Thursday, June 20, 2013

Patents to Oil Field Fluid Containment Products Invalid on the Facts

Zero Spill Systems (Int'l) Inc v 614248 Alberta Ltd 2013 FC 616 Barnes J
            2,258,064, 2,136,375, 2,166,265 Design 86793

Zero Spill Systems is a straightforward case turning on the facts. The patents and industrial design at issue related to oil field fluid containment products. The pipes used on oil rigs are full of fluid. When the pipes are disassembled it is desirable to catch that fluid, both to prevent environmental damage and to prevent the rig workers from getting “hosed.” Various fluid containment systems had been used almost since the beginning of the drilling industry [52].

Many of these systems consist of a tray adapted to fit around the flow nipple (the pipe that houses the drill pipe or string [6]), so that fluid spilled from pipes being disassembled above the nipple is directed back in to the flow nipple. The ‘375 patent was to an improved tray of this type. The uncontested evidence was that “a core inventive concept of the 375 Patent concerns the capacity of the upper tray to move telescopically relative to a fixed annular seal” [76], specifically by using a seal in the form of a flexible gasket between the tray and the flow nipple [88]. This was clearly an essential element, as it was only this feature which distinguished the invention of the ‘375 patent from the prior art [77]. On the evidence, Barnes J held that this feature was neither anticipated nor obvious [83], but neither was it infringed by either of the defendants’ containment systems. In one of those systems the seal fit snugly around the flow nipple, so as to be effectively mated and immovable [89], and in the other the tray functioned as a funnel sitting inside the flow nipple, and so was again effectively immovable [91].

The ‘064 patent concerned a containment tray adapted to fit around a “christmas tree.” There was some dispute as to how to interpret that term, but in the classic sense it means the collection of valves installed to control production on a service well. There was a dispute as to whether it could also be construed to include a blow out preventer used on a drill rig. Barnes J held that it included only a classic Christmas tree, but this point of construction does not seem to have been central to the holding of invalidity.

Barnes J held that the ‘064 patent was anticipated by the prior art Schuyler and Gayaut Patents [117], as well as by custom built solutions that had been used in the field. His reasoning on this issue was very brief; he did not identify the essential elements, and some passages suggest that his finding may have been based on obviousness. For example, he says “The 064 Patent was also anticipated by the prior use of lower trays as described by the industry witnesses. . . .Even if no exact replica of the 064 Patent apparatus was in prior use, I am satisfied that there is nothing about the design or fit up of the 064 Patent lower tray that would not have been obvious to a person of skill long before July 7, 2000" [118]. My impression is that this is a case that falls on the line between obviousness and anticipation. So, the Schuyler patent, US 5,377,748, describes a tray adapted to fit around “a variety of types of tubular members such as oil well casing, oil well pipe, and equipment attached to the casing having annular portions such as the wellhead of the oil well, well spools, blow-out preventers and the like.” The ‘064 patent claims a tray adapted to be positioned around “a christmas tree.” Does specifying a Christmas tree in particular, as opposed to a general tubular member, give rise to a potentially distinguishing selection patent, which must be assessed for obviousness, or is it a case of anticipation? The question calls to mind the statement of Lord Abinger in Losh v Hague (1838), 1 WPC 202 at 208,

it would be a very extraordinary thing to say, that because all mankind have been accustomed to eat soup with a spoon, that a man could take out a patent because he says you might eat peas with a spoon.

Whether it is invalid as anticipated or invalid as obvious, the result is the same.

Validity was the only issue in respect of the ‘265 patent, as the plaintiff no longer asserted infringement, but one of the defendants sought a declaration of invalidity [12]. Barnes J held this patent invalid for obviousness, essentially because there was no plausible evidence that the differences between the ‘265 patent and the prior art were anything but routine [139].

With respect to the ‘793 industrial design, Barnes J’s holding turned on the clear law set out in s 5.1 of the Industrial Design Act that industrial design protection does not extend to “features applied to a useful article that are dictated solely by a utilitarian function of the article” [127]. On the facts, there was no evidence that there were any common features between the design and the defendant’s products that were anything other than functional [132].

Finally, while it was unnecessary to deal with damages in light of the conclusions regarding validity and infringement, Barnes J pointed out that in order to claim lost profits damages, the patentee must show not only that the defendant sold an infringing product, but also that but for the infringement, the patentee's product would have captured that sale. In this case, there was no adequate evidence of lost profits [148]. Partly this was because the patentee rented their product, while the defendants sold theirs, so there was some difficulty in making a comparison, but more generally there were methodological flaws in the patentee’s analysis which rendered it unreliable. Barnes J concluded that “Without [reliable] evidence it is impossible to assess damages in this case on the basis of the Plaintiffs’ loss of profits” [148].

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