Inventor Fails to Extract a Win on Appeal Against Oil Producer MEG

Inventor Fails to Extract a Win on Appeal Against Oil Producer MEG

Photograph of a silhouette of a pumpjack in an oil field.

Jason Swist and Crude Solutions Ltd. v. MEG Energy Corp.[i]

Another chapter in the almost decade-long patent infringement dispute between Edmonton-based inventor Jason Swist and his company, Crude Solutions Ltd. (collectively, “Swist”) and oil sands producer MEG Energy (“MEG’) was handed down by the Federal Court of Appeal of Canada (the “FCA”) on June 20, 2022.

In dismissing Swist’s appeal, the FCA refused to interfere with the judgment of Justice Simon Fothergill of the Federal Court of Canada (the “FC”) which held that MEG did not infringe Swist’s oil extraction patent rights and invalidated several claims of said patent.

Background

The Canadian and U.S. patent offices have experienced a proliferation of oil and gas filings in the past 10 years due to growing innovation within the industry.  More patents mean more patent infringement suits.  The patent at issue in this case, entitled “Pressure Assisted Oil Recover” (the “‘746 Patent”)[ii] describes a method of extracting oil from oil sands.  Because oil contained in oil sands (or bitumen) is too thick to be pumped out of the ground directly, several extraction techniques have been adopted.  One such technique is steam assisted gravity drainage (“SAGD”).  SAGD methods involve the injection of steam into a horizontal “injector well” positioned above and parallel to a horizontal “producer well”. The steam heats oil trapped in the formation surrounding the well pair, allowing the oil to flow into the producer well and the mixture to be pumped to the surface.

Many alterations have been made to the standard SAGD method. The ‘746 Patent was one such variation and uses a third injector well between the adjacent SAGD well pairs to increase mobility.  Swist first applied for a patent in Canada in May 2011, and the ‘746 Patent was issued in Canada in 2013.  MEG uses two methods to extract oil at its Fort McMurray site, both of which similarly require an infill well to be drilled at a steam-based oilsands project, and once drilled, injected with steam.[iii]  Patents were granted to MEG based on these techniques in years following the issuance of the ‘746 patent.

Swist sued MEG claiming that MEG’s use of its patented inventions infringed claims 1 to 6 and 8 of the ‘746 Patent.  MEG counterclaimed that claims 1 to 8 of the ‘746 Patent were invalid for obviousness, anticipation, inutility and overbreadth.[iv]  Relying largely on facts and principles of claim construction, the FC dismissed Swist’s action, finding that the ‘746 Patent was not infringed by MEG and was invalid for anticipation and lack of utility.

Analysis

Swist appealed, arguing that the FC erred in its analysis, particularly with respect to its interpretation of the ‘746 Patent, its failure to find infringement and its decision to invalidate claims 1–8 of the ‘746 Patent.  Swist also argued that the FCA was permitted to re-decide the issues that Swist claimed the FC had erred, and that the FCA should either do so or remit the matter back to the FC for redetermination.[v]

Ultimately, the FCA refused to overturn the FC’s holdings and awarded costs to MEG.  In its reasons, the FAC discussed several important principles of litigation (particularly those arising in appellate courts).

Did the Federal Court Properly Construe the Claims?

On appeal, Swist submitted that the FC did not interpret (or “construe”) all the claims of the ‘746 Patent.[vi]  More specifically, Swist was concerned that Justice Fothergill had not considered claims 2–8, which led to a narrow construction of claim 1 and consequently, an incorrect conclusion on infringement.

The FCA disagreed, holding that the FC does not always have to construe all of the claims it invalidates.  Citing Corlac Inc. v. Weatherford Canada Ltd.[vii], the FCA explained that because the FC had determined that the validity of the dependent claims rested on the inventiveness of the independent claim, it did not have to construe elements of dependent claims not in dispute.[viii]  Based on the record, the FCA was satisfied that the FC had addressed the issues in dispute.[ix]

Did the Federal Court Err in its Application of Anticipation?

In Canadian patent law, anticipation refers to the prior invention or public disclosure of the claimed invention by another, or the inventor’s own disclosure of the claimed invention prior to the inventor’s application for a patent.

Swist submitted that Justice Fothergill had erred in its anticipation analysis, both in applying the two-part test from Apotex Inc. v. Sanofi-Synthelabo Canada Inc. (the “Sanofi test”)[x] [xi] and in failing to disclose the “special advantage” of the invention[xii].  The latter argument stemmed from Swist’s identification of the ‘746 patent as a selection patent (i.e., a patent for a selection of elements from a larger class of elements described in a prior patent).

Referencing principles from Sanofi, the FCA held that Swist’s re-analysis of the FC’s application of the test does not disclose any palpable and overriding error and as such, there was no basis on which for the FCA to interfere.[xiii]  In addition, there was no requirement that the special advantage of the invention be disclosed as the argument had not been raised before the court of first instance.  The FCA reaffirmed that it is not the role of an appellate court to make original factual or mixed factual legal findings, especially on questions raised for the first time on appeal.[xiv]

Commentary

The principles emerging from this decision may be helpful for future patent litigants either bringing patent suits or defending against them.  The long-standing dispute between Swist and MEG also demonstrates the value of intellectual property in unconventional oil and gas extraction, which has become increasingly reliant on new technology over the past decade.

Please contact a patent lawyer or patent agent at PCK Intellectual Property for more information on enforcing your patent rights.


Footnotes

[i] 2022 FCA 118 [Swist 2022].

[ii] Canadian Patent No. 2,800,746.

[iii] Canadian Patent Nos. 2,776,704 and 2,912,159.

[iv] 2021 FC 10.

[v] Swist 2022, supra note 1 at para 3.

[vi] Ibid at para 16.

[vii] 2011 FCA 228.

[viii] Ibid at para 22.

[ix] Ibid at para 30.

[x] 2008 SCC 61.

[xi] Swist 2022, supra note 1 at para 59.

[xii] Ibid at para 69.

[xiii] Ibid at para 59.

[xiv] Ibid at para 75.


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Photograph of a silhouette of a pumpjack in an oil field.