AIRBUS HELICOPTERS, S.A.S. Plaintiff/ Defendant by Counterclaim v. BELL HELICOPTER TEXTRON CANADA LIMITÉE, 2017 FC 170

Date: 20170302 Docket: T-737-08 Citation: 2017 FC 170 Ottawa, Ontario, March 2, 2017 PRESENT: The Honourable Mr. Justice Martineau BETWEEN: AIRBUS HELICOPTERS, S.A.S.

Plaintiff/ Defendant by Counterclaim and BELL HELICOPTER TEXTRON CANADA LIMITÉE Defendant/ Plaintiff by Counterclaim PUBLIC JUDGMENT AND REASONS (Confidential Judgment and Reasons originally issued on February 10,2017 and Amended Confidential Judgment and Reasons issued on March 2, 2017) [ 1 ] This Court is asked to determine the quantum of damages to be awarded to the plaintiff, Airbus Helicopters, S.A.S. [Airbus], as a result of the defendant, Bell Helicopter Textron Canada Limitée [Bell], having infringed the Canadian Patent No. 2,207,787 [‘787 Patent] which relates to a helicopter equipped with a skid-type landing gear: Eurocopter v Bell Helicopter Textron Canada Limitée , 2012 FC 113 , [2012] FCJ No 107 [2012 FC Judgment]; aff’d 2013 FCA 219 , [2013] FCJ No 1043 [2013 FCA Judgment]. [ 2 ] For the reasons that follow, the defendant is ordered to pay to the plaintiff the sum of $1,500,000 comprised of $500,000 in compensatory damages and $1,000,000 in punitive damages, plus pre-judgment and post-judgment interest, all with costs [Final Judgment].

I. THE ‘787 PATENT [ 3 ] The ‘787 Patent, entitled “Train d’atterrissage à patins pour hélicoptère” (skid-type landing gear for helicopter) was issued on December 31, 2002 to Eurocopter after an application filed on June 5, 1997, claiming priority based on French Patent application No. 96 07158, filed in France on June 10, 1996 [French Patent].

Although not referred to as such in the ‘787 Patent, the disclosed invention has been known colloquially, in French, as the “train à moustache” and it is designated in English as the “Moustache” landing gear [Moustache gear]. [ 4 ] The ‘787 Patent is comprised of 16 claims. Claim 1 is the sole independent claim; claims 2 to 16 are dependent claims. For ease of reference, claims 1 to 16 are reproduced below [ translation ]: 1.

Helicopter landing gear, comprising two skids each having a longitudinal ground support surface and connected to a front cross piece and a rear cross piece which are themselves attached to the structure of the helicopter by connecting devices, the rear cross piece being attached by the ends of its descending branches to the rear part of said longitudinal support surfaces, characterized in that each of said skids has at the front an inclined transition zone with double curvature orienting itself transversely in relation to said longitudinal ground support surfaces, above the plane of the latter, the two transition zones together constituting, in this way, an integrated front cross piece, offset in relation to the front delimitation of the plane of contact of the longitudinal support surfaces of the skids on the ground. 2.

Landing gear according to claim 1, characterized in that the assembly of skids and cross pieces is made of aluminium tubes. 3. Landing gear according to claim 2, wherein the aluminium of said tubes is characterized by a limit equal to approximately 75% of the fracture strength, and by a relative elongation at fracture at least equal to 12%. 4. Landing gear according to claim 2 or 3, characterized in that the wall thickness of the tubes making up said front and rear cross pieces is degressive between the central part of the cross piece and its junction with the corresponding skid. 5.

Landing gear according to any of claims 1 to 4, characterized in that the ends of the descending branches of the rear cross piece are attached to said longitudinal support surfaces of the skids by means of aluminium couplings. 6. Landing gear according to any claims 1 to 5, characterized in that the said front cross piece consists of two half-branches interconnected towards the middle of said front cross piece by a removable junction means and establishing continuity of said front cross piece in bending. 7.

Landing gear according to any of claims 1 to 5, characterized in that said front cross piece consists of a single branch whose

ends are each connected by a removable junction means to the front part of the corresponding skid, said junction means being arranged between the two curves of the transition zone in question. 8. Landing gear according to claim 6 or 7, characterized in that said junction means consist of a screwed coupling system made of aluminium, or of an attachment collar. 9.

Landing gear according to any claims 1 to 8, characterized in that said connecting devices between said front and rear cross pieces and the structure of the helicopter are of the type with controlled friction in rotation, comprising for this purpose two half-collars or similar devices surrounding the tube of the cross piece, with the interposition of a bearing made of elastic metal of the elastomer type. 10.

Landing gear according to any of claims 1 to 9, characterized in that it includes at least three devices for connection to the structure of the helicopter, one of them being attached centrally to one of said cross pieces and the other two being attached, while being mutually spaced on either side of the longitudinal axis of the gear, to the other cross piece. 11.

Landing gear according to any of claims 1 to 9, characterized in that it includes four devices for connection to the structure of the helicopter, two of them being attached to one and two to the other of the cross pieces, and being mutually spaced on either side of the longitudinal axis of the gear. 12. Landing gear according to claim 11, characterized in that the front or rear cross piece had, between two sections of cross piece, a gap in its central part, and wherein said devices for connection to the structure of the helicopter are attached as articulations with elastic return to the ends of said sections. 13.

Landing gear according to any of claims 1 to 12, characterized in that said rear cross piece consists, for its front part, of a bent tube having an aerodynamic profile forming a leading edge, this tube being extended towards the rear by an added fairing forming a trailing edge. 14. Landing gear according to any claims 1 to 13, characterized in that steps are attached to said inclined transition zones at the front of the skids, below the access doors to the cabin, three steps starting from said transition zones and extending only towards the rear. 15.

Landing gear according to any claims 1 to 14, characterized in that said integrated front cross piece is offset forwards in relation to the front delimitation of the plane of contact of the longitudinal support surfaces of the skids on the ground. 16. Landing gear according to any of claims 1 to 14, characterized in that said integrated front cross piece is offset backwards in relation to the front delimitation of the plane of contact of the longitudinal support surfaces of the skids on the ground. [ 5 ] The ‘787 Patent will expire on June 5, 2017.

Airbus is the present owner of the ‘787 Patent, as well as of the French Patent, and the counterpart US Patent No. 5,860,621 [US Patent], all of which contain substantially identical disclosures and similar claim language. II. CONFIDENTIALITY ORDER [ 6 ] A substantial part of the voluminous documentary evidence in the present matter is Confidential and/or Counsel’s Eyes Only information.

Upon the consent of the parties, on March 10, 2016, the Court issued an Amended Confidentiality Order which replaces the orders of this Court dated December 29, 2008 and November 9, 2009. [ 7 ] Pursuant to paragraph 4 of the Amended Confidentiality Order, the following information in the quantification of damages phase of the proceeding and at the continuation of the trial constitutes “Confidential Information”: • Confidential information relating to particular specifications and particular manufacturing details for the manufacture of helicopters (including helicopter landing gear) of the parties; • Confidential information relating to regulatory approval of helicopters (including helicopter landing gear); • Confidential information relating to research and development with respect to the subject matter of the ‘787 Patent, including but not limited to notebooks, laboratory journals, process flow charts, testing data, analytical results, graphs, print-outs, experimental protocols, memoranda, minutes and notes; and • Confidential information relating to marketing, operational manufacturing, sales or financial information relating to Airbus Helicopters or Bell Helicopter, their parents and their affiliated companies. [ 8 ] Upon considering that the present Judgment may contain information that is “Confidential Information” and/or “Counsel’s Eyes Only Information” under the terms of the Amended Confidentiality Order, prior to the issuance of the Final Judgment, the Court has sought the parties’ input with respect to the proposed modalities of a Direction regarding the confidentiality character of the Final Judgment.

Upon considering the parties’ representations, the Court has directed that the Final Judgment be treated as Confidential Information, which may only be disclosed to the persons, firms, and individuals mentioned in paragraph 16 of the Amended Confidentiality Order. Moreover, a public version of the Final Judgment shall be issued in the delay mentioned in the Direction once the Court has received the parties’ proposed redactions or amendments, as the case may be. [8a] The Confidential Reasons for Judgment were released on February 10, 2017 [Reasons].

Upon release, the Court issued a Direction to the parties, inviting them to make submissions on proposed redactions or amendments that should be made before the Reasons are released publicly. [8b] On February 24, 2017, the plaintiff informed the Court that it did not wish to redact any part of the Reasons.

[8c] On February 24, 2017, the defendant proposed a number of redactions (Schedule A to Bell Helicopter Textron Canada Limitée’s Response to the Direction of the Honourable Mr. Justice Martineau dated February 10, 2017). [8d] This Court is satisfied that the defendant’s proposed redactions with respect to sensitive commercial information mentioned in paragraphs 69, 137, 161, 163, 195, 200, 206, 236, 265, 305, 306, 309, 316, 326, 332, 336, 337, 360 and 362 are reasonable and has accepted that all of them should be incorporated into the Public Reasons and Judgment.

Indeed, the Court is satisfied that the risk for the defendant of the release of this sensitive commercial information outweighs any public interest in having access to that information. Moreover, even with the redactions, a reader is able to understand the nature of the evidence and the reasoning applied to reach the relevant finding. The defendant has also brought to the attention of the Court two clerical errors in paragraphs 178 and 423 that have been corrected. III.

BACKGROUND [ 9 ] The background to the litigation is already public and to the judicial knowledge of the Court – since this is a continuation of the trial that was conducted in 2011 and 2012 before the undersigned as the trial judge.

The pertinent facts are extensively set out in the 464 paragraphs of the 2012 FC Judgment and need not be repeated here, except to simply highlight some salient aspects which are mentioned in the 2012 FC Judgment and/or in the Agreed Statement of Facts and Admissions of the parties dated January 14, 2011 [Agreed Statement of Facts]. [ 10 ] Bell began development of the Bell 429 helicopter in the third calendar quarter of 2004. It was then equipped with the Original/Legacy Landing Gear [Legacy gear] (Agreed Statement of Facts at para 21).

While it was known to Bell that the Legacy gear closely resembled the Moustache gear, when concerns were raised at the time, Mr. Malcolm Foster, who was responsible of the program, advised Bell’s engineers to “carry on” (2012 FC Judgment at para 274). He was not called as a witness to either confirm or deny this statement. Bell simply decided to continue with the Legacy gear. [ 11 ] The Legacy gear and its components are faithfully represented for the purpose of this litigation in exhibits JB- 216/Confidential and JB-271/Confidential (Agreement Statement of Facts at para 22).

An isometric view of the Legacy gear, which is made of aluminium, is reproduced below: [ 12 ] The Legacy gear was publicly displayed for the first time at the Seoul Air Show in Korea in October 2005 (Agreed Statement of Facts at para 33, item 16). [ 13 ] Twenty-one Legacy gears were manufactured by Aeronautical Accessories Inc., a related Bell company, for and on the instructions of Bell (Agreed Statement of Facts at para 23). Moreover, the evidence on record confirms that Bell used the infringing gears during the certification process of the Bell 429 which began, in earnest, in early 2006.

Drop tests were conducted in 2006 and 2007 with the infringing gears. Indeed, the Bell 429, equipped with the Legacy gear, achieved its first flight on February 27, 2007 at Bell’s facility in Mirabel (2012 FC Judgment at para 22). [ 14 ] In the summer of 2008, the defendant’s engineer worked on the design of a modified landing gear, which became to be known as the Production gear.

In early 2009, the Production gear was fully developed and the defendant asked that the competent aeronautical authorities to certify the Bell 429 with the Production gear. [ 15 ] The Production gear and its components are faithfully represented for the purpose of this litigation in exhibit JB- 243/Confidential and in drawings found in JB-405/Confidential to JB-477/Confidential and JB-485/Confidential (Agreed Statement of Facts at para 28).

An isometric view of the Production gear, which is also made of aluminium alloy, is reproduced below: [ 16 ] At the HELI EXPO, the Production gear was publicly shown in Anaheim, California in February 2009 (Agreed Statement of

Facts at para 33, item 1). Certification of the Bell 429 with the Production gear was obtained from Transport Canada on June 20, 2009, from the FAA on June 30, 2009, and from EASA on September 23, 2009 (2012 FC Judgment at para 184). [ 17 ] On January 16, 2014, the defendant destroyed twenty out of the twenty-one Legacy gears in its possession and which had been quarantined sometime after the institution of these proceedings. IV.

PATENT LITIGATION [ 18 ] In Canada, the plaintiff has claimed infringement of the ‘787 Patent by two distinct models of landing gear associated with the Bell 429 helicopter: the Legacy gear and the Production gear. Similar allegations of infringement have been made by the plaintiff in France and in the United States with respect to the French and US Patents. A.

Canada [ 19 ] The plaintiff did not send a cease and desist letter to the defendant prior to instituting the present action in May 2008 (Agreed Statement of Facts at para 32). [ 20 ] In its original statement of claim, the plaintiff sought a declaration that the ‘787 Patent was valid and infringed by the defendant’s use of the Legacy gear.

While not challenging that the essential elements of claims 1, 2, 3, 4, 5, 7, 9, 10 and 15 were present in the Legacy gear, the defendant denied infringement on the basis that it was practicing prior art (Gillette defence) and that it had used the Legacy gear for the purposes of obtaining regulatory approval (experimentation exception).

In addition, the defendant sought in its counterclaim to have claims 1 to 16 of the ‘787 Patent be declared invalid. [ 21 ] In June 2009, the plaintiff amended its statement of claim to include the Production gear, alleging that both gears were functionally equivalent and incorporated the essentials elements described in claims 1, 2, 3, 4, 5, 7, 9, 10 and 15.

With respect to the Production gear, while denying any functional equivalence, the defendant submitted that the changes to the original gear (saddle joint and a small protruding ski in the front of the gear) sufficed to dispose of the allegations of infringement. [ 22 ] On October 2, 2009, the Court ordered that the quantification of damages suffered by the plaintiff (including punitive damages) and/or of profits made by the defendant be bifurcated.

Following a six week trial conducted before the undersigned judge in January and February 2011, confidential reasons on infringement and validity were communicated to the parties on July 12, 2011. An interim stay of proceeding was concurrently ordered to allow the parties to have discussions of settlement, but to no avail.

A supplementary hearing was held in January 2012, with respect to remedies. [ 23 ] On January 30, 2012, the Court rendered its final and public judgment with respect to the issues of validity, infringement and proper remedies. [ 24 ] The action in infringement and counterclaim in invalidity were allowed in part: (

a) The Court declared that claim 15 of the ‘787 Patent was valid and enforceable. However, the Court declared that claims 1 to 14 and 16 of the ‘787 Patent were invalid and unenforceable (2012 FC Judgment at paras 392-393); (

b) The Court found that the defendant had infringed claim 15 of the ‘787 Patent by using the Legacy gear (2012 FC Judgment at para 394). The Court dismissed the Gillette defence and also found that Bell could not invoke the experimentation exception either (2012 FC Judgment at paras 268 and 383); (

c) The Court found that the evidence conclusively established that, since 2005, Bell had plans to manufacture and incorporate the Legacy gear in its Bell 429 model, as soon as it could obtain certification, and that Bell had actively promoted the sales of the Bell 429 equipped with the Legacy gear (2012 FC Judgment at para 434); (

d) The Court dismissed the plaintiff’s claim that Bell had infringed the ‘787 Patent by using and promoting the Production gear incorporated since 2009 the Bell 429 helicopters sold worldwide (2012 FC Judgment at para 388); (

e) The Court found that not all of the essential elements of claim 1 were present in the Production gear, as it did not feature the “double curvature” nor the “integrated front cross piece” (2012 FC Judgment at paras 258, 259 and 388); (

f) The Court enjoined the defendant from manufacturing, using, or selling the Legacy gear or any similar landing gear until the ‘787 Patent expires, and ordered the destruction of the twenty-one quarantined Legacy gears (except one unit for the purposes of conservation of the evidence) (2012 FC Judgment at paras 403 and 405); (

g) Considering evidentiary difficulties and the fact that none of the infringing Legacy gears were ever incorporated in a helicopter sold by the defendant, the Court did not allow the plaintiff to elect between an award of damages or an account of profits (2012 FC Judgment at paras 412 to 416); (

h) As a result of its infringement of claim 15 of the ‘787 Patent, the Court declared that the plaintiff was entitled to all damages, including punitive damages, the quantum of which was to be determined at a later hearing, after exhaustion of all appeals (2012 FC Judgment at paras 416 and 456). [ 25 ] The parties appealed the January 30, 2012 judgment. Bell appealed principally on the grounds that claim 15 of the ‘787 Patent was invalid, that its Legacy gear did not infringe the ‘787 Patent, and that, in any event, the finding that punitive damages could be awarded was inappropriate.

Eurocopter cross-appealed principally on the grounds that all the claims of the ‘787 Patent were valid, and that the Production gear infringed those claims.

[ 26 ] Subsequent to the 2012 FC Judgment, this Court issued a distinct judgment on the issue of costs upon which the defendant was ordered to pay 50% of the plaintiff’s costs, calculated at the upper end of column IV of Tariff B, with respect to reasonable fees and expenses for one senior counsel, two junior counsels, expert witnesses, one in-house counsel, one technical representative, and other taxable pre-trial, trial and post-trial costs and disbursements related to the litigation leading to the Patent Infringement Judgment ( Eurocopter v Bell Helicopter Textron Canada Limitée , 2012 FC 842 , [2012] FCJ No 1055 [Costs Judgment]).

