Friday, March 26, 2021

Salt v Baker Applied

Mud Engineering Inc v Secure Energy Services Inc 2020 FC 1049 Aalto CMJ

As discussed here, Stratas JA’s decision in Salt Canada 2020 FCA 127 clarified previously unsettled law by holding that the Federal Courts always have jurisdiction to determine ownership of a patent pursuant to s 52, overruling prior caselaw which held that the FC lacked jurisdiction when the matter relates “primarily” to contract law. This case provides an excellent illustration of the shortcomings of the prior law and shows that the salutary effects of Salt v Baker are already being felt.

Prior to the decision in Salt Canada, Mud Eng brought an action alleging infringement by Secure Energy, which in turn defended on the usual grounds of non-infringingement and invalidity [5]. But Secure Energy also alleged that it was the rightful owner of the patents at issue [5]. If it was, that would likely end the litigation [29]. But before deciding who owned the patents, the parties faced the problem of figuring which court should decide who owned the patent. One problem with the prior law is that the FC lacked jurisdiction in some cases, forcing the parties to litigate in two venues. And to make things even more complicated, the nature of the test for FC jurisdiction turned on the fact-specific question of whether the matter “primarily” related to contractual interpretation, so it was difficult to know, without litigation, whether the FC had jurisdiction.

Because of that uncertainty, an action was commenced in the Alberta Court of Queen’s bench, with the result that the parties were engaged in actions with identical allegations in both the Federal and Alberta courts. My impression is that both parties would have been happy to litigate in the Federal Court, given its expertise in patent law and the fact that its judgment can be enforced nationwide [12], but they did not want to bounce back and forth between the two. Mud Eng brought an application before Ashcroft J in the Alta QB to stay the Alberta action in favour of the Federal Court. The motion was brought prior to the decision in Salt Canada, and the motion was refused on the basis of the uncertainty with respect to the jurisdiction of the Federal Court in these matters [9]. This illustrates the very unsatisfactory nature of the prior jurisprudence; Ashcroft J was not able to determine what view the Federal Court would take of the Federal Court’s jurisdiction. In dismissing the stay application, Ashcroft J invited the parties to seek a preliminary determination from the Federal Court on the issue of jurisdiction [10], indicating that she would be willing to reconsider her decision on the stay in light of the result.

This invitation was taken up by Mud Eng in the present application for a determination of a point of law. Mud Eng argued that the Federal Court did indeed have jurisdiction; and Secure Energy did not oppose the motion, reinforcing the point that lack of clarity in the law is the real problem: [11]–[12].

Aalto J had no difficulty in deciding that the Federal Court did indeed have jurisdiction in this case, holding that Salt Canada “is a complete answer to the jurisdictional issue” [14]. Aalto J decided the matter as a question of law under Rule 220, rather than by way of a declaration, which “ensures that this Order will not be construed as case specific” [20]. Consequently, we may hope that in the future such orders will not be necessary, as the parties will be able to have confidence that the Federal Courts will take jurisdiction in these types of cases. The benefit of Salt Canada is not only in preventing duplicative litigation, but also in promoting predictability in the law, thereby promoting settlement and reducing the cost of litigation.

Aalto J also addressed a legal point of interest. In its counterclaim arguing that the FC did not have jurisdiction, Secure Energy stated that the claims “are not ancillary to any matter within the jurisdiction of the Federal Court.” Aalto J noted that this engages the three-part test set out in ITO [1986] 1 SCR 752. Aalto J explained that:

[25] ITO, and the jurisprudence flowing from it, allows the Federal Court to assume jurisdiction in a matter over which it does not have direct statutory jurisdiction if the matter is “ancillary” to a claim properly within the jurisdiction of the Federal Court. Secure Energy argues that the Federal Court does not gain jurisdiction over ownership of patents through contract interpretation as an ancillary issue to patent infringement. Notably, ITO was not discussed or referred to by Justice Stratas in Salt Canada. For good reason, there was no need to discuss the jurisdiction of ownership of patents through ancillary means when the jurisdiction of the Federal Court is clear pursuant to s. 52 of the Patent Act.

I must admit that I have struggled a bit to understand the place of the ITO test, and I was wondering why it had not been addressed by Stratas JA in Salt Canada. I’m pleased to have this point clarified, at least in my own mind.

 PS: I'm still working on my post on the inventive concept aspect of Apotex v Shire 2021 FCA 52. It might take a while.

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