Airbus Helicopters S.A.S. v. Bell Helicopter Textron Canada Limited

The Federal Court of Appeal (“FCA”) has released its judgment in Airbus Helicopters SAS v Bell Helicopter Textron Canada Limited, 2019 FCA 29. This case dealt with the assessment of punitive damages for infringement of a patent.

Background:

In 2008, Airbus Helicopters (appellant) initiated legal proceedings against Bell Helicopters (respondent), alleging that Bell not only infringed on its patent on an innovative landing gear design, but made representations to the public that they were the creators of the design. In 2012, the Federal Court ruled in favour of Airbus, 2012 FC 113, and in 2013, the Federal Court of Appeal upheld the decision, 2013 FCA 219. In 2017, the Federal Court ordered Bell to pay Airbus $500,000 in compensatory damages and $1,000,000 in punitive damages for the infringement , 2017 FC 170. The amount of the punitive damages was appealed and cross-appealed.

Issues:

There were three issues before the FCA:

• A. Did the Federal Court err in law in constraining itself with a “two-million dollar ceiling” in its assessment of punitive damages?
• B. Did the Federal Court err in finding that a $1,000,000 award in punitive damages was sufficient to meet the objectives of such damages, i.e. retribution, deterrence and denunciation?
• C. Is the $1,000,000 award the lowest amount required to achieve the purposes of punitive damages?

The appellant argued that the trial judge’s determination of punitive damages was based on his mistaken belief that the amount must fall within the range of $500,000 and $2 million. The FCA found it is not inappropriate to look at awards in past decisions as “guideposts”. Moreover, there was no indication that the trial judge felt constrained by the range and did not impose on himself a “fixed cap”.

B. Did the Federal Court err in finding that a $1,000,000 award in punitive damages was sufficient to meet the objectives of such damages, i.e. retribution, deterrence and denunciation?

The trial judge based his assessment on the appropriate quantum of punitive damages using the six factors identified in Whiten v. Pilot Insurance Co., 2002 SCC 18. Those factors are: blameworthiness of the conduct; vulnerability of the parties; harm and potential harm; the need for deterrence; other civil or criminal sanctions; and wrongfully gained advantages. The trial judge determined that the two major factors were the blameworthiness of the respondent and the need for deterrence.

The appellant asserted that the trial judge made several errors in assessing the six Whiten factors. Specifically, he failed to put sufficient weight on the highly reprehensible nature of the respondent’s misconduct, which was found to be a “planned and deliberate” infringement lasting several years and disregarded the “very core and purpose of patent law”.

The FCA found the trial judge did carefully consider the seriousness of the respondent’s conduct, which he denounced as “unacceptable behaviour”. The FCA further endorsed the trial judge’s consideration of several mitigating factors, which included the respondent’s clean record on intellectual property violations, and the steps it took to quarantine the infringing gears and to build a non-infringing gear. Ultimately, the FCA found the trial judge’s assessment to be consistent with the objectives of punitive damages. The FCA also praised the trial judge’s sensitivity to the need for deterrence on both an individual and at a societal level.

In response to the claim that the trial judge failed to consider the financial position of the respondent, the FCA reviewed the three situations set out in Whiten where a defendant’s financial power may be relevant in the assessment of damages: a) if the defendant chooses to argue financial hardship; b) if the defendant’s financial clout is directly relevant to its misconduct; and c) other circumstances where it may be rationally established that a lesser award would be insufficient.

The appellant further submitted that the trial judge was mistaken to consider the conduct of the respondent after legal proceedings began as a mitigating factor in the evaluation of potential harm. Here, the FCA clarified that misconduct that does not result in actual prejudice due to sheer luck is not a mitigating factor, but the behaviour of the respondent after the infringement can be a mitigating factor.

C. Is the $1,000,000 award the lowest amount required to achieve the purposes of punitive damages?

In response to the respondent’s argument that the award was excessive, the FCA warned that downplaying its misconduct was “ill-advised and inappropriate”. The FCA reiterated the trial judge’s remarks that the respondent’s infringing conduct demonstrated “callous disregard” for patent law, represented “a marked departure from ordinary standards of decent behaviour” and is “highly reprehensible”.

Conclusion:

The appeal and cross-appeal were dismissed by the FCA.

The determination of punitive damage is an exercise that is highly contextual in nature. It requires the careful assessment of the Whiten factors. Punitive damages must be proportional to the misconduct “in several dimensions”. It is appropriate to consider mitigating factors. In making the assessment, past awards can also be used as reference points, but as each case is fact specific, past awards have limited precedential value.

Authors: Jordan D. Scopa and Jaclyn Tilak