Norwich Order Not to Be Used to Circumvent Discovery

Worthware Systems International Inc v Raysoft Inc 2022 FC 1492 Pentney J

2,515,486 / Internet Based Cellular Telephone Service Accounting Method and System

In this decision Pentney J refused to grant a Norwich Order in the patent context. No new law was involved, but the decision is helpful nonetheless as we don’t see many decisions on Norwich orders in the patent context.

The 486 patent relates to a method of inputting customer information at the point of sale of cellphones [7]. Worthware and Raysoft both provide point of sale software to dealers, and Worthware brought an infringement action against Raysoft alleging that Raysoft’s product infringed. In this motion, Worthware sought a Norwich order against Raysoft’s controlling mind—the sole director, President and Secretary, and only shareholder—Mr Lalancette, ordering him to provide information regarding Raysoft’s clients. Worthware argued that it was entitled to know the identity of the clients, who would be direct infringers, both to be able to calculate its damages, and in order to bring proceedings against the dealers in the event that Raysoft would be unable to satisfy a damages award. Raysoft, on the other hand, argued that the parties operate in a small and highly competitive market, and that Worthware was seeking the names and addresses of Raysoft’s dealers in order to try to sell them its software [20].

Pentney J refused to grant the order, primarily on the basis that Worthware had not established that Mr Lalancette is the only practical source of the information it seeks [21]. He emphasized that a Norwich Order is “extraordinary equitable relief” which is “an intrusive and extraordinary remedy that must be exercised with caution,” [22], citing GEA v Ventra 2009 ONCA 619 [85]. The requirement that the party seeking the order must show that it is necessary because the party named is the only practical source of the information is therefore an “ironclad” element of the test. In this case, the defendant Raysoft itself also holds the necessary information, as was acknowledged by Worthware [24]–[25].

Moreover, Worthware had asked for the very information it now seeks during the examination for discovery of Mr. Lalancette, who testified as the Defendant Company’s sole representative. Raysoft objected, and the CMJ refused to order production of Raysoft’s client list, because “the discovery process does not serve to obtain names of potential witnesses for the sole purpose of starting an action against them… The jurisprudence has clearly and consistently discouraged such fishing expeditions…” [26]. This confirmed that Mr. Lalancette is not, in fact, the only practical source of the information [29].

More broadly, Pentney J pointed out that “a Norwich Order is not intended to be used to circumvent the normal discovery process in litigation” [34]. If Worthware was unsatisfied with the refusal of the order for disclosure of the client list, it should have appealed that decision, rather than trying an end run by way of a Norwich Order.

Another factor is that Worthware brought its motion for a Norwich Order almost four years after bringing its action against Raysoft, even though it knew all the key facts about how the alleged infringement operated; this called into question Worthware’s motivation in deciding to seek extraordinary equitable relief [31]. Pentney J dismissed Worthware’s argument about its doubts as to whether Raysoft would be able to satisfy any damages award as being unsupported by the evidence, and undermined by Worthware’s failure to take any other steps to protect its position, such as asking for security for costs [32].

IPIC Subject Matter Test Properly Subject to Appeal

Canada (Attorney General) v Benjamin Moore & Co 2022 FCA 194 Rennie JA

2,695,130 / 2,695,146 (applications)

This decision relates to a procedural wrinkle in the Benjamin Moore litigation, which is set to clarify the law relating to patentable subject matter. The Commissioner had refused two of Benjamin Moore’s applications on the basis that the claims were directed to non-statutory subject matter. Benjamin Moore appealed, and in Benjamin Moore 2022 FC 923, Gagné ACJ endorsed a particular test, proposed by the intervener, IPIC, for assessing patentable subject matter (see here). She then sent the applications back to CIPO for redetermination. The Attorney General had agreed that CIPO had used the wrong test, and that the files should be sent back for redetermination, but would have preferred that CIPO be instructed to decide the matter according to the principles set out in Choueifaty 2020 FC 837: [FC 39]. Significantly, Gagné ACJ instructed CIPO to use the IPIC test in paragraph 3 of the judgment itself.

The Attorney General then appealed. Benjamin Moore brought this motion to strike, arguing that the AG had no disagreement with the result—the files should be sent back for redetermination—and the appeal was brought to challenge the IPIC test. It is clear that the FCA, under the Federal Courts Act, s 27, only has jurisdiction to hear an appeal against the judgment, and Benjamin Moore argued that the appeal was in substance an appeal against the reasons.