Although the plaintiff had been overall the most successful party in the Patent Infringement Judgment, and was therefore entitled to costs, the defendant was partially successful in defending its Production gear. Bell appealed the Costs Judgments and submitted that each party should bear its own costs, alleging that the success was divided. [ 27 ] Both the appeal by Bell and the cross-appeal by Eurocopter with respect to the 2012 FC Judgment were dismissed on September 24, 2013 by the Federal Court of Appeal (2013 FCA Judgment).

Notably, the Federal Court of Appeal held that there was no reason to overturn the Court’s findings and ensuing decision with respect to Eurocopter’s right to damages, including punitive damages (2013 FCA Judgment at paras 192-193). [ 28 ] In a concurrent judgment issued the same day, the Federal Court of Appeal confirmed the Costs Judgment, dismissing Bell’s appeal ( Bell Helicopter Textron Canada Limitée v Eurocopter, société par actions simplifiée , 2013 FCA 220 , [2013] FCJ No 1044 [FCA Costs Judgment]. [ 29 ] In Canada, there were no further appeals on the issues of validity, infringement, and proper remedies, as a result of the infringement of the ‘787 Patent (as well as costs).

B. United States [ 30 ] In May 2010, while the Canadian proceeding was still ongoing, Bell Helicopters Textron Inc. [BHTI] commenced an action against Eurocopter seeking a declaratory judgment that the US Patent was invalid and not infringed. In October 2010, Eurocopter made a counterclaim alleging infringement.

The parties agreed that the Legacy gear infringed claim 1 of the US Patent, but fiercely disputed whether the Production gear infringed the US Patent and also whether infringement warranted damages or injunctive relief (exhibit D- 117). [ 31 ] On August 15, 2014, the United States District Court for the District of Columbia [US Court] ruled that the Production gear “does not literally infringe and does not infringe [US Patent] under the doctrine of equivalents as a matter of law”, noting in this respect that the Production gear “does not contain equivalent structure to “a front” of claim 1 [of the US Patent]”.

With respect to the Legacy gear, the Court denied pre-suit damages to Eurocopter under 35 USC § 287(

a) because it had failed to mark the patent number on the landing gears of its EC120 and EC130 helicopters and did not provide any actual notice of the alleged infringement until October 29, 2010. [ 32 ] However, the US Court denied BHTI’s motion for

summary judgment to deny an award of damages with respect to the Legacy gear: “Although nothing in the record indicates that Bell has attempted to sell the Bell 429 helicopter with the Original Gear since 2009, there is a factual dispute concerning Eurocopter’s entitlement to damages with respect to the Original Gear […] Bell’s submission of the testing results based on the Original Gear to the Canadian aviation authorities had a direct impact on the marketability of the Bell 429, and although it occurred prior to the commencement of this lawsuit, Eurocopter has presented evidence suggesting its continued impact on the sale of the Bell 429 in the United States.” Moreover, the US court denied BHTI’s motion to deny Eurocopter’s request for injunctive relief against the Legacy gear, noting in this respect that “Eurocopter has demonstrated the existence of genuine issue of material fact concerning Bell’s infringing conduct in relation to the Original Gear and its continuing impact on the sale of the Bell 429”. [ 33 ] Indeed, on January 22, 2015, the US Court found that a permanent injunction was warranted, as it was notably satisfied that “[d]uring the hearing, Airbus established that Bell’s infringement caused Airbus to suffer irreparable harm in the form lost sales, lost customers, and reputational harm”.

Incidentally, the fact that BHTI had stopped infringing the US Patent did not constitute, in that case, sufficient reason for denying an injunction against future infringement. [ 34 ] This Court has been informed by the parties that there has been no appeal or further litigation in the United States with respect to the validity and infringement of the US Patent. C. France [ 35 ] At the date of the Final Judgment, there is still on-going litigation in France with respect to the validity and infringement of the French Patent, as well as proper remedies and quantification of damages.

Bell and BHTI [collectively Bell] are being sued in infringement of the French Patent following the seizure, on June 16, 2009, at the defendants’ stand at the International Paris Air Show Le Bourget, of a Bell 429 helicopter equipped with the Production gear.

Bell has made a counterclaim seeking to set aside the seizure and to invalidate claims 1, 2, 4, 5, 7, 8, 9, 10, 13, 14 and 15 of the French Patent (exhibit P-119). [ 36 ] On October 11, 2012, the Tribunal de grande instance de Paris dismissed both Eurocopter’s action in infringement and Bell’s counterclaim in invalidity of the French Patent, while affirming the legality of the seizure. Both Eurocopter and Bell appealed. [ 37 ] On March 20, 2015, the Cour d’appel de Paris rendered its judgment with respect to Airbus’ appeal and Bell’s cross-appeal: (

a) The Cour d’appel de Paris confirmed the validity of the seizure of the Bell 429 helicopter seized on June 16, 2009, as well as the operations performed by the Bailiffs and the experts at the International Paris Air Show Le Bourget; (

b) The Cour d’appel de Paris declared that claims 1 and 15 of the French Patent are valid and enforceable and that Bell has infringed claims 1, 2, 4, 5, 7, 8, 9, 10, 13 and 15 of the French Patent by the use of both the Legacy and the Production gears;

(

c) The Cour d’appel de Paris granted injunctive relief and also ordered the confiscation and destruction of all counterfeited gears; (

d) The Cour d’appel de Paris also ordered that Bell pay to Airbus a provision of €3 million to be imputed on the final award once the expert it has appointed has prepared an inventory of the Bell 429 helicopters equipped with the Production gear manufactured or offered for sale in France and has determined the profits made by Bell; and (

e) The Cour d’appel de Paris specifically excluded from the scope of its judgment the damages claimed by Airbus with respect to twenty-one Legacy gears which are the object of the present claim in damages. [ 38 ] Bell’s counsel has informed this Court that the defendants have or will ask the Cour de cassation to set aside the judgment rendered on March 20, 2015 by the Cour d’appel de Paris in favour of Airbus. V. TRIAL ON DAMAGES A.

Procession of the file [ 39 ] On October 22, 2014, the plaintiff asked this Court to determine the quantum of compensatory and punitive damages as a result of having been found to have infringed the ‘787 Patent. [ 40 ] On November 21, 2014, the plaintiff served and filed with its statement of issues a request to have the matter heard expeditiously by the Court. [ 41 ] On December 10, 2014, the Court allowed the plaintiff (1) to change the former name of the plaintiff – “Eurocopter (société par actions simplifiée)” – by that of its new legal designation – “Airbus Helicopters”; (2) to clarify in its statement of claim that the amount of $25 million sought by the plaintiff as punitive damages was not dependent on the number of infringing gears used by the defendant; and (3) that the plaintiff was entitled to claim compensatory and punitive damages, as well as pre- and post-judgment interest.

The defendant was also exempted from serving and filing a re-amended defence. [ 42 ] On December 17, 2014, the plaintiff filed and served its re-amended statement of claim. [ 43 ] On January 9, 2015, the defendant served and filed its responding statement of issues and notably submitted to the Court that there was no urgency to proceed to a continuation of the trial in Canada until the final outcome of the plaintiff’s claim in damages in France. [ 44 ] On January 26, 2015, a case management conference was held with the trial judge to discuss a timetable of further steps leading to the continuation of the trial in this case.

Counsel agreed on a timetable for the filing of the parties affidavits of documents; requests and responses to request to admit facts and/or documents; first round of discoveries; responses to undertakings, motions to adjudicate objections and refusals; further discoveries following the first round of oral examinations; and serving of experts reports. [ 45 ] On February 25, 2015, based on the parties’ assurance that the whole process to have the matter ready for trial would be completed by January 29, 2016, pursuant to Rule 107 of the Federal Courts Rules , SOR/98-106 [Rules], it was ordered that the trial on the quantification of damages begin before this Court on May 30, 2016 for a duration of ten days. [ 46 ] On August 18, 2015, the scheduling order of January 28, 2015 was amended to extend the delays for the completion of discoveries and other steps in the proceeding.

The plaintiff was now to serve its expert reports, if any, on or before February 12, 2016, and the defendant, on or before April 8, 2016. In effect, it turned out that these delays were not respected. The plaintiff served its expert report on March 4, 2016, while the defendant served its experts reports on April 29, 2016. [ 47 ] A trial management conference was held on May 9, 2016. At that time, the trial judge was informed by counsel that there was a disagreement with respect to the number of experts that the defendant was allowed to call at the trial without seeking leave of the Court. B.

