But IP is more than big money. For many globe-straddling corporations, it is the crux of their competitive strategy. In a moment of surprising candour, as reported in The Wall Street Journal, October 3, 2002, Hewlett-Packard attorney Marc Schuyler graphically outlined the realpolitik of how his company does business: "We get patents not to protect our own products, but because it gives us power to exclude in areas where others might want to participate." This is obviously one attorney ready to rumble.
It's an IP jungle out there. And in Canada, like everywhere else, the prize is rich. Recent cases decided by or on their way to the Supreme Court of Canada include whether higher life forms can be patented (Harvard College v. Canada (Commissioner of Patents)), whether the Canadian patent of AIDS drug AZT is valid (Apotex Inc. v. Wellcome Foundation Ltd.), what constitutes copyright and fair dealing (Canada Law Book v. The Law Society of Upper Canada), and-a subject dear to the hearts of many-making Canada safe for an alternative to the erectile dysfunction drug Viagra (Pfizer Inc. v. Bayer AG).
Every jungle needs enforcers, i.e., litigators. When the prize is as rich as it is in the IP jungle, you need some pretty serious enforcement. So, who's who in IP enforcement in Canada?
It all started in Ottawa, hometown to Smart & Biggar, Canada's largest IP boutique, and Gowling Lafleur Henderson LLP, initially known for it's top-tier IP and advocacy practice, and now a sprawling full-service nouveau national. Why Ottawa? Well, Ottawa is where the Patent Office and the Exchequer Court of Canada were. And the Exchequer Court only sat in Ottawa, so you had to go to Ottawa.
In 1971, the Exchequer Court became the more mobile Federal Court of Canada, which now sits across the country. The impact on IP litigation was profound, opening up the practice to litigators in Montreal, Toronto, and elsewhere. When, in the 1980s, the Patent Office files went online, more Ottawa apron strings were cut. "It was not necessary to physically go to Ottawa anymore. IP lawyers could stay closer to their clients," says Patrick Kierans, who leads the IP litigation practice for Ogilvy Renault in Toronto.
IP litigation in Ottawa is still big business, with Gowlings and Smart & Biggar still the two firms to beat. But the practice is increasingly national in scope and international in nature. That means it has gravitated from Canada's political capital to its financial capitals: first Montreal, where IP boutique Leger Robic Richard and upstart Smart & Biggar go head-to-head with an Ogilvy Renault practice dating back to the 1950s; and now Toronto. Kierans's own career reflects this changing legal geography. He started his practice with a small patent firm in Ottawa, joined Ogilvy Renault in Montreal in 1983, and, by 1996, was greenfielding the Ogilvy practice in Toronto.
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Today, Toronto is awash with IP litigators. Ogilvy Renault, Smart & Biggar and Gowlings are there, competing with hometown boutiques like Sim, Hughes, Ashton & McKay LLP and heavyweight Bereskin & Parr, Toronto's largest IP boutique. Toronto is also the staging ground for two of the newest developments in IP litigation-the pure IP litigation boutique, a la Sim, Hughes off-shoot Dimock Stratton Clarizio LLP, and the IP/IT boutique, a la Blake, Cassels & Graydon LLP off-shoot Deeth Williams Wall LLP.
The boutiques, Gowlings and, more recently, Ogilvy Renault, have not, however, sewn up the Toronto market. Lang Michener and McCarthy Tétrault LLP sport impressive reputations for IP litigation. And, most recently, Torys LLP has invited itself to the fray. Toronto, as one would expect, is an extremely competitive market. Who does it best? Depends who you ask.
Ogilvy Renault and Gowlings
Unique in the role IP and IP litigation plays in both their history and current strategic direction are the 657-lawyer Gowlings (Montreal, Ottawa, Toronto, Hamilton, Kitchener, Calgary, Vancouver, Moscow) and the 367-lawyer Ogilvy Renault (Montreal, Ottawa, Quebec, Toronto, Vancouver, London (England)). Gowlings began as an Ottawa IP and advocacy practice. Ogilvy was one of the first non-Ottawa firms to break into IP litigation. Each considers IP one of the "pillars" of the firm, although each arrived at this point from the opposite direction.
Gordon Gowling, Q.C., and Gordon Henderson, Q.C., were legendary advocates and superb IP litigators. Gowling & Henderson, the predecessor firm to Gowlings, dominated the Ottawa market. It opened in Toronto in 1980. By way of a rapid succession of mergers during 1998-2001 in Toronto, Montreal, Calgary and Vancouver, it transformed itself into a nouveau national. But, as national managing partner, Scott Jolliffe, is quick to point out, IP remains a pillar of the firm.
