential profit approach
by characterizing them as “the sort of cases where a patent or process
represents only a part of the ultimate production” whereas the case at hand was
one where the contract required the use of the very method devised by the
respondents and where the patent comprised the whole of what was sold by the
appellant (Reading & Bates, supra, at paragraph 28).
[54]
Moreover,
while the Court did consider the alternative tunnelling processes to be
unavailable and theoretical, the facts behind this comment show that it
referred more to the existence of the relevant process, or the practicality of
its use for the job in question. At footnote 18, the Court noted:
The evidence
revealed that “Method A” had already been tried unsuccessfully by the
respondents on a previous occasion in an attempt to install a pipeline. The
method failed and the respondents suffered a loss of $1.7 million. See the
transcript of proceedings, vol. I, at pp. 87-88 and 203-204. “Method B” had
only been used once out of more than a hundred jobs of which the witness for
the appellant was aware. It was used more than five years after the
installation of the pipeline in the St. Lawrence River for the crossing of a
river under conditions very different and much more favourable than those
encountered with the St. Lawrence River. Yet, losses in the amount of $200,000
were incurred. See the transcript of proceedings, vol. II, at pp. 134-141. As
to the impossibility of using “Method C” over a distance of more than 5,200
feet as required for the crossing of the St. Lawrence River, see the transcript
of proceedings, vol. I, at pp. 206-207. According to the witness, the distance
was too great and the pipe too slender. “Method D” was impractical for the St. Lawrence
River
project and could have led to a twist-off and the necessity of abandoning the
hole and starting all over again. See the transcript of proceedings, vol. I, at
pp. 208-210.
[55]
In the
instant case, conventional soybeans existed at that relevant time and they were
suitable for planting in Mr. Rivett’s fields. It is also worth noting that at
paragraph 30 of Reading & Bates, cited with approval by Monsanto,
the Court does not state the comparator must be shown to have been actually
available to the infringer. Rather, it requires proof that such is available in
similar conditions.
30. Assuming that
these alternatives could have been taken into consideration in computing the
profits, the burden of proving their availability, their utility and
workability in conditions similar to those under which the work was performed,
along with their costs, rested with the appellant.
[56]
This is a
very different proposition than Monsanto makes it out to be. The availability,
utility and workability of conventional soybeans in conditions similar to those
in which Mr. Rivett used the RR soybeans are established by Monsanto’s
evidence, which itself compares the two.
[57]
Further as
Mr. Rivett points out, there was evidence before the Court that 40% of soybeans
cultivated in 2004 were conventional soybeans (Rivett’s appeal book, volume 1, tab
9, page 161). And, in fact, the Judge found according to the Agreed Statement
of Facts that Mr. Rivett did cultivate 811 acres of conventional soybeans.
[58]
Therefore,
there was ample written and oral evidence on which the Judge could have
concluded as he did. In my view, he committed no error.
[59]
I now turn
to the appeals.
C. The Appeals
[60]
Although
both files share some issues, the appeals will be examined separately as the
Judge’s factual findings are grounded on original evidence presented by each
appellant.
(1) The appeal of Mr. Rivett
[61]
Mr. Rivett
having abandoned one of his five grounds of appeal, the remaining issues are:
1. Did the Judge err in
refusing to include custom costs and labour in the deductions?
2. Did the Judge err in disallowing a deduction
for rent in respect of 319 acres of land?
3. Did the Judge err in disallowing deductions
of other expenses relating to equipment repairs and general maintenance?
4.Was the percentage of
the profit differential too high?
[62]
I am of
the view that questions 1 and 2 must be answered negatively. Generally, the
Judge made evidentiary rulings and factual findings in order to arrive at the
profits to be disgorged. Subject, of course, to admissibility, the Judge was
prepared to accept evidence that a farming operation expense was incurred, in
part, with respect to the 947 acres of RR soybeans. Unless there was evidence
that an expense was incurred with respect to less than the total acreage, 26.9%
of an expenditure claimed for the farming operation as a whole would be
allocated (947/3516 acres).