The key question in this motion was therefore whether the appeal truly relates to the Federal Court’s judgment, or to its reasons for that judgment: [14]. Rennie JA noted that whether an appeal is taken from the reasons or the judgment is not always self-evident. The central policy consideration is “whether the appeal is a veiled attempt to keep the benefit of the judgment but realign the reasons for judgment. Sometimes a party will be successful in the result, but will not like the manner by which they succeeded. Courts must always be vigilant to guard against appeals brought on this basis” [25].

Rennie JA held that in this case, the appeal was an appeal against the judgment, not just the reasons, and so the motion was quashed. He discussed two prior FCA decisions, in Yansane 2017 FCA 48 and Fournier 2019 FCA 265 affg 2018 FC 464. In Yansane, the FCA had noted at [17] that “the Court often simply directs that reconsideration take place in accordance with its reasons,” and held that in such a case an appeal against the reasons was not permitted, as “only instructions explicitly stated in the judgment bind the subsequent decision-maker” [19]. In Fournier, the FC judgment stated that “The case is referred back to the Appeal Panel for reconsideration, taking into account these reasons.” The appellant asked the court to uphold the judgment, in the sense of referring the matter back to the Appeal Panel, but asked the FCA to declare that the FC had erred in its interpretation of a point of law. The FCA held that this was an impermissible attempt to appeal the reasons, and the reference to the “taking into account these reasons” did not change the essence of the appeal:

[31] I am therefore of the view that the addition of that statement in the formal judgment is not sufficient to incorporate therein the reasons in their entirety, much less to make of that statement a strict direction or even a directed verdict. If it were otherwise, reasons would always open up the possibility of an appeal.

He distinguished these decisions on the basis that they related to situations which there was a general reference to the reasons in the formal judgment [19],[20], whereas in this case “paragraph 3 of the judgment lays out a test for the Commissioner that can be uniquely enforced, separately from the accompanying reasons” [22], and

paragraph 3 of the Federal Court’s judgment is a specific direction in this respect, akin to a declaratory judgment. Consistent with [the prior cases], the specific direction in paragraph 3 forms part of the judgment and uniquely binds the Commissioner to a particular test in a way that the reasons alone do not [26].

This does distinguish the prior cases, though at first blush it might seem a bit formalistic. One response to that is simply to say that a line has to be drawn somewhere and any test that provides any degree of certainty has to be formalistic to some degree. Another response is that the distinction is by no means purely formal. Rennie JA noted that “This test responds to the only substantive consideration that was before the Federal Court, laying at the core of the Federal Court’s formal judgment in the matter” [26]. The formal point and the substantive point go hand in hand: when the particular legal test is found in the judgment itself, this is a very good indication that the court considered it to lie at the core of the decision. For both those reasons, I do find the distinction drawn by Rennie JA to be persuasive.

With all that said, it’s not entirely clear to me why the court has to be so vigilant to guard against a party seeking to “keep the benefit of the judgment but realign the reasons for judgment.” Victory on the facts in a case is always welcome, but for parties who are repeat players in the litigation system, as is true for many patent litigants, the shape of the law may be much more important in the long run. If the decision goes against a party, they have a full opportunity to reargue the law on appeal, and it’s not entirely clear to me why they should be denied that opportunity if the ruling goes in their favour, simply because the trial judge did not find the legal point important enough to put in the judgment itself. I’m sure there’s an answer to that question in the voluminous jurisprudence on the US “case or controversy” requirement, but I won’t pursue it, since the point is academic in this context, given that Rennie JA did allow the appeal to proceed.

 

Routine Correction of Inventorship

Genentech, Inc v Canada (Commissioner of Patents) 2022 FC 1447 Manson J

            2,979,671

This was a routine correction of inventorship under s 52. The application was supported by affidavits and it was established that the mistake arose through inadvertence. Manson J provided a useful summary of the relevant law at [11]–[14].

A (Kind Of) Successful Overbreadth Attack

Rovi Guides, Inc v BCE Inc 2022 FC 1388 Lafrenière J

2,336,870 / 2,339,629 / 2,425,482 / 2,514,585 / Interactive Television Program Guide / Internet Protocol Television

As discussed in my last post, in this decision Lafrenière J held that all of the asserted claims of Rovi’s patents were invalid for anticipation and / or obviousness. The last post focused on remedial issues. This post discusses overbreadth.

