February 24, 2022
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In Kobold Corporation v. NCS Multistage Inc., 2021 FC 1437, the Federal Court considered the scope of the new prior use defence set out in section 56 of the Patent Act (the “Act”). This was the first time the Court was tasked with interpreting the amendments to section 56 of the Act since they came into force in 2018.
Factual Background
Kobold Corporation and NCS Multistage Inc. both provide fracking equipment for the oil and gas industry. Kobold alleged that four of NCS’s tools used for oil and gas extraction infringed its patent, Canadian Letters Patent No. 2,919,561 (the “561 Patent”). The inventive concept of the ‘561 Patent is a new way of equalizing pressure in the bottomhole assembly (a tool used to prepare a well for production) by pulling on the sealing element.
NCS asserted that it had been using equivalent technology called the “Blue Bullet” with its own tools since 2012 — three years before the 2015 claim date of Kobold’s patent. NCS claimed that its prior and continuing use of the Blue Bullet was a complete defence to any patent infringement claim, despite the fact that the original 2012 Blue Bullet had been modified over time.
NCS sought to have Kobold’s action dismissed by way of summary judgment motion.
The Summary Judgment Motion
NCS’s success on the motion was divided. The Court granted summary judgment with respect to some, but not at all, of the issues raised.
The Court held that the proper interpretation of section 56 of the Act was a discrete enough question of law that it could be resolved in a summary fashion without reference to any of the factual issues at play. The Court also determined that claims construction with respect to the 561 Patent was an appropriate matter for summary judgment.
The Court found that there was insufficient evidence to make a determination regarding all of Kobold’s infringement allegations, however, and directed that those remaining issues proceed to trial.
Interpreting Section 56 of the Act
Section 56 of the Act, as it currently reads, came into effect on December 13, 2018. The new section differs from the old section in three main ways:
The first difference is the right to continue manufacturing, using or selling as the prior user did before the patent (i.e., the right to commit an “act” that would otherwise constitute infringement), whereas the old section merely covered the sale or use of a physical product.
Second, while the old section limited protection to the sale or use of the “specific” physical manifestation of the invention, commission of “the same act” is now protected.
Third, the new section grants protection not only to persons who committed an infringing act prior to the claim date, but also to those who “made serious and effective preparations to commit such an act.”
In view of the foregoing, the Court established a three-part test for considering a defence under the new section 56:
[113] First, one must determine whether the acts being performed before and after the claim date are identical (other than wholly non-functional changes, such as colour). If they are, then there is no need to consider infringement, as subsection 56(1) would always provide a defence to any potential infringement.
[114] Second, if the acts are not identical, one must determine whether the acts infringe the patent, and if they do, which claims. If the post-claim acts do not infringe the patent, then there is no “otherwise infringing acts” and therefore no need to rely on subsection 56(1). If the pre-claim acts do not infringe the patent, subsection 56(1) cannot apply. If the post-claim date acts infringe a particular claim of the patent that the pre-claim date acts do not, subsection 56(1) cannot apply.
[115] Finally, if the pre- and post-claim date acts are not identical but only infringe the same claims, then one must determine whether the changes relate to the inventive concept of the patent. If they do not, then subsection 56(1) will provide a defence.
The Court held that only in the clearest of cases (i.e., where the acts before the claim date are identical to those after the claim date) would there be no need to construe the claims of the patent or conduct an infringement analysis. The Court indicated that such cases would be particularly well suited to summary judgment.
Construing the Claims of the ‘561 Patent
The Court then proceeded to construe the asserted claims of the 561 Patent based on the evidence put forward by Kobold’s expert witness, Dr. Fleckenstein, which narrowed the issues left to be determined at trial.
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Authors: Em Windrim and Larissa Fulop