[63]
In each
case, the admissibility of a deduction was determined on a principled basis,
that is, on the evidence, or lack thereof, tendered by Mr. Rivett in his
attempt to meet his onus (Monsanto Canada Inc. v. Schmeiser (C.A.), 2002
FCA 309, [2003] 2 F.C. 165, at paragraph 85). The appellant takes support from AlliedSignal
Inc. v. Du Pont Canada Inc., [1998] F.C.J. No. 190 (FC) [AlliedSignal],
asking this Court to re-weigh the evidence given little or no weight to by the
Judge, either because it was based on hearsay or because it was found
unreliable. It cites AlliedSignal, at paragraph 144, for the proposition
that although it may be difficult to calculate some costs, it does not preclude
“the court’s obligation to make its best estimate, and ultimately to take such
costs into account.”
[64]
With
respect, I find AlliedSignal of little use in this appeal. After a
careful review of the Judge’s reasons and of the transcripts, I have not been
persuaded that the Judge committed a palpable or overriding error. The Judge
could not find evidence where there was none. As well, the Judge could not “guesstimate”
the costs directly related to Mr. Rivett’s RR soybean crop. As stated by the
Judge, Mr. Rivett was “properly entitled to deduct from the gross revenue
received from the sale of the crop his legitimate and proved expenses” (Rivett’s
reasons, at paragraph 66) (emphasis added).
(a) Custom
costs and labour
[65]
The
appellant argues that the Judge erred in not permitting “any deductions
representing the cost of planting, cultivating, spraying, harvesting and trucking
the infringing soybean crop”, referred to as custom work costs (Rivett’s memorandum,
at paragraph 27). In the Agreed Statement of Facts, Mr. Rivett made a number of formal
admissions that he did not pay any third party to carry out the infringing
activities.
[66]
Still, in order to obtain a deduction
for his own labour, Mr. Rivett attempted to introduce an unaudited Income
Statement comparing his revenue and expenses for the years ended December 31,
2004 and December 31, 2005, which had not been previously produced on record
and whose author was not on the list of witnesses. This evidence was ruled
inadmissible. The appellant also produced a hand-written document he had
prepared that purported to reflect mostly the average cost incurred to grow
soybeans (exhibit D-12, Rivett’s appeal book, volume 2, tab 26, at page 499),
along with a chart apparently prepared by the Ontario Federation of Agriculture
relating to average custom work rates in Ontario in 2003 (exhibit D-13,
Rivett’s appeal book, volume 2, tab 27, at page 500).
[67]
The Judge
ruled that the appellant could speak to the information contained in exhibit
D-12, but that any information contrary to direct evidence of actual expenses
incurred, or contrary to any of the agreed facts would be given no weight. Further,
it was indicated that little weight was likely to be given the evidence insofar
as it relied on information obtained from third party sources. In the end, in
light of his ultimate decision on the issue, the Judge completely disregarded exhibit
D-12.
[68]
Also, the
Judge did not allow a deduction for the cost of Mr. Rivett’s labour. Mr. Rivett
argued that in Schmeiser, the trial judge had reduced the gross revenues
by a reasonable amount to reflect an allowance for Mr. Schmeiser’s labour (Monsanto
Canada Inc. v. Schmeiser, [2001] F.C.J. No. 436 (FC)). However, the Judge
found the facts of the instant case on that point quite distinguishable from
those in Schmeiser. In that case, the infringing party was not Mr.
Schmeiser, but his corporation. The profits to be disgorged were those of the
corporation, from which Mr. Schmeiser would have been paid a salary for his
work instead of the dividends he actually took, and on that basis the profits
were reduced by an allowance of $16 per acre. Here, as the Judge found at
paragraph 92 of his reasons in Rivett:
… Whether
[Mr. Rivett] pays himself a salary or takes the whole of the yearly profits of
the farming operation at year end, the result is the same -- the entire amount
is his profit. To permit a deduction for his labour in these
circumstances would be to permit him to keep, rather than disgorge, some of the
profits made because of the infringement. That is neither equitable nor just.
[69]
In light
of the record, it was open to the Judge to disallow custom work costs and
labour costs. I conclude that this ground of appeal is ill-founded.
(b) Rent costs
for 319 acres
[70]
On its
reading of the evidence, Monsanto had suggested that land rent should be
calculated on the basis of $49.00 per acre for the 947 acres of RR soybeans. The
Judge found at paragraph 79 of his reasons in Rivett that only 628 acres
out of the total 947 were accounted for in terms of rent. He allowed a
deduction of $44 795.62. Records for the rest were incomplete. Rent for the
remaining 319 acres in question, at least, in part, was not paid by Mr. Rivett.
