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Concurrent Jurisdiction for Patent Infringement Actions

The Facts

Canadian Energy Services L.P. and Canadian Energy Services Inc. (collectively, Canadian Energy) are successors in interest to the party who filed Canadian Patent No 2,624,834 (the 834 patent), as owner. In Alberta, Canadian Energy sued Secure Energy Services Inc (Secure Energy) and Secure Energy (Drilling Services) Inc. (Secure Drilling),( collectively Secure) in 2018 alleging patent infringement and seeking various types of relief, including a declaration of patent infringement, declaration of ownership, injunctive relief, damages, disgorgement, and imposition of a constructive trust. Secure Energy Services Inc. v. Canadian Energy Services Inc.2022 ABCA 200


Secure Energy filed a statement of defence and Secure Drilling filed a counterclaim against Canadian Energy and Mr. Ewanek in 2018, alleging that it was the rightful owner of the 834 patent and that Canadian Energy held the 834 patent in a constructive trust for the benefit of Secure Drilling. Secure Drilling was also seeking various types of relief, including a declaration of ownership, declaration of patent infringement, damages, and disgorgement.

The parties are direct competitors as service and chemical providers in the Canadian oil and gas industry.

Canadian Energy commenced its action in Alberta to resolve the ownership issue as it appeared, at least initially, that the dispute centered on interpreting an employment agreement and/or release. However, the law changed while the action was outstanding. Previously it was questionable whether the Federal Court had any jurisdiction to interpreting agreements and other commercial instruments concerning the ownership of a patent under s. 52. While the action was outstanding the Federal Court of Appeal determined that the Federal Court did have jurisdiction to interpreting agreements and other commercial instruments under s. 52.

Secure Drilling filed an application under s. 52 of the Patent Act in Federal Court for declarations that Mr. Levey was the sole inventor of the 834 patent and a related patent (the 339 patent). On July 13, 2021, a Prothonotary, acting in his capacity as the case management judge, considered this outstanding appeal in Alberta regarding the 834 patent, and ordered that only the application respecting the 339 patent would proceed. Judgment was subsequently granted in favour of Secure declaring Mr. Levey to be the sole inventor of the 339 patent with a direction that the records in the Patent Office be corrected.

Canadian Energy filed an application seeking summary judgment and, in the alternative, an order striking Secure’s statement of defence and counterclaim as having no merit.

Secure filed an application seeking to sever and resolve the issue of inventorship and ownership of the 834 patent first, and pending the resolution of inventorship, to stay all other issues and for other procedural relief.


The Chambers Judge’s Determination

The Judge was satisfied that Secure could not maintain a claim to co-ownership of the 834 patent by virtue of Mr. Levey’s inventorship because Canada is a “first to file” jurisdiction and Canadian Energy’s predecessor was the first to file the application for the 834 patent

The Judge was satisfied that Secure’s claim for breach of confidence was filed out of time. First, he was satisfied that Secure’s predecessor had actual knowledge in 2005 of the alleged misappropriation of confidential information upon which the claim to ownership of the 834 patent was founded. Second, the chambers judge was satisfied that, in the alternative, Secure’s predecessor could have, through exercising reasonable diligence, discovered the alleged misappropriation of confidential information when the application for the 834 patent was published in April 2007.

The Judge was also satisfied that Secure’s claim for breach of confidence was barred by a release. The parties entered the release after issuing demand letters to Mr. Ewanek alleging misappropriation of confidential information and after the application for the 834 patent was made public.


The Appeal

Secure appealed to the Alberta Court of Appeal. It was uncontested that the provincial superior courts have concurrent jurisdiction to hear disputes over infringement of patent cases, which would naturally involve disputes about ownership and to determine as between the parties, whether the patent in suit is invalid.

The Court said even if Secure establishes it as the rightful owner of Patent 834, that does not end the matter relative to the Alberta action. While a successful s 52 Patent Act application may assist Secure moving forward, it does not assist in the Alberta action retrospectively. The proceedings brought in Alberta are enforcement proceedings and any defences a party might have apply to that action. Available defences include that the claim is statute barred under the Limitations Act, or otherwise precluded because the current lawsuit is governed by the terms of a settlement release. Secure cannot assert a title or an entitlement that was released or is statute barred. In that way, the case is analogous to any other case where a plaintiff has a valid claim but is prevented from enforcing that claim because of the expiry of a limitation period or has released an otherwise valid claim.

The dissenting judge disagreed. First, inventorship is key under the Patent Act; only inventors (or assignees of the inventors) can file applications for patents. While the term “inventor” is not defined, in general terms, an inventor is the person or persons who conceived of the new and useful art, process, machine, manufacture, or composition of matter, or any new and useful improvement.

Under s. 52 of the Patent Act, the Federal Court has exclusive jurisdiction to vary or expunge any entry in the record of the Patent Office. This includes changing the named inventors to identify the correct inventors. Inventorship is the “root” of title to a patent. The majority emphasized that s. 52 of the Patent Act is a rectification provision. The section was enacted to enable the rectification by the Federal Court of the records in the Patent Office relating to title so “the party or parties actually entitled to the grant ... might have their rights properly recorded.”

The Chambers Judge erred when he relied on “first to file” as a sufficient basis to deal with the issue of inventorship. As set out above, the word “title” in s. 52 of the Patent Act includes inventorship, which is the “root” of title. Conflating the two independent issues of “first to file” and inventorship resulted in a failure to identify the threshold question. Only after determining inventorship could the Chambers Judge deal with the remaining issues, such as the limitation period, the release signed by Mr. Ewanek, and the proper parties.


Comment

As the Court observed while patent infringement actions are commonly brought as a practical matter in the Federal Court, provincial superior courts have concurrent jurisdiction. The Federal Court is given exclusive original jurisdiction regarding actions to impeach a patent. But, in an infringement action in a provincial superior court a defendant may raise issues of invalidity by way of defence and the court may conclude, as between the parties, that the patent in suit is invalid.

While the Federal Court of Appeal has given s. 52 new life by confirming that the Federal Court has jurisdiction to interpreting agreements and other commercial instruments the existence of such a proceeding does not stay proceedings in a provincial court.

Toronto, September 2022


If you have questions, please contact me at mckeown@gsnh.com.


John McKeown

Goldman Sloan Nash & Haber LLP

480 University Avenue, Suite 1600

Toronto, Ontario M5G 1V2

Direct Line: (416) 597-3371

Fax: (416) 597-3370

Email: mckeown@gsnh.com


These comments are general in nature and not intended to provide legal advice as

individual situations will differ and should be discussed with a lawyer.


A version of this article originally appeared in the Lawyer’s Daily published by LexisNexis Canada Inc.

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