Tuesday, September 28, 2021

Gillette Defence and Prior User Rights

Kobold Corporation v NCS Multistage Inc 2021 FC 742 Zinn J


At one level this is a mundane procedural decision denying a motion to file expert reply evidence on the basis that the issue ought to have been anticipated [10]. But the effect is to hold that a Gillette defence cannot be based on prior use rights found in s 56 of the Act, with the consequence that the underlying motion for summary judgment was also derailed [19]. This is problematic in light of the “culture shift” in favour of simplified procedures endorsed by the SCC in Hryniak v Mauldin 2014 SCC 7 [2] that has been embraced by the Federal Courts in several recent decisions, most recently Canmar Foods 2021 FCA 7 affg 2019 FC 1233 (here). I suggest that a purposive analysis of the provision in question indicates that there may be a way to permit a motion for summary judgment to proceed in similar future cases.

After being sued for infringement of the 561 patent by Kobold, NCS brought a motion for summary judgment on the basis that the allegedly infringing procedure it currently uses is the same procedure that it had used prior to the claim date [5], [6]. NCS’s argument is similar to the so-called “Gillette defence,” established in Gillette Safety Razor (1913) 30 RPC 465 (HL), which permits the defendant to prove that the alleged infringement was practised in the prior art, so that either the alleged infringement does not fall within the claims of the plaintiff’s patent, or if it does, the patent is invalid for anticipation. (The Gillette defence may also turn on obviousness.) As Locke JA explained in Western Oilfield 2021 FCA 24 [77] the Gillette defence is not actually a distinct defence under the Act, but is rather “a shortcut around the often difficult and time-consuming process of construing the claims of a patent, and then determining whether those claims are valid and whether they have been infringed.” So, if the defendant can prove that it was only doing what it had always done publicly, which is purely a matter of fact, the claims asserted against it must either be invalid or not infringed. Crucially, this makes it unnecessary to construe the claims and assess anticipation; the whole point of the Gillette defence is that it avoids the cost of construing the claims and assessing validity in favour of a purely factual inquiry. The Gillette defence is often less helpful in practice because it is rare that a defendant will be willing to put all its eggs in that basket—but this suggests that the Gillette defence is a prime candidate for a summary trial, where determination of a single factual issue can determine the case.

That was NCS’s position in this case. NCS argued that the procedure it uses today is the same procedure it used prior to the claim date. But NCS did not rely on the Gillette defence as such. The allegedly infringing device was a bottom hole assembly used in oil and gas drilling and I suspect that NCS was concerned that it might not be able to establish that its prior use had made its device available to the public so as to be prior art for the purposes of anticipation under s 28.2. NCS instead sought to rely on the prior user rights granted by s 56, the effect of which is to allow a person to continue to do any act that it had done prior the claim date, even if its prior use had not been public.

More particularly, s 56(1) provides that “if—before the claim date of a claim in a patent—a person. . . committed an act that would otherwise constitute an infringement of the patent in respect of that claim. . . it is not an infringement of the patent. . . if the person commits the same act on or after that claim date.” The difficulty for NCS lay in the phrase “that would otherwise constitute an infringement of the patent.” In support of its motion for summary judgment based on s 56, NCS filed a fact affidavit of one its employees, evidently to the effect that NCS’s allegedly infringing bottom hole assembly was the same as NCS had used prior to the claim date [3]. In response, Kobold filed an expert affidavit going to infringement and (apparently) to claim construction [4]. NCS then brought a motion seeking to file expert reply evidence.

The Rules do not expressly allow for evidence in reply and such evidence is permitted only in special circumstances: Amgen v Apotex 2016 FCA 121. NCS argued the reply evidence should be permitted because it could not have anticipated that Kobold would file evidence on claim construction, because claim construction was irrelevant to the question of whether the bottom hole assembly it currently uses is the same as the assembly it used before the claim date [6]. Zinn J rejected this argument, saying that issues related to claims construction and whether NCS’s device was infringing ought to have been anticipated by NCS:

[10] These are two of the very issues at the heart of this litigation. Moreover, they are the very issues to be addressed when relying on section 56 of the Patent Act, unless a party admits that its tools and procedures do breach the relevant patent, but argues that they have been in use prior to the patent claim date.

The key point is that s 56 is available only in respect of “an act that would otherwise constitute an infringement.” As Zinn J put it, NCS’s position

ignores the express wording of section 56, which. . . speaks to a defendant committing an act before the claim date “that would otherwise constitute an infringement of the patent in respect of that claim.” This language brings directly into issue both claims construction and infringement. [11]

The effect of this holding is that a Gillette defence is available based on a prior public use, but not based on a prior secret use; while a defendant can avoid addressing claim construction and infringement when its prior use was public, it cannot avoid addressing those issues when its prior use was secret.

This also effectively means that a summary judgment is not available based on prior user rights. If the NCS’s device would not constitute an infringement, s 56 is not available, and unless NCS admits infringement, validity and infringement are therefore in issue. To get a summary trial focusing on the purely factual issue of prior use, NCS must admit infringement. It is of course a very risky proposition to put all its eggs in that basket.

This is somewhat counter-intuitive. In either case, the argument is that the defendant should be permitted to keep doing what it had always been doing, on the basis that the act must either be non-infringing, or permitted, either because the patent is invalid by anticipation, in the former case, or by prior user rights under s 56, in the latter case. Why should there be a functional difference between the two scenarios?

To answer that question we should look to the purpose of the key phrase. Why does s 56 apply only to an act “that would otherwise constitute an infringement of the patent”?

The long-standing provisions of the Act relating to prior user rights were replaced by entirely new provisions in 2018. It appears that the new provisions were modeled on the corresponding provisions of the UK Patents Act 1977, namely s 64. While there are some significant differences in the overall provision, this particular passage is very similar. It appears that the intent of this phrase in the UK Act is to ensure that prior uses which are non-infringing by virtue of statutory exceptions under s 60(5) of the UK Act, eg an experimental use, are not protected by the prior use provisions: see Terrell on Patents §14-203. It seems reasonable to suppose that the purpose of the parallel phrase in the Canadian Act is the same. (The main exceptions under the Canadian Act appear to be use authorized to respond to a public health emergency under s 19.4(7); regulatory use under s 55.2; and experimental use under s 55.3. There are also third party rights under s 55.11 which give rise to an exception under certain circumstances, but these have their own prior use provisions.)

That is, it appears that the intent of the key phrase is to ensure that the statutory exceptions to infringement do not give rise to prior user rights. An experimental use, for example, is a limited exception to infringement, which does not confer unlimited rights to make, sell and use the invention; consequently, an experimental use prior to the claim date should not give rise to a general right to make, sell and use the invention after the claim date. The defendant who was engaged in experimental use prior to the claim date is nonetheless entitled to continue engaging in the same limited experimental acts after the claim date, not by virtue of the prior user rights provisions, which are inapplicable, but by virtue of the experimental use exception itself. Extending the prior user rights acts to prior experimental use is therefore both unnecessary and undesirable.

If that is indeed the purpose of the key phrase, I suggest that the defendant need not admit infringement in order to take advantage of s 56; it should be enough for the defendant to admit that its acts do not fall within any statutory exception to infringement. On a motion for summary judgment, if NCS could then establish the factual point that the prior use was the same as the current use, while admitting that it was not subject to any exception—including eg that the use was not experimental—this would establish that NCS was entitled to the prior use defence without requiring it to admit infringement.

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