Rather, it was exchanged for goods and services. The Judge wrote:
[80] … on a balance
of probabilities all of the land devoted to the cultivation of the infringing
crop in 2004 was rented for value. However, that value appears, in large part,
to have been Mr. Rivett’s own labour. Counsel for Monsanto took the Court to
passages from the discovery of Mr. Rivett wherein it is clear that some of the
land was paid for, at least in part, in goods and services to the landowner,
e.g., tillage, snow removal, or hay.
[81] I find
below that Mr. Rivett is not entitled to any deduction from gross revenue for
his labour. The same reasoning applies here. Further, there is no principled
basis on which the Court can determine the value of any goods, such as hay,
that were exchanged for use of the land he cultivated.
[71]
Once
again, Mr. Rivett argues that the Judge was tasked with making his best
estimate of the costs associated with the rented land since he had found that
use of the 319 acres was clearly not for free. Having failed to do so, he
committed an error. I disagree.
[72]
In light
of the wide variation in rent prices (see Rivett’s transcript for 12 January
2009, pages 118-130), lack of specific evidence as to the market value of the
acres in question, and the fact that Mr. Rivett had given value in the form of
unquantifiable goods and services (ibidem, at pages 157 and following),
the Judge was entitled to conclude as he did.
(c) Expenses
not otherwise allowed, equipment repairs and general maintenance
[73]
Mr. Rivett
suggests that the general apportionment of 26.9% applied in respect of other costs
should have been applied to the $11 961.40 (total amount disbursed according
to exhibit D-7) paid for general maintenance and equipment repairs which the
evidence showed (exhibit D-7, Rivett’s appeal book, volume 2, tab 21, at pages
383-417) . The result would be a further reduction of the profit by $3 217.62. Monsanto
replies that the appellant failed to correlate such costs with revenues derived
from his infringing activities. I agree with Mr. Rivett.
[74]
Exhibit
D-7 is a series of invoices from Midnight Excavation (generally in respect of
repairs to farm equipment) dated from February 2004 to June 2004, each one
accompanied by a cheque for a corresponding amount duly cashed by its payee.
The work performed is described as “general repairs” on all of them, but one
that mentions “skidster work” needed “to clean up some fence rows to put the
trees back (…) so they don’t smother the crop” (Rivett’s transcript for 12
january 2009, at page 169, lines 15-20). In his reasons, the Judge did not
specifically deal with this evidence. On a fair and liberal reading of his reasons,
I do not think that these general repair costs are caught by his statement at
paragraph 69:
… In my view, it is not
appropriate to consider costs such as general farm insurance, capital depreciation,
water, electricity, etc. as would be additionally considered under the full
cost approach, discussed above. These expenses are too indirect to be entitled
to consideration. In any event, the defendant provided no evidence of such
costs.
[75]
Then it
leaves unaccounted for the costs associated with general maintenance and
equipment repairs. I am of the view that this omission constitutes an error. A
deduction of $3 217.62 should have been allowed for the reasons given below.
[76]
As
mentioned above at paragraph [62], the Judge had set the general rule that “(p)rovided there is evidence that the expense was incurred, in part, with respect to the 947 acres of [RR] soybeans, a principled basis [upon which] to allocate that
expense is … the percentage of the acreage of RR soybeans to the total acreage
of the business” (Rivett’s reasons, at paragraph 68) (Emphasis added).
[77]
A good
example of how the Judge applied this rule concerns the fuel costs for which
“Mr. Rivett’s testimony coupled with the documentary evidence permit[ted] a
determination of these costs on a balance of probabilities” (Rivett’s reasons,
at paragraph 83). In addition to providing accounts for diesel fuel for tractors
and combines (exhibit D-6, Rivett’s appeal book, volume 2, tab 20, at pages
328-381), Mr. Rivett testified that “per acre fuel expenditures [were] similar
from crop to crop, with the exception of wheat which involve[d] marginally
higher combining costs, or “a little bit of difference in fuel per acre””. The
increase for wheat being marginal, the Judge held that the costs should be
“spread equally among the crops” (Rivett’s reasons, at paragraph 85). This
evidence allowed the Judge to conclude that fuel expenses were “incurred, in
part, with respect to the 947 acres of [RR] soybeans” (ibidem, at
paragraph 68).