Jolliffe has spent his entire career at Gowlings. He is widely viewed as an accomplished IP litigator, as illustrated by his 1999 "Best Litigator of the Year" ranking by Britain's Managing Intellectual Property. Within Gowlings's one hundred-plus IP group, Jolliffe boasts a contingent of 66 IP litigators nationwide, with about 20 in Toronto-the result of an almost century-long commitment to the practice.
Ogilvy Renault didn't get into IP as early as Gowlings, but early enough to make it count. Central to the firm's market position in Montreal was Joan Clark, Q.C., now regarded as one of the doyen of the Quebec IP Bar. Clark was instrumental in building a strong IP litigation practice, anticipating the increase in work as the Exchequer Court morphed into the Federal Court. By the 1980s, when IP work was no longer Ottawa-centric, Ogilvy Renault had the "top-notch" IP litigation practice in Montreal. When François Guay opened Smart & Biggar's office in Montreal in 1990, he knew who the competition was. "The target for me was Ogilvy Renault. I wasn't interested in competing with the others. I always viewed Ogilvy Renault as the firm to beat."
Ogilvy strengthened its IP practice by first an alliance and then a full merger with Swabey Mitchell Houle Marcoux & Sher (now Swabey Ogilvy Renault), a patent and trademark agency practice. By this time, IP was formally recognized as one of the four pillars of the firm, labour, litigation and business being the other three. As explained by senior partner Malcolm McLeod, the firm recognized the "knowledge component of economy and business was as important as goods and services and it expected both the volume and importance of IP litigation to increase." Plus, with the exception of Gowlings, none of the other major full-service firms seemed to be giving it much thought.
When Ogilvy entered the Toronto market in 1996, IP and IP litigation came with it in the person of Patrick Kierans. Kierans brought with him a national practice, including clients like the Wellcome Foundation Limited (a subsidiary of GlaxoSmithKline), facing off against Apotex Inc. and Novopharm Ltd. over the Canadian patent of anti-AIDS drug AZT, and the Stentor telephone companies, then battling AT&T.
"We're a funny exception, because we are not a new kid on the block," says Kierans. "We were already in IP when we opened up-all we were missing was an office in Toronto. We were more like the big kid who moved down the street. We haven't earned a place in Toronto-we already had one." The competition-in IP litigation at least-agrees. "Ogilvy Renault made an impact when they were in Montreal, and they're making it now that they're in Toronto," says John Morrissey, who leads the Toronto office of Smart & Biggar.
Early this year Aird & Berlis LLP lost Donald Cameron, a top-ranked IP practitioner, as well as a number of other IP lawyers, to the Toronto office of Ogilvy. The move was seen by pundits within the IP community as an impressive coup on the part of Ogilvy. The firm now argues that its benchstrength, nationwide and in Toronto, is comparable to that of Smart & Biggar and Gowlings. But the pundits don't buy that argument. This is a practice area that watches itself like a hawk. There's a problem, they say. Demographics.
Gowlings has one marked advantage over Ogilvy Renault: in both IP litigation and IP generally, it has a solid middle. The head of its national IP litigation practice, Kelly Gill, was called to the Bar in 1993. Led by Jolliffe, Gill is heading to the S.C.C. on behalf of The Law Society of Upper Canada in the final chapter of the law society's dispute with Canada Law Book Inc. Jolliffe has mentored over two new generations of IP litigators. At Ogilvy Renault, Clark (1954) "is still in here and does cases, and she's acting as counsel to the younger people," says McLeod (1965). "She's still an important contact for a number of clients." As between the "younger people" and senior counsel such as Clark, McLeod and Nelson Landry (1969), there is a sizable gap, particularly in the Montreal office.
"The middle capacity is a problem," admits McLeod. But Kierans thinks the national scope of Ogilvy's practice mitigates it. "That's why we practise as a group. We can get lawyers involved across all offices. If any particular city has a gap somewhere, we can handle it nicely." Perhaps. It depends who you talk to.
