Federal Court Abolishes ‘Reasonably Diligent Search’ Test and Invalidates Claims 9-10 in Aux Sable Patent Action

Overview

On Friday, May 10 the Federal Court publicly released its decision in the patent impeachment action Aux Sable Liquid Products LP et al. v. JL Energy Transportation Inc., 2019 FC 581. The patent at issue is related to the transportation of natural gas by pipeline. Justice Southcott held that Claims 9 and 10 of the 670 Patent are invalid for overbreadth, inutility, unpatentable subject matter and anticipation. Justice Southcott dismissed the invalidity allegations with respect to Claims 1 to 8.

Test for Prior Art: Justice Southcott held that the “reasonably diligent search” test no longer applies.  Instead, prior art is citeable for the purposes of section 28.3 of the Patent Act (obviousness) based on the same test applicable for section 28.2 (anticipation).  Justice Southcott cited conflicting decisions from the Federal Court and two recent decisions of the Federal Court of Appeal, but noted these Courts did not have the “benefit of significant and substantive argument of the sort presented by the parties in the case at hand”, including principles of statutory interpretation. In particular, Justice Southcott accepted that the identical language in sections 28.2 and 28.3 invokes access to the same prior art for both anticipation and obviousness analyses.

Justice Southcott left open the question of whether the reasonably diligent search test, or some version of it, applies when considering whether the skilled person would construct a “mosaic” of prior art references.

Claims

The 670 Patent contains two independent claims, and thus two claim sets.  The first claim set is claims 1-8.  The second claim set is claims 9-10.  The two claim sets included significantly different wording which led to the invalidation of the latter claim set.

As construed by the experts, the parties, and the Court, Claim 1 and its dependent claims all required two key elements:

  1. “The intentional addition to natural gas of a C2 hydrocarbon [e.g. ethane] and/or a C3 hydrocarbon [e.g. propane] ; and
  2. Ensuring that the product of the molecular weight (“Mw”) and the [compressibility factor (“z”)] of the resulting gas mixture is lower than the zMw product prior to such addition.”

In contrast, Claim 9 and its dependent Claim 10 relate to gas mixtures for transport in a pipeline. The claims covered gas mixtures within the given ranges of composition, pressure and temperature, with the limitation that the mixtures not be in the liquid phase.  These claims do not require the two key elements listed above and expressly stated for claims 1-8.

Had the parties not agreed on this construction, the Court noted that it would have been improper to incorporate these two limitations into Claims 9 and 10.

Invalidity of Claims 9 and 10

Claims 9 and 10 were found to be invalid for overbreadth, inutility, unpatentable subject matter and anticipation.  Furthermore, it is clear that Justice Southcott would have held that those claims were invalid for obviousness as well, but that finding was unnecessary given his reasons (particularly as they relate to anticipation). 

Overbreadth: Aux Sable successfully relied on the Federal Court of Appeal’s 1986 decision in Amfac Foods Inc. v. Irving Pulp & Paper Ltd. to argue that Claims 9 and 10 were broader than the invention disclosed in the patent. Justice Southcott relied upon the unshaken evidence of Aux Sable’s witnesses that the invention disclosed included the two key elements of “adding” the C2 and/or C3 hydrocarbon and reducing the zMw, a conclusion supported by the “summary of the invention” which recites both limitations. Notably, claims 9 and 10 did not require these two key elements, and were overbroad for this reason.

Justice Southcott dismissed JL Energy’s arguments by holding that:

  1. the Supreme Court of Canada’s AstraZeneca decision did not change the law with respect to overbreadth and had not overruled Amfac;
  2. Aux Sable’s experts had properly conducted the analysis required by Amfac, and there was no requirement to do an “essential elements analysis” in the manner suggested by JL Energy; and
  3. it would be improper to disregard the overbreadth allegation and address it under inutility (as argued by JL Energy), noting the Federal Court of Appeal’s recent caution to address invalidity allegations individually.

Inutility: Applying the Supreme Court of Canada’s reasons in AstraZeneca, Justice Southcott held that the “subject matter of the invention” relates to the efficient transportation of natural gas. Aux Sable had unchallenged evidence that claims 9-10 included within their scope inefficient combinations of gas composition, pressure and temperatures.  Accordingly, Justice Southcott held that claims 9-10 lacked utility.

Justice Southcott rejected JL Energy’s contention that the mere transportation of a gas mixture by pipeline was sufficient in and of itself to meet the utility requirements articulated in AstraZeneca.  Justice Southcott held that efficiency was a concern specifically for claims 9-10 and that those claims included useless selections by not including the limitations taught by the patent (and claimed by claims 1-8) which ensured the achievement of efficient transportation of natural gas by pipeline.

Justice Southcott also dismissed JL Energy’s argument that the Court’s finding of inutility was an application of the now defunct “promise doctrine”:

“[88] Finally, I note that I do not regard the assessment of the utility of claims 9-10, based on whether they include useless selections, to represent an application of the promise doctrine. These claims lack utility, not because the 670 Patent promises efficient transportation of natural gas, but because efficient transportation is the subject matter of the invention.”

Non-patentable subject matter: Because the key limitations that ensured efficient transport were not included in claims 9-10, the skilled person would have to rely on the exercise of his or her professional judgment to successfully practice claims 9-10.  This rendered claims 9-10 invalid based on the principles described in Abbott Laboratories (Bermuda) Ltd, Re, 2014 FC 1251.

Anticipation: Justice Southcott held that two prior art references (the Stinson reference and the “Handbook”) each disclosed an embodiment within the ranges claimed in Claims 9 and 10. The Court affirmed that the disclosure of a single point within a range can invalidate a claim, citing the decision in Calgon Carbon Corp. v. North Bay (City), 2006 FC 1373. The Court also agreed with Aux Sable that it is legally irrelevant whether the anticipatory prior art reference also discloses subject matter which does not anticipate the claims. Justice Southcott held that it was irrelevant that Stinson recommended a particular set of conditions for pipeline transmission of a gas composition which does not fall within the scope of claims 9-10 when it also disclosed subject matter that does fall within those claims.

Claims 1 to 8

In light of the finding that the “reasonably diligent search” test no longer applies, the Court found that every piece of prior art relied on by Aux Sable was citeable for the purposes of the obviousness analysis. With respect to the key element (1) of Claims 1 to 8, there were no gaps between the prior art and the Claims. However, the Court held that the content of the prior art and common general knowledge could not bridge the differences between the prior art and key element (2) of Claims 1 to 8. The allegation of obviousness was consequently dismissed. The allegations of insufficiency and non-patentable subject matter in relation to Claims 1 to 8 were also dismissed.

Aux Sable Liquid Products LP, Aux Sable Liquid Products Inc., and Aux Sable Canada Ltd., were represented by Timothy St. J. Ellam, Q.C., Steven Tanner, Sanjaya Mendis and Kendra Levasseur from McCarthy Tétrault LLP.

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