Friday, September 17, 2021

Purpose of s 53.1 Explained

Bauer Hockey Ltd v Sport Maska Inc (CCM Hockey) 2021 FCA 166 Locke JA: de Montigny, Rivoalen JJA affg 2020 FC 624 Grammond J

2,214,748 / FC Prosecution History

In this decision, the FCA affirmed Grammond J’s holding that the claims at issue were obvious, essentially on the basis of the deferential standard of review applicable to conclusions of mixed fact and law [16]. The most important aspect of the decision are Locke JA’s obiter comments on the interpretation of s 53.1 regarding the use of prosecution history. He provide a succinct analysis of purpose of the provision which will no doubt inform its interpretation in future cases.

In the decision under appeal, Grammond J held that no valid claims of Bauer’s 748 patent were infringed. The invention at issue relates to hockey skates. The uppers were traditionally made with two “quarters” that were sewn together. The 748 patent essentially claimed a one-piece quarter. It may seem obvious that the two pieces should be joined together, and this is exactly what Grammond J held [FC 154-58], [FC 184]. Grammond J addressed the “Beloit question,” [FC 146], referring to Beloit (1986), 8 CPR (3d) 289 (FCA) 295, to the effect of “If it was so easy, why was it not done before?” His answer was that one-piece quarters were expensive when implemented with directional material, such as leather, and became commercially feasible with the development of non-directional skate materials [FC 162–64]. The FCA affirmed, essentially on the basis of the deferential standard of review applicable to conclusions of mixed fact and law [16].

Locke JA noted that Grammond J began his discussion of obviousness by referring to the Sanofi 2008 SCC 61 [67] framework. Locke JA remarked (citations omitted):

[6] The Federal Court further noted, and I agree, that this framework should not be applied in a rigid manner. The only mandatory considerations are those laid out in section 28.3 of the Patent Act, which is concerned with obviousness to a person skilled in the art or science to which the invention pertains, having regard to “information disclosed before the [relevant date] in such a manner that the information became available to the public in Canada or elsewhere.”

The Sanofi framework has proven to be contentious and even unhelpful in some cases, particularly at the step of either identifying the inventive concept or construing the claims—see here, here and here—and this remark by Locke JA might be seen as the FCA starting to step back from reliance on the Sanofi framework. But I wouldn’t read too much into this statement, as the Sanofi framework has never been considered mandatory, and this was a case in which identification of the inventive concept was easy, so that whatever guidance might be provided by that framework is less significant.

On another point of passing interest, Bauer made the novel argument that “where inferences from findings of fact involve an evaluation of numerous factors (as with obviousness), intervention by an appellate court may be more appropriate in cases where the fact-finding judge is inexperienced” [17], relying on Actavis v ICOS [2019] UKSC 15 [78]–[79], where the UKSC stated (my emphasis) “Where inferences from findings of primary fact involve an evaluation of numerous factors, the appropriateness of an intervention by an appellate court will depend on variables including the nature of the evaluation, the standing and experience of the fact-finding judge or tribunal, and the extent to which the judge or tribunal had to assess oral evidence.” Bauer argued that less deference should be given to Grammond J’s inferences of fact because he had only previously been involved in one other patent infringement case [17].

Locke JA rejected this argument, noting that “To set the degree of appellate intervention based on the experience of the judge at first instance would require an appeal court to consider the judge’s background on every appeal. This would result in standards of review in a spectrum, rather than the two standards defined in Housen” [18]. Locke JA also noted that Actavis could be distinguished, as “Bauer proposes reduced deference in the case of a judge with limited experience, whereas Actavis was suggesting increased deference in the case of a judge with considerable experience” [19, original emphasis]. That is true, but it seems to me that giving relatively more deference to an experienced judge necessarily requires giving relatively less deference to an inexperienced judge; while Bauer’s argument is remarkable, but it does have a basis in Actavis. Accordingly, Locke JA did not rely on that distinction, but instead indicated that he would not be inclined to follow Actavis on this point: “In any case, I see no reason to modify the tools the Court already has to address decisions under appeal.” He noted that functionally, “[t]he advantages the judge at first instance has regarding assessment of factually-suffused issues, which prompted the Supreme Court in Housen to adopt a deferential standard, apply even to inexperienced judges” [19]. This strikes me as an entirely compelling point. I’d also note that following the Actavis line of reasoning leads to a morass. Not all appellate judges are experienced in patent litigation, so we might have four standards based whether the appellate judges are or are not experienced and whether the trial judge is or is not experienced.