Boutiques
François Guay was 24, and the only litigator at Lapointe Rosenstein, then a small Montreal general practice, when he argued his first IP trial, a dispute between a division of Canadian manufacturer Bauer-Guay's client-and multinational shoe retailer Bata, represented by Roger Hughes, Q.C., already a senior practitioner with Toronto-based Sim, Hughes. Guay won the trial and scooped the client. Now with Smart & Biggar, Guay acts for Bata. Gowlings and Ogilvy Renault nothwithstanding, the leading IP litigators gravitate to boutiques, which, depending who you talk to, handle between 70 and 80 per cent of Canadian IP litigation.
The boutique advantage, i.e., experience gained performing hundreds of appendectomies being of no assistance when you need a brain surgeon (read IP litigation specialist with a boutique practice) versus the big firm advantage, i.e., clients need the trial experience and muscle, i.e., multiple areas of expertise, of general practice litigators, debate in IP litigation has been going on for almost two decades. Set out on pages 108 and 112 are the Intellectual Property Litigation League Tables for Toronto, Ottawa and Montreal from the 2003 Lexpert Directory. It is hard not to be impressed by the position enjoyed by the boutiques.
Smart & Biggar is the oldest and, at one hundred professionals, 65 of them lawyers, the largest of the boutique platforms. It is also the only boutique with a true national presence, with offices in Ottawa, Toronto, Montreal, Edmonton and Vancouver. It is associated with patent and trademark agents Fetherstonhaugh & Co. This traditional two-firms-in-one model is also used by Toronto-based Sim, Hughes/Sim & McBurney and by Montreal-based Leger Robic Richard/Robic. Bereskin & Parr, Toronto's largest IP boutique, houses its agency and advocacy practices within one firm.
The boutique platform is partly about survival. As Roger Hughes at Sim, Hughes says, "In the arena of huge firms that claim to do everything, you have to specialize, and you have to be good at it." IP and IP litigation, say boutique practitioners, thrive in boutiques because the major law firms just don't know how to do it.
This is not a practice area where people mince words. "The major law firms do not understand the business of IP," Hughes says bluntly. François Guay, Hughes's old opponent from the Bauer/Bata litigation, is in total agreement with his former adversary. "The business of IP is not like general legal practice. We run it differently, and we earn money differently. I view our firm as something between a law firm and engineering consultants. The culture of those businesses is different. It seems to be difficult to map it onto a general practice firm."
The major law firms have a tradition of developing IP groups...and then losing them. Sim, Hughes, formed by Dr. Harold George Fox and Donald Sim in 1970, is essentially an off-shoot of McCarthy Tétrault. Blake, Cassels & Graydon painstakingly put together an IP/IT practice in the late 1980s, only to see a good part of it (Douglas Deeth, Amy-Lynne Williams, Gervas Wall) leave in 1994 to form Deeth Williams Wall. "Many of the large firms have not been able to keep their IP people," says Jolliffe. "IP lawyers are a different breed and a breed that's hard to house."
At one time, Deeth saw big firms as the future of IP. "We were attracted by what the big firms had to offer," he says. He saw the big firms eyeing IP and moving to establish IP/IT practices, and believed they could be formidable competitors. "My view at the time was that if it was going to happen, we should be among the first people to make the move to the big firms."
Deeth moved his small boutique practice to Blakes. But it didn't work. "The plan for large firm IP/IT groups was that they would be more of a service group than independent practices," says Williams. "And our practices were evolving as separate practices. We wanted to be more flexible and agile. We decided to move into a boutique setting to be able to react more quickly to things that were coming up in our clients' businesses."
In founding Deeth Williams Wall, both Deeth and Williams envisioned a new type of IP boutique-one that didn't draw sharp distinctions between "pure IP" and IT. (see SIDEBAR: "Pure IP, Dirty IT"). When he left Sim, Hughes, after 20 years with the firm, Ronald Dimock was also thinking along different lines. He set up Dimock Stratton Clarizio as, essentially, a pure IP litigation practice. "We had our own ideas on how a firm ought to operate in the IP field, and some of the ideas conflicted with those of my former partners," he says. "There was some conflict regarding the direction the firm ought to take.... We wanted to give more focus to a litigation practice." Now at 12 lawyers, Dimock Stratton is "principally a litigation practice with some agency clients."
In the U.S., "pure play" IP litigation boutiques have come and gone, victims of their own success, as the full-service majors snapped them up to cash in on the lucrative IP suits. In Canada, that hasn't happened. Yet. "It hasn't been for want of trying," says Williams. "Most of the successful boutiques have been approached by big firms looking to merge or absorb big chunks of the practice. We've certainly been approached many times." In Montreal, Leger Robic Richard is also a sought-after target. "Over the past 10 years, we've been approached about five times a year," says Jacques Léger, Q.C.
