Friday, June 19, 2020

Display to the Public Not Enabling

Bombardier Recreational Products Inc v Arctic Cat, Inc 2020 FC 691 Roy J

            2,350,264

This litigation originally concerned four patents, three rider position patents and one frame construction patent. In his initial trial decision, 2017 FC 207 Roy J held the rider position patents to be invalid for insufficiency (see here), and this was upheld by the FCA: 2018 FCA 172 (here). Roy J had held that the frame construction patent was not infringed, but the FCA reversed on a point of claim construction, held that the frame construction patent was infringed, and remanded to Roy J for determination of validity and remedies [3]. No new law was applied, but there are a few points of interest: Roy J was strongly disinclined to apply issue estoppel based on foreign litigation to a question of validity; he was inclined to view claim construction points that had not been appealed as res judicata; the prior art was not enabling because public display after races without opportunity for inspection was not disclosure to the public; and lost profits were refused because of the difficulty of establishing a causal link between the single infringed patent and the lost sales.

Foreign issue estoppel

An initial question arose because Arctic Cat sought to argue that the frame construction patent was anticipated as a matter of issue estoppel, which applies to preclude re-litigation of an issue which has been conclusively and finally decided in previous litigation between the same parties or their privies [23]. In particular, Arctic Cat argued that issue estoppel applied because of a jury verdict in US District Court in Minnesota, finding that the asserted claims were anticipated and obvious [23], [30]. After carefully reviewing the relevant cases on foreign issue estoppel, Roy J held that this argument had no reasonable prospect of success [71]. He noted that while some cases had suggested that issue estoppel based on a foreign decision might be potentially be applicable regarding purely factual findings [52], [64], no cases had actually gone so far as to apply foreign issue estoppel even on a factual issue. Further, the great weight of authorities is to the effect that determinations of validity of a patent in a foreign court are not helpful and cannot be the basis for an estoppel argument [51], [66]. In short, Arctic Cat “has not been able to refer to one patent case where the proposition it advances has had even a measure of success” [64]. Nonetheless, Roy J did not (quite) hold that foreign issue estoppel could never apply to a determination of validity, but rather that:

It would take, it seems to me, a very strong demonstration in order to accept that the issue has been conclusively decided by a jury in a foreign jurisdiction with its own law applied by its own courts, such that the verdict would bar litigation before a Canadian court, preventing it from considering the validity of a Canadian patent, using its own substantive and procedural laws, and hearing Canadian admissible evidence.

On the facts, there was not nearly enough evidence, in particular related to whether the US law of anticipation is the same as that in Canada, for the argument to have any prospect of success [68].

Reconsideration of claim construction on remand?

An interesting procedural issue was raised. The construction of several terms was at issue in the first trial [77], but only the term “engine cradle” was considered on appeal [FCA 13], and it was on the construction of that term that the FCA reversed. The question therefore arose as to whether the construction of other contentious terms should be reconsidered in light of the FCA’s construction of “engine cradle.” The issue was important because one element of prior art, the “T/S sled,” did not anticipate on the original construction of the key issues, but might if the construction of certain terms was reconsidered. Roy J was inclined to the view that the construction of the other terms was res judicata [79], but he did not need to decide as he concluded, after reconsideration of the other terms, that the outcome was the same [80], [103]. The argument that the T/S sled anticipated therefore failed in light of the claim construction [108].

Disclosure to the public

One interesting point arose in respect of anticipation. Roy J held that even if the T/S sled embodied the claimed invention (which it did not), it would not anticipate because the enablement branch of anticipation was not satisfied. This is because the evidence was that the T/S sled was only on display after races and the essential elements of the invention would not have been apparent to a skilled person on mere visual inspection [112]. This strikes me as correct; anticipation requires that the invention be made available “to the public,” and while it is enough that the public had opportunity to access the invention, in this case even that opportunity was not established. This case is quite similar to Bauer v Easton 2010 FC 361 aff’d 2011 FCA 83 in which hockey skates embodying the invention were worn in a public arena by skaters subject to an obligation of confidence; this was held not to anticipate as visual inspection at a distance was not sufficient to provide an enabling disclosure of the invention, and members of the public were not free in law and equity to carry out a close examination of the skates that would have disclosed the essential elements of the invention.

The obviousness attack failed on the facts [124]. Roy J therefore held the frame patent to be valid and infringed [125].

Remedies

Turning to remedies, BRP sought lost profits for sales that it would have made but for the infringement and a reasonably royalty in respect of the remaining sale.

The claim for lost profits failed, because BRP’s case on damages “was largely built on the four patents-in-suit having been infringed.” In light of the holding that only one patent was infringed, it was too difficult to make out the necessary causal link between the infringement of that single patent and the lost sales, as the rider position patents that had been held to be invalid, were a major driver of the lost sales [128], [136], [138], [144], [151].

The parties agreed that the hypothetical negotiation methodology was appropriate for establishing a reasonable royalty with a 50% split of the incremental profits attributable to the infringed patent [166], [174]. The key issue was therefore the assessment of the incremental profit. On this point Roy J preferred the evidence of BRP’s expert.

BRP sought the usual permanent injunction. Usually, Arctic Cat resisted, not merely on the basis that there was no prospect of future infringement; on the contrary, it appears that it was Arctic Cat’s position that it should be permitted to continue to infringe: [183]. Arctic Cat advanced a variety of reasons why a permanent injunction should not be granted [183], all of which were rejected by Roy J [184]-[191], noting that “(a)n injunction normally will follow once the Court has found that a patent is valid and has been infringed” [185], quoting Abbvie 2014 FC 489 [35]. Roy J’s analysis was brief and I agree entirely, so I won’t recap it. I will plug the recent book I co-edited with Brad Biddle, Jorge Contreras, an d Brian Love, “Patent Remedies and Complex Products: Toward a Global Consensus” (open access) and especially Chapter 4 on Injunctive Relief, where we recommend that a permanent injunction be refused “if the negative effects of the injunction on enjoined parties would be disproportionate to the nature of the infringement and any noncompensable harm that the patentee will experience as a result of the absence of an injunction.”

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