• Infringement and Validity of Automatic Drilling System Patent  Determined
  • January 13, 2014
  • Law Firm: Borden Ladner Gervais LLP - Toronto Office
  • VarcoCanada Limited v. Pason Systems Corp., 2013 FC 750

    This is a patent infringement action. The patent in issue relates to an automatic drilling system. The Court first addressed and rejected the attacks as to credibility made by the Defendants in respect of the inventor. After setting out the development of the invention, the Court construed the claims of the patent, and determined that the Defendants infringed the asserted claims. The Court also concluded that the Defendants are liable for inducing infringement by others. With respect to infringement by exportation, the Court concluded that the method claims are outside the Court’s jurisdiction because the evidence established that the parts are manufactured in Canada but shipped in unassembled form, but the product claim is infringed because the sale of the infringing product occurs in Canada.

    The Defendants asserted invalidity of the patent on the basis of anticipation, obviousness, inutility, overbreadth, and deemed abandonment/bad faith. The Court found that the prior art cited by the Defendants did not meet the test of either disclosure or enablement for the purposes of anticipation. The Defendants also alleged anticipation by prior use. In particular, the inventor had no ability to test the prototype developed and used a rig owned by a third party for testing. The Court noted that the Defendants have the burden to prove that there was disclosure of the invention that was sufficiently disclosing for the invention to be practiced. The Court found that the Defendants did not meet this burden. The Court noted that there was no evidence of an unconditional sale of the prototype and experimental use is not prior use. Furthermore, the Defendants’ witnesses conceded that testing was necessary to determine if the invention would work. While there was no confidentiality agreement, and no evidence at the trial regarding industry practice, the actions of the inventor indicate an intention to keep the product confidential.

    The Court found that the claims were not obvious or overly broad. In terms of inutility, the Court noted “[g]iven the evidence as to the operation of the Wildcat and the Pason AutoDriller, and the finding of infringement, the challenge of “inutility” has a false ring.” Part of the inutility challenge relates to use of the terms “increase” and “decrease” in pressure in claims 9 and 10. In particular, “increased” was used when “decreased” should have been used, and vice versa. In response to an ex parte application to the Commissioner of Patents (the“Commissioner”), an amendment was permitted to these claims. The Court in a separate proceeding granted judicial review of the Commissioner’s decision. In addressing the merits of the allegation of inutility, the Court in the within case concluded that a person skilled in the art would recognize the error and would not be confused or misled, and therefore the allegation of inutility failed. Finally, the Court concluded that the patent was not invalid on the basis of abandonment.

    In terms of remedies, the Court noted that the Plaintiffs established a basis for the equitable relief of an accounting of profits, and no inequitable conduct on the part of the Plaintiffs that would prevent the award of this relief. The Court concluded that the remedy of disgorgement of profits is the appropriate remedy in the circumstances of the case, and awarded approximately $53 million to the Plaintiffs. The Court also calculated lost profits/ reasonable royalty as an alternative, as well as a reasonable royalty amount as a further alternative. The Plaintiffs requested exemplary/punitive damages, which the Court indicated would have been awarded if damages had been awarded and not the disgorgement of profits remedy “because of the deliberate infringement carried out in the face of advice from Leier and recklessness as to the consequences.” Costs were awarded pursuant to Column V of the Tariff.