Federal Court Posts “Model” Bifurcation Order For IP Matters

Danny Titolo is a JD candidate at Osgoode Hall Law School.

The Federal Court of Canada has posted a new “model” bifurcation order which is to be used in matters pertaining to intellectual property. Bifurcation refers to a judge’s ability to divide a trial into two parts and render a judgment on two sets of legal issues separately.  In IP cases, it most often refers to the court’s determination of liability first and quantum of damages later, if it is still necessary.

Rule 107(1) of the Federal Courts Rules allows the Court, at any time, to order the trial of issues in a proceeding to be determined separately. Subsection (2) grants the Court discretion in what procedures are to be followed, which typically includes examinations for discovery and the discovery of documents. This rule is most commonly used in intellectual property matters, for example, when separating the issues of liability of a defendant from the issue of damages and profits claimed by the plaintiff for the infringement. Bifurcation is a discretionary recourse and is not necessarily granted by the Court.  

Bifurcation orders are usually issued on the consent of both parties involved; however, the orders can also be challenged. Garford Pty Ltd. v Dywidag Systems International is an example of a case where bifurcation orders were contested and where the Federal Court established the principles to be followed in issuing such orders.  

The Court will issue a bifurcation order when it is satisfied, on a balance of probabilities, that bifurcation is more likely than not to contribute to the most expeditious and cost-effective way of concluding the proceedings. In determining whether or not bifurcation is appropriate, the Court will consider the following factors:

  1. The nature of the action and whether issues for the first trial are straightforward
  2. The extent to which the issues proposed for the first trial overlap with those remaining for the second
  3. Whether a decision from the first trial regarding liability may conclude the action altogether
  4. The extent to which the parties have already devoted resources to all of the issues
  5. The possibility of delay of proceedings and decision
  6. Any potential advantage or prejudice the parties involved may experience
  7. Whether the motion is brought on consent or over the objection of one or more of the parties involved

If a bifurcation order will likely result in one party not being able to establish or defend liability, then it will not be ordered by the Court. Effective proceedings containing all the proper evidence take precedence over expeditiousness and cost-effectiveness.

In the new “model” bifurcation order, the Federal Court defines “Liability Issues”, “Liability Phase” and “Quantification Issues” and determines how they are to be determined separately.

Liability Issues refer to all the issues in the action excluding those involving quantification. Some of these issues may include: whether there was infringement by the defendant; if the plaintiff is entitled to declaratory or injunctive relief; the plaintiff’s entitlement taking into account any profits; if the defendant’s conduct merit an award of aggravated, punitive or exemplary damages.

The Liability Phase refers to discovery and all other steps up to and including a trial or other determination of all the Liability Issues. This will also include any appeals.

Quantification Issues may include any of the following: the quantum of the plaintiff’s damages as a result of the infringement by the defendant; the quantum of any profits obtained by the defendant as a result of the infringement; and the extent of infringement. The Quantification Issues shall be determined separately from, and only after the Liability Phase. During the Liability Phase, documentary or other discovery on matters relating to the Quantification Issues will not be permitted.

Determination of the Quantification Issues shall be directed by the Liability Phase trial judge. This includes whether determination will require further trial or reference. Both the defendant and the plaintiff may bring a motion for directions following the trial judgement in the Liability Phase and regardless of whether the judgment is being appealed.