Third Party Prior User Rights

Kobold Corporation v NCS Multistage Inc 2021 FC 1437 Zinn J

            2,919,561 / Bottomhole assembly

As outlined in last week’s 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. Zinn J granted summary judgment on the interpretation of this provision. I’ve discussed aspects of the decision relating to 56(1) in previous posts.

Zinn J also briefly addressed 56(6) and 56(9), which protect third parties. Subsection 56(6) provides that “the use of an article is not an infringement. . . if the article was acquired. . . from a person who, before the claim date . . . in good faith, made or sold. . . an article that is substantially the same as the one used, for that use.” Subsection 56(9) similarly protects a person who uses a service provided by a third party who had provided substantially the same service before the claim date. Note that there is no requirement in these provisions that the third party itself bought the product or service before the claim date; the third party can buy the product after the claim date from a party who sold a substantially similar product before the claim date.

NCS argued that it was protected by this provision because it bought the Blue Bullet element from a third party. The Blue Bullet was part of the packer assembly [27], and presumably an important part; in any event, its exact nature is not important to the decision. Zinn J rejected the s 56(9) argument purely on the facts. There was no evidence that NCS purchased the service from others; on the contrary, NCS was providing the service: [146]. Consequently, on its face s 56(9) does not apply. Zinn J also rejected the 56(6) argument on facts, on the basis that there was no evidence that NCS actually acquired the Blue Bullet from a third party, as is required by the provision: [146].

That turns simply on the facts, but one interesting point concerning the language “substantially” the same, found in 56(6),(9), which is evidently broader than “the same,” which is used in 56(1). Kobold submitted that this was intended to protect a third party “from having to prove what it is using is the same as what was previously available, provided it is still substantially the same and used for the same use” [144]. Presumably this is on the view that the third party may have bought the product after the claim date, and may not have easy access to evidence of what was being sold before the claim date, in contrast to the manufacturer, who should be able to provide evidence of what they themselves were doing before the claim date. That’s at least a plausible suggestion, though I’m not sure that a different substantive test is the best way to deal with that problem. After all, the third party still has to prove that the product is substantially the same as the pre-claim date product, so it still has to have some kind of access to that earlier product, so the evidentiary problem largely remains. If the problem is one of evidence, it might have been better addressed directly, by an evidentiary presumption of some kind. Further, these provisions do not provide a great deal of additional protection to the third party. If the new product purchased by the third party is not “the same” but it is “substantially the same,” then the third party will generally not be able to purchase it anyway; even if the purchaser can take advantage of 56(6) to use the product, it will probably not be able to purchase the product after the claim date, because the vendor who cannot take advantage of 56(1) will likely be enjoined from selling.

In any event, the current Act does have two different standards, “the same” and “substantially the same,” which are evidently different. This case has told us what “the same” means; it will take another case to find out what “substantially the same” means. Kobold’s suggestion is plausible, but not beyond doubt. No doubt we’ll see further speculation as to the purpose of the “substantially the same” requirement, given that it is relevant to a purposive interpretation of the provision.

Zinn J also gave a second reason for rejecting the 56(6) argument:

[149] I also agree with Kobold’s further submission that subsection 56(6) does not apply because the use of the Blue Bullet element is not the potentially infringing act. Claims 1, 9, and 12 of the ‘561 Patent are for the use of tools that incorporate elements that are not present in the Blue Bullet element. Claim 15 is for a pressure equalization tool having elements not present on the Blue Bullet element. It is only the use of the Blue Bullet element in conjunction with the other elements of NCS’s packer assemblies that infringes the claims.

I’m just going to leave this here. Because Zinn J ordered a trial, the facts are not particularly well developed, and I don’t understand why the use of the Blue Bullet element is not the potentially infringing act. It does seems to have been the element that incorporates all of the key elements of the inventive concept. This isn’t to say I disagree; I just don’t understand the point well enough to comment. I am flagging it nonetheless, as it does appear to be some kind of substantive restriction on the availability of 56(6).