[78]
In direct
examination, Mr. Rivett stated that the invoices filed under D-7, “again like
the fuel”, dealt with the farm generally. Repairs were for “everything on the
farm […] It is not just one thing there that they’re allocated for. It is in
general … seed drills, calibrators, tractors...” (Rivett’s transcript for 12
January 2009, at page 165, lines 13 and f.). Once the Judge had decided to
spread the fuel costs equally among the various crops, it seems only logical to
allocate as well, and on the same basis, the costs of maintaining and repairing
the machinery that burns the fuel. Having carefully examined the evidence and
the transcripts available in appeal, I conclude that these costs were incurred
in part to grow the infringing crop.
(d)
Percentage of the profit differential: 31% versus 18%
[79]
This
leaves the final question of whether the percentage of the profit differential
applied by the Judge was too high. I think that it was.
[80]
The Judge
found the differential was 31% based on a chart prepared by Monsanto, which
advertised a profit differential of 18%.
[81]
Interpreting
the figures on the chart prepared by Monsanto in light of Mr. Rivett’ s
admission that he did not pay for the RR seeds because he inherited them, the
Judge found the differential profit to be 31%.
[82]
In its
relevant parts, the chart reads as follows:
|
|
Roundup Ready
bulk
|
Conventional
Bin run
|
|
|
|
|
|
Yield (bu)
|
39.0
|
32.9
|
|
Price per
bushel
|
$8.75
|
$8.75
|
|
Total
Revenue
|
$341.25
|
$287.88
|
|
Seed
|
$51.32
|
$18.46
|
|
Weed
Control
|
|
|
|
1st
application
(preplant
burndown)
|
$14.69
|
$14.69
|
|
2nd
application
|
$9.79
|
$37.23
|
|
Total Seed
and Weed Control
|
$75.79
|
$70.38
|
|
|
|
|
|
Return
toward profit/other
|
$265.46
|
$217.50
|
[83]
Monsanto’s
chart is aimed at showing the greater value that RR soybeans can bring to a
farming operation. It advertises a potential advantage of over $40.00 per acre.
Even
though the seeds are more expensive ($51.32 compared to $18.46), the yield is
so much better (39 bushels compared to 32.9 bushels) and the total weed control
costs are so much less ($75.79 compared to $70.38), that the expected net
profit increases from $217.50 to $265.46 (a difference of $47.96, or 18%).
[84]
The Judge accepted
that the chart represents the expected differential profit from using RR
soybean seeds over conventional soybean seeds, but in applying the information
on the chart to the facts of Mr. Rivett’s case, he disallowed $51.32,
representing the cost of RR seeds, as that expense had not been incurred by Mr.
Rivett (he had inherited the RR seeds he planted). Adding $51.32 back to the
amount of return toward profit in the RR bulk column, the final result changed
from $265.46 to $316.78. On that basis, the Judge computed the profit
differential between the RR bulk and the conventional bin run as 31%.
[85]
In my view, it was reasonably
open to the Judge to treat Monsanto’s chart as the best evidence available to estimate
the profit attributable to Monsanto’s patent. It is a representation by
Monsanto of the incremental profit a hypothetical farmer might expect to derive
from planting RR soybean seeds (bought in bulk) instead of conventional soybean
seeds. Thus, it represents a benchmark for the differential element in the
computation of differential profit.
[86]
However,
the Judge should have recognized that the chart does not purport to state Mr.
Rivett’s actual farming costs, or anyone’s actual farming costs. Altering the
chart to remove the seed cost from one column, as the Judge did, is
problematic because it adjusts one element of the chart, and one element only,
to reflect Mr. Rivett’s actual situation while ignoring the fact that none of
the other elements represent his situation either.
[87]
According
to Monsanto’s chart, the advantage to a hypothetical farmer of using the
patented invention is the difference between $265.46 and $217.50, or 18%. I
agree with Mr. Rivett that the portion of his profits to be disgorged to
Monsanto should follow Monsanto’s own and unchallenged evidence and be equal to
18% (Rivett’s memorandum, at paragraph 53).
[88]
This being
said, I now turn my attention to the Janssens’ file. Of course, whenever issues
in common with the Rivett appeal have already been dealt with, I will adopt my
previous reasoning and simply refer to the relevant paragraphs of these
reasons.
