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.

Clarification of Federal Court Jurisdiction over Patent-related Contractual Matters

McCain Foods Limited v JR Simplot Company 2021 FCA 4 Locke JA: Near, Mactavish JJA varg 2019 FC 1635 McVeigh J

2,412,841 / Process for Treating Vegetables and Fruit Before Cooking

The Federal Court’s jurisdiction over patent-related contractual matters was recently expanded in Salt v Baker 2020 FCA 127 (here). This FCA decision on a motion to add a third-party claim clarifies the limits of that jurisdiction. As discussed here, in the action underlying this motion, McCain sued Simplot, one of its competitors, for infringement of McCain’s 841 patent which relates to a system that uses a pulsed electric field (“PEF”) to facilitate cutting of frozen fruits and vegetables [1]. Simplot implemented the system using a PEF system manufactured by Elea, a German company [FC 3]-[5]. Simplot’s contract with Elea specified that Elea would “defend, save harmless, and indemnify Simplot” for patent infringement cases arising from products supplied by Elea to Simplot [FC 74]. Accordingly, when Simplot was sued by McCain, it requested an indemnity from Elea [FC 8, 74]. Elea refused [FC 9].

Rather than bringing an action against Elea on the contract, in the motion under appeal Simplot sought to bring Elea into the infringement action with a third party claim. This was allowed by Aylen J at first instance and by McVeigh J on appeal to the FC. Locke JA’s decision for the FCA reversed on this point and refused to allow the third party claim. The bottom line is that for the Federal Court to have jurisdiction, it is not enough that the claim relates to a patent: the claim must have a basis in federal law, which as a practical matter means a basis in a federal Act.

A third party claim must stand on its own as an independent proceeding [26]. The question therefore is whether the Federal Court would have jurisdiction over Simplot’s claim against Elea if brought as an independent action. Because the Federal Court is a statutory court, its jurisdiction must be founded on some statutory grant of jurisdiction by Parliament [58].

Of course the Federal Court has jurisdiction over patent infringement [62]. Simplot therefore argued that Elea had induced Simplot to infringe the 841 patent. Locke JA disposed of this with a neat logical point:

[69] either Simplot does not infringe McCain’s patent (in which case it will have no liability to McCain that could ground a claim against Elea), or Simplot does infringe (in which case it cannot claim to be a person claiming under the patentee, and hence lacks standing to sue).

So, Elea may indeed be an infringer by inducement; if McCain had brought an action against Elea for inducing Simplot to infringe, this would be a classic inducement scenario and there would be no question that the Federal Court would have jurisdiction. But the question is not whether McCain can bring an infringement action against Elea, but whether Simplot can. Elea can only be liable for inducement (to anyone) if Simplot is an infringer [70]. But if Simplot is an infringer, it can’t be the plaintiff in a patent action; under s 55(1) only a “person claiming under the patentee” has standing to bring an infringement action, and an infringer is not a person claiming under the patentee [73]–[80]. This analysis provides a clear and logical legal foundation to support the intuition that a direct infringer can’t sue the party who induced it to infringe (at least not for infringement). This means this argument was disposed of not as a matter of Federal Court jurisdiction, but as a matter of standing. This seems right to me: the question isn’t whether Elea is inducing infringement, but whether Simplot can bring the action.

Simplot’s next argument was that the Federal Court has jurisdiction pursuant to s 20(2) of the Federal Courts Act:

20(2) The Federal Court has concurrent jurisdiction in all cases, other than those mentioned in subsection (1), in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention, certificate of supplementary protection issued under the Patent Act, copyright, trademark, industrial design or topography referred to in paragraph (1)(a).

Under this provision the party has to be (1) seeking a remedy (2) under an Act of Parliament or at law or in equity (3) respecting any patent of invention. It’s not entirely clear from this portion of the decision, but I take it that the remedy sought by Simplot was indemnification under its contract with Elea [90], [91], and that Simplot argued that this was a remedy “respecting any patent of invention.” These points were not elaborated as the matter was disposed of on the basis of element (2), requiring an “Act of Parliament or at law or in equity.”

Locke JA rejected this argument on the basis that “Act of Parliament” in this provision cannot refer to the Federal Courts Act itself, as this would be impermissibly self-referential [86]. In so holding, he followed Windsor Bridge 2016 SCC 54 [52] on the interpretation of s 23, which deals with different subject matter (eg bills of exchange), but is otherwise similarly worded [85]. Section 20(2) gives jurisdiction when the party is seeking a remedy under an Act of Parliament, but the Federal Courts Act does not confer rights for which a remedy might be sought, so it cannot be the requisite “Act of Parliament.” That is, the Federal Courts Act “it is not itself a federal law under which the Company can seek relief, however ‘relief’ is defined”: Windsor Bridge [52].

This provides a good basis for distinguishing Salt v Baker, which expanded the previous understanding of the Federal Court’s jurisdiction. Locke JA noted that “Salt concerned an application under section 52 of the Patent Act to vary an entry in the records of the Patent Office. Section 52 of the Patent Act therefore constituted a specific statutory grant of jurisdiction to the Federal Court” [63]. That strikes me as an entirely sound distinction. It is not merely technical. Section 52 gives the Federal Court jurisdiction to vary records relating to title. Determining who actually has title will normally require interpretation of the relevant assignments, but also application of the Patent Act priority rules which are set out in what is now s 49 of the Act. Thus, varying the title records is almost always closely entwined with application of substantive provisions of the Act.

Turning back to the jurisdiction conferred by s 20(2), what about focusing on a remedy “at law”? If Simplot is seeking to enforce its contractual right to indemnity, that looks like a remedy “at law.” Locke JA rejected this argument, saying “Because both the jurisdiction of the Federal Court and patent law in general must be based on statute, Simplot must nevertheless base its argument on a federal statute” [88], and moreover, a federal statute other than the Federal Courts Act [88]. This remark doesn’t directly address the “at law” phrase, but Windsor Bridge 2016 SCC 54 and especially Quebec North Shore Paper [1977] 2 SCR 1054, 1058, 1065-66, make it clear that “at law” or “or otherwise” must refer to federal law, which is to say either a statute or federal common law (if the latter exists).

