Broken Promises – Canadian Patent Claims Don’t Fly - Patent

Originally published in Blakes Bulletin on Intellectual Property, February 2012

A recent Canadian decision has invalidated most of the claims of a patent for failure to meet the promised utility. The decision has also effectively introduced into Canadian law the concept of enhanced damages for willful infringement.

A number of recent decisions by Canadian courts have highlighted the importance of meeting the utility requirement imposed under the Canadian Patent Act. Although many of these decisions have focused on pharmaceutical inventions, the decision of the Federal Court (the Court) in Eurocopter v. Bell Helicopter Textron Canada emphasizes the need to satisfy the utility requirement in mechanical cases as well.

In addition, while Canadian law does not provide for treble damage awards for willful infringement as in the U.S., the decision serves as a strong warning to businesses that infringement of a patent may, in certain circumstances, result in the imposition of punitive damages.

Eurocopter sued Bell for patent infringement. Bell counterclaimed that it did not infringe the patent and that the patent was invalid on various grounds. As discussed below, the Court found all but one of the claims of the patent to be invalid for lack of utility. The remaining claim was held valid and infringed. Bell's conduct was also found to be willful and egregious, thereby warranting an award of punitive damages.

The Patent

The patent relates to an improved landing gear for helicopters and contains 16 claims.

The landing gear comprises a pair of skis or skids connected by front and rear cross bars. The front cross bar was the primary focus of the invention. The prior art taught landing gears having a front cross bar that is mounted behind the ski tips. Through various studies, the inventors developed the "Moustache" landing gear, which had a sleigh-shaped design comprising a front cross bar that was integrally formed with the front ends of the skis and which was bent upwards to lie above the plane of the skis. The patent describes in particular two embodiments of the landing gear, where the front cross bar is inclined either forwardly or rearwardly of the front ends of the skis.

The patent describes the invention as an improvement over the prior art by providing a landing gear that offers at least three specific advantages, namely, an improved stress response to load factors upon landing; an improved frequency adaptation to minimize the ground resonance phenomenon; and reduced weight. All these improvements were construed by the Court to form the "promise", or promised utility of the invention.

Claim 1 of the patent recites the various elements of the Moustache landing gear. Claim 15 depends from claim 1 and specifies the forward incline of the front cross bar. Claim 16 depends from claim 1 and specifies that the front cross bar has a backward incline.

Bell's Activities

Bell began developing a new helicopter landing gear after grant of the patent. In the course of its development program, Bell leased a helicopter having the Moustache landing gear and developed its "Legacy" landing gear. Eurocopter commenced its infringement action in 2008 shortly after becoming aware of the Legacy landing gear. Bell then redesigned the Legacy landing gear to create the "Production" gear.

Infringement

The Court first construed the claims of the patent. It then considered the infringement allegations and found that Bell's Legacy landing gear infringed most of the claims of the patent including, in particular, claims 1 and 15. The Court found that the Production gear developed by Bell after commencement of Eurocopter's action did not infringe any of the claims.

Failed Promise – Court's Findings

Bell challenged the validity of the patent on various grounds: anticipation, obviousness, insufficiency of disclosure and lack of utility. All these challenges were considered and dismissed by the Court with the exception of the allegation of lack of utility. The Court held all but claim 15 invalid for not meeting the utility requirement.

In assessing utility, the Court examined the patent to determine whether the promised utility was either demonstrated or reasonably predicted as of the filing date of the patent. With regard to the latter, the Court reiterated the test for supporting a reasonable prediction, namely, that:

there must be a factual basis for the prediction;
there must be a sound line of reasoning for inferring the prediction from the factual basis; and
there must be proper disclosure in the patent.

In its analysis, the Court first focused on claim 15 and determined that the utility promised by the patent was demonstrated by the claimed forwardly inclined front cross bar. Specifically, the Court noted that as of the filing date, the inventors had sufficient evidence to show that the embodiment of claim 15 had the three advantages promised in the patent, in particular, the minimization of ground resonance. Therefore, claim 15 was held valid.

The Court then turned to claim 16, which covered the embodiment in which the front cross bar was rearwardly inclined. The Court noted that such embodiment was only illustrated in one figure and that it was only briefly described in the patent as having the same benefits as other embodiments. The Court found that as of the filing date, there was no evidence that the rearwardly inclined embodiment of claim 16 would have the promised ground resonance behaviour. The Court also found that the patent did not contain any factual basis from which such utility could be reasonably predicted. On this basis, claim 16 was held invalid for failing to meet the utility requirement.

Next, in reviewing claim 1, the Court found that, by not specifying the incline position of the front cross bar, the claim necessarily included all orientations, including the embodiment of claim 16. Therefore, for the same reasons as claim 16, claim 1 was also held invalid for failing to meet the utility requirement.

Failed Promise – Lessons Learned

The decision offers a few important lessons with respect to the promised utility of an invention. Firstly, the decision clearly highlights the importance of ensuring that the utility of all claims of a patent application is either demonstrated as of the filing date or can be reasonably predicted from a factual basis. In the event that a claim is to rely on predicted utility, both the factual basis and the reasoning applied by the inventors to arrive at the claimed invention should be clearly described in the specification. Indeed, even in the case of demonstrated utility, it is very important to include supporting data in the patent specification or at least include a reference to experiments or studies done that support the described utility.