(2) The Janssens’ appeal
[89]
Lawrence
and Ronald Janssens are brothers. They and Alan Kerkhof own a farming business
and farm together in an informal arrangement. As mentioned earlier, the
infringement, which is fully admitted, relates to two years of cultivation of
RR soybeans. Collectively, fifty acres of soybean seeds, saved from a previous
year’s harvest were planted in 2004 and, using seeds retained from the 2004
yield, 250 acres in 2005.
[90]
The issues
are:
1.Did the Judge err in refusing
cultivation costs for the year 2004?
2.Did the Judge err in refusing to
include custom costs and labour in the deductions?
3.Did the Judge err in not allowing
Ronald Janssens a deduction for the land costs?
4.Did the Judge err in disallowing
deductions of other expenses relating to marketing and interest costs?
5.Did the Judge err in attributing
the profits of Aldy Farms Inc. to Alan Kerkhof personally?
6.Was the percentage of the profit
differential too high?
[91]
I am of
the view that the Janssens’ appeal must fail on all issues, but the sixth one. The
evidentiary record amply supports the Judge’s findings on issues 1 through 5.
(a)
Cultivation costs for the year 2004
[92]
The
Janssens submit that the Judge erred in refusing them any deduction whatsoever
for the year 2004. Their best evidence for 2004 was that for the year 2005. Building
on the same argument presented by Mr. Rivett, they argue that “the Court has an
obligation to make its best estimate” (Janssens’ memorandum, at paragraph 50). I
accept paragraph 33 of the Judge’s amended reasons in Janssens as a full answer
to that ground of appeal:
[33]
It was observed by counsel for the
defendants that it is obvious that soybeans do not plant, cultivate and harvest
themselves, and thus that some expenses must have been incurred in that process.
However, the defendants provided no evidence on which the Court, on a
principled basis, could find that the 2004 expenses would be of the same order
as the 2005 expenses. The 2004 crop was planted in a sharecropping arrangement
with a third party who is not before the Court in these proceedings. Accordingly,
the Court finds that there is no basis on which to credit the defendants with
any expenses against the gross revenue received from the 2004 crop.
(b) Custom
costs and labour
[93]
The same
can be said about this ground of appeal. Paragraph 43 of the Judge’s amended
reasons in Janssens is a full answer to this issue:
[43]
The difficulty with this submission
is that the claimed expenses conflate a variety of separate items, such as fuel
costs and labour, which cannot be disentangled on the evidence before the Court.
Further, as counsel for the plaintiffs elicited in cross-examination of Mr. Kerkhof,
the custom rates relied upon by the defendants to estimate the cost of spraying
and trucking, for example, do not account for the fact that the market value of
these services is determined by factors such as wage rates, insurance premiums,
and licensing costs which the defendants would not have incurred. For this
reason the figures provided by the defendants are not reliable and the Court
will not allow deductions from gross revenue for any of these expenses. Further,
for the reasons given in Rivett, the defendants are not entitled to any
deduction for their own labour.
(c) Land costs
of Ronald Janssens
[94]
This
ground of appeal stems from paragraph 52 of the Judge’s amended reasons in
Janssens where he held that:
“Ronald
Janssens is being required to disgorge slightly more profit with respect to the
2005 crop than the other defendants despite the fact that his crop was only
half of their crop. This results as he grew the soybean crop on land he owned,
rather than rented. Therefore, while the other defendants were credited with
the lease costs of the land, he was not. No evidence was led of any similar
costs, such as property tax, that Ronald Janssens may have incurred with
respect to his land. I have considered whether there is a basis on which the
Court should provide some deduction for Ronald Janssens, but have concluded
that in the absence of any evidence any deduction by the Court would be
arbitrary and could not be said to have been made on a principled basis.”
[95]
For Ronald
Janssens, land involves actual and direct costs, including taxes, insurance,
mortgage interest, upkeep, and use-value which could otherwise be spent growing
other crops. Such costs are difficult to assess, but are certainly incurred. Given
that the Judge accepted evidence with respect to the cost of renting land by
the other appellants, Ronald Janssens argues that equity demanded that the
Judge used the cost of land rent as a means to determine deductible costs
associated with his own land (Janssens’ memorandum, at paragraph 57).