The assault on individual practitioners is even greater. "I've been asked by all the big firms to join them over the last five years," admits Guay, characterizing some of the recruitment tactics as "quite aggressive." The majors offer big money ("Signing bonus!"), power ("national head of the litigation department!")-all the usual lures. "For me to consider moving, it would take a lot," he says. "I'm very happy with Smart & Biggar. It's allowed me to become a better pracitioner, and it's a big boutique, but it's still a boutique." The fight for top IP litgators cuts both ways. Scott Jolliffe at Gowlings has been periodically headhunted by boutiques.
Practising in a boutique, says Léger, allows IP litigators to stay focused. "We always try to be very focused-our strategic plan is to be focused on what we are good at. The bottom line for us is a focus on IP matters. That's the driving factor." And then, of course, there's the more intangible cultural factor. Leger Robic Richard hasn't had a partner leave the firm-ever.
Sim, Hughes has-but the most significant exodus formed a smaller, even more focused boutique, i.e., Dimock Stratton. "The boutique practice will continue to flourish," says Hughes confidently. Robert MacFarlane thinks so too, but for MacFarlane, bit-ticket IP litigation required the support of a big boutique. In 1997 he left his own firm, Fitzsimmons, MacFarlane, for the broader support offered by Bereskin & Parr. "It's difficult for a small boutique when you have two or three cases coming to a frenzied pitch at the same moment," he says. "I was looking for a larger organization to back me up." But not a big, full-service firm. "In large firms, IP departments are adjuncts of corporate departments. If you want to build up a patent prosecution and IP litigation practice, and it's not a firm's primary focus-it is difficult to be successful."
Big Firms
With boutiques unwilling to do a deal, some big firms are developing IP litigation practices one lawyer at a time. "It's difficult to develop an effective IP group from scratch," says Malcolm McLeod. He should know-McLeod was in on the ground floor as Joan Clark built the IP litigation practice at Ogilvy Renault. As he watches other firms go down the same path some 40 years later, he doesn't have high hopes. "Some firms move to develop IP practices, but treat it as a flavour of the month. There is no instant gratification here," he says. The market position that Ogilvy currently enjoys in IP litigation was decades in the making.
Not so, says Torys. Best known for its top-tier corporate practice, Torys entered the fray in 2001 with, inter alia, the recruitment of Andrew Shaughnessy from Dimock Stratton Clarizio to head up its IP litigation practice. The firm added further muscle in 2002 when it took on board 11 IP lawyers, lead by Conor McCourt and Eileen McMahon, who decamped en masse from the tottering Donahue LLP, Ernst & Young's affiliated law firm. Torys isn't flying completely in the face of reason-both Goodmans LLP and Lang Michener have developed solid IP litigation practices within the context of big, full-service firms.
At Lang Michener, IP litigation is personified in Donald MacOdrum, the mastermind behind The Lubrizol Corporation's triumph over Imperial Oil Limited. in one of the largest IP suits in Canadian history. He has been retained by Bayer in its Levitra/Viagra patent dispute with Pfizer. MacOdrum leads a group of 19 IP lawyers, 12 of them litigators, all within the context of a large service firm.
Goodmans owes it all to Harry Radomski. And Radomski owes it all to basically one client, generic drug maker Apotex. His relationship with Apotex predates Goodmans and his exposure to IP. Radomski first acted for Apotex on an administrative law matter, then another, and suddenly, the administrative matters became IP files. The one client, he says, "mushroomed into an IP litigation practice," which has already taken him to the S.C.C. a couple of times, most recently in Apotex Inc. v. Wellcome Foundation Ltd. on the AZT patent, which he lost to Patrick Kierans at Ogilvy Renault.
The seven-lawyer IP litigation group at Goodmans functions as an internal boutique, says Radomski. "We act as a firm within a firm," avoiding many of the difficulties experienced by IP groups at other majors in part, he says, because Goodmans doesn't do any agency work, outsourcing it to an IP boutique.
"There are difficulties in big firms maintaining an IP practice," concedes MacOdrum, although he believes Lang Michener has been relatively successful in avoiding most of these. And boutiques are certainly not problem free. Legal conflicts may surface as a problem for IP litigators at the majors, but, as MacOdrum points out, "boutiques have their own conflict problems. For example, if they do a lot of patent prosecution, they may find themselves not being able to act for everybody."
