Prior Users’ Exception to Patent Infringement Clarified by Federal Court of Canada

In Kobold Corporation v NCS Multistage Inc., 2021 FC 1437, Justice Zinn released the first decision interpreting and applying amended section 56 of the Patent Act [section 56]. Section 56 sets out the Prior Use exception to patent infringement and permits a defendant the right to commit an act or use a purchased article or service that would otherwise constitute infringement, based on an act or use made by the alleged infringer prior to the claim date.

Background

The Plaintiffs [Kobold] claimed the Defendant [NCS] infringed Canadian Patent No. 2,919,561 [the ‘561 Patent], with four of NCS’ tools, called BHAs, used for fracking in the oil and gas industry. NCS brought a motion for summary judgement under Section 56 based on its prior use of the “Blue Bullet,” a part used in all of NCS’ BHAs. The evidence showed that one BHA had been used since 2012 and variants of the device have been developed over time. Kobold argued that NCS could continue to manufacture and use the 2012 BHA but could not expand into new commercial products via the other devices.

Interpretation of Section 56

Justice Zinn held summary judgement was appropriate for the proper interpretation of section 56 and noted three significant differences in the new version of subsection 56(1):

1. It is no longer limited to granting a prior user the right to sell and use a patented physical invention, but includes a prior users’ right to commit an “act”, meaning the making, constructing, using, and selling of the invention;
2. It protects the commission of “the same act”; and
3. It extends protection not only to those who committed an infringing act before the claim date, but also to those who “made serious and effective preparations to commit such an act.”

Justice Zinn further noted that sections 56(6) and 56(9) deal with the use of a purchased article or service and “appear designed to extend prior user rights to third parties.”

Justice Zinn concluded the “same act” referred to in section 56(1) required the pre- and post-patent acts to be identical. That is, “one can only perform those acts set out in section 42 of the Patent Act which were actually performed pre-patent, or those acts for which substantial preparations for performance were made.” As an example, Justice Zinn noted a “same act” means if a prior user previously manufactured and used its device, they could continue to manufacture and use the device after the patent claim date but could not sell the device because the “prior user does not have a carte blanche to infringe the patent in any way it wishes.” A prior user could also change and add to parts of its device found in the prior art or outside the patent claims but could not make changes to the infringing aspect of the device because they would not be performing the “same act” protected under section 56. However, it would be unreasonable to restrict the prior user to only using a method known in the prior art when a patent does not specify what method should be used and where the method does not form part of the inventive concept.

Process for section 56 Defense

Justice Zinn outlined a three-step process to follow when considering a section 56(1) defence:

1. The Court must determine whether the act performed before and the act performed after the claim date are identical—if so, section 56(1) would always provide a defense.
2. If the acts are not identical, the Court must determine whether the act performed after the claim date infringes the patent, and if so, which claims. Section 56(1) will not apply if: (1) the post-claim date acts do not infringe, (2) the pre-claim date acts do not infringe, or (3) the post-claim date acts infringe a claim of the patent that the pre-claim date acts do not.
3. Third, if the pre- and post-claim date acts are not identical, but only infringe the same claims, the Court must determine whether the changes relate to the inventive concept—if not, section 56(1) will provide a defense.

It is only in the clearest of cases where acts before and after the claim date are identical that there is no need for claims construction or an infringement analysis. These cases will be appropriate for summary judgement.

Application of section 56

The motion for summary judgement regarding NCS’ alleged infringement and whether NCS’ products and activities were saved by virtue of section 56 was not granted because there was insufficient evidence. Justice Zinn did grant summary judgement on the construction of the ‘561 Patent and the applicability of subsections 56(6) and 56(9) to the case.

Justice Zinn held NCS could not rely on subsections 56(6) and 56(9), which afforded more generous prior user rights, because those sections intend to benefit third parties who purchase devices or the services of others. The evidence showed NCS was performing the services and, at best, suggested NCS commissioned a third party to construct the infringing element on its behalf. Merely outsourcing production of NCS’ designed devices did not afford NCS the more generous prior user rights under section 56(6).

The decision can be found here.