So, Locke JA’s decision is solidly based in the SCC jurisprudence he relies on. My difficulty with all this is that the SCC in Kellogg [1941] SCR 242 held that the Exchequer Court had jurisdiction to determine ownership of a patent based on the “in equity” phrase of s 22(c) of the Exchequer Court Act, which is the same as s 20(2) in relevant respects. The appellant in that case sought a declaration that it was the owner of a patent by virtue of the fact that the inventor was an employee and consequently a trustee of the invention for the company [p246]. The SCC noted that the provision gave the Exchequer Court jurisdiction “in all cases where a ‘remedy is sought’ ‘respecting any patent of invention’ ‘under the authority of any Act of the Parliament of Canada or at Common Law or in Equity.’ The remedy sought by the appellant . . . is evidently a remedy in Equity respecting a patent of invention” [p250]. Now, I can readily see how Kellogg might be distinguished on the basis that a claim respecting ownership of a patent is more closely connected to patent law than a claim under the indemnity provision at issue in this case. But that distinction would presumably turn on the phrase ““respecting any patent of invention,” and the question at hand is the interpretation of the “at law or in equity / or otherwise” phrase in s 20 and 23. On that point I’m having a hard time reconciling Kellogg with Quebec North Shore Paper and Windsor Bridge. Though I don’t want to express a firm opinion, so far as I can tell, Kellogg is probably no longer good law on this point. And after all, that provision was only a alternative basis for jurisdiction, which was founded primarily on the statutory conflict provisions of the Patent Act. This aspect of Kellogg does seem to be universally ignored. (I'm not sure I'm persuaded by the SCC interpretation of s 23 in Quebec North Shore Paper and Windsor Bridge, but that's beside the point.)

Finally, “Simplot argues that it would be put in an absurd position of having to prove infringement in a separate provincial court proceeding in order claim its indemnity” [90]. Locke JA was expressly sympathetic to Simplot’s situation “of having to commence separate legal proceedings in a different court to enforce its claims in warranty and indemnity against Elea” [91]. But as he noted, “concerns about a multiplicity of proceedings and/or inconsistent results cannot justify finding that the Federal Court has jurisdiction where no federal statute grants it jurisdiction” [90] I have to quibble a bit; while it is of course true that such concerns alone cannot be the basis for Federal Court jurisdiction, they may be relevant to a purposive interpretation of the relevant provisions. For example, the FCA in Salt v Baker [40]–[44] relied on such considerations in interpreting s 52. With that said, I have to agree that such purposive considerations cannot overcome the authorities relied on by Locke JA. So far as I can see, while there may be a real problem here, it will need some statutory fix to extend the Federal Court’s jurisdiction in order to solve it, assuming that is constitutionality possible.

I must say that it’s not clear to me that there will necessarily be duplication on the particular facts of this case, as we have been given very little of the contractual terms. To the extent that the contract requires Elea to indemnify Simplit for infringement, then once infringement is established in this action, it is not clear to me why non-infringement would need to be re-litigated in an action on the indemnity claim. To the extent that the contract requires Elea to defend the action, then I don’t see how the indemnity claim on that point would turn on whether Simplot actually infringed.

To summarize, while Simplot had a convoluted infringement argument that failed, at the end of the day, Simplot was essentially trying to bring an action against Elea in Federal Court to enforce the contractual indemnification provision. It is perfectly clear that the Federal Court does not have jurisdiction in a case “purely and simply concerning a contract between subject and subject”: Kellogg 249. The issue is whether the fact that the contractual provision at issue is in respect of an indemnity related to patent infringement is sufficient to bring it within the jurisdiction of the Federal Court. The answer is no. It is not enough that the claim relate to “any patent of invention,” the claim must have a basis in federal law.

A final point on this topic is that in Libbey-Owens-Ford Glass Co v Ford Motor Co (1968), 55 CPR165 (Ex Ct), the Exchequer Court held that there was a “good arguable case” that a claim against a third party for indemnity based on contract by a defendant in the context of a patent infringement action fell within the jurisdiction of the Exchequer Court [92]. Locke JA held it cannot be reconciled with the SCC jurisprudence he relied on and it can no longer be considered good law.

To wrap this all up, Simplot also sought to amend its statement of defence to allege a defence based on an implied licence or acquiescence, flowing ultimately from the fact (as alleged) that Elea sold its systems worldwide with McCain’s knowledge. This was permitted by Aylen J and McVeigh J. As discussed here, I found that aspect of McVeigh J’s decision a bit difficult to follow, but Locke JA has clarified that it really just turns on the facts, and while “Simplot’s implicit license defence is light on details, and it may prove difficult for it to adduce evidence sufficient to prove the existence of a license that would benefit it” [32], this is not enough to refuse it to go forward. (And see similarly [53] regarding the acquiescence defence.)

Jurisdiction of the Federal Court to Interpret Contracts Relating to Patents: A Fresh Start

SALT Canada Inc v Baker 2020 FCA 127 Stratas JA: Near, Woods JJA rev’g 2016 FC 830 Boswell J

            2,222,058

In a direct and vigorous decision, Stratas JA for the FCA has held that the Federal Court always has jurisdiction to determine who has title to a patent in an application under s 52 of the Act [12], [47], [49], expressly repudiating a line of cases holding that the FC does not have jurisdiction if determination of ownership of the patent is “primarily” a matter of contractual interpretation [27]-[31]. This a very welcome development that will simplify litigation in this area. This issue has been a pet peeve of mine ever since the trial decision in SALT v Baker four years ago and I am very pleased to see the issue dealt with so clearly. There is, however, one loose end, namely the effect on Innotech (1997) 74 CPR (3d) 275 (FCA) rev’g 72 CPR(3d) 522 (FCTD), holding that the Federal Court does not have jurisdiction when a contract relating to patent ownership is used as a sword, rather than a shield. Innotech is formally distinguishable, in that it did not involve an application under s 52, but the holding is extremely difficult to reconcile with Stratas JA’s reasoning in this case. In my view, Innotech is no longer good law, but some uncertainty remains, as it is an FCA decision and was not directly addressed in SALT v Baker.

As discussed here, SALT v Baker involved conflicting assignments of rights in the ‘058 patent from the inventor, Dr Markels. The first was a complex series of assignments which ultimately led to the respondent, Baker. Baker registered his ownership with the Patent Office. Some of the assignments in this series included provisions requiring the ‘058 patent to be reassigned to Markels if certain conditions were breached. Believing that the conditions had indeed been breached, in 2015 Markels assigned title to the Applicant, SALT. Markels also prepared a reassignment from Baker to Markels, which was, however, never executed by Baker. SALT sought to have its ownership registered, but the Patent Office refused on the basis that the assignment was not executed by Baker, the registered owner [3]-[9]. SALT then brought this application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent (as well as other additional and alternative relief). A key substantive question related to the interpretation of the various agreements, and whether the conditions in the first series of assignments had been breached, such that Markels was entitled to a reassignment [24].