Interlocutory order with respect to the number of experts [ 48 ] According to this Court’s jurisprudence, no distinction should be drawn between the number of expert witnesses who may be called at trial and the number of expert reports that may be served in advance of trial ( Apotex v Sanofi-Aventis , 2010 FC 1282 , [2010] FCJ No 1592 at para 31 ). [ 49 ] In the first phase of the proceeding, three qualified experts were actually called at trial on behalf of the plaintiff (January and February 2011): Mr. Andrew Logan, an expert in helicopter design and certification; Dr.

Edward Roberts Wood, an expert in aeromechanics, dynamics and ground resonance with experience in the design and development of helicopters, and in testing helicopters for ground resonance; and Dr. François Malburet, an expert in acoustic, vibratory mechanic and mecatronic related to helicopters, with experience in ground resonance. A few weeks before the trial, the Court made an interlocutory order declaring that the proposed expert report of Mr.

Murray Wilson, a retired patent examiner with a Bachelor’s degree in mechanical engineering, was inadmissible and that the plaintiff was barred from presenting him as an expert witness at trial ( Eurocopter v Bell Helicopter Textron Canada Limitée , 2012 FC 1328 ). [ 50 ] On the other hand, three qualified experts were actually called at trial on behalf of the defendant: Dr. Dewey Hodges, an expert in helicopter dynamics, including aeromechanical stability, structural dynamics, aeroelasticity and structural mechanics, including finite element methods; Dr.

Farhan Gandhi, an expert in dynamics, aeroelasticity and aeromechanical stability of rotorcraft (helicopters);

and Mr. Thomas J. Toner, an expert in helicopter design, development and certification, with experience in rotor systems, aircraft structure and landing gear. However, during the first phase of the trial, the defendant had in fact served four expert reports on the plaintiff, even though the fourth expert, Dr. Earl Dowell, was not called at trial. [ 51 ] On March 4, 2016, the plaintiff served the expert report of Mr. Bradley A.

Heys, an expert in the fields of business, securities and intellectual property valuation, financial investigation, finance, and economics. [ 52 ] On April 29, 2016, the defendant served four expert reports: Mr. Steven Schwartz, an expert in economic matters, namely intellectual property valuation disputes; Mr. Stéphane Dupuis, an economist and an expert in economic issues related to the determination of transfer prices and the valuation of intellectual property; Mr.

Michael O’Reilly, an expert in the characteristics of the helicopter industry and the repair, overhaul, valuing, buying, selling and leasing of new and used commercial helicopters; and Mr. Ronald T. Wojnar, a former Deputy Director at the Federal Aviation Administration and an expert in the aircraft certification process in the United States and Canada. [ 53 ] On May 6, 2016, invoking Rule 52.4(1) which provides that a party intending to call more than five expert witnesses in a proceeding shall seek leave of the Court in accordance with

section 7 of the Canada Evidence Act , RSC 1985, c C-5, the plaintiff objected to the number of experts. [ 54 ] As directed by the Court on May 9, 2016, the defendant made a motion in writing to have the matter decided prior to the continuation of the trial. [ 55 ] On May 27, 2016, the Court allowed the defendant to rely upon any two of the four expert reports served on April 29, 2016 – that is one expert above the five expert limit stipulated in

section 7 of the Canada Evidence Act . What the Court stated in Airbus Helicopters v Bell Helicopter Textron Canada Limitée , 2016 FC 590 [2016 Interlocutory Order] at paragraphs 47 and 62-63 is particularly relevant: [47] Moreover, it seems quite clear that the present bifurcated proceeding constitutes a single “trial” or “proceeding” for the purposes of Rule 52.4 and

section 7 of the CEA. As submitted by Airbus, the construction of Rules 106 and 107 supports this

interpretation. Rule 106 deals specifically with the severance of proceedings, in contradistinction with Rule 107, which permits bifurcation. If Rule 107 were also interpreted as leading to severance, it would be redundant. As Airbus points out, the French version of the Rules makes this difference more apparent, as Rule 107 refers to the separate determination of issues within “une instance”, whereas Rule 106 refers to issues or causes of action continuing “en tant qu’instances distinctes”. The bifurcation in the present case was ordered under Rule 107(1) , and therefore did not create a separate “proceeding” or “trial” for the purposes of

section 7 of the CEA or Rule 52.4. […] [62] I have considered Bell’s and Airbus’ respective submissions (including Bell’s reply) in light of Rule 52.4(2), which states that in deciding whether to grant leave to a party to call more than five expert witnesses, the Court shall consider all relevant matters, including the following factors: (

a) the nature of the litigation, its public significance and any need to clarify the law; (

b) the number, complexity or technical nature of the issues in dispute; and (

c) the likely expense involved in calling the expert witnesses in relation to the amount in dispute in the proceeding. I have found the additional factors identified by Airbus also relevant and I have kept in mind that the Court’s exercise of its discretion, particularly on the eve of the upcoming trial, must “secure the just, most expeditious and least expensive determination of every proceeding on its merits” (Rule 3).

This naturally includes the upcoming trial, which is to be exclusively focused on the quantum of compensatory and punitive damages. [63] To be fair and equitable to the parties, the result achieved by the leave order must be proportionate, strike a proper balance and serve the best interests of justice in assuring the prompt conduct of the trial at an efficient cost, considering the number, complexity or technical nature of the issues in dispute. Accordingly, I have decided to allow Bell to rely upon the two expert reports and testimonies of Mr. O’Reilly and Mr.

Schwartz (one expert above the five expert limit) and to refuse leave to have Mr. Dupuis and Mr. Wojnar testify in this proceeding as two additional experts on the issue of damages (unless Bell decides to substitute either of them for Mr. O’Reilly or Mr. Schwartz). [ 56 ] The trial in the present proceeding resumed in Montréal, Quebec on May 30, 2016 and ended on June 10, 2016. [ 57 ] On May 30, 2010, at the opening of the hearing, defendant’s counsel announced that Dr. Schwartz and Mr. Dupuis would be called as expert witnesses (while Mr. O’Reilly would now testify as an ordinary witness). The reports of Mr.

Wojnar and Mr. O’Reilly were returned by the Court to the defendant. On June 6, 2016, while the trial on damages was being conducted, the defendant served and filed a notice of appeal of the 2016 Interlocutory Order. [ 58 ] In the morning of June 9, 2016, Bell’s counsel informed the Court that they had made the decision not to call Mr. Dupuis who had been present throughout most of the hearing.

His report has been returned to the defendant by the Court. [ 59 ] No request for the adjournment of the trial on damages, or suspension of the Court’s deliberations, pending Bell’s appeal of the 2016 Interlocutory Order and/or the final resolution of the litigation in France, was made at any time by the defendant or the plaintiff. [ 60 ] On August 2, 2016, the Federal Court of Appeal (Justice Near) ordered that Bell’s appeal be stayed until ten days after the expiry of the deadline to appeal the present final judgment on the quantum of damages. C.

The evidence on record [ 61 ] On June 9, 2016, counsel for Airbus and Bell declared their evidence closed. On June 10, 2016, the parties made their final arguments on the quantification of damages, which were supplemented, in the following months, by additional written submissions on the particular issues identified by the Court in its Directions.

1. Admissions of fact [ 62 ] The number of admissions in this case is minimal, as the parties mainly relied on the Agreed Statement of Facts, provided in the first phase of trial in 2011 and 2012. It turns out that a number of contested issues which could have resulted in admissions (without prejudice to the parties’ right to debate at trial) following the discoveries at trial on damages remain unsettled. Such lack of cooperation makes it difficult to validate any calculations, made either by Airbus’ expert or by Bell’s expert.

Also, this has obliged the Court to address these calculations in its reasons, thus contributing to their overall length. 2. Documentary evidence [ 63 ] Rule 276 provides that all exhibits adduced into evidence shall be marked and numbered.

The exhibits contained in the joint book of documents produced in evidence during the first phase of the trial in 2011 and 2012, including the Agreed Statement of Facts, were all marked and numbered (JB-1 to JB-542 and C-1 respectively). [ 64 ] Despite the admissions made by the parties during the first phase of the trial with respect to the authenticity and/or the contents of the documents included in the 18 volume joint book of exhibits [JB] (2012 FC Judgment at para 16), there appears to have been some misunderstanding, at the appeal level, with respect to the scope of this documentary evidence ( Bell Helicopter Textron Canada Limitée v Eurocopter , 2012 FCA 152 , [2012] FCJ No 662).