Finally, the most important aspects of the decision relate to the interpretation of s 53.1 regarding the use of prosecution history. Grammond J had held that

[65] When an issue of claims construction arises, the patentee is always making representations to the Court as to the proper construction of the claims and the defendant is always attempting to rebut those representations. Therefore, in my view, as long as the issue is one of claims construction, section 53.1 applies and the prosecution history is admissible. In other words, there is no need to identify a particular representation and rebuttal every time a reference is made to the prosecution history. It is simply integrated in the interpretive process.

As Locke JA noted, “[t]his interpretation seems to open the door to unrestricted reference to the prosecution history to assist with claim construction,” and as such it is at odds with the text of the provision:

Subsection 53.1(1) is a detailed provision that contemplates admitting into evidence certain portions of a patent’s prosecution history for a certain purpose: “to rebut any representation made by the patentee in the action or proceeding as to the construction of a claim in the patent.” If this provision had been intended simply to brush aside the general prohibition against reliance on a patent’s prosecution history for the purposes of claim construction, it could have been much shorter.

This is not simply a textual point. The purpose of of s 53.1 “is to provide a tool to use against patentees who take one position concerning the meaning of a claim during prosecution of a patent application and another during litigation on the resulting patent. Accordingly, the concern relates to inconsistent statements” [37] (my emphasis). This limited purpose makes sense. On the one hand, it is particularly objectionable when the patentee wants to have it both ways, advancing a narrow interpretation during prosecution to obtain the patent, and then advancing a broad interpretation during litigation to expand the scope of its monopoly. On the other hand, permitting the general use of prosecution history, raises problems relating to “the public notice function of patent claims and the potential for inappropriately complicating litigation” [39], that were identified by the SCC in Free World 2000 SCC 66 [66] as reasons for refusing to allow the use of prosecution history for claim construction. Even though the legislature has now permitted some use of prosecution history, those concerns remain valid. The need to balance these considerations provides a purposive rationale for the limited nature of the exception, and that purpose is consistent with a straightforward reading of the text. While the legislature might reasonably have balanced these considerations differently, “it is not the role of the courts to participate in such a debate. Rather, we interpret and apply the legislation as written” [39].

Locke JA also noted that Grammond J’s interpretation seems to be inconsistent with the prior FC caselaw on s 53.1, specifically referring to Canmar 2019 FC 1233 affd 2021 FCA 7 (see here) and Lilly v Apotex 2020 FC 814. The interesting point here is that Locke JA did not refer to the decision of Crampton CJ in Allergan v Sandoz 2020 FC 1189, which, as discussed here, identified what appears to be a truck size loophole that is based squarely in the text of the provision. Crampton CJ’s decision certainly supports the point being made by Locke JA, namely that the exception is a limited one, and the text of the Act must prevail when it is clear. So the fact that Locke JA chose not to cite Allergan v Sandoz, while citing other FC caselaw, namely Lilly v Apotex, suggests to me that he did not want to be seen as approving Crampton CJ’s interpretation. I don’t take this as suggesting that Locke JA necessarily disagrees with Crampton CJ’s interpretation, but only that, given the magnitude of the loophole that Crampton CJ identified, the issue is best addressed by the FCA after the point is directly raised and argued, rather than by approving the decision in obiter comments.

Thursday, September 16, 2021

Anti-Suit Injunction Refused

 Seismotech Safety Systems Inc v Forootan 2021 FC 773 McHaffie J

2,199,189 / 2,364,081 / 2,551,847 / 2,551,854 / 2,552,603 / 2,621,287

Anti-suit injunctions, anti-suit injunctions and even anti-anti-suit injunctions, are a hot topic these days in the context of global SEP / FRAND proceedings: see eg Jorge Contreras, The New Extraterritoriality: FRAND Royalties, Anti-Suit Injunctions and the Global Race To The Bottom In Disputes Over Standards-Essential Patents, 25 BU J Sci & Tech L 251 (2019). On the other hand, Canadian anti-suit injunctions related to patents are rare—I think this is the first I’ve seen in the decade that I’ve been writing this blog. This adds interest to McHaffie J’s decision refusing Seismotech’s motion for an anti-suit injunction that would have prevented Mr Forootan from litigating a patent settlement agreement in California, though the circumstances of this case are very far removed from SEP / FRAND litigation.