Boswell J at first instance, relying primarily on Lawther (1995), 60 CPR(3d) 510 (FC), held that the Federal Court “lacks jurisdiction where determination of the ownership of a patent depends upon the application and interpretation of contract law principles” [20]. The question is whether the matter at hand “relates primarily to contract or to patent law: this Court will have jurisdiction over a case that primarily concerns the latter, but not the former” [21].

The FCA has now reversed. The reasoning of Stratas JA was straightforward. The basis of the FC jurisdiction is the grant by Parliament. The text of s 52 of the Patent Act is clear [8]:

[5] Section 52 of the Patent Act provides that the “Federal Court has jurisdiction…to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged”. The application before the Federal Court sought just that. On the plain language of . . . section 52 of the Patent Act, the Federal Court had jurisdiction over the appellant’s application.

There is no constitutional objection to the grant of jurisdiction under s 52 [49].

A Stay in Favour of Provincial Superior Courts Will Be Granted Only in the Clearest of Cases

Stelpro Design Inc. v. Thermolec Ltée, 2019 FC 363 St-Louis J

While the Federal Court has exclusive jurisdiction to annul a patent (Federal Courts Act s 20(1)), its jurisdiction in respect of infringement is concurrent with that of the provincial superior courts: s 20(2). In Stelpro, the patentee, Thermolec, brought an action in the Superior Court of Québec, and Stelpro defended there in part on the basis that the patent was invalid. Stelpro then brought an impeachment action before the Federal Court. Stelpro moved to have Quebec action stayed; that motion was refused by the Quebec court: [9]. Thermolec in turn sought to have the Federal Court action stayed by the Federal Court. That motion was also refused by St-Louis J in this decision.

The facts are similar to those in Safilo Canada Inc v Contour Optik Inc 2005 FC 278, in which Safilo brought action for impeachment in the Federal Court a few hours before the patentee, Contour, brought an action in the Superior Court of Québec. (In Safilo it is clear that the patentee was motivated to bring its action in the Quebec courts in part by the prospect of obtaining an interlocutory injunction, which is of course essentially impossible for a patentee to obtain in the Federal Court, and which was granted by the Quebec court. One might speculate that Thermolec’s motivation was the same, as it was also granted an interlocutory injunction in Quebec).

In considering whether to grant a stay, both de Montigny J in Safilo and St-Louis J in the case at hand, referred to the list of relevant factors summarized by by Dubé J. in White v EBF Manufacturing Ltd, 2001 FCT 713:

1. Would the continuation of the action cause prejudice or injustice (not merely inconvenience or extra expense) to the defendant?

2. Would the stay work an injustice to the plaintiff?

3. The onus is on the party which seeks a stay to establish that these two conditions are met.

4. The grant or refusal of the stay is within the discretionary power of the judge.

5. The power to grant a stay may only be exercised sparingly and in the clearest of cases.

6. Are the facts alleged, the legal issues involved and the relief sought similar in both actions?

7. What are the possibilities of inconsistent findings in both Courts?

8. Until there is a risk of imminent adjudication in the two different forums, the Court should be very reluctant to interfere with any litigant's right of access to another jurisdiction.

9. Priority ought not necessarily be given to the first proceeding over the second or, vice versa.

Two important additional factors emerged in Safilo.

First, only the Federal Court can rule on the in rem validity of the patent and dispose of it at a national level, while the Superior Court judgment would only be valid between the parties and in Quebec. This strongly suggests that the FC action should not be stayed. To address this difficulty, the patentee in Safilo, who was seeking to pursue the action in Quebec, gave an undertaking that if the final result in the Quebec litigation was that the patent was invalid as between the parties, the patentee would agree to the striking out of the patent by the Federal Court [33]. (This practice was derived from the copyright case of Apotex v Astrazeneca [2003] 4 FC 826.) A similar undertaking was given in this case. In Safilo de Montigny J indicated that an undertaking “makes moot the distinction between the in rem and in personam nature of the remedies which the Federal Court and Superior Court may grant respectively” [34]; in this case, St-Louis J quoted this statement and remarked “I have no reason to disagree” [45]. The undertaking thus removes one major substantive objection to staying the FC action.

As noted by St-Louis J at [42], a second important consideration emerging from Safilo is the relative state of advancement in the proceedings in each of the courts. In Safilo, de Montigny J granted the stay, essentially on basis that case was further advanced in Quebec and in light of undertaking to expunge given by the patentee [38]. (And see also YKK Zipper v Wahl Bros (1972), 8 CPR(2d) 131, also granting a stay when the proceedings in the Superior Court of Québec were very far advanced when the FC action was initiated.)

In Stelpro, in contrast, St-Louis J refused to stay the Federal Court action. The decisions are straightforwardly distinguishable, because, as St-Louis J emphasized, in Stelpro, unlike in Safilo, the proceedings on the merits were at an early stage in both courts [47].

St-Louis J concluded that

[48] As per the Safilo Canada guidelines, the power to grant a stay may only be exercised sparingly and in the clearest of cases. As can be shown from the paragraphs above, I have not been convinced that this is “the clearest of cases”, and will thus not grant the stay.

This is despite the undertaking given by Thermolec to agree to consent to the entry of a judgment in the Federal Court that mirrors the Superior Court’s future decision on the validity of the patent [9], and despite the fact that a stay had been refused by the Superior Court of Québec, giving rise to a real prospect of duplicative litigation and conflicting outcomes.

This illustrates that the principle that a stay will granted only in the rarest of cases is an important one. Per the 8^th point from White v EBF, “the Court should be very reluctant to interfere with any litigant's right of access to another jurisdiction.” While I acknowledge the force of that principle, and St-Louis J’s decision in this case does appear to be consistent with the prior caselaw, I must say that the result does not seem entirely satisfactory.

Ownership Can Be Raised as a Defence but Not as a Counterclaim

Farmobile, LLC v Farmers Edge Inc 2018 FC 1269 Mactavish J aff’g 2018 FC 915 Ring J
            2,888,742 / Farming data collection

Farmobile, the patentee in this action, sued Farmers Edge (FE) for infringement of the 742 patent. FE asserted, by way of both defence and counterclaim, that it was the rightful owner of the patent [915-3]. The defence and counterclaim were both based on the same facts [14], [914-38], to the effect that the right in the invention had been assigned to it [8]-[12], [914-4]. Farmobile sought to strike the allegations related to ownership from both the Statement of the Defence and the Statement of Counterclaim, which were considered separately. Ring J granted the motion to strike the counterclaim, but allowed the same allegations to stand as a defence (see here). Mactavish J has now affirmed.

