Infringement by Common Design: New Liability Under Canadian Patent Law?
March 27, 2018
Unlike in some other jurisdictions, Canada’s patent legislation (the Patent Act) does not explicitly specify all of the circumstances under which a patent may be held to be infringed. It has therefore fallen to Canadian courts to establish the principles governing the issue of infringement. Infringement by common design has not been, to date, recognized in Canada. However, two recent decisions of the Federal Court of Canada have addressed allegations of infringement by common design and may open the door to a finding of liability on this basis.
WHAT IS INFRINGEMENT?
In Canada, infringement is understood to mean doing anything within the exclusive rights of the patentee, without authorization. Section 42 of the Patent Act provides that a patentee has the exclusive right, privilege and liberty of making, constructing and using the invention in Canada and selling it to others to be used.
Patent infringement in Canada has traditionally been limited to direct infringement or the common law tort of inducing infringement, whereby someone induces another to conduct the direct infringement. The Federal Court of Appeal, in Nycomed Canada Inc. v. Teva Canada Limited (Nycomed), confirmed that there is no cause of action in Canada for “contributory infringement” (partial responsibility for infringement that falls short of inducing infringement). It has been argued that Nycomed goes further and confirms that Canadian law only recognizes direct infringement and infringement by inducement.
WHAT IS INFRINGEMENT BY COMMON DESIGN?
The theory behind “infringement by common design” is that multiple parties may act together, as joint tortfeasors, to infringe a patent. The actions of any one actor may not amount to direct infringement, but the collective acts of the group could result in an infringement of one or more claims of the patent.
CANADIAN COURTS CONSIDER INFRINGEMENT BY COMMON DESIGN
The Federal Court of Canada has previously contemplated the possibility of joint liability for patent infringement. In Bauer Hockey Corp. v Easton Sports Canada Inc., Justice Gauthier cited, in obiter, the earlier U.K. case of Unilever plc v. Gillette (UK) Ltd., where the English Court of Appeal said that multiple parties could infringe by common design even if they only had a “tacit agreement” to do any act that proved to be an infringement. Justice Gauthier left it for future cases to decide whether this principle should be applied to patent cases in Canada. However, that case pre-dates Nycomed.
In Packers Plus Energy Services Inc. v. Essential Energy Services Ltd. (Essential Energy) and Georgetown Rail Equipment Company v. Rail Radar Inc. (Tetra Tech), the Federal Court of Canada had the opportunity to consider whether to recognize the tort of infringement by common design. Neither case resulted in a finding of infringement by common design, but both judgments left open the possibility that the actions of multiple cooperating parties could be the basis for patent infringement liability in the future.
In Essential Energy, the court heard a consolidation of four patent infringement proceedings that related to Packers Plus Energy Services Inc.’s (Packers Plus) patent for a method for using a horizontal wellbore completion system that was widely employed in the oil and gas industry. The system helps to control the flow of high pressure liquids into a wellbore as part of the hydraulic fracturing process. Packers Plus alleged that several competitors, including Essential Energy Services Ltd. (Essential Energy), were selling wellbore completion systems that infringed on several of the claims in its patent.
Justice O’Reilly concluded that Essential Energy’s completion system did not directly infringe the claims of the Packers Plus patent because Essential Energy did not itself engage in fracturing, and merely supplies equipment to pumping companies. In other words, Essential Energy had not itself practiced the method in the patent. Justice O’Reilly also found that Essential Energy had not induced any of its customers to infringe the claims of the patent.
As an alternative basis for liability, Packers Plus argued that Essential Energy had acted in concert with other companies in the fracking industry to jointly infringe the patent. Justice O’Reilly was not persuaded by the theory of infringement by common design, and said that there was no authority in Canadian law to support the cause of action. Justice O’Reilly did hold that multiple tortfeasors could be held jointly liable if they entered into an agreement to commit a tortious act (such as patent infringement). However, in this case, he made a factual finding that there was no evidence that any such agreement had been entered into between Essential Energy and any other company.
Tetra Tech was decided shortly after Essential Energy and was a patent infringement case involving a system and method for inspecting railroad tracks. The plaintiff, Georgetown Rail Equipment Company (Georgetown Rail), alleged that Tetra Tech Inc. (Tetra Tech) had infringed two of its patents when Tetra Tech sold a competing rail inspection system to Canadian National Railway (CN). As an alternative to direct infringement, Georgetown Rail also alleged that Tetra Tech and CN were liable for infringement by common design because Tetra Tech installed and serviced the rail inspection system, which CN used to collect data.
Justice Fothergill considered the Essential Energy decision and cited Justice O’Reilly’s statement that parties who enter into an agreement to commit a tortious act in concert can be held jointly liable. Justice Forthergill held that three commercial agreements between Tetra Tech and CN (an equipment agreement, a licence agreement, and a service agreement) could be enough to support a claim for infringement by common design. Ultimately, however, the evidence supported a finding of direct infringement, so Justice Fothergill did not fully consider the issue of infringement by common design.
Blakes successfully represented Essential Energy in this matter.
The Future of Infringement by Common Design in Canada
Joint liability of multiple parties who act in concert to commit a tortious act is well established in Canadian law. The novelty of Essential Energy and Tetra Tech is that so far the principle of joint liability has not been applied in the context of patent infringement. The Federal Court of Appeal in Beloit Canada Ltée. v. Valmet-Dominion Inc. made it clear that merely selling a non-infringing product that could be used to infringe a patent is not itself infringement, even when the seller knows that the buyer intends to use the product to infringe the patent. This basic rule of Canadian patent law limits the scope of joint tortfeasor liability in the context of patent infringement.
The reasons of Justices O’Reilly and Fothergill in Essential Energy and Tetra Tech appear to at least open the door for adopting the common law tort of infringement by common design in Canada. Although the facts in Essential Energy did not support it, Justice O’Reilly agreed that where parties enter into an agreement to commit a tortious act, such as patent infringement, they can be held jointly liable. Justice Fothergill adopted this reasoning in Tetra Tech, and if it were not for the fact that the defendants were liable for direct infringement, the facts may have supported a claim for infringement by common design.
It is still true that Canadian courts have never imposed liability on multiple parties as joint tortfeasors in patent infringement, but the Federal Court decisions in Essential Energy and Tetra Tech appear to be inching Canadian patent law closer to the situation in other jurisdictions.
For further information, please contact:
Antonio Turco 416-863-5261
or any other member of our Intellectual Property group.
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