Kobold Corporation v. NCS Multistage Inc., 2021 FC 1437

On January 7, 2022, the Federal Court of Canada (“the Court”) released the public judgement and reasons in the case of Kobold Corporation v. NCS Multistage Inc., 2021 FC 1437 (“Kobold v. NCS”). This summary judgement motion dealt with various matters, including consideration of the prior use defence under s. 56 of the Patent Act, RSC 1985, c P-4 (“Patent Act”, “the Act”), which will be the focus of this post. This was the first judicial consideration to the prior use defence since significant amendments were made to the Act in 2018, as well as the first occasion the Court had to consider it as a defence to a patent infringement action. The prior use defence is an important consideration in terms of business carrying on their activities pre- and post-grant of a patent that they may have unknowingly infringed.

Background

Kobold and NCS are both providers of equipment for use in the oil and gas industry for hydraulic fracturing, commonly known as fracking. In this matter, Kobold purported that four of NCS’s packer assemblies used in fracking infringe Kobold’s Canadian Patent No. 2,919,561 (the ’561 Patent).

Patent lawyers for NCS requested that the court consider the defence of prior use under s. 56 of the Act, in order to dismiss the infringement action by way of summary judgement motion. While it was decided by the court that the actual application of the defence to the case cannot be decided on summary judgement due to the lack of evidence before the court, Justice Zinn stated that given that the proper interpretation of s. 56 of the Act is a discrete question of law that may be resolved without factual issues at play, it is suitable for summary judgement.

S. 56 of the Patent Act, as it currently stands, grants more substantial rights to the potential infringer than the previous version. The previous version of the provision referenced a specific right to use and sell a physical product, whereas the current version grants the right to perform the “same act”, meaning any act that would have established infringement. Further, the previous version did not grant protection to patented methods, and only applied to the right to use and sell a physical invention. The current version provides a prior user with the right to commit an “act” which would have constituted infringement. While the previous version protected a person who committed infringement prior to the claim date, the current version also protects a person who made “serious and effective preparations” to commit infringement.

Analysis

Justice Zinn reached the following determinations regarding the scope of the prior use defence under s. 56 of the act:

• the word “same” in subsection 56(1) requires that the acts pre- and post-claim date must be identical. This is evident through the interpretation of subsections 56(6) and 56(9), where a third party may be able to use the prior use defence on the standard of “substantially the same”. Parliament’s use of “substantially the same” in the case of third-party prior users while using the phrase “same” when dealing with direct prior users reflects their intention to apply different standards.
• an “act” refers to categories of infringing acts and should be interpreted in light of section 42 of the Patent Act, which includes “making, constructing and using the invention and selling it to others to be used.”, thus covering a wider set of circumstances under which acts are protected under subsection 56 (1).

Justice Zinn further went on to lay out a test for using the defence of prior use under subsection 56(1). The first determination should be whether the acts being performed before and after the claim date are identical. In the case that they are in fact identical, the defence will always be available to any potential infringement.

If the acts are not identical, the second determination would be whether the acts infringe the patent, and if they do, the specific claims being infringed must be determined. If the post-claim date acts do not infringe the patent, then there are no infringing acts, and no need to rely on subsection 56(1). Further, subsection 56(1) cannot apply if the pre-claim date acts do not infringe the patent. If the post-claim date acts infringe a claim of the patent that the pre-claim date acts did not, there is no defence applicable under subsection 56(1).

The final determination is if the pre-claim date and post-claim date acts are not identical yet infringe the same claims, the analysis must rest on whether the changes relate to the inventive concept of the patent. If the changes do not, then there is an applicable defence under subsection 56(1).

Commentary

Summary judgement was granted by Justice Zinn with respect to the interpretation of section 56 of the Act and the construction of the claims in the ‘561 Patent, but it was not granted with respect to the infringement issue and the application of section 56(1) to the matter, as further evidence was needed to make a decision.

With this being the first interpretation and analysis of section 56 by the federal court, this decision sets the stage for future interpretation on the defence of prior use as it relates to infringement in future cases. This decision is particularly valuable for providing protection to businesses to allow them to carry on their previous activities when they become aware that they have been unknowingly infringing on a patent.

For more information on the prior use defence, please contact a professional at PCK Intellectual Property.

PCK IP is one of North America’s leading full-service intellectual property firms with offices in Canada and the United States. The firm represents large multinational companies, scaling mid-size companies, and funded innovative start-up entities. PCK IP professionals include seasoned patent and trademark agents, engineers, scientists, biochemists and IP lawyers having experience across a broad range of industries and technologies. Contact us today.

The contents of this article are provided for general information purposes only and do not constitute legal or other professional advice of any kind.