In affirming that the allegation of ownership may stand as a defence, Mactavish J established what appears to be a novel point, albeit a minor one, namely that ownership of the patent by the defendant is indeed a defence to a claim of patent infringement which may be asserted in Federal Court, like non-infringement, invalidity and use pursuant to a licence [31]. This was in the face of Farmobile’s argument that the Federal Court lacked jurisdiction to entertain ownership in any context; it asserted that “while ownership is indeed a defence to a claim for patent infringement, it is not one that can be asserted in this Court” (Mactavish J’s emphasis). As Mactavish J pointed out, it is well-established that a licence to use is a valid defence, notwithstanding that assessing the merits of such a defence involves a matter of contractual interpretation, and “A licence is, after all, merely one form of contract” [32]. This holding seems clearly correct, but it is nonetheless a relief.

At the same time, Mactavish J affirmed that the Court does not have jurisdiction to consider exactly the same issue, based on exactly the same facts, by way of counterclaim. Mactavish J held that the contracts relating to ownership may be used a shield, but not as a sword [26], [35], [50]. The rationale is that in the defence, the essence of the litigation is patent infringement, while in the counterclaim, the essence of the litigation is patent ownership. This distinction does have support in the cases, in particular Innotech (1997) 74 CPR (3d) 275 (FCA), relied on by Mactavish J [34],[43]-[50]. And it is also reasonable to say the that the Federal Court can determine ownership when raised as a defence to an infringement action, even if it does not have jurisdiction to do so when ownership is raised independently.

However, the shield / sword distinction does not address, or affect, the more fundamental issue as to whether the Federal Court has jurisdiction to consider patent ownership when raised indepednently. If the Federal Court does not have such jurisdiction, then the sword / shield distinction makes sense; but if it does have such jurisdiction, then it doesn’t. Mactavish J’s reasoning is sound if one accepts that the Federal Court does not have jurisdiction to determine patent ownership on its own, but nothing in her decision addresses that fundamental point, one way or the other.

In previous posts, here and here, I have argued that the Federal Court does indeed have such jurisdiction, in light of s 20(2) of the Federal Court Act which gives the Federal Court “concurrent jurisdiction in all cases. . . in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention.” In Kellogg [1941] SCR 242 the SCC interpreted the predecessor provision of the Exchequer Court Act as follows:

It will be noticed that subsection (c) deals with the "remedy" which is sought. And it enacts that the Exchequer Court shall have jurisdiction between subject and subject in all cases where a "remedy is sought" "respecting any patent of invention" "under the authority of any Act of the Parliament of Canada or at Common Law or in Equity." The remedy sought by the appellant, as a result of paragraph 8 of its statement of claim, is evidently a remedy in Equity respecting a patent of invention. The appellant claims that remedy as a consequence of the facts alleged in its paragraph 8 [that the appellant was owner by assignment]. It claims the remedy as owner deriving its title from the same alleged inventor of whom the respondent claims to be the assignee, through other assignors. In such a case, the invention or the right to the patent for the invention is primarily the subject-matter of the appellant's claim, and the remedy sought for is clearly "respecting any patent of invention." And this is covered by subsection (c) of section 22 of the Exchequer Court Act, as it stands at present.

Mactavish J interpreted Kellogg as holding that the Federal Court “may resolve contractual issues raised in an action that is in ‘pith and substance’ within the Court’s jurisdiction” [20]. I’m not sure that is exactly right: what the above passage says is that a party has jurisdiction when seeking a remedy respecting any patent of invention; which, of course, is what s 20(2) of the Act says on its face.In any event, whatever the broader principle, it seems to be to say quite explicitly that the Court does have jurisdiction in the circumstances at hand.

The argument endorsed above was made in the alternative (though that does not detract from its authority, as it was "obviously intended for guidance" and so should be accepted as authoritative: R v Henry 2005 SCC 76 [57]). Mactavish J implicitly distinguished Kellogg by saying that in that case the “primary issue” was a matter of patent law, not that alternative argument, citing pages 249-250. The exact “matter of patent law” at issue in Kellogg at 249 was as follows

the appellant is entitled to the benefit of the invention because John L. Kellogg, Jr. [the putative inventor], at the time when he is alleged to have made it, was in the employ of the appellant and then carrying out work which he was instructed to do on the plaintiff's behalf, and that, by virtue of his contract of employment and the circumstances under which the invention was made, he became and is a trustee of the invention for the company; if it be true further that, by reason of his being such a trustee, he was unable to transfer any right, title, or interest in the invention to any other party, and that the plaintiff is now the owner of any invention so made by John L. Kellogg, Jr., this would be one of the reasons why the appellant should be declared entitled, as against the respondent, to the issue of a patent including the claims in conflict as applied for by it.

That is, the "matter of patent law" is the question of who is the true owner of the patent in light of the contract of employment. This is exactly the question at issue in Farmobile: see the allegations [915-4], reproduced in my post on Ring J’s decision. The argument which I have previously discussed, based on what is now s 20(2), was an argument in the alternative. The primary basis for the decision in Kellogg, which Mactavish J acknowledged was a matter of patent law, is that ownership of a patent by virtue of contractual assignment and related circumstances, is essentially a matter of patent law and so the Federal Court has jurisdiction by virtue of that fact. This is entirely apart from any authority to award a remedy under s 20(2), or vary the Register under s 20(1). This aspect of Kellogg strikes as even more fundamental and directly on point. I cannot see how it is distinguishable from the facts at hand.

I remain perplexed by the Federal Court’s unwillingness to accept jurisdiction in these situations. When SCC precedent is unsound, I can understand that the Federal Court would resist its application by looking for tenuous distinctions. Indeed, that is in part how the common law “works itself pure.” But to my mind Kellogg makes perfect sense. The Federal Court consistently recognizes that it is “inconvenient” to require a party to commence a second proceeding in a provincial superior court in such circumstances [52]; the Court does not seem to be resisting jurisdiction out of concern that it would create some practical problem, which might not be apparent to an academic such as myself. It is of course true that inconvenience in itself is not a basis to assert jurisdiction where it does not exist [52], but conversely, creating inconvenience is not a basis to refuse jurisdiction where it does exist.