As Lafrenière J put it, “A claim is overly broad and invalid if it asserts ‘exclusive property or privilege in something the inventor did not actually invent’” [298]. In my articles on Overbreadth in Canadian Patent Law (2020) 33 IPJ 21 and (2021) 33 IPJ 147, I showed that overbreadth is functionally redundant in almost all cases in which it is invoked; that is, in almost all cases, the factual basis and reasoning leading to a finding of invalidity for overbreadth is exactly the same factual basis and reasoning leading to a finding of invalidity on some other standard ground, such as anticipation: see eg BVD v Canadian Celanese [1937] SCR 221. (The historical exception is Amfac (1986) 12 CPR(3d) 193 (FCA), which I argued was wrongly decided.)

Now, even though overbreadth is functionally redundant in almost all cases, that does not mean it is necessarily functionally redundant all cases; so, in my article I gave the example of the ‘roads to Brighton’ problem in which overbreadth might in principle play an independent role. In Seedlings 2021 FCA 154 [50] the FCA held that “overbreadth remains a proper ground of invalidity,” but at the same time Locke JA acknowledged that “the overlap with other grounds of invalidity makes it difficult to define circumstances in which a patent claim would be invalid for overbreadth but not also invalid on other grounds” [52]. Since Seedlings, parties attacking a patent have attempted to give some independent force to an overbreadth attack, so far without success.

In this case the defendants made overbreadth attacks on two patents, one of which failed and one of which succeeded, albeit in obiter.

The overbreadth attack on the 870 patent was novel. The factual basis for the Defendants’ attack was that the 870 patent claims priority from US provisional application 60/092,807 (the ‘807 Application’). One of the inventors of the 870 patent admitted that “the invention he made in July 1998 was limited to that which he described in the 807 Application” [300]. It was undisputed that the matter disclosed in the 807 Application has very limited overlap with the 870 patent: [301]–[302]. What the inventors claimed in the 870 Patent was therefore significantly broader than the 807 Application, and the Defendants argued that the 870 Claims are invalid on that basis [303].

Lafrenière J rejected this; he agreed with Rovi that “the ‘invention made’ is to be determined as of the filing date, not the priority date” [304]. This must be right, or overbreadth would swallow the claim date rules. The claim date is the filing date unless priority is claimed to a prior application “disclosing the subject-matter defined by the claim”: s 28.1(1)(a)(i),(ii). If the subject-matter disclosed by the application as filed is broader than that in the priority document, the only consequence is that priority cannot be claimed. And that is on a claim by claim basis, as the term “claim date” indicates. Claims that are directed to subject-matter that was disclosed in the priority document can still claim priority. To invalidate the entire patent would upend that well-established system.

The overbreadth attack on the 482 patent was different in nature. The 482 patent relates to a system and method for automatic retrieval of on-demand media data so as to avoid interruption to prevent unacceptable delays in the display of the video-on-demand listings during periods of higher traffic or low bandwidth connections. Lafrenière J rejected a construction which would have included “manual only” retrieval of on-demand data, but nonetheless considered and accepted the Defendants’ argument that if the 482 claims covered manual retrieval, they would be overbroad: [556]–[563].

On the claim construction point, as I understand it, Rovi wanted to argue that the claims included user-initiated download of on-demand data, presumably to bolster their infringement argument: see [562]. The claim at issue expressly requires “automatically retrieving” the on-demand data [473]–[474], and Rovi’s expert had admitted that user initiated retrieval was not automatic retrieval [500]. So, the argument that the patent covered manual retrieval was a complete dud. This makes it a bit difficult to grasp the overbreadth argument, since the premise that the claim encompasses manual retrieval is without foundation.

Lafrenière J’s discussion was understandably brief, given his holding on claim construction. Much of his discussion reviewed the evidence to the effect that the patent was entirely addressed to technology using automatic retrieval, which is of course consistent with Lafrenière J’s finding on claim construction. Manual retrieval simply was not addressed.

With this background, the key discussion was that

[561] I agree with [the Defendants’ expert] that the Skilled Person would understand that the invention described in the 482 Patent requires “automatically retrieving” at least some of the on-demand media data without a user indication to access it because “manual only retrieving” the on-demand media data causes the very undesirable consequences that the 482 Patent seeks to avoid.

[563] Dr. Robinson’s uncontested evidence is that there is no disclosure in the 482 Patent about manually retrieving on-demand media data. Therefore, to the extent such a claim is made in the 482 Patent, the claim is broader than any invention disclosed.

