Wednesday, December 20, 2017

Slice and Dice to Avoid Infringement?

Packers Plus Energy Services Inc v Essential Energy 2017 FC 1111 O’Reilly J

The technology embodied in Packers Plus’ 072 patent relates to a method for fracking by selective transmission of fluids to different segments of a wellbore by way of a tubing string consisting of a series of packers and ports which can be operated independently [8]. My understanding from general news sources is that the patented technology is widely used in the fracking industry. O’Reilly J held the 072 patent to be invalid as anticipated and for obviousness. These issues are dealt with in subsequent posts.

O’Reilly J also held that even if the 072 were valid, it was not infringed, nor had the defendant, Essential, induced infringement [3]. He held that in light of the claim construction, “it is clear that Essential’s equipment. . . infringes the ‘072 patent when used in an open-hole fracturing operation” [38]. However, the claims in issue were method claims, and Essential only supplied and installed the equipment, but did not carry out the complete method [44], [52], [53]. Packers Plus therefore argued inducement and joint infringement.

On inducement, O-Reilly J noted that the first step of the three-part test for inducement set out in Corlac v Weatherford 2011 FCA 228, [162], requires an act of infringement by a direct infringer. inducer. He then held:

[51] Packers has not produced evidence of direct infringement by anyone. It merely implies that Essential’s main customers, the operating companies who own and operate the wells, are the infringers. However, the evidence shows that there are often numerous entities involved in a fracturing job, including the operating company and the various service entities it hires – drilling companies, pumping companies, cementing companies, tool companies, and fracturing companies. It is unclear who the direct infringer would be in that situation.

[55] Perhaps the collectivity of companies involved in a fracturing operation could be said to work the method claimed in the ‘072 patent. However, each of their respective contributions to the operation would amount to a partial or, at most, an indirect infringement, not a direct infringement of the patent. Therefore, Packers cannot meet the first branch of the test for inducement. It has not proved direct infringement by anyone.

This holding, that inducement requires direct infringement by a single party, appears to me to be novel. The holding in Corlac itself was this:

[162] It is settled law that one who induces or procures another to infringe a patent is guilty of infringement of the patent.

This does not hold that there must be a single direct infringer, but rather implicitly assumes that there is. The question of whether all the acts constituting the patented method must be carried out by a single actor was simply not at issue. The Corlac test assumes that there is direct infringer, and asks when it is permissible for the patentee to pursue the inducer instead. The first prong of the test is (my emphasis):

[162] First, the act of infringement must have been completed by the direct infringer.

Again, this does not hold that there must be a single direct infringer. Rather it assumes (“the”) that there is, and asks whether that direct infringer had completed the act of infringement. So, in Dableh v Ontario Hydro [1996] 3 FC 751 (FCA), cited in this paragraph of Corlac, the first prong was not satisfied because the use by the putative direct infringer had not proceeded beyond experimental use, and so there was no direct infringement at all (though a quia timet injunction was nonetheless granted). In AB Hassle v. Apotex, 2002 FCA 421, also cited in Corlac as authority for this test, the allegation was the drug would be prescribed off-label for an infringing use, and the first prong was not satisfied because the trial judge was not persuaded that this would actually happen [25]. Again, there was no direct infringement at all, regardless of the number of parties involved (In the third case cited in Corlac, MacLennan 2008 FCA 35, inducement was established.)

While I have not reviewed all the Canadian inducement cases, I am not aware of any which holds that the direct infringement must be carried out by a single party. As a general matter, this question is a controversial one. The evident concern with O’Reilly J’s holding is that in industries in which key operations are routinely carried out by a variety of different parties in conjunction, it might be impossible to effectively enforce patent rights. Perhaps of even greater concern, parties might be able to arrange their operations, for example by subcontracting certain tasks, so as to avoid infringement. The issue has been addressed most recently by the US Federal Circuit in Akamai v Limelight 797 F.3d 1020 (Fed Cir 2015), on remand from 134 S.Ct. 2111, holding that in order to find induced infringement, it is not necessary to prove that all the steps were committed by a single entity. I also note that under s 60(2) of the UK Patents Act a party is liable for infringement if "he supplies . . .any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows. . . that those means are suitable for putting, and are intended to put, the invention into effect."  It seems perfectly clear that Essential would be liable under this provision, as there is no requirement for direct infringement, but only that the invention be put into effect, and, as noted above, O'Reilly J clearly held at [38] that the invention would be put into effect by the use of Essential's equipment. That statutory provision is of course not directly applicable in Canada, but it highlights some of the policy considerations related to O'Reilly J's holding.

This is not to say that O’Reilly J was wrong to say that there must be a single direct infringer. Divided infringement raises difficult policy and doctrinal questions, which I won’t explore in this post, as O’Reilly J’s holding on infringement was not crucial in light of his holding that the patents were invalid. Moreover, on the facts of this case, it might well be that even if there was a party who should be held liable for infringement, that party is not Essential. My point here is simply that his holding is novel and controversial, and that it does not follow from Corlac and the cases cited therein.

UPDATE: For an even more recent decision of the US Fed Cir, see Travel Sentry v Tripp, released yesterday, and discussed on Patently-O. Note that, as discussed here, the EWCA in Warner-Lambert [2015] EWCA Civ 556, has a thorough discussion of the European position, which contrasts with the US approach.

See also my blog post here

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