Be that as it may, Rule 275 provides that the Court may give directions at trial concerning the methods of proving a fact or of adducing evidence. [ 65 ] It has always been clear for the parties and the trial judge, that a document included in the joint book of exhibits [JB] and whose authenticity had been admitted, was part of the documentary evidence adduced at trial, and would be accordingly considered by the Court (subject to the weight to be attributed to same if there was no admission with respect to its content), unless the document in question had been removed from the joint book of exhibits at the close of the presentation of the parties’ evidence at trial. [ 66 ] On June 1, 2016, upon the consent of the parties’ counsels, the Court directed that: (

a) All the exhibits contained in the joint book of documents [JB] in the first phase of the trial; (

b) All the exhibits whose authenticity was admitted by the parties; (

c) All exhibits produced during the hearing (first or second phase); and (

d) All the exhibits included in the extracts of examinations on discovery which are part of the “read-ins” (first or second phase) – with the exception of newspaper articles and the I-Beam Patents who do not constitute proof of their content and are subject to the usual rules of evidence with respect to their probative value –, are part of the evidence before the Court for the purpose of the present trial on the quantification of damages. [ 67 ] Although not specifically mentioned or discussed in these reasons, the Court has considered the totality of the documentary evidence adduced at trial.

In the interest of clarity, exhibits JB-1 to JB-542 (excluding any documents removed from the joint book of exhibits – first phase), exhibits P-1 to P-93 and exhibits D-1 to D-76 (first phase), and exhibits P-94 to P-133 and exhibits D-77 to D-124 (second phase), are part of the evidence considered by the Court in the second phase of the proceeding, inasmuch as this documentary evidence is relevant for the purpose of determining the quantum of damages. The authenticity and the content of the majority of these exhibits were admitted by the parties, but not for all.

As the case may be, the weight to be given to the contents of the above-mentioned evidence will be discussed, when relevant, by the Court. [ 68 ] As previously described, the parties presented a large amount of documentary evidence in support of their claim (including read-ins of testimonial evidence). The evidence was either public, or “Confidential” and/or “Counsel’s Eyes Only”.

Among the public evidence, the parties have submitted documentation dealing with the economic context as well as the nature of the market for civilian aircraft at the time of the first infringement (notably exhibits P-99, P-100, P-101, P-102, D-77, D-78 and D-79). The plaintiff has put some emphasis on exhibit P-103: a press review regarding the release of the Bell 429, in which Bell was portrayed as the first company to assemble the skid-type landing gear on an aircraft.

The parties also submitted a large amount of exhibits relating to the development of alleged non-infringing alternatives [NIAs] (notably exhibits D-105, D-106, D-110, D-113 and D-114). On that note, one of the most striking pieces of evidence is undoubtedly Minderhoud’s

article (JB-224-D). The defendant’s expert, Dr. Schwartz also referred to documentary reports on the development of NIAs and regarding Letters of Intent [LOIs] with respect to the purchase of Bell 429 helicopters (notably exhibits D-121, D-122, D-123 and D-124). The parties also produced exhibits relating to the development of the Moustache gear and the EC120 and EC130 (notably exhibits JB-016-D, JB-018-D, D-81 and D-82).

Finally, the parties submitted decisions rendered in France and in United States regarding the alleged infringement of the French and US Patents (exhibits P-119 and D-117). [ 69 ] With regard to Confidential/Counsel’s Eyes Only evidence, the parties have, for the most part, produced read-ins of statements at trial or examinations for discovery of witnesses which occurred both in the first and second phase of the trial (exhibits P-95, P-96, P-109 to P-113, D-85, D-86, D-115, D-116, P-122, and P-133). The plaintiff also emphasizes exhibit P-123 when it objected to Ms.

Cynthia Garneau’s statement and the admission of the defendant’s new IP policy. Indeed, exhibit P-123 was the transcript of Bell’s undertaking to produce any new policy enforced by it after 2005. Another major part of the confidential evidence is the opinions and analysis made by the experts (P-115, 116, D-119 and D-120). Furthermore, the defendant produced evidence regarding the LOIs and the cancellation of production of a number of Bell 429 helicopters (exhibits D-94, D-95, D-96, D-97, D-99, D-100, D-101, D-102 and D- 103).

Finally, the plaintiff produced a few examples of licensing agreements that show their business line regarding technology or “core- technology” (exhibits P-104, P-105, P-106, P-107 and P-108). Nevertheless, the Court notices that two documents had a significant impact on the pleadings: the document written by Mr. Robert Gardner for the Weight Summit (exhibit JB-479-

D) and the document regarding the three years program invested by Bell to shave |||||||||||||||||||| lbs off their aircraft (exhibit P-117). 3. Fact witnesses

[ 70 ] The plaintiff called four fact witnesses: Mr. Pierre Prud’homme Lacroix (May 30, 2016); Mr. Alex Youngs (May 30 and May 31, 2016); Mr. Laurent Bron (May 31, 2016); and Mr. Frederic Lemos (May 31, 2016). [ 71 ] The defendant called seven witnesses: Ms. Cynthia Garneau (June 2, 2016); Mr. Charles Williams Evans (June 3, 3016); Mr. Michael Patrick O’Reilly (June 3, 2016); Ms. Frankie Jones (June 3, 2016); Mr. Donald L. Hatcher (June 3, 2016); Mr. Ramesh Thiagaran (June 6, 2016); and Mr.

Robert Edward Gardner (June 6 and June 7, 2016). [ 72 ] Throughout the trial, the parties have made a number of objections to questions posed to and answers provided by witnesses, most of which have been decided on the bench. All objections that have been taken under reserve have been considered abandoned, unless counsels have made specific representations in their final pleadings.

Objections, which were reasserted by counsel, will be addressed below inasmuch as there is still a need to do so. [ 73 ] It is well-established that ordinary witnesses should confine themselves to those facts that are within their personal knowledge, and should not offer opinion ( Saputo Groupe Boulangerie Inc v National Importers Inc , 2005 FC 1460 , [2005] FCJ No 1898 at paras 52-53 ). The same principle applies to the two experts on damages, Mr. Heys and Dr.

Schwartz, with respect to matters which are not economic, or within the scope of their particular expertise, such as the technical features and the market demand for the type of competitive technology covered by the ‘787 Patent.

Although the overall context surrounding the existence of a NIA and the reasonable royalty is hypothetical, it remains that only a qualified expert can testify to the technical feasibility of any suggested NIA at the eve of the first infringement. [ 74 ] Unless otherwise indicated in the present reasons, the Court has found the parties’ witnesses to be generally credible and it has become more a matter to assess the relative weight given to evidence pointing in different directions. (

a) Airbus [ 75 ] Mr. Prud’homme Lacroix had already testified in the first phase of the trial, given that he is one of the named inventors of the Moustache gear described and claimed in the ‘787 Patent. He has also been an engineer at Airbus Helicopters since 1982 and actually began as an engineer at the design research office, working there until about 1987. Following that, he was transferred to the computing service, where he remained for twenty years, and was elevated the service where he acted for another seven years, from 2000 to 2007.

Since 2007, he has been working as an expert in the area of structural calculations. Mr. Prud’homme Lacroix’s testimony has been helpful inasmuch as it has to do with the efforts and amount of time required to develop the Moustache gear (see paras 312-314 and 319). [ 76 ] Mr. Youngs was testifying for the first time in this case. Mr. Youngs worked for Eurocopter as Director of Marketing in Grand Prairie, Texas, beginning in 2006, and as Director of Market Research in Fort Erie, Ontario, beginning in 2009.

In 2012, he became Head of Market Research at Eurocopter’s headquarters in Marignane, France, before moving to his current position with Vector in 2013. Mr. Youngs’ testimony has been helpful inasmuch as it has to do with understanding the nature of the civilian helicopter market, the competition between the manufacturers, as well as the customers’ demands (see paras 125, 126, 128, 149, 152, 153, 157, 158 and 162). [ 77 ] Mr. Bron has been legal counsel with Airbus Helicopters since 2005. His current title at Airbus is Legal Counsel, Intellectual Property Law and Trade-marks with Airbus Helicopters.

He testified at trial regarding Airbus’ business line of conduct, especially for licensing technology. Mr. Bron’s testimony has been of assistance insofar as it has to do with the issue of granting a license to a competitor in the case of core or patented technology (see paras 145 and 149). [ 78 ] Mr. Lemos is the Head of Private and Business Aviation, Sales and Marketing, Europe at Airbus. He has worked at Airbus for 13 years. At trial, he testified about the civilian market and the upcoming of the Bell 429. Mr.

Lemos’ testimony has been valuable as it has to do with understanding the nature of the civilian helicopter market and the competition between the manufacturers (see paras 124 and 126). [ 79 ] In addition, the plaintiff introduced in its read-ins evidence, statements made in the course of discoveries by Mr. Evans and Mr. Gardner during both phases of the trial, as well as their answers to undertakings and documentation provided on behalf of Bell (exhibits P-109, P-110 to P-113, P-122, and P-123/Counsel’s Eyes Only), and statements notably made by Mr. Youngs, Mr. Prud’homme Lacroix, and Mr.

