In Summary, A Foreign Voluntary Dismissal is not Res Judicata

Defendant Sonos, Inc brought a summary judgment motion to dismiss Google LLC’s Canadian patent infringement action. The parties had agreed to a stipulation of voluntary dismissal of a parallel suit in the Northern District of California concerning United States Patent No. 7,065,206. Sonos asserted that, through the US Stipulation, Google had admitted the impugned products do not infringe the identically worded claims of Canadian Patent No. 2,545,150.

In both countries, Sonos maintained that its speaker products do not have an essential element of Google’s patents’ claims—namely, an “adapted determination of an order of noise suppression and echo cancellation.” Google disagreed with Sonos’ position, but it agreed to move to jointly dismiss the US suit, with prejudice, if Sonos made certain representations in a binding stipulation.

In the Canadian patent action, Sonos relied on the Stipulation and dismissal to support its motion for summary judgment on three separate but related grounds: A) there is no genuine issue for trial on infringement of the Canadian Patent; B) res judicata; and C) abuse of process. The Federal Court Judge, Justice Southcott, dismissed the motion for summary judgment.

Both parties presented expert evidence on this motion from a US lawyer, explaining how a US suit can be dismissed on a voluntary basis and the effect of such a dismissal. Google’s expert further opined that neither party conceded or intended to concede the position of the other on infringement or claim construction through the Stipulation.

Noting “[i]t is well-established that questions of foreign law are treated as questions of fact and, as such, require proof through expert evidence,” the Court found Google’s expert evidence admissible to understand the effect of the Stipulation and the subtext of correspondence between the parties, to the extent that the correspondence relied on US law (see, e.g., International Air Transport Association v Canada (Transportation Agency), 2020 FCA 172).

Nevertheless, the Court did not conclude that the expert had relied on US law to form this opinion, entitling the Court to resort to Canadian law (see generally Lakeland Bank v Never E Nuff (Ship), 2016 FC 1096). Following Canadian jurisprudence, Justice Southcott confirmed that he could and must look to collateral evidence, such as the correspondence, to consider the effect of a consent dismissal order (see Spender (Guardian of) v Spender, 1999 CanLII 6548 (BCSC)).

“While no particular form of words need be used in a concession by a party in order to constitute an admission, the concession must be made deliberately and must be clear,” (Apotex Inc v Wellcome Foundation Ltd, 2009 FC 117). The Court was unable to find an express admission of non-infringement from Google, but rather found several references to conserving party and judicial resources.

The Court then rejected the argument that Google had failed to put its “best foot forward” by not submitting evidence of its intentions surrounding the Stipulation. Instead, the Court found that Sonos had not met its burden to demonstrate that Google had made the alleged admissions. In any event, the Court found merit in Google’s alternative argument, that any factual admissions about Sonos’ product and US claim construction alone would not be enough to support a summary judgement in the Canadian action. Reasoning that “under Canadian law, claims construction is a matter of law,” the Court concluded “the possibility of different claim constructions would be sufficient to raise a genuine issue for trial.”

Turning to res judicata, the Court found that “the absence of a judicial determination of any of the facts upon which Sonos’ summary judgment motion is grounded means that there is no basis to invoke either the Canadian doctrine of issue estoppel or its US counterpart.”

While “under the right circumstances,” the Court found “issue estoppel may be available to preclude re-litigation of an issue of fact that was determined in a foreign proceeding,” Justice Southcott emphasized “there appears to be no precedent, or indeed any logical foundation, for the prospect of reliance on res judicata or its sub-doctrines to support conclusions on claims construction, validity, or infringement, that necessarily involve matters of Canadian patent law, resulting from findings in a foreign proceeding.”

Finally, Justice Southcott found that the action was not an abuse of process, noting that “Sonos’ inability to rely on issue estoppel turns not on its failure to satisfy some technical requirement of that principle but rather on the absence of a finding of fact by the US Court upon which application of that principle must rest.”

A copy of the decision can be found here.