When Are Two Acts “The Same” for the Purpose of 56(1)?

Kobold Corporation v NCS Multistage Inc 2021 FC 1437 Zinn J

            2,919,561 / Bottomhole assembly

As outlined in my last post, this motion for summary judgment addresses the new prior user defence set out in s 56. The main operative provision, 56(1), provides that if a person, before the claim date, “committed an act that would otherwise constitute an infringement. . . it is not an infringement. . . if the person commits the same act on or after that claim date.” The key question is what it means for the post-claim date act to be “the same” as the pre-claim date act. This turns out to be a very difficult question. I’ll suggest that there is some internal tension in Zinn J’s approach; but I don’t see any flaws in his reasoning, and I don’t have anything better to suggest. The facts are outlined in my previous post. I won’t repeat them here, but some of the examples in the following discussion assume familiarity with the invention.

As discussed in the last post, it is clear that the prior user right is not confined to the same specific article that had been used prior to the claim date. On the other hand, the fact that the person did an ‘infringing’ act before the claim date does not give them carte blanche to carry out any infringing act after the claim date. Some halfway house is needed: the subsequent act must be the same as the prior act in a way that goes beyond the mere fact that both are infringing. (If the prior act is not infringing, 56(1) does not apply; and if the subsequent act is not infringing, there is no need to appeal to 56(1): [114].)

The question then, is as to the nature and degree of changes permitted before the subsequent act is no longer considered to be “the same” as the prior act and the protection of s 56 is lost.

First Decision on Prior User Rights: Overview

Kobold Corporation v NCS Multistage Inc 2021 FC 1437 Zinn J

            2,919,561 / Bottomhole assembly

This motion for summary judgment is the first decision to consider the new prior user defence set out in s 56 of the Act, which came into in effect in December 2018 [53]. The previous s 56 also provided for a form of prior user defence, but the new provisions are so completely revamped that the cases interpreting the old s 56 are of no assistance (except, in some cases, in the negative sense of constituting the problem that the legislature intended to correct). Zinn J’s decision in Kobold v NCS has given us a very careful analysis of the key operative provision, 56(1), as well as some discussion of 56(6),(9), which provides for third party prior user rights. This post will give an overview and discuss some of Zinn J’s general observations.

Prior user rights are assessed on a claim by claim basis, and the key date for establishing such rights is the claim date. Subsection 56(1) provides that if a person, before the claim date,

committed an act that would otherwise constitute an infringement. . . it is not an infringement. . . if the person commits the same act on or after that claim date.

The key question is what it means for the subsequent act to be “the same act” as the prior act. This question didn’t arise under the old provision, which gave protection only in respect of “the specific article” that had been used or acquired before the claim date. It is clear that the new provision is intended to expand the prior user rights, so that a person who used an infringing device—more precisely, a device that would be infringing if used after the claim date—before the claim date can not only use that very device, but can also use new devices, so long as the new device is “the same” as the old device. What if the old device was painted green and the new device is painted red, but is otherwise identical—is it the same? The answer is clearly yes. Where, then, do we draw the line? At the risk of oversimplifying, Zinn J’s view is that considerable variation is permitted, so long as the new device does not incorporate changes related to the inventive concept. I’ll discuss this key point at more length in my next post.

Then the question is what it means for changes to relate to the inventive concept. This decision provides some guidance in this respect, although it is limited. Zinn J granted summary judgment on the interpretation of 56(1), but not on its application to the facts, which he held required a trial; but he did address a couple of points on the facts. Zinn J also granted summary judgment on claim construction, which did of course turn on the facts, but the analysis did not implicate the s 56 issue. Finally, he also granted summary judgment in respect of the 56(6), (9), but this did not turn on the question of whether the prior acts were the same as the subsequent acts.

The facts nonetheless provide context for the rest of the discussion. The 561 patent relates the bottomhole assembly [BHA] used in fracking. Fracking involves pumping large volumes of fluid at high pressure into the well to fracture the formation. Kobold’s 561 patent particularly relates to one element of the BHA, namely the packer, which seals the well so the pressurized fluid cannot escape. The packers at issue in this litigation use an elastomeric material to seal the well. The BHA is pushed into the desired position, and then the packer is anchored to the wall of the well. A mandrel connected to the packer is then pushed further, compressing the elastomer, and causing it to expand and seal the well. This much was all part of the prior art [7–13]. The trick is to get the BHA out again. After fracking, there is a large pressure differential above and below the packer that has to be equalized before the BHA can be moved. The most common ways to do this in the prior art were the use of an equalization valve on the sealing element, or by having a passageway through the centre of the tool. The inventive concept of the ‘561 patent is a new method of equalizing pressure by using the mandrel to pull on the sealing element, decompressing the elastomer, which contracts, creating an annular passageway on the outside of the packer which the fluid flows through, equalizing the pressure [13–18]. The inventive concept “is the connecting of the sealing element to the mandrel so that when the mandrel is pulled the sealing element is also pulled, thus forming an annular passageway that equalizes pressure” [153]. (Note that most of the claims, including Claim 1, the representative claim, were method claims, to the method of using such a BHA, not the BHA itself, though some claims were to the tool itself: nothing turns on this.)