Certain during their discoveries or at trial, not to mention numerous statements of other witnesses heard during the first phase of the trial (exhibits P-95, P-96, and P-133/Counsel’s Eyes Only). (

b) Bell [ 80 ] Ms. Garneau has been President of Bell since 2016. She began working for Bell in 2004. She has a BA in Special Education, and a Bachelor of Laws from the University of Sherbrooke. She has been a member of the Barreau du Québec since 1994. Prior to joining Bell in 2004, she worked at Bombardier Aerospace in Montreal as a contract manager. At trial, Ms. Garneau testified with respect to the impact on Bell of the 2012 FC Judgment and the steps taken to avoid recurrence of patent infringement. Ms.

Garneau’s testimony has been helpful inasmuch as it has to do with determining whether the punitive damages award is notably proportionate to the blameworthiness of the defendant’s conduct and to the need for the deterrence (see paras 402-405, 409 and 428). [ 81 ] The plaintiff’s counsel objected to Ms. Garneau’s testimony on the new IP Manual that was implemented by Bell after 2005. Rule 248 precludes this evidence from being introduced as the plaintiff sought to obtain all the new policy enforced by the defendant after 2005 during the discovery and its requests went unheeded.

This disposition aims to avoid a party being prejudiced by late disclosure of documents or information and to prohibit “trial by ambush” ( Apotex Inc v Sanofi Aventis , 2010 FC 481 , [2010] FCJ No 560 at para 6 ). Under the undertaking 35 taken during the examination of Mr. Gardner on June 11, 2009, Bell had to provide a copy of its current IP policy, and to indicate since when the policy has been put in place, and if the current IP policy was different than the one put in place originally in 2000 and 2003 at the time of the Modular Affordable Program Line [MAPL] program.

At trial, the plaintiff specified that its objection was only related to Ms. Garneau's statement about the new measure undertaken by Bell to enforce patent law within the company. The objection is well-founded, yet not determinative. According to Ms. Garneau’s testimony, the 2005 Textron manual, which

was in fact the policy in place at the time of the infringement, was not followed by Bell’s employees. [ 82 ] Mr. Evans has been Director of Marketing of BHTI since October 2010. Before joining BHTI, Mr. Evans worked from 1998 to 2010 for Bombardier’s Commercial Aircraft Division, selling the CRJ and Dash 8 lines of aircraft. Mr. Evans’ testimony mainly focused on the civilian helicopter market and segments, the Bell 429, the customer’s consideration in the purchase of a helicopter and the Bell technology license agreements. Mr.

Evans’ testimony has been of assistance insofar as it has to do with understanding the nature of the civilian helicopter market, the competition between the manufacturers, customer’s demand and Bell’s practices with respect to accepting LOIs (see paras 127, 155, 159, 163-165 and 334). [ 83 ] Mr. O’Reilly is Chairman of the Board of Eagle Copters, Eagle Copters Maintenance, and DART Aerospace. He is also the founding member of Eagle Copters South America and Eagle Copters Australasia Pty. Ltd.

His testimony mainly focused on his personal experience as regards to the primary considerations of clients, as well as the usual time and cost to design and manufactures a landing gear (see paras 168 and 322). However, his testimony has to be assessed in light of Airbus’ general objection that Mr. O’Reilly is not a qualified expert, and thus he cannot provide an opinion on market demand and, particularly on the debatable issue of whether Bell’s helicopters, including the Bell 429, meet particular needs of customers. [ 84 ] Mr. Hatcher is Director of Finance for Bell commercial aircraft.

He first joined Bell in 2003 as an analyst in subcontract evaluation. He left Bell in 2009 to take a job at L-3 Communications, before returning to Bell in 2011 as Manager of Commercial Finance. Mr. Hatcher held this position until 2014, when he was promoted to his current role. Mr. Hatcher spoke about the deposits received in relation to the LOIs for the Bell 429 and cash management (see paras 333 and 427). [ 85 ] As for Ms. Jones, she is Commercial Business Operations Manager for BHTI. Before joining BHTI in 2009, Ms. Jones worked at Textron Aviation – a sister company to BHTI. Upon joining BHTI, Ms.

Jones was manager of a group of contract managers who were responsible for all the purchase agreements worldwide for Bell Helicopter, including in relation to the Bell 429. In 2014, Ms. Jones transferred to the role of Commercial Business Manager. Ms. Jones testified about the LOIs for the Bell 429, as well as the cancellation, refunds/credits (see para 332). [ 86 ] Mr. Thiagarajan is Staff Engineer of BHTI. He worked on the landing gear for the Bell 407 helicopter, from 1994 until almost 1996, and later began work designing for the Bell 427.

Thereafter, he was involved in the testing of the Bell 427 for certification until 1999. In 2008, Mr. Thiagarajan was promoted to Principal Engineer, a position he held until 2013. In 2013, he became Supervisor for Structural Analysis. He is currently Staff Engineer for BHTI, where he serves as a liaison between the United States H1 upgrade programme offices from the government side to the helicopter side. Mr.

Thiagarajan mainly discussed the development of the I-Beam gear which the defendant submits constituted a valid NIA on the eve of first infringement (fall of 2005) (see paras 201-203 and 317-318). [ 87 ] The testimony of Mr. Thiagarajan is the object of a general objection by Airbus for lack of adherence to Rule 223 and because Mr. Thiagarajan is not a qualified expert.

Indeed, the existence of the I-Beam Gear as a NIA was only communicated to Airbus for the first time on March 31, 2016, in document numbered B-0436 (exhibit P-117/Counsel’s Eyes Only) – a PowerPoint presentation dated December 20, 2012 entitled “M429 I-Beam Landing Gear – Remaining Cost/Schedule for Project Completion (12/20/2012)” [the 2012 Presentation]. While the objection is well-founded, the Court nevertheless considered the totality of Mr. Thiagarajan’s testimony, which is credible inasmuch as it relates to the chronology, the several configurations and features of the I-Beam.

However, it is inadmissible and at best merely speculative with regards to the availability of the I-Beam gear as a NIA, either from a technical point of view (he is not a qualified expert) or from an economic perspective (he was not responsible for taking business decisions). [ 88 ] Mr. Gardner already testified in the first phase of the trial. Mr. Gardner is an engineer who first joined Bell in 1993 as a structural analyst. He left Bell in 2001 to work for another company in Montreal, before rejoining Bell in 2003. Mr.

Gardner worked on the MAPL project in Fort Worth, Texas, before entering the Bell 429 project as a structural lead analyst. In 2009, Mr. Gardner became chief of structures in Mirabel at Bell. In 2012, he became manager of engineering services at Bell, and in late 2013 he was appointed chief engineer on the model 429. In August 2015, Mr. Gardner was appointed manager of analysis for airframe structure, airframe loads, rotors, and fatigue. Mr.

Gardner mainly testified on the development of the Bell 429 including costs of alternatives to the Legacy gear and the certification process of the Bell 429 (see paras 137, 189, 190-195, 316, 362 and 363). [ 89 ] At trial, the plaintiff’s counsel objected to a number of Mr. Gardner statements used by Dr. Schwartz in his report and reasserted or repeated at the trial by Mr. Gardner regarding the technical availability of valid NIA(s), and objected as well to gratuitous time estimates for the development of the Production gear. In particular, the plaintiff has objected to Mr.

Gardner’s opinion on the availability of the conventional gear as a NIA on the eve of first infringement of the ‘787 Patent (fall of 2005). Mr. Gardner has not been recognized as an expert (2012 FC Judgment at para 181). Consequently, he was not qualified to say whether the conventional technically constitutes a valid NIA. However, to the extent that Mr. Gardner simply testified that, as a matter of fact, the Conventional gear was considered by Bell’s management in the development of the Bell 429, his testimony is admissible and has, in fact, been duly considered by the Court.

Therefore, the Court has decided to admit most of Mr. Gardner’s testimony, while giving no weight to any of his opinions and gratuitous statements that are not credible or supported by corroborative documentary evidence. [ 90 ] Although Mr. Certain did not testify at the second phase of the trial, the defendant referred, to statements made during the discoveries in 2009 and 2010 (exhibit D-115/Confidential). Mr.

Certain has worked as a flight test engineer with Eurocopter and its predecessors since the 1970s, and mainly testified about his first flight with aircrafts equipped with the Moustache landing gear around 1996. Mr. Certain also discussed about the other prototypes developed by Airbus in the same period and their struggle with ground resonance problems. In its read-ins, the defendant highlighted the passages in which Mr.