So, the gist of it seems to be that the 482 patent made no mention of manual downloading, so if it had claimed manual downloading, it would have been overbroad, in much the same way as the 482 patent would have been overbroad had it claimed a compound that cures cancer on the basis of a description focusing entirely on interactive television guide technology.

More broadly, a claim is overbroad if it claims subject-matter that is entirely unrelated to the disclosure. That seems reasonable enough, but the question is whether this raises overbreadth as an independent ground of invalidity. I suspect that in the vast majority of cases, a patent that claims subject-matter unrelated to the disclosure would be invalid for insufficiency. Put another way, is it possible for a patent to have claim to subject-matter that is entirely unrelated to the disclosure, in which the claim is nonetheless not invalid on any traditional ground? What if the 482 patent in this case had omitted the word “automatically” in the claim, and it was held that the claim, properly construed, encompassed manual retrieval. Suppose also that automatic retrieval was technically difficult, and the disclosure exclusively addressed automatic disclosure without mentioning manual retrieval; but at the same time, manual retrieval was not technically difficult and could easily be implemented by a skilled person in light of their common general knowledge. Would that patent be invalid simply on the basis the description did not mention manual downloading ie even if manual downloading was novel and non-obvious? I’m not sure.

My sense is that the success of the overbreadth argument in this case turned on the fact that it was premised on a claim construction that had no foundation in the patent. This makes it difficult to draw broader lessons from the analysis. It’s not very surprising that if we give a claim a construction that has no basis in the patent, the claim will be invalid in light of that patent. I doubt that observation is going to generate any independent role for overbreadth in the context of a properly construed claim.

Accounting and Injunction Denied Due to Patent Holdup

Rovi Guides, Inc v BCE Inc 2022 FC 1388 Lafrenière J

2,336,870 / 2,339,629 / 2,425,482 / 2,514,585 / Interactive Television Program Guide / Internet Protocol Television

In this decision Lafrenière J held that all of the asserted claims of Rovi’s patents were invalid for anticipation and / or obviousness in an analysis that turned entirely on the facts. Infringement was largely conceded [142]. The most import aspect of the decision was Lafrenière J’s discussion of remedies, though it was strictly obiter given his holding on validity [578]. Lafrenière J held that even if the patents had been valid and infringed, he would have denied both an accounting of profits and injunctive relief, expressly on the basis that “the present case exemplifies the patent holdup problem” [652]. In my view, Lafrenière J was right in both his analysis and his conclusions.

The trial in this case took place shortly after completion of the trial of the infringement action brought earlier by Rovi against Videotron, also before Lafrenière J, resulting in Rovi v Videotron 2022 FC 874* [36]. Rovi v Videotron involved two of the same patents, namely the 629 and 870 patents, as well as two additional patents, 2,337,061 and 2,730,344. (I’ve counted a total of 12 different Rovi patents that have popped up in various motions and other litigation, and no doubt this is only a selection from a large portfolio.) As discussed here, the result in Rovi v Videotron was much the same as in this case: Lafrenière J held all of Rovi’s asserted claims to be invalid, and he would have denied an accounting. Lafrenière J’s remedial analysis was also very similar in Videotron, though this decision is somewhat more explicit in discussing the holdup problem.

It is fortunate for the development of the law that this was a particularly clear case of holdup on the facts; it sets out the principle that an accounting and injunctive relief can be denied to address holdup, while leaving it to future cases to address more difficult borderline cases. I can’t say that the principle is now established, given that the remedial holdings in BCE and Videotron were obiter decisions at the trial level. But I hope they will be influential nonetheless, as Lafrenière J’s decisions strike me as a sound basis for further development of the law of patent remedies in the context of patent holdup and patent assertion entities.

A couple of preliminary points. This post is much too long, but to paraphrase Pascal, I didn’t have time to write a shorter one. I am going to blame Covid brain fog for the length and delay. Second, this is a very long decision, dealing with multiple patents and issues, and it would be very helpful if Lafrenière had asked his clerk to create a hyperlinked table of contents to go at the start of the decision. The decision is well-structured with headers (like most FC decisions), so all that would be required is to generate the ToC. I’ve seen this done in a number of decisions, and I’d like to see it become routine, at least for long decisions.

Posting to Resume Soon

I thought I'd post an update since it's been an unusually long time since I last posted. I'm not giving up on the blog. There was a long stretch in October were there weren't any substantive decisions released. Then, when I was halfway through a long post on Rovi Guides 2022 FC 1388, I got hit by Covid. I hope to start posting again later this week.