Practical Lessons from NCS Multistage Inc v. Kobold Corporation
The Federal Court decision in NCS Multistage Inc v. Kobold Corporation, released late last year, addressed six patents related to drilling multistage horizontal oil wells.[1] NCS and Kobold are competitors in oilfield services, and both sell hydraulic fracturing equipment to oil and gas companies.[2] Kobold’s co-defendant, Promac, manufactured sleeves and tools for Kobold.[3]
Justice McVeigh agreed with counsel that this case is “perhaps the most complex intellectual property matter before the Federal Court”.[4] One of the witnesses for the plaintiff was even an inventor on patents for both parties.[5] The Court was asked to resolve 128 separate liability issues that addressed 123 claims across six patents. Quantifiable damages remedies were bifurcated.
This post focuses on key practice points drawn from Justice McVeigh’s reasons.
Overarching Strategic Considerations
- The best defence may be a strong offence. In an understandably lengthy decision, the Federal Court declared all five of the plaintiff NCS’ patents invalid.[6] The defendant, Kobold, asserted its own patent by counterclaim.[7] The Court held that this sixth patent was the only patent that was both valid and infringed.[8] The Court ordered delivery up or destruction of NCS’ infringing product.
- Focus on key issues. Justice McVeigh adopted the Federal Court of Appeal’s commentary in Western Oilfield Equipment Rentals Ltd v M-I LLC that NCS raising so many issues showed a “lack of wisdom”.[9] In her view:
This manner of presenting a case is akin to trial by everything but the kitchen sink. It unnecessarily obscured the points made by each party, took the parties’ and experts’ time and focus away from the determinative issues.[10]
Counsel and Experts’ Role
- Site visits do not taint the expert. Kobold’s experts took a “shop tour” of Kobold’s facilities along with counsel for Kobold and other Kobold representatives. Only one of the two experts disclosed the tour in their report. Despite NCS impugning the experts’ impartiality and independence based on this tour, the Court “did not find the tour tainted the experts in any way or that Counsel was unethical in the situation.”[11]
- Counsel can be involved in searching for prior art. NCS argued that Kobold’s experts were provided with certain search terms but it was not clear which ones versus which ones they had searched for themselves.[12] The Court held that counsel are permitted to have some involvement in this type of search.[13]
- Experts do not need to construe terms of art in claim drafting and counsel can inform experts of their use. Justice McVeigh adopted Justice Gauthier’s reasoning in dTechs:[14] “interpreting ‘comprising’ as a term of art in claim drafting was outside the expertise that any of the experts were qualified on; its interpretation may refer to expert evidence, but will be construed within the context of these patents based on this Court’s own analysis.”[15] She explained further that “counsel are frequently and extensively involved in drafting expert reports and guiding the experts through the report creation process. ... It does not strike me as unheard of for counsel to inform their experts of the use of this term [comprising] and to provide legal guidance on its meaning.[16]
Claim Construction
- Claim construction comes before the validity analysis. Claim “construction sets the fences down and does not look to whether the claims will function.”[17] Questions about whether the claims are operable or overbroad are not to be imported into claim construction.[18] The only reason to consider whether the invention works as claimed in the construction exercise is to assess whether a claim element is essential or not.[19]
- Think carefully about using the term “comprising” and like terms in drafting. The parties agreed “that the jurisprudence establishes that comprising has been interpreted by its ordinary meaning, i.e., including but not limited to”.[20] However, they disagreed on how this law applied.[21] Ultimately, Justice McVeigh warned “that using ‘comprising’ and like terms in a claim is a double-edged sword. Used properly, it may protect essential elements while not artificially limiting the scope of a claim. However, the same interpretation must prohibit its use so as not to artificially inflate the scope of a claim”.[22] It seems the question of “comprising” is not yet put to rest.
- Forced Divisionals Do Not Raise Double Patenting Concerns. Where an inventor can trace the origin of the divisional back to a direction of the Commissioner, it will be immune from double patenting attacks. However, where a voluntary divisional has been made by the applicant, the divisionals must disclose different inventions to avoid double patenting concerns.
