T-1300-02

2003 FCT 669

Realsearch Inc. and Dingwell's Machinery & Supply Ltd. (Plaintiffs) (Defendants by Counterclaim)

v.

Valone Kone Brunette Ltd. and BDR Machinery Ltd. (Defendants) (Plaintiffs by Counterclaim)

Indexed as: Realsearch Inc. v. Valone Kone Brunette Ltd. (T.D.)*

Trial Division, Noël J.--Ottawa, May 15 and 28, 2003

Patents -- Practice -- Federal Court Rules, 1998, r. 107 motion for separate determination of claims construction issue in patent infringement action -- Motion founded on American practice "Markman Proceeding" -- Used in U.S.A. because patent trials heard by jury but claim construction is matter of law -- R.107 never before invoked for this purpose -- Court may exercise discretion to order trial of issue if will secure just, expeditious, least expensive determination of proceeding on merits: r. 3 -- Seven factors Court considers in deciding whether to order trial of issue -- S.C.C. authority for proposition claim construction is "antecedent" to validity, infringement inquiries -- F.C. patent cases take years to be resolved, proposed procedure could speed up litigation -- Motion granted.

This was a motion under rule 107 of the Federal Court Rules, 1998 for the separate determination of issues in a patent infringement action. By this motion, defendants sought determination of the meaning of certain phrases in the patent claim. The question was whether a preliminary determination of this issue would secure the just, most expeditious and least expensive determination of the proceeding on its merits.

Held, the motion should be granted.

This motion was founded on an American practice, a "Markman Proceeding", for a preliminary patent claim construction. The practice is named after a case in which it was held that claim construction is a matter of law to be determined as a preliminary proceeding. In the United States, patent trials are held with a jury. Rule 107 has never before been invoked for patent claim construction so granting this motion could open the door to a new approach to Canadian patent trials.

The general principle stated in rule 3 is that the Rules are to be interpreted such as to secure the just, most expeditious and least expensive determination of every proceeding on its merits. The Court will exercise its discretion to order the trial of an issue if satisfied on a balance of probabilities that, in light of the evidence and all the circumstances (including the nature of the claim, the conduct of the litigation, the issues and remedies sought), severance would more likely than not achieve the objective of rule 3.

The following are among the factors that courts have considered: (1) whether the issues for the first trial are relatively straightforward; (2) the extent to which the issues proposed for the first trial are interwoven with those remaining for the second: (3) whether a decision at the first trial is likely to put an end to the action altogether, significantly narrow the issues for the second trial or significantly increase the likelihood of settlement; (4) the extent to which the parties have already devoted resources to all of the issues; (5) the timing of the motion and the possibility of delay; (6) any advantage or prejudice the parties are likely to experience; (7) whether the motion is brought on consent or over the objection of one or more of the parties.

*     The Federal Court of appeal allowed an appeal from this decision on January 9, 2004: A-260-03, 2004 FCA 5, Stone J.A., 14pp, not yet reported.

The Supreme Court of Canada has held that claim construction is "antecedent" to inquiry into validity and infringement. The Alberta Court of Appeal has held that it "is only when one has clearly construed the scope and breadth of the claims in a patent that other linked issues, such as anticipation, obviousness and prior use, not to mention infringement, are capable of being properly and adequately assessed".

Patent infringement cases often go on for years, and this suggested new procedure might speed up the process. The arguments for infringement and invalidity could be significantly strengthened or weakened depending upon the claim construction arrived at by the Court. It was appropriate that this case be dealt with as a specially managed proceeding and that the claim construction issue be dealt with by the case management judge.

statutes and regulations judicially

considered

Federal Court Rules, 1998, SOR/98-106, rr. 3, 107.

cases judicially considered

applied:

Markman v. Westview Instruments Inc., 52 F.3d 967 (Fed. Cir. 1995); affd 517 U.S. 370 (1996); Ciba-Geigy Canada Ltd. v. Novopharm Ltd. (2001), 14 C.P.R. (4th) 491; 274 N.R. 334 (F.C.A.); Illva Saronno S.p.A. v. Privilegiata Fabbrica Maraschino "Excelsior", [1999] 1 F.C. 146; (1998), 84 C.P.R. (3d) 1 (T.D.); Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067; (2000), 194 D.L.R. (4th) 193; 9 C.P.R. (4th) 129; 263 N.R. 88; Free World Trust v. Électro Santé Inc., [2000] 2 S.C.R. 1024; (2000), 194 D.L.R. (4th) 232; 9 C.P.R. (4th) 168; 263 N.R. 150; Almecon Industries Ltd. v. Anchortek Ltd. (2003), 303 N.R. 76 (F.C.A.); Polansky Electronics Ltd. v. AGT Ltd. (2001), 277 A.R. 43; [2001] 5 W.W.R. 603; 90 Alta. L.R. (3d) 3; 5 C.P.C. (5th) 106; 11 C.P.R. (4th) 7 (C.A.).

referred to:

General Refractories Co. of Canada v. Venturedyne Ltd. (2001), 6 C.P.C. (5th) 329 (Ont. S.C.J.); Markesteyn v. Canada (2001), 208 F.T.R. 284 (F.C.T.D.).

MOTION under Federal Court Rules, 1998, rule 107 for a separate determination of the claim construction issue in an action for patent infringement. Motion granted.

appearances:

David W. Aitken for plaintiffs.

Ronald E. Dimock and Michael D. Crinson for defendants.

solicitors of record:

Osler, Hoskin & Harcourt LLP, Ottawa, for plaintiffs.

Dimock Stratton Clarizio LLP, Toronto, for defendants.

The following are the reasons for order and order rendered in English by

[1]Noël J.: By this motion pursuant to rule 107 of the Federal Court Rules, 1998 [SOR/98-106], the defendants seek a separate determination of the issue of claim construction procedure know as a "Markman Proceeding" under the United States practice, and for a schedule for this determination.

FACTS

[2]This action was commenced by statement of claim filed August 12, 2002. Pleadings were completed upon filing of the reply and defence to counterclaim on December 9, 2002.

[3]The Canadian Patent No. 2106950 (the 950 Patent involves a mechanical device for removing the bark from logs. Only one device (the Brunette Reclaimer) is alleged to infringe. The statement of claim recites the claims and characterizes the Brunette Reclaimer in terms of the elements of the claims alleged to be infringed. In their defence, the defendants deny all allegations of infringement.

[4]By this motion, the defendants are specifically seeking determination of the meaning of the following phrases in claim 1 of the 950 Patent:

"disc spatially and radially disposed"

"wood fibre debris abrader means disposed on the circumference"

ISSUE

[5]Will a preliminary determination of the above issue secure the just, most expeditious and least expensive determination of the proceeding on its merits?

ANALYSIS

[6]The defendants' motion is founded on a procedure, the "Markman Proceeding", used in the United States for a preliminary patent claim construction. It originates from the Markman case (Markman v. Westview Instruments Inc., 52 F.3d 967 (Fed. Cir. 1995); affd 517 U.S. 370 (1996)) wherein it was held that claim construction was a matter of law for the court to decide. Because in the United States a patent trial is held before a jury, the claim construction, as a matter of law, is held before the Court as a preliminary proceeding.

[7]To the parties' and the Court's knowledge, rule 107 has never been used to carry out patent claim construction. It appears that if this motion is granted, it could open doors to a new approach to patent trials in Canada. The plaintiffs argue that subsection 107(1) of the Rules is an inappropriate vehicle for such a procedure, whereas the defendants submit that the discretionary power of the Court provided by this rule, allows the Court to adopt this suggested claim determination procedure.

[8]Subsection 107(1) provides: "The Court may, at any time, order the trial of an issue or that issues in a proceeding be determined separately." The discretionary power of the Court to order the trial of an issue should be exercised so as to secure "the just, most expeditious and least expensive determination of every proceeding on its merits", pursuant to rule 3 of the Federal Court Rules, 1998, as held in Ciba-Geigy Canada Ltd. v. Novopharm Ltd. (2001), 14 C.P.R. (4th) 491 (F.C.A.), and in Illva Saronno S.p.A. v. Privilegiata Fabbrica Maraschino "Excelsior", [1999] 1 F.C. 146 (T.D.) (Illva). In the latter case [at paragraph 14], the Court stated the applicable standard in exercising the Court's discretion to order the trial of an issue:

. . . the Court is satisfied on the balance of probabilities that in light of the evidence and all the circumstances of the case (including the nature of the claim, the conduct of the litigation, the issues and the remedies sought), severance is more likely than not to result in the just, expeditious and least expensive determination of the proceeding on its merits.