Certain testified about the “ maquette ” of the Moustache landing gear, which was allegedly prepared, for the first time, the evening prior its official presentation in 1995. [ 91 ] In addition, the defendant introduced in its read-ins evidence, statements made in the course of discoveries by Mr. Gardner, Mr. Evans, and Mr. Youngs, as well, as answers to undertakings and documentation provided on behalf of Bell and Airbus respectively (exhibits D-85, D-86/Confidential and D-116/Confidential and Counsel’s Eyes Only). 4. Expert evidence

[ 92 ] The plaintiff called Mr. Bradley A. Heys as its expert on damages (June 1 and June 2, 2016) [Airbus’ expert]. In addition to his March 4, 2016 report (exhibit P-115/Counsel’s Eyes Only), Mr. Heys filed, at the hearing, an addendum dated May 26, 2016 (exhibit P-116/Counsel’s Eyes Only). [ 93 ] The defendant called Mr. Steven Schwartz as it expert on damages (June 7, June 8 and June 9, 2016) [Bell’s expert]. Dr. Schwartz filed at the hearing his expert report dated April 29, 2016 (exhibit D-119/Counsel’s Eyes Only) and his supplemental report dated May 27, 2016 (exhibit D-120/Counsel’s Eyes Only). (

a) Qualifications [ 94 ] Mr. Heys is currently a Vice-President of NERA Economic Consulting and a member of the firm’s intellectual property, securities, and finance practices. He is also a chartered financial analyst and a certified fraud examiner. He earned a Bachelor of commerce from the University of Guelph, an MA in economics from Queens University, and completed the course work for a PhD in economics at the University of Toronto. He also has a law degree from the University of Toronto. The parties have stipulated that Mr.

Heys is a financial, economics, and damages expert with experience in the valuation of intellectual property and in the quantification of economic damages (notably lost profits damages and reasonable royalty damages) in disputes involving allegations of infringement of intellectual property rights (exhibit P-114). [ 95 ] Dr. Schwartz is currently an economist and Vice-President employed by Charles River Associates International [CRAI] based in Dallas, Texas. He completed an undergraduate degree in economics at Wesleyan University, and a Masters and PhD in economics at the University of Maryland.

The parties have stipulated that he is an expert in economic matters related to intellectual property, antitrust and commercial damages disputes, including the determination of reasonable royalties resulting from hypothetical royalty negotiations in patent cases, including applicable bargaining theory, as well as the assessment of economic benefits resulting from patent infringement, with experience in aircraft/aerospace matters, including patent work related thereto (exhibit D-118). [ 96 ] The Court is satisfied that the two experts on damages possess specialized knowledge in economics beyond that of the ordinary person.

However, the defendant has seriously questioned the weight to be given to Mr. Heys’ opinions on the matter since he has never been involved in a case of hypothetical negotiation for a reasonable royalty for a patent infringement. On the contrary, Mr. Heys’ expertise primarily relates to copyright and trademark (Bell’s final argument at para 84). The Court understands that Mr. Heys’ experience in the assessment of damages resulting from patent infringement is somehow not as strong as his colleague, Dr. Schwartz, who is in fact an expert on the matter (exhibit D-118). Nevertheless, the Court considered all of Mr.

Heys’ testimony and reports, given his general economic expertise in the quantification of damages in intellectual property disputes. (

b) Scope of the experts’ respective opinions [ 97 ] Mr. Heys stated that his mandate was to provide his opinion as to the compensatory damages suffered by Airbus, in the first instance, and in the second instance, the economic benefit realized by Bell as the result of its infringement. In his March 2016 expert report (exhibit P-115/Counsel’s Eyes Only), Mr.

Heys explored a few components of the hypothetical negotiation such as the type of royalty that would have been granted, the existence of any NIA on the eve of the first infringement and finally the incremental profit that Bell would have made from the implementation of the Legacy gears compared to the cost of developing its own sledge gear. He stated that he was not asked to offer any opinion as to the appropriate quantum of punitive damages, because he understood that to be a matter for the Court to determine.

Thus, his analysis of the economic benefit realized by Bell from its infringement of the patent is only provided to assist the Court with its own assessment of punitive damages. Mr. Heys also produced an addendum to his report, as he was asked to address information relating to (1) the development of the I-Beam gear; and (2) the deposits that Bell received from its prospective customers in connection with LOIs for the purchase of Bell 429 helicopters (exhibit P-116 / Counsel’s Eyes Only). [ 98 ] Dr.

Schwartz was asked by Bell’s counsel to undertake an “affirmative analysis” of the reasonable royalty likely to result from a hypothetical license negotiation between Bell and Airbus for a license granting Bell to exploit the ‘787 Patent. Dr. Schwartz considers that his assessment of Airbus’ profits at risk and Bell’s need for a license are overstated and not consistent with marketplace competition and the economics of the marketplace. Dr. Schwartz disagrees with Mr. Heys’ conclusions about the royalty rate and the royalty structure. In connection with Airbus’ claim for punitive damages, Dr.

Schwartz also carried out an assessment of Bell’s economic benefits flowing from the infringement of the ‘787 Patent: examining saved capital costs associated with the collection and use of customer deposits for the Bell 429, saved certification costs, incremental profits and costs savings, and improved customer relationships and reputational value. (

c) Agreed and disputed assumptions of fact [ 99 ] In writing their reports and making their calculations, the parties’ experts assumed that the hypothetical negotiation for the right conferred by the plaintiff (licensor) to the defendant (licensee) to use the patented technology covered by the ‘787 Patent would have taken place in the fall of 2005, and that the hypothetical license would be a worldwide license (exhibit P-115 at para 80/Counsel’s Eyes Only; exhibit D-119 at para 34/Counsel’s Eyes Only).

To support their respective calculations on the quantum of damages, each expert rely on a number of facts, some of which are admitted by the parties or already proven (such as the findings made by the Court in the 2012 FC Judgment), while others are severely disputed (such as the existence of a valid non-infringing alternative, development costs, incremental benefits, etc.). [ 100 ] A major difficulty encountered by the Court in this proceeding arises from the quality or reliability of the information upon which the experts base their respective analysis and conclusions. For example, Airbus’ expert, Mr.

Heys, underlines that he has not been provided with relevant information concerning: (1) costs incurred by Bell in the development of the infringing Legacy gear and Production gear;

(2) Bell’s forecast of sales of the Bell 429; (3) information or data regarding Bell’s gross profit margins on the Bell 429 helicopter or its light helicopters more generally; and (4) information regarding actual or expected revenue and profits relating to aftermarket products, or maintenance, repair and overhaul services for Bell 429 helicopters or Bell’s light helicopters more generally. On the other hand, Dr. Schwartz (as if he was the trier of facts) examined what he described as the “threshold issue of causation”. For there

to be a benefit in the categories of possible economic benefits to Bell listed above, there must be a causal link between the infringement and the benefit. These difficulties must be addressed in light of the respective evidentiary burden of the parties. [ 101 ] Inasmuch that the reports and testimonies at trial of the two experts are limited to economic issues or in their particular fields of experience, the Court has taken account of same in the calculation of the reasonable royalty owed to Airbus provided that the assumptions made by the experts could be supported by the evidence. (

d) Concerns with respect to the experts impartiality and their methodologies [ 102 ] It is not the role of the experts to make findings of fact which are the exclusive realm of the Court, nor to make legal arguments in support or against a party.

As Justice Hughes stated in Pfizer Canada Inc v Canada (Minister of Health) , 2008 FC 11 , [2008] FCJ No 3 at para 47 , regarding the construction of the disclosure of the patent, the Court may be informed by experts as to the meaning of words, terms and the science and background that are pertinent, but they must be careful not to let the experts supplant the role of the Court. Although it is established that expert witnesses have “an overriding duty to assist the Court impartially on matters relevant to his or her area of expertise”, pursuant to Rule 52.2, Mr. Heys and Dr.

Schwartz were at times (but not always), in the Court’s view, no more than advocates for Airbus and Bell respectively, considering some of the extreme or unrealistic positions taken by the two experts. [ 103 ] The choice of methodologies chosen by each expert is also subject to criticism. They both have, more or less, taken a result driven approach in their respective reports and made argumentative statements in their respective reports.

The Court is also at odds with the ambivalent or contradictory positions of experts who have suggested the best of two conflicting worlds in the apparent interest of the respective clients. Before the trial, Airbus’ counsel objected to Dr. Schwartz’s findings regarding the presence or the absence of evidence (exhibit D-87/Counsel’s Eyes Only). In response, Bell’s counsel objected to the same legal findings made by Mr. Heys in his report (exhibit D-88/Counsel’s Eyes Only).

While not going so far as to strike out those paragraphs, the Court will not give any probative value to any legal opinion made by the experts in their report or at trial. [ 104 ] With respect to the calculation of a reasonable royalty, the Court notably finds that Airbus’ analysis of profits at risk based on expected sales of Bell 429 helicopters is biased and unrealistic, and seeks to achieve the best of both worlds. Mr.