More broadly, a court faced with the question of who is the present owner of the patent must address who was the inventor, in order to determine who had the right to make a valid assignment in the first place, and that is surely a matter of patent law; as well as the question of how is the first owner, which is usually said to be a matter of patent law (see Comstock 38 CPR(3e) 29, 51-54; s 49); as well as the matter of priorities under s 51. Ultimately the remedy is amendment of the Register, which is established pursuant to s 12, and which the Federal Court, but not the provincial superior courts, has the authority to order amended, pursuant to s 52. Thus, patent law and the Patent Act is implicated at every stage of an patent ownership dispute. Consequently, while contacts of assignment are also implicated, the matter of ownership of a patent seems to me to be essentially a matter of patent law, and that is what Kellogg says on its face.

Kellogg Co v Kellogg and Jurisdiction of the Federal Court to Interpret Contracts Related to Patent Ownership

Farmobile, LLC v Farmers Edge Inc 2018 FC 915 Ring J
            2,888,742 / Farming data collection

Farmobile brought an action against Farmers Edge for infringement of the 742 patent. Farmers Edge wants to defend on the basis that it is the rightful owner of the 742 patent. On this motion to strike, Ring J has held that the Federal Court lacks jurisdiction, because determination of ownership is essentially a matter of interpretation of the contracts of assignment. This means that in order to effectively defend against this action brought against it, Farmers Edge will have to bring a separate action in a different forum seeking a declaration that it is the true owner [55].

The jurisdiction of the Federal Courts in such matters is governed by s 52 of the Act, which (in combination with s 20) gives the Court jurisdiction “to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” Ring J stated that “It is well-established that this Court lacks jurisdiction to entertain a claim under section 52 of the Patent Act where the issue to be decided is the proper owner of a particular patent, and the determination of ownership depends on the interpretation of various contract documents between the parties and the application and interpretation of contract law principles” [27].

There is indeed a well-established line of authority in the Federal Court to that effect. In my post on SALT Canada Inc v Baker 2016 FC 830, I suggested that this line of authority had overlooked the SCC decision in Kellogg Co v Kellogg, [1941] SCR 242, or interpreted it too narrowly. Kellogg also involved a motion to strike, where the underlying action was a conflict between pending applications. It is worth setting out the pleading (246) which was allowed to stand by the Supreme Court:

8. In the event that the Court should find as a fact that the said John L. Kellogg, Jr., was the first inventor of the subject-matter of the said application serial No. 450,047, then the plaintiff alleges

(a) That the late John L. Kellogg, Jr., was employed in the Experimental Department of the Kellogg Company from October 15, 1936, until December 19, 1936;

(b) If any invention was made by the said John L. Kellogg, Jr., which is not admitted but denied, it was made during and in the course of his employment by the plaintiff and when he was carrying out work which he was instructed to do on the plaintiff's behalf. By virtue of the contract of employment and the circumstances under which the invention was made the said John L. Kellogg, Jr., became and was a trustee of the invention for the company which was and is entitled to the benefit of it.

(c) The said John L. Kellogg, Jr., was by reason of his being such a trustee unable to transfer any right, title or interest in the invention to any other party and the plaintiff is now the owner of any invention covered by the application serial No. 450,047.

Compare this with the allegations which were stuck in Farmobile (reformatted for clarity)

[4] In support of its assertion that all rights to the invention claimed in the ‘742 Patent were ultimately assigned to it, Farmers Edge pleads that

(a) the three individuals who incorporated Farmobile, Heath Gerlock, Randall Nuss, and Jason Tatge, had previously been employed by Crop Ventures Inc., the corporate predecessor of Farmers Edge;

(b) Ron Osborne, who was the CEO of Crop Ventures, and Gerlock and Nuss jointly conceived and developed the invention claimed in the ‘742 Patent while they worked for Crop Ventures;

(c) Gerlock and Nuss each signed confidentiality and non-competition agreements whereby they assigned all rights and interests in the intellectual property to the inventions claimed in the ‘742 Patent to Crop Ventures; and

(d) Tatge signed an employment terms letter agreement whereby he agreed to sign Crop Venture’s standard Proprietary Information and Inventions Agreement [collectively the “Agreements”].

The allegations are substantively virtually the same: they are both to the effect that the invention was made during the course of employment and therefore belong to the employer.

Ring J distinguished Kellogg as follows (original emphasis):

[33] Further, I am of the view that the Supreme Court’s decision in Kellogg Co v Kellogg, [1941] SCR 242, is distinguishable and does not assist Farmers Edge in responding to Farmobile’s motion to strike. In Kellogg, the moving party sought an order striking out a claim, pled in the alternative, that the plaintiff was entitled to the benefit of an invention by virtue of an employment contract. In the present case, the essence of the Amended Counterclaim, namely the claim of ownership to the subject matter of the ‘742 Patent based on a series of Agreements, is sought to be struck out.

The distinction being drawn by Ring J is evidently that in Kellogg the disputed pleading was in the alternative, whereas in Farmobile it was by way of counterclaim. While that is true, I do not see it as a satisfactory distinction, for two reasons.

First, in the preceding section of her decision, Ring J had made the point that jurisdiction over the counterclaim has to be assessed separately from jurisdiction over the main action, relying on Innotech (1997) 74 CPR (3d) 275 (FCA) rev’g 72 CPR (3d) 522 (FC). In Innotech, the FCA held that “The counterclaim, when viewed by itself, would stand alone as an action for breach of contract and as such is not within the jurisdiction of this Court.” The same principle would appear to apply to the alternative claim in Kellogg, as the issue raised in the disputed pleading would have been capable of standing alone as a separate action. That is, if the pleading in Kellogg had been struck, and the plaintiff had subsequently lost and the patent issued to the defendant, nothing would have prevented the plaintiff from bringing an action to establish its ownership of the patent based on the facts alleged in the pleading at issue.

Secondly, and more importantly, there is not the least hint in Kellogg itself that the fact that the pleading was in the alternative is at all relevant; it was mentioned in the description of the facts, but never even adverted to in the Court’s reasoning.

Ring J then stated:

[34] Kellogg stands for the proposition that the Federal Court may resolve incidental contractual issues where the overall claim is, in “pith and substance”, within the Court’s jurisdiction. However, this Court has no jurisdiction to adjudicate a claim (or in this case, a counterclaim), where the claim is “purely and simply” a contractual dispute (Kellogg), or where an issue over which the Court may have jurisdiction is “secondary to and dependent upon” the resolution of a contractual issue (Salt).

[35] Since the relief sought by Farmers Edge in its Amended Counterclaim is dependent on a prior determination of the rights conferred by the Agreements described in the Amended Counterclaim, and the interpretation of these Agreements is clearly a matter of contract, rather than patent law, it is plain and obvious that the Court lacks jurisdiction to adjudicate the impugned portions of the Amended Counterclaim, and those pleadings must be struck out.

