Manufacturer added as a defendant in action against end users

Ecobee, a manufacturer of smart thermostats, successfully moved to be added as a defendant to a patent infringement action by Seismotech against end users in Seismotech IP Holdings Inc v John Does, 2023 FC 1335.

Seismotech’s action against end users is one of four actions it brought in relation with the allegedly infringing thermostats:

• a simplified action against the John Doe end users who purchased thermostats made by Canadian manufacturers;
• a reverse class action against defendants who manufactured, distributed, or sold the allegedly infringing thermostats in Canada, which would include Ecobee; and
• two similar actions relating to thermostats made by manufacturers outside Canada.

The Federal Court observed that Rule 104, which permits the Court to add a party, should be “interpreted and applied against the backdrop of the principle of party autonomy in civil litigation” and, as a result, should be interpreted narrowly. The Federal Court held that “it will be necessary to add a party to a proceeding where that party’s legal interests are affected by the outcome of the proceeding.” The Court found that the the action affected Ecobee’s legal interests for two reasons.

• First, the action directly calls into question the lawfulness of Ecobee’s products. If Seismotech succeeds in its action against the end users, “it will necessarily mean that Ecobee’s products are infringing Seismotech’s patents and that Ecobee has no right to manufacture them.”
• Second, if the end users are found to infringe, they will likely sue Ecobee in warranty, possibly by way of a class action. Ecobee could therefore be directly prejudiced based on the outcome of the infringement action.

The Federal Court rejected Seismotech’s argument that Ecobee can protect its interests by participating in the reverse class action or by bringing a separate action pursuant to section 60 of the Patent Act. Ecobee is not the proposed representative of the reverse class action. In addition, because Seismotech’s patents are now expired, it was unclear whether Ecobee can bring an action pursuant to section 60, and, even it if can, there would be no practical benefit in forcing Ecobee to do so.

The Federal Court allowed Ecobee’s motion and ordered that Ecobee be added as a defendant to the action.

A copy of the decision is available here.