[9]The defendants' counsel argued that early claim construction will reduce the duration of discovery, increase the likelihood of settlement, provide "the public notification function of patents", and reduce "litigation chill" suffered by the defendants.

[10]Factors which the courts have considered to have a bearing on the justice and expediency warranting a trial of an issue are:

(i) whether issues for the first trial are relatively straightforward;

(ii) the extent to which the issues proposed for the first trial are interwoven with those remaining for the second;

(iii) whether a decision at the first trial is likely to put an end to the action altogether, significantly narrow the issues for the second trial or significantly increase the likelihood of settlement;

(iv) the extent to which the parties have already devoted resources to all of the issues;

(v) the timing of the motion and the possibility of delay;

(vi) any advantage or prejudice the parties are likely to experience;

(vii) whether the motion is brought on consent or over the objection of one or more of the parties. (See: General Refractories Co. of Canada v. Venturedyne Ltd. (2001), 6 C.P.C. (5th) 329 (Ont. S.C.J.); Markesteyn v. Canada (2001), 208 F.T.R. 284 (F.C.T.D.))

[11]Both Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067 and Free World Trust v. Électro Santé Inc., [2000] 2 S.C.R. 1024, confirm that claim construction is "antecedent" to the inquiries of validity and infringement. This means that claim construction is carried out before the infringement or validity analysis. In Almecon Industries Ltd. v. Anchortek Ltd. (2003), 303 N.R. 76, Justice Sharlow of the Federal Court of Appeal [at paragraph 22], held that "[I]t is incorrect to construe a patent with an eye on the allegedly infringing device: Dableh v. Ontario Hydro, [1996] 3 F.C. 751; Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067, at paragraph 49(a)". I can assume from this comment, that a separate proceeding for the determination of the claim construction will prevent a judge to construe a patent with an eye on the allegedly infringing device.

[12]Since the two Supreme Court decisions on claim construction cited above, there has been a recent tendency in Canada to identify the issue of claim construction prior to the trial on infringement or invalidity. For example, the Alberta Court of Appeal, in Polansky Electronics Ltd. v. AGT Ltd. (2001), 277 A.R. 43 [at paragraph 6], was faced with the issue that the claims of the patent in question were never properly construed:

It is apparent that Telus's various arguments are linked to one central underlying issue. Precisely, what does the Polansky Patent protect? This is the key starting point. It is only when one has clearly construed the scope and breadth of the claims in a patent that other linked issues, such as anticipation, obviousness, and prior use, not to mention infringement, are capable of being properly and adequately assessed. Claims construction is therefore a necessary forerunner to a correct consideration of both validity and infringement issues: Electric and Musical Industries Ltd. v. Lissen Ltd. (1938), 56 R.P.C. 23 (H.L.); Unilever P.L.C. v. Procter & Gamble (1995), 61 C.P.R. (3d) 499 (F.C.A.); Whirlpool Corp. v. Camco Inc., [2000] S.C.J. No. 68, 2000 SCC 67.

[13]Without settlement, patent infringement actions in this Court often take many years to be resolved. I believe that this suggested new procedure might give an opportunity to parties to speed up the litigation in such actions. If, early in the litigation, the claims are construed, the parties can possibly better determine the relative merits of their positions. The chances of success for one party or the other could be better ascertained and assessed by each. The argument of infringement could significantly be strengthened, or weakened, depending on the claim construction arrived at by the Court. Likely, the argument of invalidity could be similarly improved or weakened.

[14]Of course, there is no guarantee that such a process will succeed and in fact alleviate a patent trial from its never ending motion proceedings. However, I strongly believe that if the parties work together to get the claim construction issue out of their way, it can only be beneficial for all parties. To this effect, I think it is appropriate that this case should be dealt with as a specially managed proceeding and that the issue of a claim construction be dealt with by the case management judge in collaboration with the parties.

ORDER

THIS COURT ORDERS that the motion for the issue of a separate determination of claim construction to be determined on a pre-trial hearing, is granted. The file is referred to the Associate Chief Justice of the Federal Court so that it may proceed as a specially managed proceeding and that a case management judge be assigned.

No costs will be allowed.