[96]
Frankly, I
fail to see the difficulty in proving or assessing land costs in the present
context. It is Mr. Janssens who did not meet his burden of proof, not the Judge
who failed at his task. Moreover, there is no basis to assume that Mr. Janssens’
land costs approximated his partners’ rental costs. In the absence of evidence,
the Judge did not err in refusing to allow such a deduction.
(d) Marketing
and Interest costs
[97]
The Janssens
argue at paragraphs 73 to 77 of their memorandum of fact and law that the Judge
erred by not allowing a deduction for marketing costs and interest on loans for
input costs. According to Mr. Kerkhof’s testimony, these costs would have been “approximately
$1,000 in 2004, and $5,000 in 2005, or an average of approximately $20 per
acre” (ibidem, at paragraph 75). The transcripts show that these figures
were conceded to be estimated costs only, which included miscellaneous expenses.
Cross-examined on the issue, Mr. Kerkhof answered as follows:
Q. Your interest
in marketing costs that you spoke to?
A. Yes.
Q. You
don't have any documentation to back that up?
A. No,
I don't.
Q. You
said those figures are including accounting, household and office?
A. Right.
Q. And
those expenses you would incur regardless of whatever crops are in your
field?
A. That's
right.
[98]
On that
evidence, the Judge was certainly entitled to find that the figures provided
were “unreliable” (see paragraph 43 of Judge’s amended reasons in Janssens
cited above at paragraph [93].
(e) Mr. Kerkhof
and Aldy Farms Inc.
[99]
To avoid
disgorging profits, Mr. Kerkhof submits that all farming activity done or
managed by him was done on behalf of his company Aldy Farms Inc. As a result,
Aldy Farms earned the profit from the 120 acres of infringing crop grown in
2004 and 2005, not him.
[100]
The record
does not support that statement. Firstly, Mr. Kerkhof’s statement of defence
simply does not mention Aldy Farms. Secondly, Mr. Kerkhof, who was represented
by counsel throughout the proceedings, admits to the infringement in his
personal capacity and agrees to disgorge profits. Thirdly, no evidence was
provided that suggested Aldy Farms was the recipient of the revenues and of Mr.
Kerkhof’s services. The only reference to that entity was during his
examination-in-chief. Finally, the Agreed Statement of Facts is to the effect
that Mr. Kerkhof planted, harvested and sold the seeds in his personal
capacity.
[101]
Thus, I
agree with Monsanto, that there was no basis for the Judge to take into account
the alleged involvement of Aldy Farms Inc. in the infringing activities of Mr.
Kerkhof.
(f) Percentage
of the profit differential: 31% versus 18%
[102]
For the
reasons given above at paragraphs [79] and following, I would allow that ground of appeal.
Conclusions
Monsantos’s cross-appeals
[103]
Monsanto’s
cross-appeals should be dismissed.
The appeals of Mr. Rivett (A-314-09); and
of Messrs. Janssens and Kerkhof (A-315-09)
[104]
I propose
to allow the appeals, in part.
[105]
The
Federal Court Judge set the specific amounts of money to be paid by the appellants
to Monsanto. These amounts concerned (a) the profits to be disgorged (b) the
pre-judgment interest calculated in accordance with subsection 36(1) of the Federal
Courts Act (c) post-judgment interest calculated in accordance with
subsection 37(1) of the same Act and (d) the costs, including post-judgment
interest on these costs.
[106]
As a
result of my conclusion in the within appeals, these specific amounts will require
re-calculation. It is hoped that with the guidance of these reasons, the
parties will come to an agreement as to the new amounts replacing those
appearing at paragraphs 1 through 4 of the Federal Court’s judgment in File
314-09 and in paragraphs 2 through 17 in File 315-09.
[107]
If they
agree and wish for orders giving effect to these new amounts, the parties may
prepare for endorsement draft orders implementing the Court’s conclusions.
[108]
If they
disagree, any party may bring a motion for supplementary judgment in accordance
with Rule 369 of the Federal Courts Rules.
[109]
A copy of
these reasons will be filed with the Registry for each appeal.
Costs: appeals and cross-appeals
[110]
In view of
the divided success, I would allow no costs on the appeals or cross-appeals.
“Johanne
Trudel”
“I
agree
K. Sharlow J.A.”
“I
agree
Eleanor R. Dawson J.A.”
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