Secondly, it is also very important to ensure that the promised utility of a claimed invention is properly defined in the specification when the patent application is being drafted. Broad statements in an application that may be construed to be promised utility may later prove problematic should the claimed invention be found not to have one or more of the promised advantages. Thus, it is important to carefully frame the promised utility of a claimed invention.

Willful Infringement – Court's Findings

Having held that one of the claims of the patent was both valid and infringed, the Court determined that Eurocopter was entitled to an award of damages (although not the right to elect, in the alternative, an accounting of Bell's profits) and a permanent injunction prohibiting further acts of infringement during the remaining term of the patent.

The Court next turned to Eurocopter's argument that it was entitled to an award of punitive damages in light of Bell's conduct. In particular, Eurocopter argued that:

Bell knowingly and maliciously infringed the patent; and
Bell's conduct caused damages that cannot be corrected by merely an award of damages.

The Court held that an award of punitive damages was appropriate in the circumstances. As with the award of general damages, the Court determined that the quantum of punitive damages was best left to be determined at a later hearing after the exhaustion of all appeals on the issue of liability.

In Canada, punitive damages may be awarded when a party's conduct has been malicious, oppressive and high-handed or otherwise offends the court's sense of decency or represents a marked departure from ordinary standards of decent behaviour. The Federal Court of Appeal, in its 1996 decision in Lubrizol Corp. v. Imperial Oil Ltd., acknowledged that there was no reason why punitive damages could not be awarded in the appropriate circumstances in an intellectual property case. Despite this ruling, however, punitive damages have been awarded very infrequently in intellectual property cases in the 15 years since the Lubrizol decision.

In fact, a commonly held view prior to the Eurocopter decision was that, in the absence of a finding that the defendant has breached a court order or otherwise done something to frustrate the court process, punitive damages are unlikely to be awarded for patent infringement. Mere infringement, no matter how willful, would not be enough to justify an award of punitive damages. For this reason, the decision in Eurocopter to award punitive damages can rightly be seen as groundbreaking.

In assessing whether to award punitive damages, the Court in Eurocopter was influenced by the following factors.

First, the Court found that Bell's assertion that it had no knowledge of the patent prior to the commencement of the litigation was not plausible and, indeed, was contrary to the evidence. In this regard, the Court concluded that Bell had corporate knowledge of the patent even if the individuals who testified on its behalf at trial did not have such knowledge. The Court was influenced by the fact that, at the time of infringement, Bell had a policy manual and guidelines with respect to intellectual property matters, including measures to avoid infringing valid intellectual property rights held by others. Bell's technical resource specialists were given responsibility for maintaining knowledge of competitive patents and advising leaders of Bell's integrated product teams of any concern regarding potential infringement that might occur during new product development.

The Court was also concerned about Bell's failure to lead testimony at trial from representatives of the company who had responsibility for verifying possible infringements. The Court noted that Bell had cited privilege in refusing to respond to requests for copies of infringement opinions or had otherwise been evasive on the subject. In view of the foregoing, the Court decided to draw an adverse inference that Bell's omissions were attributable to the fact that such evidence would not have been favourable to its case.

Second, the Court was influenced by its finding that the infringing Legacy landing gear used by Bell was "no more than a slavish copy of the patented Moustache landing gear".

Third, the Court held that there was clear evidence of bad faith and egregious conduct on the part of Bell in that its infringement was not small, trivial or isolated; nor was it a case where the defendant was unsophisticated or ignorant. On this front, the Court found that Bell and its parent company are sophisticated entities employing thousands of engineers and that its infringement was attributable either to willful blindness or "intentional and planned misappropriation of the claimed invention".

Fourth, the Court noted that Bell had not shown any remorse for its activities or offered any excuse.

Fifth, the Court took into account Bell's activities in promoting its Legacy landing gear. More particularly, the Court was influenced by the fact that Bell had concealed from the public that it had copied Eurocopter's patented landing gear. The Court also appeared to be concerned by Bell promoting its Legacy landing gear as being innovative when, in reality, the unique advantages being promoted by Bell had already been disclosed in the patent.

Sixth, the Court held that an award of punitive damages was necessary not only to punish Bell but also to deter others from acting in a similar manner.

Punitive Damages – Lessons Learned

Several lessons may be learned from the Court's decision on the issue of punitive damages in Eurocopter.

As a starting point, any business would be well advised to obtain a freedom-to-operate opinion from Canadian counsel before taking any action that could expose the business to liability for infringement of a Canadian patent. In the event that the business is subsequently sued for patent infringement, it could introduce the opinion into evidence at trial as a defence to a claim for punitive damages.

If sued, a business should also give some thought to the evidence that it wishes to adduce at trial regarding the development of its product. To the extent this evidence shows that the business did something other than merely "slavishly copy" the patented product, it could be helpful.

A business should also consider how it promotes its products in Canada lest its activities be interpreted by a court as justifying an award of punitive damages. For example, promotional activities that go beyond merely marketing a product that turns out to be infringing and cross the line into appropriating the patented technology by, for example, suggesting that the defendant and not the patentee is the true innovator, are to be discouraged.

Lastly, a business should give careful thought to the manner in which it defends a patent infringement claim. Obviously, mounting a thorough and vigorous defence is always the primary objective. However, one must also bear in mind that taking unreasonable positions during the litigation that have no possibility of success, such as denying infringement of certain claims in circumstances where infringement is clear, can expose the defendant to an award of punitive damages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Canada: Broken Promises – Canadian Patent Claims Don’t Fly