Ring J’s point is that the interpretation of the agreements is “purely and simply” a contractual dispute. One could certainly say that the dispute is over the interpretation of a contract, which just happens to involve ownership of a patent; but one could also say that the dispute is over the ownership of a patent, which just happens to turn on contractual interpretation. In my view, the SCC decision in Kellogg makes it quite clear that the second way of looking at the matter is correct. 

Here is the crux of the SCC’s reasoning in Kellogg (249-50):

It is undoubtedly true, as stated by the learned President, that the Exchequer Court has no jurisdiction to determine an issue purely and simply concerning a contract between subject and subject (His Majesty the King and Hume and Consolidated Distilleries Limited and Consolidated Exporters Corporation Limited); but here the subject-matter of the appellant's allegation only incidentally refers to the contract of employment between John L. Kellogg, Jr., and the appellant. The allegation primarily concerns the invention alleged to have been made by him and of which the appellant claims to be the owner as a result of the contract and of the other facts set forth; in the allegation. The contract and the claims based thereon are advanced for the purpose of establishing that the appellant is entitled both to the rights deriving from the invention and to the issue of a patent in its own name. That is precisely the remedy which the Exchequer Court of Canada has the power to grant under paragraph (iv) of subs. 8 of sec. 44 of the Patent Act

That is, in Kellogg the claim was allowed to stand because it was primarily about who owned the patent – even though the answer to that question turned entirely on the contract of employment. On its face, Kellogg says that a contractual dispute over ownership of an invention is primarily a dispute about the invention, not primarily about the contract. This holding was not obiter: the result in Kellogg itself is that Court had jurisdiction over a contractual dispute concerning the ownership of a patent, because of the subject matter of the dispute, ownership of the patent, meant it was more than “purely and simply” a contract between a subject and subject. An example of a dispute which is purely and simply between subject and subject is Consolidated Distilleries, in which the SCC held that the Exchequer Court did not have jurisdiction to hear a claim for indemnity for loss suffered by reason of certain bond agreements; it was a contractual dispute about a underlying issue which was itself unrelated to any head of federal power.

While I don’t find Ring J’s attempt to distinguish Kellogg to be at all persuasive, I again acknowledge that she was right to say that her decision is consistent with a well-established line of Federal Court authority. In my view, Farmobile illustrates the inconsistency between Kellogg and that line of cases. At the very least, there is a real tension. We should keep in mind that this was a motion to strike. It may be plain and obvious that the Court lacks jurisdiction based on the recent line of Federal Court cases; but the real question is whether it is plain and obvious that those cases are consistent with with Kellogg. Even if my interpretation of Kellogg is wrong, I would like to think that it is not “plain and obvious” that I am wrong. Ring J’s attempt to distinguish Kellogg implies that if the facts were such that the claim at issue in Farmobile had been pleaded in the alternative, it would have been allowed to stand. Is it plain and obvious that there is a crucial principled distinction between a counterclaim and a claim in the alternative?

Ring J, and the Court of Appeal, have said that the fact that the parties whose claim is struck will have to bring its action in a different forum is an “inconvenience,” but “such inconvenience ‘is not, of itself, a basis for this Court assuming jurisdiction.” [39], [55]. No doubt it is true that the Court cannot assume jurisdiction simply because it would make good practical sense for it to do so, but the problem should not be dismissed as a mere inconvenience. It is a defect in our patent system — indeed, a scandal worthy of Dickens — that a party seeking to defend a patent action should have to bring a separate action based on overlapping facts in a different court. If the law requires such a scandalous result, so be it, but I remain unconvinced.

What is the Jurisdiction of the Federal Court under s 20(2) of the Federal Courts Act?

Alpha Marathon Technologies Inc v Dual Spiral Systems Inc 2017 FC 1119 Kane J

In Alpha Marathon the plaintiff claimed to be the co-inventor of an invention patented by the defendant in the US [4]. The plaintiff sought, in substance, a declaration that it was the entitled to the US patent rights: [4], [20]. Kane J granted the defendant’s motion to strike the statement of claim on the basis that the Federal Court lacks jurisdiction over the dispute [108]. In so doing, Kane J provided an extensive and helpful review of the law related to the jurisdiction of the Federal Court under s 20(2) of the Federal Courts Act. I agree with Kane J's conclusion that the FC lacks jurisdiction in this case, but I must admit that I remain puzzled as to the exact limits of the Court’s jurisdiction in such matters.

As Kane J noted [37], [52], the basic test for the jurisdiction of the Federal Court is set out in ITO-Int'l Terminal Operators v. Miida Electronics [1986] 1 SCR 752, 766:

1. There must be a statutory grant of jurisdiction by the federal Parliament.

2. There must be an existing body of federal law which is essential to the disposition of the case and which nourishes the statutory grant of jurisdiction.

3. The law on which the case is based must be "a law of Canada" as the phrase is used in s. 101 of the Constitution Act, 1867 .

This has been re-affirmed in Windsor (City) v Canadian Transit Co, 2016 SCC 54, which, at [25ff], emphasized the importance of determining the “essential nature” of the claim.

The main question in Alpha Marathon turned on the first branch of the test. The plaintiff relied entirely on s 20(2) of the Federal Courts Act, as interpreted in Kellogg Company v Kellogg, [1941] SCR 242, as providing the necessary statutory grant of jurisdiction [46], [60].

Subsection s 20(2) gives the FC concurrent jurisdiction in all cases “in which a remedy is sought under the authority of an Act of Parliament or at law or in equity respecting any patent of invention.” The defendants argued that s 20(2) is not applicable “because the words ‘any patent of invention’ in that section mean a patent of invention obtained in Canada, not simply an invention or a patent of invention obtained in another country” [38, my emphasis]. This seems right to me. As a matter of statutory interpretation, it would appear that “patent of invention” in s 20(2) means the same thing as “letters patent for an invention” under the Patent Act, s 2, and the Patent Act clearly refers to Canadian patents. This is not express, but clear nonetheless from eg s 4(2) which provides that “The Commissioner shall . . . do all acts and things requisite for the granting and issuing of patents of invention.” That provision is evidently not empowering the Commissioner to grant US patents.

Kane J accepted this point:

[59] In order to fall within subsection 20(2), the Plaintiff must be seeking a remedy that arises from “federal law”. With respect to patents, the only relevant “federal law” is the Patent Act, which does not create remedies respecting the ownership of unpatented inventions or foreign patents.

See also [67], emphasizing the need for a Canadian patent.