Seismotech is owned by Reza Baraty, who invented disaster management technology that eventually gave rise to several Canadian and US patents. Mr Baraty is a BC resident and Seismotech is a BC company [8]. For convenience, I’ll refer to them collectively as Seismotech. Seismotech entered into a Purchase and Sale Agreement [PSA] with Mr Forootan under which Mr Forootan was to raise capital to assist in commercializing the technology [12]. The PSA includes a choice of law clause stating that the agreement “shall be governed by and construed in accordance with the laws of Canada, without giving effect to conflict of laws” [13]. As part of the PSA, Seismotech assigned the patents to Mr Forootan’s company [11].

The relationship soured and the parties began litigation. In 2015, Mr. Forootan filed a complaint in the California State Court [2015 California Action]. This was then settled by a Settlement Agreement in 2017, after mediation which took place in California [15], [16], [49]. Then things got messy. In January 2020, Mr Forootan filed a complaint in California District Court [the 2020 District Court Action] alleging breach of the Settlement Agreement, and seeking remedies including a transfer of the US and Canadian patents back to Mr. Forootan [21]. Five months later, Seismotech started an action against Mr Forootan in the Supreme Court of British Columbia [2020 BC Action], seeking a declaration that the US and Canadian patents belong to Seismotech. (So at this point we have parallel actions in US federal court and BC provincial superior court.) Now, as readers are aware, in Canada provincial superior courts have exclusive jurisdiction over purely contractual matters, though the Federal Court has jurisdiction over patent law. Contractual disputes involving patents are on the borderline, and cannot necessarily be heard in Federal Court. The US has a similar division, with state courts having jurisdiction over contractual disputes and the federal court system having jurisdiction over patent matters. Six months after Seismotech started the BC action, the 2020 District Court Action brought by Mr Forootan was dismissed for lack of jurisdiction, without prejudice to refiling in state court [23]. (Now we’re down to just the BC action.) As it turns out, just three weeks after Seismotech brought the 2020 BC Action, SALT v Baker 2020 FCA 127 was decided, holding that the Federal Court jurisdiction to hear contractual matters related to patents was broader than had previously been understood. Consequently, two weeks after Mr Forootan 2020 District Court Action was dismissed, Seismotech started an application in the Federal Court seeking declarations similar to those in the 2020 BC Action, though without formally discontinuing the BC action. (Now we have two Canadian actions, no US actions.) Two weeks after that, Mr Forootan started an action in the California state court [the 2021 California Action.] (Two Canadian actions, one US state court action.)

Seismotech then brought the present motion for an anti-suit injunction, seeking to prohibit Mr Forootan from pursuing the 2021 California Action as it pertains to the Canadian patents [48].

In deciding whether the anti-suit injunction should be granted, McHaffie J applied Amchem [1993] 1 SCR 897 and subsequent cases developing its principles. The first question is whether the Federal Court has personal jurisdiction over Mr. Forootan. McHaffie J held that requirement is satisfied. The underlying question in this litigation is who owns the Canadian patents on the basis of the Settlement Agreement. In light of SALT v Baker, McHaffie J was satisfied that the Federal Court has jurisdiction to hear such a matter, and that satisfies the “real and substantial connection” test [51].

At the next step, according to Amchem 931–32 (emphasis added):

the domestic court as a matter of comity must take cognizance of the fact that the foreign court has assumed jurisdiction. If, applying the principles relating to forum non conveniens outlined above, the foreign court could reasonably have concluded that there was no alternative forum that was clearly more appropriate, the domestic court should respect that decision and the application should be dismissed.

