ottawa sign with aitken lee llc team

Can a party make invalidity arguments against dropped claims?

In NCS Multistage Inc. v Kobold Corporation, 2023 FC 1486 Justice McVeigh determined whether NCS could raise invalidity arguments against non-asserted claims of Kobold’s Canadian Patent No. 3,027,571. The 571 Patent claims a downhole tool that has a shock-absorbing sleeve.

The underlying action T-1420-18 involves NCS and Kobold, two competitors who provide equipment for hydraulic fracking in the oil and gas industry. The mootness issue arises from Kobold’s counterclaim alleging NCS impeached and infringed Kobold’s 571 Patent with their LP3 sleeve product. In its Defence to Counterclaim, NCS plead all claims were invalid. After this, the parties submitted a Joint Statement of Issues where Kobold alleged infringement with respect to Claims 5, 10, 13-15, and 17-24 of the 571 Patent. Kobold later restricted its infringement allegations to Claims 6, 11, 12, and 16 (as they depend from Claims 1, 3, and 4).

Kobold argued that there was no longer any basis for the invalidity defence against the non-asserted claims because infringement was no longer alleged against them. NCS argued its allegations of invalidity were permitted under section 59 of the Patent Act.

The court addressed (1) which statutory provision NCS relies on for its invalidity pleading; and (2) whether the provision allows NCS to “plead invalidity against the entire patent or only in response to the claims that Kobold alleges infringement in relation to.”

Justice McVeigh considered sections 59 and 60 of the Patent Act. A section 59 defence constitutes a judgement between the parties whereas a section 60 defence constitutes a judgement in rem on the invalidity of a patent throughout Canada. Further, a section  60 defence must “originate out of an original action or a counterclaim” (Johnson & Johnson). Justice McVeigh found that NCS could only raise an inter partes argument (using section 59) against the 571 Patent, not an in rem (using section 60) allegation as their pleading only indicated it relies on section 59.

With respect to mootness, Justice McVeigh explained “a proceeding is moot where there no longer remains any tangible or concrete dispute between the parties” (Borowski). First, she discussed the procedural issue concerning the parties live dispute about antecedent Claims 1, 3 and 4, as the dependent Claims 6, 11, 12, and 16 (the asserted claims) incorporate them. Justice McVeigh found it was open to the Court to consider the antecedent claims that the asserted claims were dependent on if NCS had properly alleged invalidity of the asserted claims.

Justice McVeigh found that although NCS’ Defence to Counterclaim put all the claims of the 571 Patent at issue, the Joint Statement of Issues narrowed the claims at issue thereby funnelling the patent issues from all claims to the asserted claims. She found that NCS could not now re-broaden the issues as it would be unfair and prejudicial to Kobold. She explained “validity is done on a claim-by-claim basis and dependent claims may be sufficiently narrow to escape invalidity attacks, even though the broader claims may be invalid.” So even if the antecedent claims (i.e., claims 1, 3 and 4) were found invalid, the Court could not “consider the validity of the limitations added by the dependent Asserted Claims as their validity was not properly put before the Court.”

Justice McVeigh concluded the Court would only consider the properly argued invalidity grounds against the asserted claims of the 571 Patent.

The full decision can be read here.

See the following blog posts on the other topics from this decision: