Tuesday, March 1, 2011

Valence Tech v Phostech Lithium Overview

Valence Technology, Inc. v. Phostech Lithium Inc. 2011 FC 174, Gauthier J

Gauthier J’s decision in Valence Technology, Inc. v. Phostech Lithium turned almost entirely on the facts, though some interesting legal points were raised tangentially. This post provides an overview. I will discuss the legal issues in separate posts.

The invention in question related to a process for making lithium mixed metal cathodes for lithium ion batteries. It was known in the prior art that LiFePO4 is a good cathode material [24], but it had not been commercially adopted, apparently because of the cost of production. Both the plaintiff, Valence, and the defendant Phostech, had developed new processes for making LiFePO4 cathodes at about the same time. The key to Valence’s process was the use of carbothermal reduction (CTR). Valence held three process patents on its technology: 2,395,115 and 2,466,366, which was a divisional of ‘115, and the subsequent 2,483,918 patent which was intended to claim an extension of the technology to a wider set of compounds.

Challenges to the validity of the ‘115 patent were abandoned in oral argument [180], and Gauthier J held that Phostech’s process infringed the ‘115 patent [178]. While Phostech did raise some claim construction arguments, these were not particularly strong, in my view. While Gauthier J noted [139] that "as a whole the claims are not particularly well written,” she had no real difficulty in coming to a conclusion which favoured Valence. The difficult question was whether the Phostech process used carbothermal reduction or some other reductive process. This was a difficult question on the facts. While there were disputes in discovery, the real difficulty was more fundamental. It was established that the compounds used in the Phostech process could support CTR under the right conditions [158], but it was difficult, as a matter of science, to determine whether the conditions inside the closed industrial kiln used by Phostech would actually result in carbothermal reduction. A variety of tests were conducted by both parties, and ultimately Gauthier J held that Valence had established on the balance of probabilities that the Phostech process used CTR [166]. While Valence’s expert witness on this point was particularly good, and Phostech’s expert was particularly weak [49, 166], Gauthier J carefully reviewed the evidence and from the decision itself there is no reason to believe that the inexperience of Phostech’s expert influenced the outcome. Gauthier J did note that "what surprises me most is the fact that Phostech’s expert did not perform tests that more closely mirror the actual timing and temperatures used in its P1 Process” [168]. Read in context this does not amount to shifting the burden to the defendant, as the plaintiffs had conducted enough tests to support Gauthier J’s conclusion. It does make the basic point that once the plaintiff has advanced enough evidence to support its case on the balance of probabilities, the defendant needs to respond with solid evidence in order to tilt the balance back in the other direction.

Gauthier J made no determination as to infringement of the ‘366 and ‘918 patents, but she did hold that the ‘918 patent was invalid as being anticipated by Canadian Patent Application 2,423,129, which had been published prior to the ‘918 priority date (but after the ‘115 priority date). She had no difficulty in coming to this conclusion. The root of the problem was that the ‘918 patent claimed too broadly. The advance in the ‘918 patent was an extension of the CTR technology to a wider set of compounds, but as drafted it included all the compounds described in the ‘115 patent, and also LiFePO4 which was described in the an example of the ‘129 application [230], and construction was not disputed [151]. (Obviousness of the ‘918 patent over the ‘129 application was not discussed, presumably because the application, while prior art, was not part of the cgk [149].) As all claims of the ‘918 patent were invalid, the patent as a whole was declared to be void.

An insufficiency attack on the ‘366 patent was readily dismissed on the facts [182ff].

In the result, Gauthier J held that ‘115 patent was infringed, and that the ‘918 patent was void.

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