The basic issue in Nova v Dow is how to define "profits" in an accounting of profits remedy, in the patent context. In my view, the majority SCC decision is a complete train wreck and the dissent of Côté J was excellent. 

The brief facts are that Dow had a patent on plastic film (eg chocolate bar wrappers). Nova was a competitor that made infringing film. (Liability was not at issue in this decision, only remedy.) Dow was awarded an accounting of Nova’s profits. The major input to the infringing film is ethylene, an unpatented bulk commodity. Nova had a very efficient process for making ethylene, so it could manufacture at far below market price. Nova’s accounting profit (revenue less its actual cost) on the infringing film was $600m. On the facts, if it had not infringed, Nova would have used its ethylene to make commodity grade “pail and crate” plastic. Because of its low cost ethylene, it would have made $300m in profit in the pail and crate market.

Prior to the FCA decision in Dow v Nova, the (emerging) law in the Federal Court was that the profit to be disgorged is the profit caused by the infringement, using “but for” causation. So, in this case, the actual profit from the infringement is $600m, the profit that would have been made but for the infringement is $300m, and the profit to be disgorged would be the difference, namely $300m.

The FCA in Dow v Nova used a different approach, comparing the actual profit with the profit that would have been made using the best non-infringing alternative (NIA). So the key question is how to define the NIA. In my view, the best non-infringing alternative is simply what the infringer would in fact have done but for the infringement. In other words, there is no difference between the NIA analysis and but for causation. This is really the underlying issue - is the "non-infringing alternative:" approach (1) simply a reflection of "but for" causation (my view), or (2) is it something else, and if so, what?

The FCA in Dow v Nova rejected (1) and held that on the facts that there was no NIA, and consequently, Nova was liable to account for the entire $600m actual profit. The SCC majority affirmed. So, on the facts, but for causation was rejected. 

If the NIA is not simply a reflection of but for causation, what is it? Neither the FCA nor the SCC answered this question. The SCC majority said (a) it is a matter of fact and (b) there was a concession, so there is no reason to intervene..Côté J made two good points in response. Re (a), surely it can't just be an unprincipled and essentially arbitrary matter of fact - there must be some guiding principle, and if so, we need to know what it is. To illustrate how uncertain it is, the majority indicated that even the pail and crate market might count as an NIA if the TJ made a finding to that effect. Re (b) she has a good discussion of why the concession wasn't really a concession to that effect. But nonetheless, the point remains that the majority treated it as a concession, and that is why it was able to avoid applying a clear principle on the facts. 

The key question in the patent context going forward will be how to define the NIA.

The broader issue is the extent to which this decision will impact other areas of the law. My sense is not very much - it will be possible to interpret it in a way that it is confined to patent law. I'd also be interested in your views on Côté J's discussion of general principles of restitution etc. I think she was entirely correct on the patent side, but I don't know the broader literature as well. 

If you want more, I've written quite a lot on the FCA decision: FCA Radical FCA Subjective FCA Baseline FCA Fixed Costs FCA Sunk Costs FCA leave granted