The defendant argued that s 20(2) was satisfied because the dispute related to “an invention made in Canada and by Canadians.” But s 20(2) does not require merely that the invention is somehow Canadian; it requires that the remedy sought is in respect of a Canadian patent. In this case no remedy was sought relating to any Canadian patent, nor even to a potential Canadian patent application. I should note that the Plaintiff did not actually seek a declaration as to the ownership of the US patent, but rather a declaration that it was the owner of the invention claimed in the corresponding US patent application; an injunction requiring the defendants to convey their interest in the US patent application to the plaintiffs; and injunction prohibiting the defendants from infringing the US patent application [20]. The reference in the pleadings was to the US application, notwithstanding that the US patent had actually been granted: US Patent No. 6,902,385 [18]. Presumably this was because a request for a declaration as to ownership as to the US patent would be self-evidently absurd; but dressing it up as a request for relief related to the US application does not change the substance.

While that point was enough to dispose of the issue, Kane J undertook a more general review of s 20(2), with the key cases being Kellogg, Radio Corporation of America v Philco Corporation (Delaware), [1966] SCR 296, and Cellcor Corp v Canada v Kotacka [1977] 1 FC 227, 27 CPR(2d) 68 (FCA).

I discussed Kellogg in my post on SALT Canada Inc v Baker 2016 FC 830, in which Boswell J refused to make a declaration as to ownership of a granted patent pursuant to s 52 of the Patent Act, on the view that the FC lacks jurisdiction when the essential issue is the ownership based on the interpretation and application of contract law principles. My post suggested that the parties had overlooked Kellogg , which might be read as holding that the statutory grant could be found in s 22(c) of the Exchequer Court Act, which is substantively the same as the current s 20(2) of the Federal Courts Act.

Kane J held that the jurisprudence subsequent to Kellogg reflects a more constrained approach to the interpretation of the Federal Courts Act [69]. Her conclusion is perhaps best summarized by Tremblay-Lamer J in Peak Innovations, 2009 FC 661, [9], quoted with approval at [77]:

Section 20(2) of the Federal Courts Act only establishes jurisdiction for remedies where jurisdiction for the underlying cause of action is established elsewhere in a statute.

And see [78] reiterating the point. As I understand it, the point is that s 20(2) is effectively solely to enable the Federal Court to grant the appropriate remedy, after substantive jurisdiction has been established under some other provision.

I’m not sure I’m entirely persuaded that is the correct interpretation of s 20(2). The text of s 20(2) states that “The Federal Court has concurrent jurisdiction in all cases. . . in which a remedy is sought. . . respecting any patent of invention .” It does not say, “The Federal Court has concurrent jurisdiction in all cases . . . to grant a remedy . . . respecting any patent of invention.” I would say that on its face s 20(2) gives jurisdiction to the Federal Court (subject to the other branches of the ITO test). That is the reasoning on which the SCC in Kellogg based its interpretation of the provision.

The primary authorities for a more restrictive interpretation of this proposition were Radio Corp and Cellcor. I acknowledge that in writing my post on SALT Canada v Baker 2016 FC 830 I had overlooked both of those cases. And it is also true, as pointed out by Kane J [73], that in Cellcor at [11] the FCA perceived a possible conflict between Radio Corp and Kellogg, and chose to follow Radio Corp. But I’m not convinced there really is a conflict between Radio Corp and Kellogg.

Kellogg was a conflict proceeding in which the main question was which of the parties, Kellogg Co or Kellogg, was the true inventor. The Commissioner had made a decision in favour of Kellogg, pursuant to the procedure set out in then s 44, and that decision had been duly appealed by Kellogg Co to the Exchequer Court pursuant to s 44(8) of the Patent Act. It was undisputed that the Exchequer Court had jurisdiction in that respect. Kellogg Co had also pleaded in the alternative that even if Kellogg were the true inventor, Kellogg was an employee of Kellogg Co. In that case, the remedy sought was that Kellogg Co should be adjudged to be “the owner of the invention made by [Kellogg], and that the respondent should be directed to execute an assignment to the appellant of the entire right, title and interest in and to the invention and the application relating to it” (246). The Exchequer Court had ordered the alternative pleading struck on the basis of lack of jurisdiction, and the SCC reversed, in part because s 20(2) (then s 22(c)) gave jurisdiction because “the remedy sought by the appellant. . . is evidently a remedy in Equity respecting a patent of invention” (250).

Radio Corp also involved a conflict proceeding, and one of the parties, dissatisfied with the Commissioner’s decision, had appealed pursuant to the same provision (by then 45(8)). But in addition to attacking the Commissioner’s decision on the claims which had been found to be in conflict, the appellant had also attacked a variety of other claims in relation to which no conflict had been found (301). The SCC reviewed the history of the relevant provisions, pointing out that under the Act of 1906, conflict proceedings were to be decided by a board of arbitration, while in Hutchins Car Roofing Co ( 1916), 16 Ex CR 391, Cassells J had held that what is now s 20(2) gave the Exchequer Court concurrent jurisdiction with that board (303). The result was that there were two distinct procedures for dealing with conflicting applications. This led to the enactment of the s 44(8) (originally 22(7)), providing for an appeal procedure from a decision of the Commissioner, and, by implication, depriving the Exchequer Court of original jurisdiction in such matters. As the SCC stated (my emphasis):

This subsection [44(8)] recognized the jurisdiction of the Exchequer Court with respect to conflicting applications for patents, but limited the period during which it might be exercised.

The important point is, however, that, since 1923, Parliament has made it clear in the provisions of the various Patent Acts that, notwithstanding the jurisdiction conferred by the Exchequer Court Act upon the Exchequer Court to deal with conflicting patent applications, the right to seek redress in that Court by an applicant is governed and limited by the provisions of the Patent Act respecting conflicting applications. The conclusion which I draw from the legislative history of the provisions of the Patent Act respecting conflicting applications is that, although jurisdiction is conferred upon the Exchequer Court by s. 21 [now 20(2)] of the Exchequer Court Act in cases of conflicting applications for a patent, the right of a party involved in such a conflict to attack the patent application of another party is governed by s. 45 and such party is restricted to such rights as are conferred by that section. As previously stated, it is the opinion of this Court that proceedings under subs. (8) of that section are limited to the subject matter of the claims found to be in conflict by the Commissioner.

I read this as saying that Cassells J’s interpretation of s 20(2) was not wrong, and indeed was confirmed by s 44(8), which did not grant the Exchequer Court jurisdiction respecting conflicts, but rather limited the jurisdiction that was already conferred by s 20(2). That is, if the Act did not provide any other method for resolving a conflict, the Federal Court would have jurisdiction under s 20(2), but given that an alternative procedure had been established, s 20(2) could not be used to circumvent that alternative procedure.