- Pay attention to the same terms used by the same inventors in patents issued around the same time. The Court interpreted terms across patents in the same way and cautioned:
For the same reason that a common POSITA and CGK should be used for this analysis, the use of several terms in common between the patents should be interpreted the same way. This is unless there are explicit reasons individual terms should be interpreted differently in one patent from the others. Where there are reasons to the contrary they shall be noted, but it would be inconsistent for patents on the same subject matter issued in similar times with the benefit of shared inventors, a common POSITA, common CGK, and common prior art to use the same term with different implied meanings.[23]
Invalidity Allegations
- Overbreadth: It still exists. The Court took this opportunity to once again reaffirm that overbreadth exists as an independent ground of invalidity. Although arguments relating to overbreadth and utility can be combined, it “led to confusion” in this case.[24]
- Inoperability: Lead evidence that the claim “positively points to an embodiment that does not work”. The Court set out two possibilities where it may be obvious that the particular embodiment should be avoided. The issue hinges on whether the claim “positively points” to that embodiment or not:
- Double-patenting: Lead evidence on forced divisionals. To demonstrate a divisional was forced and should therefore be immune from a double-patenting attack, a party must show that the divisional patent was connected to an objection on unity of invention from the Patent Office. The divisional patent must be based on these objections or, at least, in response to these objections.[27] The Court does not adopt Justice Manson’s reasons in Biogen suggesting that an objection may not be enough to establish the divisional was “forced”.[28] Instead, Justice McVeigh adopted what she described as “an informed middle ground” between Justice Manson and Justice Heneghan in Abbott who held that the examiner raising a connected unity of invention objection was enough.[29]
- Obviousness: Lead evidence on priority of every claim. Priority can be asserted on a claim-by-claim basis, but the assessment of which priority date relates to which claim ought to take place during prosecution before CIPO not “ex post facto” in an action where patent “validity is being determined”.[30]
- Obviousness: Limited use for file histories. Although Justice McVeigh leaves “the door…firmly ajar to relying on file histories in other circumstances”, she holds “it is not appropriate to submit a file history essentially to re-argue the same protest in relation to the [patent] when the Patent Office issued the patent with those priority dates”.[31] Later in the decision, the Court also rejects an attempt to rely on the file history to suggest the patentee’s motivation in dividing its patent application was to escape obviousness objections.[32] In this case, file histories were to “carry little weight unless they are related to claims construction”.[33]
- Obviousness: Each expert does not have to address every piece of prior art. Where more than one expert is opining on the prior art, each expert is not required to comment on every piece of prior art. The Court interpreted NCS’ argument as being that “where a piece of prior art is obvious, it should be obvious to both experts” and rejected it, holding that “NCS does not rely on any authority in support of this proposition, nor is it rational”.[34]
Pleadings and Other Court Documents
- Defendants can counterclaim for invalidity of unasserted claims under s. 60(1) but maybe not obtain invalidity declarations under s. 59 (even as between the parties). Kobold could counterclaim under s. 60(1) of the Patent Act to invalidate patent claims in rem, even where they were not asserted to infringe those claims (just as they can assert s. 60 independently without it arising from a counterclaim).[35] However, NCS only pleaded s. 59 instead which allows only for a declaration as between the parties.[36]
- Do not plead the Gillette defence without a corresponding anticipation allegation. The Court adopts the holding in Sanofi-Aventis Canada v. Apotex Inc. that the Gillette defence cannot be sustained in isolation as a defence to infringement where anticipation arguments did not succeed.[37]
- Plead double-patenting.[38] Although neither party made submissions as to whether the Court could consider Kobold’s double patenting allegation given it was not pleaded, the Court considered the issue. It held Kobold could not raise double patenting invalidity[39] but nevertheless did not strike related evidence since the issue was in the Statement of Issues.[40]
- The Statement of Issues is binding. The Court refused to allow NCS to “re-broaden its invalidity allegations to claims beyond what was contained in the Joint Statement of Issues”.[41] Its decision does not consider invalidity grounds which were not independently alleged against the asserted claims, holding: “Even if the Court were to find the antecedent claims invalid, the Court cannot consider the validity of the limitations added by the dependent Asserted Claims as their validity is not properly before the Court.”[42]
___
[1] NCS Multistage Inc. v. Kobold Corporation, 2023 FC 1486 at para. 1 [“NCS v. Kobold”].
[2] NCS v. Kobold at para. 11.
[3] NCS v. Kobold at para. 12.
[4] NCS v. Kobold at para. 8.
[5] NCS v. Kobold at para. 1303.
[6] 676, 652, 907, 026, and 704 Patents.
[7] Kobold initially asserted two of its patents were infringed but later abandoned its action in respect of the second patent.
[8] 571 Patent.
[9] Western Oilfield Equipment Rentals Ltd. v. M-I L.L.C., 2021 FCA 24 at para 9.
[10] NCS v. Kobold at para. 10.
[11] NCS v. Kobold at para. 100.
[12] NCS v. Kobold at para. 101.
[13] NCS v. Kobold at paras. 102-103.
[14] dTechs EPM Ltd v British Columbia Hydro and Power Authority, 2023 FCA 115.
[15] NCS v. Kobold at para. 335.
[16] NCS v. Kobold at para. 329, citing dTechs EPM Ltd v British Columbia Hydro and Power Authority, 2023 FCA 115 at paras. 33-34.
[17] NCS v. Kobold at para. 186.
[18] NCS v. Kobold at para. 120.
[19] NCS v. Kobold at para. 121.
[20] NCS v. Kobold at para. 327.
[21] NCS v. Kobold at paras. 328-337.
[22] NCS v. Kobold at para. 337.
[23] NCS v. Kobold at para. 322 (emphasis added).
[24] NCS v. Kobold at para. 174.
[25] NCS v. Kobold at para. 208 (emphasis added).
[26] NCS v. Kobold at para. 209 (emphasis added).
[27] NCS v. Kobold at para. 1228, 1236.
[28] Biogen Canada Inc. v. Taro Pharmaceuticals Inc., 2020 FC 621 at para. 106 and 197-199, on other grounds 2022 FCA 143.
[29] Abbott Laboratories v Canada (Minister of Health), 2009 FC 648 at para. 193, on other grounds 2010 FCA 168.
[30] NCS v. Kobold at para. 1331-1335.
[31] NCS v. Kobold at para. 1325.
[32] NCS v. Kobold at para. 1613.
[33] NCS v. Kobold at paras. 1326 and 1336.
[34] NCS v. Kobold at paras. 1417-1418.
[35] NCS v. Kobold at paras. 828, 981, 1047-1053. NCS did not argue that Kobold was not an “interested person” for the purpose of s. 60(1) (para. 1053).
[36] NCS v. Kobold at para. 1556.
[37] NCS v. Kobold at para. 1644, citing 2009 FC 676 at para. 348.
[38] Kobold’s double patenting argument was addressed in the alternative, in case the Court’s conclusion that the issue was not pleaded and therefore could not be raised were to be reversed on appeal (para. 1227).
[39] NCS v. Kobold at para. 1221.
[40] NCS v. Kobold at paras. 1225-1226.
[41] NCS v. Kobold at para. 1565.
[42] NCS v. Kobold at para. 1566.