NCS builds and operates four BHAs at issue in this litigation [26]. One, known as the Mongoose, was in use since 2012, predating the claim date of the 561 patent [30]. I assume that NCS did not argue that the 561 patent was invalid as being anticipated by the Mongoose because the BHA would not have been available to the public, since it was used at the bottom of a high pressure oil well and, so far as I can tell, was actually operated by NCS, rather than being leased out so that it might have been available for inspection. Kobold conceded that NCS could continue to use the Mongoose, presumably because it was protected by s 56 [31]. The question for s 56 was whether the other three models can be considered “the same” as the Mongoose.

Expanded protection

Zinn J began his analysis with a comparison of the old and new provisions. He noted that it is express in the amending legislation that the new s 56 is intended to grant more expansive rights than the previous version: [67]–[68], referring to Budget Implementation Act, 2018, No 2, SC 2018, c 27, Summary of Subdivision A of Division 7 of Part 4.

He observed that the current version of subsection 56(1) differs in three key ways from the former [70]:

● The former provision was limited to physical inventions and did not cover patented methods. The current provision, referring to “an act” that would otherwise be infringing, encompasses any act kind of potentially infringing act: [71]. (For convenience, in what follows I will generally refer to a physical device, like a BHA, but keep in mind that the protection is broader; the actual claims at issue in this case were method claims.)

● The former provision protected the “specific article”; the current provision instead protects “the same act”: [72].

● The former version only protected persons who had committed an infringing act prior to the claim date; the current provision also protects persons who made “serious and effective preparations” to do so [73]. Zinn J pointed out that this change was likely intended to legislatively overturn Merck v Apotex 2006 FCA 323, in which the FCA held that Apotex was not protected by the former s 56 because it had not actually acquired title to the infringing product by the claim date, even it had ordered the product and production had actually started [74]–[75]. Merck v Apotex can no longer be considered good law.

Further, Zinn J noted that s 56(6) and 56(9), which deal with third party use of a purchased article or service have no corresponding provisions in the previous provision.

The same type of infringement

The current provision protects “the same act.” What does it mean for the acts to be the “same”?

Part of the answer is that the acts must be the same in the sense that the type of infringement—make, sell or use—must be the same. So, if a person manufactured and used an infringing device prior to the claim date, “they can continue to manufacture and use it, but they cannot now sell the device to others to use, as selling is not an act done prior to the issuance of the patent” [98], and see [97], [91]. Section 56 seems to be broadly modeled on the corresponding provision of the UK Patents Act 1977, s 64, and this holding is consistent with the UK caselaw: see Lubrizol Corp v Esso Petroleum Co Ltd [1998] 115 RPC 727 (CA) 769–70 (Aldous LJ); Forticrete [2005] EWHC 3024 [15] (Kitchin J). This point does not appear to have been disputed.

In some cases, this limitation seems straightforward. If NCS was making and operating infringing BHAs before the claim date, but was not selling them to third parties, then it can continue to make and operate the same BHA after the claim date, but it does not have the right to start selling them. A more difficult question arises if a person has in good faith imported an infringing product prior to the claim date, with the intention of selling it, but did not actually make any sales prior to the claim date. In such a case, it appears that the protection would allow the person to continue to import the product, but not to sell it—”unless the importation amounted to an effective and serious preparation to sell it”: see Forticrete [2005] EWHC 3024 [15]. Zinn J did not discuss this point, which did not arise on the facts of this case.

It is necessary that the type of infringement is the same, but that is not sufficient to invoke s 56: a person who makes one infringing device prior to the claim date does not have carte blanche to make any infringing device after the claim date: [100], [90]. A comparison must be made between the prior act and the subsequent act to determine if those acts are the same. This point does not seem to have been contested. (Zinn J accepted Kobold’s submission on that point [90], and that submission does not appear to have been opposed by NCS.) This holding is also consistent with the UK jurisprudence: Lubrizol v Esso (No. 1) (1992) 109 RPC 281 (Pat) 295 (Laddie QC); Lubrizol Corp v Esso Petroleum Co Ltd [1998] 115 RPC 727 (CA) 770 (Aldous LJ); Forticrete [2005] EWHC 3024 [25] (Kitchin J).

