January 12, 2021
The Federal Court was recently asked to grant a last minute motion for leave to file a supplemental expert report in Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey) (2020 FC 1123). The motion for leave to file the report came in the wake of Nova Chemicals Corporation v. Dow Chemicals Company, (2020 FCA 141) [“Nova Chemicals”], which was released on September 15, 2020.
Justice Grammond ultimately granted leave to file the report to Sport Maska Inc. [“CCM”], finding that, despite the report coming late in the proceedings, the factors in favour of granting leave outweighed those against it.
CCM is the defendant in an ongoing trademark infringement trial with Bauer Hockey Ltd. [“Bauer”]. One of the remedies sought by Bauer is an accounting of the profits CCM made selling skates that allegedly infringed Bauer’s trademark. The calculation of potential profits by both parties required expert witnesses to be retained. The experts for both parties assumed that, in calculating CCM’s profit, the only deductions would be CCM’s incremental costs.
The Nova Chemicals Decision in September 2020
On September 15, 2020, the Federal Court of Appeal [“FCA”] released its judgement in Nova Chemicals. In the decision, the FCA provided an in-depth analysis of the law regarding accounting of profits and held specifically that, absent compelling or exceptional circumstances, the correct method for an accounting of profits is the full cost method. This means that incremental costs and fixed costs are deductible.
CCM reacted to the findings in Nova Chemicals by consulting its expert and requesting a supplemental report with profits calculated on a full costs basis. Bauer objected to the filing, citing the timing concerns and claiming that it would be prejudiced by the inability to conduct discovery on the issues covered in the report.
Justice Grammond ultimately granted CCM’s motion for leave to file the supplemental report, agreeing with CCM’s argument that the motion should be decided on principles similar to those governing the Federal Courts Rules for the admission of new evidence. While acknowledging that CCM could have raised the issue more quickly following the release of Nova Chemicals, Grammond J. found that the evidence contained in the report was relevant and would be of assistance to the Court. He also noted that the report was based “exclusively” on documents already in the record.
Although Grammond J. was not persuaded by Bauer’s argument that it would be prejudiced without the opportunity to conduct discoveries on the issues covered by the report, he suggested that, if CCM had attempted to file new financial records on the eve of trial, as opposed to simply proposing new calculations on already existing data, he would have had “serious concerns”.
Authors: Sam Galway and Emma Baumann