In this case, “[t]he question is thus whether the California State Court could reasonably have concluded there was no alternative forum (here, the Federal Court) that was clearly more appropriate” [54]. The California State Court has not yet actually made such a determination, so the question for McHaffie J was whether it could reasonably have done so.

While the Settlement Agreement does relate to some Canadian patents [58], there are many aspects which relate to the US. The Settlement Agreement arose from and resolved the 2015 California Action. “The parties to the Settlement Agreement agreed the California State Court ‘shall retain jurisdiction over the action for all purposes to enforce the terms of this Agreement.’ . . . Mr. Forootan is a California resident and SDRT, the registered owner of the majority of the patents, is a (suspended) California company” [56]. This was enough for McHaffie J to conclude that the California court might reasonably conclude that the Federal Court was not a clearly more appropriate forum [57].

McHaffie J also recognized that only the Federal Court can order records of the Canadian Patent Office to be varied, pursuant to s 52 [60]. However, he pointed out that “this does not mean the Federal Court is the only court that can address contractual issues relevant to title” [60]. The 2021 California Action Mr Forootan was seeking a declaration conferring all rights and title in the US and Canadian patents to Mr. Forootan [21], [62]. Prior to SALT, in the purely Canadian context, the Federal Court would often refuse to hear contractual matters related to title. As I understand it, the parties would seek a declaration of ownership in the provincial superior court, and then would take this declaration to the Patent Office, which would rectify the title accordingly, without an order being required. If the Patent Office declined to do so, the prevailing party could then apply to the Federal Court to have the register rectified in light of the judgment of the provincial superior court: see Lawther (1995), 60 CPR(3d) 510 (FC) 511–12. This is all to say that a purely declaratory remedy would be effective in practice.

McHaffie J also noted that the effect of granting the anti-suit injunction would not be to rationalize the litigation, but rather to divide it in two, as it would be litigated in the US in respect of the US patents and in Canada in respect of the Canadian patents [92]. This is even though ownership of both sets of patents is determined by the same Settlement Agreement.

McHaffie J also noted the importance of seeking a stay from the foreign court before seeking an anti-suit injunction: “a Canadian court should only rarely pre-empt a foreign court’s opportunity to address whether an action before them is properly brought: Amchem at pp 930–931. Either a stay should have been unsuccessfully brought in the foreign jurisdiction or there should be compelling reasons for not having done so” [82]. McHaffie J provided a thorough discussion of the caselaw illustrating what might constitute “compelling reasons”: [83]–[87]. He concluded that a compelling case had not been made out on the facts, but it was unnecessary for him to decide whether this was in itself sufficient reason to deny Seismotech’s request, given his conclusion on the main elements of the Amchem analysis.

Finally, there are some general comments that I’d like to highlight [citations omitted]:

[59] Contractual agreements pertaining to intellectual property will frequently cover rights in multiple jurisdictions, and even globally. Contrary to Seismotech’s submission, there is no requirement that the same provisions in the same contract be litigated separately in every jurisdiction in the world in which those intellectual property rights arise. I note that courts in Canada have been willing to interpret contracts as they pertain to international intellectual rights, even where those contracts are made under foreign law. A Canadian court may also be considered forum conveniens in respect of a transborder intellectual property dispute, even where relief is sought pursuant to the laws of the United States. As Professor Vaver summarizes, “IP-related activity that has a real and substantial connection with a country, province, or state can be handled by a court that is a convenient forum, whether or not the defendant accepts or is present within the jurisdiction.”

This is all very reasonable, but it goes considerably beyond the facts at hand. I’ll point out that the UKSC decision in Unwired Planet v Huawei [2020] UKSC 37, holding that a UK court may enjoin the sale of infringing products that incorporate an industry standard if the parties do not enter into a global license for patents covering that standard, has been very controversial: see eg here and here. There is a fear that there will be a race to the bottom, as patentees, and particularly patent assertion entities, will seek a global judgment from a patentee-friendly court. This may be exacerbated by the possibility of “forum selling”, in which courts compete to attract high-stakes litigation by making themselves increasingly patentee friendly. At some level these concerns call into question whether the strong presumption of comity that is reflected in Amchem is sound. There are also many differences between the SEP / FRAND litigation and this case—the validity of the patents is not at issue; infringement is not at issue; global licensing terms are not at issue—though these all go to substantive issues rather than the issues relating to the connection to the forum which are the focus of the Amchem anti-suit injunction analysis.

