Saturday, October 6, 2012

Is the Test for Inducement “Strict”?

Weatherford Canada Ltd. v. Corlac Inc. 2012 FC 76 Phelan J (on remand from 2011 FCA 228)

The patent at issue relates to a seal assembly for use in oil well pumps. In Weatherford Canada Ltd. v. Corlac Inc. 2010 FC 602 varied 2011 FCA 228, Phelan J held a number of claims to be valid and infringed by Corlac. All of the claims in issue except one, claim 17, were to the assembly itself. Claim 17 was a claim to a method of detecting and restraining oil leaks using that assembly. On appeal, the FCA affirmed Phelan J except in relation to claim 17. The FCA at [162] re-affirmed the accepted three-part test for inducement:

            First, the act of infringement must have been completed by the direct infringer.
Second, the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place.
Third, the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement

Layden-Stevenson JA, for the court, held that Phelan J had not explicitly applied this test, and “[i]n view of the stringent test for inducement, I cannot determine whether the judge, had he explicitly applied the test, would have arrived at a conclusion that the appellants indirectly infringed claim 17" [168]. The FCA therefore remanded the case to Phelan J for re-determination in accordance with the accepted test [171].

Perhaps the most interesting part of Phelan J’s decision concerns the standard of proof. Part of Corlac's complaint on appeal was that there was no direct evidence of direct infringement by end-users. Though the FCA did not accept that such evidence was necessary, it did hold that “[t]here seem to be significant gaps in the evidentiary basis needed to support what appears to be an implicit finding of third party use” [169]. Thus the standard of proof was a significant issue. Further, as Phelan J noted at [10], the FCA variously described the test as a “difficult one to meet”, “a stringent test”, and a “strict” test. But, as Phelan J pointed out at [11], “[t]he Supreme Court has confirmed that there are only two evidentiary standards – ‘balance of probabilities’ and ‘beyond reasonable doubt’ (see F.H. v McDougall2008 SCC 53),” and the civil standard is proof on the balance of probabilities, or “more likely than not.”

Having established that the standard of proof is the balance of probabilities, Phelan J then reviewed the evidence, explicitly applied the three-prong test for inducement and held, on that standard, that it had been satisfied, in effect because Corlac has sold the assembly with instructions directing the end-users to use it in an infringing manner. Phelan J was willing to accept, on the evidence that customers were likely to use the assembly according to the instructions and that Corlac would have intended that they do so. Consequently, Corlac was held liable for inducing the infringement of claim 17 [24].

So what does it mean to say that a particular test is “stringent”? As Phelan J noted, it cannot mean any change in the standard of proof. It strikes me that in saying the test was “stringent” or “strict” the FCA may simply have been saying that all three prongs must be met. In saying the test is a difficult one to meet, the FCA may have meant that because the three separate prongs must all be met, it will be generally be difficult for a patentee to establish inducement, even on the balance of probabilities. That is, these remarks were meant as an observation, rather than a proposition of law. But I am not sure it is right to say that the test is particularly difficult to satisfy in practice: as Mandamin J noted in Glaston v Horizon Glass 2010 FC 1191, in a number of cases “[i]nducement has . . . been found where a seller provides a purchaser with instructions or directions for using an infringing method” [89]. This decision adds to that list.

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