Heys notes that “Bell has realized significant economic benefits from its infringement of the ‘787 Patent, notwithstanding that it has not sold any B429 helicopters with an infringing landing gear”, and which “[c]umulatively […] could total in the tens of millions of dollars” in the form of saved capital costs associated with the collection and use of customer deposits for the Bell 429 received by Bell as a result of its promotion of the aircraft prior to the creation of the Production gear in early 2009; of saved certification costs and incremental profits and/or accelerated gross profits from not having to redo the optimisation and certification testing; cost savings arising from Bell not having to independently develop in the first place a non-infringing gear for the Bell 429; and improved customer relationships and reputational (or brand) value as a result of Bell’s promotion of the Moustache landing gear as if it was Bell’s own invention (exhibit P- 115 at paras 140 to 155/Counsel’s Eyes Only).

In this respect, Mr. Heys argues that “[t]he economic benefits actually realized by Bell may be relevant to the Court’s determination of punitive damages to the extent such benefits are not otherwise reflected in any calculation of compensatory damages” (exhibit P-115 at para 139/Counsel’s Eyes Only). However, in the calculation of the compensatory damages which would take the form of a reasonable royalty lump sum payment that would be in the range of approximately $1.7 million to $11.8 million, Mr.

Heys proposes a framework where none of the economic benefits mentioned above are accounted for – except for the expected incremental costs of development without a license which represent $250,000. [ 105 ] On the other hand, Bell’s expert opinion is highly argumentative. Consider Dr. Schwartz’s report, which contains a number of “affirmative conclusions” that are completely outside the realm of his expertise.

The Court finds objectionable for Bell’s expert to make “findings” in his report with respect to such highly disputed factual issues as transfer of technology, differences in practice of the invention, non-inclusive license, territorial limitations, terms of license, competitive technology, competition between licensor and licensee, demand for the product, risk, novelty of the invention, compensation for research and development, displacement of business and capacity to meet market demand (exhibit D-119 at para 47/Counsel’s Eyes Only), and to further provide his conclusion on whether each of the factors is likely to have a “neutral”, a “positive” or a “negative” effect on the royalty.

This greatly impacts on the impartiality of the overall analysis of Bell’s expert (exhibit D-119 at paras 83-84/Counsel’s Eyes Only). [ 106 ] Moreover, how can Dr. Schwartz realistically propose to the Court a compensation model based on a running royalty payable during the lifetime of the patent based on projected sales of Bell 429 helicopters and computed on twenty-one helicopters incorporating the Legacy gear? In effect, there were no sales of Bell 429 helicopters with the Legacy gear, while the twenty-one infringing Legacy gears were used to obtain the certification of the Bell 429 and/or to obtain LOIs.

Moreover, the saved development incremental costs were already realized and could have been easily calculated by Dr. Schwartz, using reliable information. There is simply no justification to propose a running royalty. The nominal amount of $5,187 calculated by Dr.

Schwartz is unrealistic and would never have been offered or considered by the parties in an hypothetical negotiation on the eve of first infringement of the ‘787 Patent even with the benefit of hindsight. [ 107 ] To sum up, it turns out that the relative weight to be given by the Court to the expert evidence on any proposed methodology for the calculation of damages is largely dependent on the particular conclusions that can be made by the Court on a number of disputed facts.

While both parties agree that the appropriate framework for quantifying compensatory damages is that of the hypothetical negotiation of a royalty, this does not exclude the possibility that the Court resorts to another formula if this makes more sense in view of the particular facts of the case and the practical reality of the situation under assessment. Over the years, different specialists have observed a phenomenon known as “anchoring” developing among expert.

This phenomenon can be described as when people make estimates, for instance, on fair market value, to anchor the decision-maker into their final estimates (Guthrie, Chris; Rachlinski, Jeffrey J.; and Wistrich, Andrew J., “Judging by Heuristic: Cognitive Illusions in Judicial Decision Making” (2002), Cornell Law Faculty Publications, Paper 862). Research on the so-called anchoring effect has demonstrated that a randomly chosen standard in a comparative judgement task may dramatically influence a subsequent absolute judgement on the same target. A good example would be in the civil context of damage awards.

In personal injury verdicts, the requested compensation systematically influences the compensation awarded by the jury (Englich, Birte; Mussweiler, Thomas; Strack, Fritz, “Playing Dice With Criminal Sentences: The Influence of Irrelevant Anchors on Expert’s Judicial Decision Making”, (2006) 22:2 PSPB 188-200). As such, the Court is not challenging the calculations or bases upon which both parties’ expert have relied in their reports. In the event, however, that both experts express such opposite

propositions, the Court cannot rely on such irrelevant anchors and will instead stick with the objective, factual evidence of the case. D. Final determination on the quantum of damages [108] The Court has considered the totality of the admissible evidence adduced at trial. In its final analysis, this Court determines thatthe plaintiff is entitled to a total damages award of $1,500,000 plus pre-judgment and post-judgment interest at the rates already fixed inthe 2012 FC Judgment, comprised of $500,000 in compensatory damages and of $1,000,000 in punitive damages.

The particular findingsof the Court with respect to causation and calculation of damages are set out in the two following sections. VI. COMPENSATORY DAMAGES AWARD A. Legal principles at play [109] Any act which interferes with the full enjoyment of the statutory monopoly granted to the patentee constitutes infringement.The defendant is only required to make good any loss which would not have been suffered by the plaintiff “but for” the defendant’sactions (Athey v Leonati, (SCC), [1996] 3 SCR 458 at para 14).

Causation is necessary (Merck & Co Inc v Apotex Inc,2013 FC 751, [2013] FCJ No 840 [Lovastatin FC], aff’d 2015 FCA 171, [2015] FCJ No 900 at para 45 [Lovastatin FCA], leave toappeal refused [2015] SCCA No 414). [110] In deciding today that that amount of compensatory damages to be awarded to the plaintiff – as a result of the defendant havingbeen found to have infringed the ‘787 Patent – should be $500,000, it goes without saying that this exercise was very fact driven, as thisCourt had to find the right balance in light of the unique and very special circumstances of this case.

Indeed, the purpose of Patent Lawas a whole is to advance research and development, and to encourage broader economic activity (Free World Trust v Électro Santé Inc,2000 SCC 66, [2000] 2 SCR 1024 at para 42). Thus, under-compensation of an inventor discourages research and development, and thedisclosure of useful inventions.

Likewise, over-compensation of an inventor chills potential competition to the extent that a potentialinfringer is uncertain about the scope and validity of a patent (Lovastatin FCA at para 42). [111] As stated in the 2012 FC Judgment at paragraphs 407: [407] The purpose of an award of damages is to restore the plaintiff to the position in which it would have been had the infringementnever occurred.

Every infringement is a separate wrong, and thus, each unit made infringes (in this case, each Legacy gear), but “[a]sense of proportion must, however be retained” ([David Vaver, Intellectual Property Law, 2nd ed (Toronto: Irwin Law Inc, 2011)(Vaver)], at page 632). The fact that Bell allegedly did not know its acts constituted infringement is irrelevant to its liability; damages forinfringement track those for tort generally (Vaver, above, at pages 631-632).

As stated by the Supreme Court of Canada in [MonsantoCanada Inc v Schmeiser, 2004 SCC 34 , [2004] 1 SCR 902 [Schmeiser]] at para 37, “[a]s a practical matter, inventors arenormally deprived of the fruits of their invention and the full enjoyment of their monopoly when another person, without licence orpermission, uses the invention to further a business interest”, which was clearly the case in this instance. [Emphasis added] [112] In principle, under section 55(1) of the Patent Act, RSC 1985, c P-4, the patentee is entitled to two alternative types of remedy:damages and an accounting of profits.

In the case at bar, the Court has already determined that the plaintiff could not seek an accountingof profits (2012 FC Judgment at paras 410-416).

When actual damages (e.g. lost profits) cannot be proved, the patent owner is entitled toa reasonable royalty (Jay-Lor International Inc v Penta Farms Systems Ltd, 2007 FC 358, [2007] FCJ No 688 at para 123 [Jay-Lor];Lovastatin FC at para 41). [113] The extent of infringement is not really in issue today, inasmuch as it is not challenged that twenty-one infringing Legacy gearswere manufactured by a subsidiary company and used by the defendant for a variety of purposes (2012 FC Judgment at paras 176-177).The plaintiff has not attempted to quantify any lost sales of helicopters as a result of the infringement, although in Dr.

Schwartz’salternative proposition of compensatory damages, the twenty-one infringing gears used by Bell are accounted for as lost sales. In thelatter case, the market value o

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