In Rivett v. Monsanto Canada Inc. (2010 FCA 207), the Federal Court of Appeal (“FCA”) unanimously allowed Rivett’s and Janssens’ (Appellants) appeals, in part, from their Federal Court (“FC”) decisions, 2009 FC 317 and 2009 FC 318 respectively. The FCA held the FC had erred in calculating Monsanto Canada Inc.’s (Monsanto) award of profits when applying the differential profit approach. Monsanto cross-appealed on several grounds, including the FC’s choice to apply the differential profit approach in calculating an award of profits, and the use of conventional soybeans as a comparator. The FCA dismissed Monsanto’s arguments.

Monsanto owns Canadian Patent No. 1,313,830 (“CA ‘830) entitled “glysophate-resistant plants”, which is sold under the trademark Roundup Ready (“Roundup”). CA ‘830 claims engineered genes and plant cells containing these genes that give the plant herbicide resistant qualities, however CA ‘830 does not claim the plant itself. The Appellants admitted infringing the patent and therefore the dispute dealt solely with the remedy for infringement. Monsanto chose to claim profits instead of damages, and the FC applied the differential profit approach to determine Monsanto’s award.

Approach to Accounting of Profits

Monsanto argued that the FC’s choice to apply the differential profit approach was in-correct, and the correct approach for deliberate and intentional infringement is the variable cost approach. In considering Monsanto’s cross-appeal, the FCA noted “in Schmeiser . . . the Supreme Court called the differential profit approach the ‘preferred means of calculating an accounting of profit’.” Monsanto attempted to distinguish Monsanto Canada Inc. v. Schmeiser (2004 SCC 34) on the basis that that case dealt with an innocent infringer, and therefore the “preferred means of calculating an accounting of profit” was the preferred means for an innocent infringer. Monsanto argued that the Appellants in this case deliberately infringed their patent, and therefore Monsanto ought not to be followed. The FCA dismissed Monsanto’s qualification and stated that the “Supreme Court’s statement in Schmeiser is unambiguous: the preferred means of calculating an accounting of profits . . . is the differential profit approach.”

Differential Profit Approach – Comparator

Monsanto also argued that conventional soybeans were not available when the Appellants chose to use Roundup, and in turn infringe Monsanto’s patent, and therefore conventional soybeans cannot be used as a comparator to determine differential profit. The FCA dismissed this argument by noting that in Reading & Bates Construction Co. v. Baker Energy Resources Corp. (C.A.) [1 F.C. 483], the case relied on 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.” The FCA found such proof in “Monsanto’s evidence, which itself compares the two.”

Calculating Differential Profit

The FCA then considered the Appellants’ grounds of appeal. The Appellants alleged several errors by the FC in calculating differential profit – refusing to include costs and labour in the deductions, disallowing a deduction for land costs, disallowing deductions for other expenses relating to equipment repairs and general maintenance, refusing to include cultivation costs and that the percentage of profit differential was too high. The FCA allowed the Appellants’ appeal on two grounds – the FC erred in failing to allow deductions for other expenses relating to equipment repairs and general maintenance and in applying too high of a percentage of profit differential.