While I’m not an expert in this area, Seismotech strikes me as a relatively easy case; given the strength of the connection to California and the nature of the dispute, the California court is arguably more appropriate than the Canadian Federal Court. More contentious patent cases, such as the SEP / FRAND litigation, raise issues that may pose more of a challenge.

Tuesday, September 14, 2021

No Strict Rule that an NPE Cannot Elect an Accounting

Pfizer Canada ULC v Seedlings Life Science Ventures, LLC 2021 FCA 154 Locke JA: Gleason, Laskin JJA affg 2020 FC 1 Grammond J

2,486,935 / FCA Sufficiency / FCA Overbreadth / FC accounting / FC reasonable royalty / FC novelty and utility / FC claim construction / FC Overbreadth

My prior posts on Seedlings dealt with insufficiency and overbreadth. This one considers the issue of entitlement to an accounting. My prior posts were long, but I’ll keep this one short, given that I agree entirely with Locke JA’s discussion on this issue.

As discussed here, Grammond J at first instance indicated in obiter that a non-practising entity cannot be entitled to an accounting of profits: “where the patentee does not itself manufacture, distribute or sell the invention, it cannot be entitled to the profits made by the infringer with respect to those activities” [FC 252]. While Locke JA’s conclusion that the claims were invalid made it unnecessary to address the question of remedies, he nonetheless took the opportunity to do so, stating that there is no authority for a strict rule of that type: “none of the cited decisions provides firm support for the broad principle that a patentee that makes (or intended to make) profits by selling licenses to its patent should not be entitled to elect an accounting of profits” [78].

Moreover, a strict rule prohibiting a non-practising entity for electing an accounting would not be sound policy, particularly given that an entity that does not practice the invention is not necessarily a patent troll:

[79] I am particularly concerned about the potential effect of such a broadly defined principle on inventors who recognize that their specialty lies in inventing, and that production and marketing of their inventions are better left to different specialists. Such inventors will seek to license third parties to take their inventions to market as a matter of business efficiency. The broadly defined principle would force such inventors to choose between business efficiency and retaining a potential remedy for infringement of their patent rights. The value of a patent would therefore be reduced for specialist inventors. I see no reason to force such a choice. In my view, business efficiency should be encouraged.

This is not to say that it is irrelevant whether the patentee practices the invention itself, but only that it is not determinative.

[81] Certainly, a patentee’s decision to license its invention may be a factor for a court to weigh when considering whether to permit a patentee to elect an accounting of profits. However, I disagree that such a decision should necessarily deny a patentee the right to elect.

Friday, September 10, 2021

What is “the Core of the Invention”?

Pfizer Canada ULC v Seedlings Life Science Ventures, LLC 2021 FCA 154 Locke JA: Gleason, Laskin JJA affg 2020 FC 1 Grammond J

2,486,935 / FCA Sufficiency / FC accounting / FC reasonable royalty / FC novelty and utility / FC claim construction / FC Overbreadth

The FCA Seedlings decision is important for expressly affirming that overbreadth is an independent ground of invalidity and holding on the facts that the claims of interest were invalid for that reason. In my article Overbreadth in Canadian Patent Law: Part I (2020) 33 IPJ 21, I suggested that a revival of overbreadth as an independent ground of invalidity runs the risk of turning into a new kind of the promise doctrine, in which claims to perfectly good inventions will be invalidated based on an idiosyncratic parsing of the disclosure. Seedlings has done nothing to assuage my fears, and much to confirm them. Seedlings holds that a claim is overbroad if it omits elements which are at “the core of the invention.” Seedlings is express that “the core of the invention” is different from the essential elements of the claim, and, more importantly, Seedlings also makes it clear that “the core of the invention” is different from the inventive concept. Identifying the inventive concept has proven contentious enough and now we have a similar sounding but somehow different concept to wrestle with. The prior caselaw does not provide any assistance. As Locke JA acknowledges at [50], [52], in almost all of the prior cases, overbreadth overlaps with another ground of invalidity, so we cannot find guidance as to how overbreadth might apply as a distinct ground of invalidity. And indeed, in Seedlings itself, overbreadth overlaps with insufficiency both in the facts and in the reasoning. (See here for my post on insufficiency.) We are nonetheless assured that it is “a distinct ground of invalidity that must be considered separately” [50]. In this post I do my best to try to understand how overbreadth operates as an independent doctrine. Unfortunately, I come up empty-handed. It appears to me that to the extent that overbreadth is different from insufficiency, “the core of the invention” was identified largely arbitrarily.