A purposive analysis arguably also provides some support for a broad reading of s 20(2). It rounds out the statutory scheme in the same way that s 7(b) of the Trade-marks Act rounds out that Act. S 7(b) allows a trade-mark owner to bring an action in Federal Court based on a registered mark, and plead 7(b) in the alternative, rather than being forced to resort to a new proceeding in provincial superior court if its registration should be held invalid. Similarly, as in Kellogg, s 20(2) allows a plaintiff to raise ownership as an alternative to its claim to inventorship, when the factual issues are closely enmeshed, rather than having to resort to a new proceeding in a different court.

It may also be possible to reconcile Cellcor with Kellogg, but not so readily. In Cellcor the plaintiff sought a declaration that it was the party entitled to apply for a Canadian patent on the basis that it was the inventor of the specified invention, which had been stolen by the defendant, who intended to file an application in Canada. However, it appears that the plaintiff had not actually applied for a Canadian patent. Counsel for the defendant did argue that “the Court cannot exercise its jurisdiction under section 20 unless a right to relief exists by virtue of some other statutory provision,” but it is not clear to me that the Court accepted this proposition. The Court held (my emphasis):

Under the Patent Act, the official who must first decide whether a patent may issue to an applicant is the Commissioner. The Act does not empower the Courts to give him directions on the decision he should reach; it is only if he is alleged to have made a wrong decision that, under the statute, the Courts may be seized of the matter. In my view, it would be contrary to the scheme of the Patent Act for the Courts to assume the power, in a case like the present one, to make the declaration sought.

This could be read as saying that the Act provided for a process by which a party may apply for a patent, and to decide who is entitled to the grant of a patent in the case of a dispute, and that specific procedure displaces any general jurisdiction granted by s 20(2). This suggests a distinction between Kellogg and Cellcor on the basis that there is a specific procedure for determining a conflict between inventors, but there is no specific procedure for determining ownership, for example as between an employer and employee. So, in Comstock Canada v Electec Ltd., (1991) 38 CPR(3d) 29, 49-50 (FCTD), the Federal Court held it had jurisdiction under s 20(2) to consider a dispute as to inventorship in respect of a granted patent. Section 52, which allows the FC to order an entry in the patent records to be varied, was invoked purely as remedial authority. (Though note that Muldoon J in Comstock relied on McCracken v Watson, [1932] Ex CR 83, 88, which actually adopts a restrictive view of s 20(2)). In any event, if Comstock was rightly decided, it seems to me that on the same basis, s 20(2) gives concurrent jurisdiction to the FC to determine who, as between the employer and employer is entitled to apply for the Canadian patent, subject to the requirement under the second branch of the ITO test that the question of inventorship is essential to the disposition of the issues.

But these distinctions may be too fine. In Kellogg the underlying issue was the employer / employee relationship, while in Cellcor it was misappropriation of confidential information, both leading to dispute over ownership of a potential Canadian patent application. It strikes me that there is a real distinction between disputed inventorship and ownership, because “inventor” is a concept found in the Patent Act, and inventorship must therefore be defined under that Act, whereas ownership disputes based on contracts, confidential information, or the employer / employee relationship, turn on the proper law related to the dispute. But by the same token, I don’t see any principled distinction between a dispute based on confidential information and one turning on the employer / employee relationship,. If the Federal Court has jurisdiction in the one type of case, I would think it should also have it in the other type, and vice versa.

If Kellogg and Cellcor cannot be reconciled, perhaps it was Cellcor which was wrongly decided. On the other hand, rather than straining to reconcile Kellogg with subsequent cases, maybe it is better to acknowledge, with Kane J [69], that the law has moved on. While Kellogg is SCC authority, it is long in the tooth. Old authority is not necessarily bad authority; indeed, the authority of a case may grow with time, as it is regularly cited. But that is not the case here; while Kellogg itself is regularly cited, as Kane J noted [61], it is cited for the proposition that the Federal Court may resolve “incidental” contractual issues, and not for its holding on s 20(2). Moreover, the holding on s 20(2) was in the alternative, though perhaps not strictly obiter.

In any event, regardless of the theoretically correct interpretation of s 20(2), Kane J’s review of the case law indicates that the Federal Court has generally been reluctant to accept concurrent jurisdiction. It not clear to me why this should be. No doubt there are some cases in which the Federal Court would have concurrent jurisdiction under the Kellogg reading of s 20(2), yet where another court would be more suitable, but in such cases the Federal Court could decline to exercise its jurisdiction on the basis of forum non conveniens.

Jurisdiction of the Federal Court and IP Related Contracts

SALT Canada Inc v Baker 2016 FC 830 Boswell J
            2,222,058

Section 52 of the Act gives the Federal Court “jurisdiction. . . to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” SALT Canada brought an application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent. Boswell J dismissed the application for lack of jurisdiction. In so doing Boswell J reviewed a number of cases and provided a helpful and clear statement of the law related to the jurisdiction of the FC under s 52. However, he did not discuss Kellogg Co v Kellogg [1941] SCR 242, presumably because it was not cited to him. This omission is unfortunate, as that case might be taken to suggest a different result, and it would have been interesting to see how it would have affected his reasoning. Boswell J also emphasized the need for the court which does have jurisdiction hear the dispute to take into account s 51 of the Act, which establishes a priority scheme for patent title based on registration. But that same point, looked at from the other direction, suggests that the FC might have jurisdiction to begin with. So, while Boswell J’s holding initially appears to be a straightforward application of existing law, a closer look suggests there may be a reasonable argument for a broader interpretation of the Court’s jurisdiction.

The case involved two conflicting assignments of rights in the ‘058 patent from the inventor, Dr Markels. The first was a complex series of assignments which ultimately led to the Respondent, Baker. Baker registered his ownership with the Patent Office. Some of the assignments in this series included provisions requiring the ‘058 patent to be reassigned to Markels if certain conditions were breached. Apparently believing that the conditions had indeed been breached, in 2015 Markels assigned title to the Applicant, SALT. Markels also prepared a reassignment from Baker to Markels, which was, however, never executed by Baker. SALT sought to have its ownership registered, but the Patent Office refused on the basis that the assignment was not executed by Baker, the registered owner [3]-[9].

SALT then brought this application for a declaration under s 52 that the register be varied to list SALT as the owner of the ‘058 patent (as well as other additional and alternative relief). A key substantive question related to the interpretation of the various agreements, and whether the conditions in the first series of assignments had been breached, such that Markels was entitled to a reassignment [24].