So, it is clear that on the one hand, the prior user right is not confined to the same specific article that had been used prior to the claim date; but the fact that the person did an ‘infringing’ act before the claim date does not give them carte blanche to carry out any infringing act after the claim date. The answer lies somewhere between these two extremes. This will be the subject of my next post.

OxFirst Webinar on the Non-Infringing Alternatives in Canadian Patent Law

On Thursday, January 27, I’ll be presenting a free webinar, hosted by OxFirst, titled The Non-Infringing Alternative in Monetary Remedies in Canadian Patent Law. The webinar will run from 15:00-16:00 GMT (10:00-11:00 Eastern):

This webinar addresses the role of the “non-infringing alternative” in assessing damages and an accounting of profits in Canadian patent cases. This doctrine permits an infringer to argue that it would have been able to compete with the patentee as well, or almost as well, by using an non-infringing alternative, so that damages (or the profit to be disgorged) may be reduced, in some cases to zero. The webinar will show how the the doctrine is based in traditional principles of “but for” causation; illustrate its application in some of the leading case; discuss some of the main objections; and discuss some of the fine points that have been emerged from the Canadian caselaw.

You can join the webinar here.

Squeezing Through the Utility / Obviousness Gap

Pharmascience Inc v Teva Canada Innovation 2022 FCA 2 Locke JA: Stratas, Monaghan JJA affg 2020 FC 1158 Kane J

2,702,437 / 2,760,802 / glatiramer acetate / Copaxone / Glatect / NOC / FC Anticipation

In this decision, Locke JA, writing for the FCA, affirmed Kane J’s holding that the 802 patent was valid and that it would be infringed by Pharmascience’s generic product. The 802 patent at issue in this case relates to the use of glatiramer acetate for the treatment of multiple sclerosis, and in particular a dosing regime of 40mg three times a week [11]. Pharmascience argued that the 802 patent was invalid either for lack of sound prediction of utility or obviousness. (Kane J’s holding that the 447 patent was novel, but invalid for obviousness, was not appealed.)

Locke JA’s decision of sound prediction began by mentioning the putative enhanced disclosure requirement for utility based on sound prediction, which would require the factual basis for the sound prediction to be disclosed in the patent itself.* However, it was not necessary for Locke JA to engage with this issue because he found that Kane J had not in any event relied on a factual basis that was not disclosed; her holding that a sound prediction of utility was established was based on the common general knowledge and the logic disclosed in the specification [21]–[22].

This gave rise to a squeeze: “Pharmascience argues that, if the common general knowledge was sufficient to support a sound prediction of utility of the invention of the 802 Patent, then the same common general knowledge would make the invention obvious to try, and therefore invalid for obviousness” [6]. Locke JA rejected the squeeze on the basis that there is a gap between the two requirements:

[38] There is no necessary inconsistency between the finding, on the one hand, that an idea is sufficiently described in the patent disclosure and the common general knowledge to support a sound prediction that it will be useful. . . and, on the other, that the idea is not sufficiently known in the prior art (including but not limited to the common general knowledge) to lead the PSA directly and without difficulty to the solution taught in the patent.

In effect, an expert might say “I would never have thought of trying that, but now that you mention it, yes, I would say that it would probably work.” This makes sense to me, particularly in a case where the inventive concept lies in the insight that a particular approach is worth trying.

*Locke JA prefaced his comments by noting that “the parties do not disagree on the question of whether there is indeed a heightened disclosure requirement applicable to inventions based on sound prediction. Accordingly, it is not necessary to comment on that question here” [16]. I take this to be saying that he is not commenting on whether the law actually requires a heightened disclosure requirement. But in the next paragraph he went on to say that “In my view, the Trial Judge did not misunderstand the disclosure requirement under the sound prediction doctrine” [17]; this evidently says she was correct, not just that it was not necessary to address whether she was correct, given that the parties were in agreement. Locke JA contined by saying “at paragraph 874, she discussed the disclosure requirement specific to the context of the doctrine of sound prediction,” quoting from Eurocopter 2013 FCA 219 [153], which is ambiguous, at least as I read it. I find all this a bit opaque, but it at least seems clear that this decision does not change anything one way or the other in respect of the putative heightened disclosure requirement.