With the FCA nonetheless expressly approving overbreadth doctrine, we will undoubtedly see overbreadth raised regularly in upcoming litigation. Given the very limited guidance provided by Seedlings, we can expect trial judges to struggle with how to apply the doctrine. I expect we will see a variety of approaches with more or less arbitrary results, which will ultimately have to be sorted out by the FCA. I have no idea where we will end up, but it will certainly be interesting times for patent litigators.

Tuesday, September 7, 2021

Enabling After-Arising Technology

Pfizer Canada ULC v Seedlings Life Science Ventures, LLC 2021 FCA 154 Locke JA: Gleason, Laskin JJA affg 2020 FC 1 Grammond J

2,486,935 / FC accounting / FC reasonable royalty / FC novelty and utility / FC claim construction / FC Overbreadth

The Seedlings decision is notable for holding that overbreadth is an independent ground of invalidity, but the discussions of insufficiency and entitlement to an accounting are also of interest. In this post, I’ll start with the insufficiency issue, which raises the very difficult issue of how the enablement requirement applies to after-arising technology. The post is long, but the bottom line is that the key holding, that “[t]he disclosure must teach the skilled person to put into practice all embodiments of the invention, and without exercising inventive ingenuity or undue experimentation” [68] This must be wrong, or any invention that is capable of improvement would be invalid for insufficiency. But this means that on its face, Seedlings raises some very obvious avenues of attack on almost any patent, particularly those relating to mechanical inventions. I suspect these attacks will mostly fail—unsurprisingly, there is a very large body of caselaw to the effect that a patent is not invalid simply because it encompasses improvements. Unfortunately, I don’t see a lot of wiggle room for a principled distinction on the facts. So the interesting question will be how the FCA will handle Seedlings going forward and how much the law will ultimately change as a result.

The invention at issue relates to an auto-injector, primarily intended for injecting epinephrine to treat anaphylaxis. The best known auto-injector is the EpiPen. The original EpiPen was relatively bulky—a cylinder about 15 cm long and 2.5 cm in diameter—which made it inconvenient to carry. Another problem was that the needle remained exposed after use, which is a particular concern in light of the risk of transmission of blood-borne diseases [FC 11]–[12]. The patented injector device solved these problems. It is flat and much smaller than the original EpiPen—the size of a thick credit card—so it is more easily carried and used [FC 63]; and it has an actuator that moves forward once the injection is complete to serve as a shield that protects the needle [FC 19]: see the video here. This second aspect of the invention, which I’ll refer to simply as the needle shield, is at the center of the holding on both insufficiency and overbreadth.

A number of claims were asserted, but the claims of particular interest are claims 40, 59, 60 and 62. Claim 40, which is representative of the claims of interest, “describes an auto-injector with a flat housing, that is front-actuated and that has an actuator that also serves as a needle shield. That is the ‘inventive concept’ of this claim” [FC 139]. These claims were invalidated by Grammond J solely on the ground of overbreadth. The FCA affirmed on overbreadth [56]–[65], but held that the claims were also invalid for insufficiency [66]–[72], reversing Grammond J [185]–[186] on that point. The claims were neither obvious nor anticipated ([FC 102], [FC 115], [FC 138] affd [40]–[45]), nor did they lack utility [FC 163]. Grammond J held that none of the asserted claims were infringed by Pfizer’s Next Generation Auto-Injector (NGA) Epipen, which is oval in cross-section, not flat [191], [208]. The FCA did not address infringement in light of its conclusion that the claims were invalid [74]. Consequently, the FCA holding on validity is not obiter, even in a technical sense.