Exploring The Boundaries Of Patent Protection: Federal Court Of Appeal Holds That Marketing Is Not (2024)

07 May 2024

by Sana Halwani , Jordana Sanft and Andrew Moeser

Lenczner Slaght LLP

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The Federal Court of Appeal's decision in Steelhead v ARC upholds JusticeManson's summary trial decision finding no infringementby ARC Resources of Steelhead's 085 Patent. In summary, the FCAheld that the marketing of an apparatus that – if built– would infringe the 085 Patent did not constitute"use" (or "exploiter" in the French version)under section 42 of the Patent Act, and therefore could notbe infringement.

Since the Supreme Court of Canada's decision in Monsanto v Schmeiser, the monopolyover "use" of a patented invention has been viewedexpansively because of the SCC's statements that:

"Use" or "exploiter", in their ordinarydictionary meaning, denote utilization with a view to production oradvantage.
The basic principle in determining whether the defendant has"used" a patented invention is whether the inventor hasbeen deprived, in whole or in part, directly or indirectly, of thefull enjoyment of the monopoly conferred by the patent.
If there is a commercial benefit to be derived from theinvention, it belongs to the patent holder.

Those words from the SCC have frequently been interpreted assuggesting a flexible approach to what acts constitute patentinfringement. With its Steelhead decision, the FCA has puta limit on that flexibility.

Discussion

Canadian Patent No. 3,027,085, at issue in this case, relates toapparatus, methods, and systems for near-shore or at-shoreliquefaction of natural gas, and claims a near-shore or at-shorefloating LNG (FLNG) facility.

The appellants alleged that the respondents infringed the 085Patent through the design, development, and marketing of an LNGproject to potential investors and others that included a designfor an LNG facility that, if built, would comprise the essentialelements of the invention claimed in the 085 Patent. Therespondents had commissioned a preliminary Front End EngineeringDesign ("pre-FEED") study for an LNG facility. Thepre-FEED study contained engineering drawings, specifications andcost estimates, and a high-level summary of the pre-FEED study wasshown to potential investors. The only question of fact and lawbefore the Court was whether the respondents had "used"the invention claimed in the 085 Patent.

The parties have a fairly complex history (e.g., Justice Mansonseparately decided an impeachment counterclaimchallenging the 085 Patent, and the parties are litigating causesof action other than patent infringement in a parallel actionbefore the BC Supreme Court). However, for the purposes of thesummary trial, the respondents conceded that the 085 Patent wasvalid and that, had the FLNG facility described in the pre-FEEDstudy been built, it would have included all the essential elementsof the 085 Patent (i.e., it was agreed that if built itwould infringe).

The appellants' argument in brief was that by sharing thepre-FEED study with third parties as part of their efforts topromote their FLNG project, the respondents "used" theappellants' invention by obtaining a commercial advantage orbenefit that belonged to the appellants by virtue of the monopolygranted by the 085 Patent. This argument was rejected by both theFC and FCA.

The FCA held that the Supreme Court's approach inMonsanto indicates that what is "used" undersection 42 is the claimed invention. In the case of a patent for anapparatus – such as the 085 Patent here – the claimedinvention is the apparatus described in the claims, not its goal,purpose or advantage, however these might be defined. The FCArejected the argument of the appellants that the French phrase insection 42 "exploiter l'objet to l'invention"(which could arguably be translated to "exploit the object ofthe invention") means that section 42 of the PatentAct grants a patentee the exclusive right, privilege andliberty of using the goal, purpose or advantage of an invention forcommercial benefit. It is the invention itself that must be used(i.e., the apparatus or method) for infringement to beestablished, and not only the goal or purpose.

The FCA rejected the notion that an invention over an apparatuscould be "used" under section 42 without that apparatusexisting. The FCA also noted that a quia timet actioncould be brought in situations where a patented invention had notyet been made but was imminently going to be made, which was not aclaim being made here.

With respect to the SCC's discussion of commercial benefitin Schmeiser, the FCA stated: "The question is notwhether commercial benefit is relevant to the analysis. Thequestion is whether a commercial benefit is realized in the contextof a defendant's commercial activities involving thepatented object" [emphasis in original].

The FCA ultimately rejected the appellants' argument thatpatent protection should extend to an invention's goal,purpose, or advantage:

Under their proposed interpretation, section 42 would preventcompetitors from relying on the inventive solutions laid out in apatent disclosure as a proof of concept to show that their ownparticular product idea or project plan is achievable in order togenerate business interest or secure financial support to develop,by designing around the patent, a non-infringing alternative.Finding a different way to accomplish the benefit of an inventionby designing around a patent does not constitute infringement sincethe protection of the patent "lies not in the identificationof a desirable result but in teaching one particular means toachieve it" [citations omitted]. The interpretive outcomesought by the appellants would frustrate, not enforce, the patentbargain.

Finally, the FCA noted that while the Patent Act couldnot protect from the activities that the appellants were seeking toprevent, other forms of intellectual property including copyright andmoral rights, or the enforcement of any non-disclosure agreementsbetween the parties respecting the treatment and use ofconfidential information may provide that protection.

Takeaways

In terms of takeaways, while the FCA was at pains to say that itwas being consistent with the decision of the SCC inSchmeiser, this decision may be viewed as narrowing thewide ambit of protection that Schmeiser was previouslyunderstood to have defined.

Further, this decision does not appear to address whether thesame impugned marketing activities would constitute "sellingit to others to be used." In particular, this case appears tostill leave open the question of whether "selling toothers" under section 42 of the Patent Act includesan offer for sale.

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