And the major full-service firms, states Malcolm McLeod, are becoming more constructive over conflicts, differentiating "actual legal conflicts" from "business conflicts". Both types of conflicts pose a more serious challenge for transactional firms like Torys than firms like Ogilvy Renault, which "prefer the 'cradle to grave' philosophy, with not too many graves." And being part of something bigger does give you greater resources, states McLeod.
It also gives you a broader perspective, states Scott Jolliffe, something boutique practitioners frequently lack. At Deeth Williams, Deeth tacitly agrees, acknowledging that their experience at Blakes provided his new firm with a better understanding of the overall corporate considerations than is standard with most IP specialists.
McCarthy Tétrault has acted in some of the most high-profile, big ticket IP litigation in Canada. A broader perspective and general corporate litigation expertise is what Paul Morrison says his firm brings to the table. Morrison has nothing against boutiques. He just thinks that in an IP dispute, what clients "need first and foremost is a good litigator." Morrison's argument is: "first get training and experience in general litigation, then come to IP." While McCarthys has no IP litigation group, IP litigation is a growing practice area for the firm and one that the firm is keen on expanding. Why? Simple. As Morrison explains: "The fights are often over significant assets and involve significant dollars."
Big Bucks
"IP has become a more important area of law for Canadian business," says Jolliffe. "Just as bricks and mortar were important 20 years ago, software and patents are equally important today. The importance of IP has meant a rise in the importance of IP lawyers." But that's not why the big firms aren't willing to let the boutiques dominate IP. The answer-as always-is money. IP litigation is big business, "very lucrative" and more than makes up for the conflict headaches and the challenges posed by the "uniqueness" of the practice and the practiti
oner.
The perception as to the dollars involved in IP litigation is somewhat skewed by U.S. suits, where jury trials, treble damages, and the exponentially larger market combine to inflate numbers, with awards pushing the $1 billion mark. "You won't see that in Canada," says François Grenier, a partner with Leger Robic Richard.
Most IP litigators in Canada never see the sunny side of $100 million settlement. "An award in excess of $20 million is large," says John Morrissey. There are, of course, exceptions. Unilever's fight with Procter & Gamble (P&G) over Bounce is understood to have cost P&G a cool half billion. While under the confidential terms of the settlement, the lawyers for the various parties will not confirm actual numbers, they do concede the amount is the largest they've ever seen.
Right up there with Bounce is what Imperial Oil paid Lubrizol in their fight over Imperial's infringement of Lubrizol's motor oil patent. Under the terms of the settlement, Imperial paid Lubrizol a paltry US$25 million cash, but it also committed to a supply agreement worth a walloping $460 million to Lubrizol.
It's hard to quantify just how much an IP case is worth, because in some cases no money changes hands. But there's always a winner and loser. As Radomski points out, "In some of these cases, what's at stake is hundreds of millions of dollars. If the patent is unsuccessful and the defendant is successful, they have kept hundreds of millions of dollars." In the process, plaintiff and defendant shell out several million in legal fees. IP litigation is not cheap, which means, says François Guay, "It is lucrative. Clients spend more-they try to protect market share. In most files, there is no limit on the budget."
"The stakes are so high, the client wants you to search high and low for a solution," agrees Morrissey. Says Kierans, "If what's at stake is a $100 million a year market, $2 to $3 million in legal fees is not outrageous." But fewer and fewer IP litigators receive a blank cheque. As the stakes have climbed, so have concerns over costs. "We see it especially with American clients," says Morrissey. "Clients are more cost-conscious and have us on a shorter leash than in the past. Some have been burnt in the U.S. by exorbitant legal fees and are a lot more careful."
But it's not just about money-for the clients, anyway. "In IP cases, money is not the main point," explains Grenier. "IP, at its core, is about control and ownership of ideas-worldwide." Says Kierans, "IP, for many of these companies, is their only asset. When you're litigating IP, you're really betting the company, and not just in Canada. A bad outcome in Canada can have an effect on the company's patents and IP elsewhere."
And this is where this article opened. IP is about the ownership of ideas. And the ownership of ideas can often be more valuable than money itself. It can facilitate ownership of the future by excluding others. From a business perspective, this is invaluable. As Marc Schuyler, the attorney at Hewlett-Packard so shrewdly put it, "We get patents not to protect our own products, but because it gives us the power to exclude."
Marzena Czarnecka is a Lexpert staff writer.