In a lengthy judgment released on September 16, Federal Court Judge Yvan Roy convincingly dismissed a patent lawsuit brought against Bombardier Recreational Products Inc. (BRP) by one of its main competitors, Arctic Cat, Inc. (2016 FC 1047).
Arctic Cat had accused BRP of infringing a patent relating to electronic engine control for two-stroke engines. This lawsuit came on the heels of a lawsuit which BRP had earlier filed against Arctic Cat for infringement of a series of patents relating to rider forward positioning and frame construction of snowmobiles.*
In finding for BRP, the Court ruled that its engine control systems did not infringe Arctic Cat's patent. The Court also ruled that if there had been a finding of infringement, the patent would have been held invalid. The judgment addresses many factual issues which are particular to the case but also sets out some broader legal principles which will be of interest to patent practitioners as well as their clients:
BRP challenged whether the named inventor of Arctic Cat's patent was in fact the true inventor of the technology (if any) disclosed and claimed in the patent. Inventorship is an issue that is rarely raised in Canadian cases, and has not received much judicial attention to date. In this case, the evidence showed that the inventor had done nothing more than explore a general idea with a third party supplier of engines, who then provided solutions to the problems raised by the purported inventor. The Court found that under cross-examination, the inventor was unable to clearly describe his invention, or explain what his contribution to the invention would have been. In the end, the Court concluded that Arctic Cat had not met the relatively low threshold of showing that the alleged inventor had made even a "a minor contribution" to the patented invention.
Obviousness-Based Gillette Defence
Patent lawyers are familiar with the Gillette defence, which is raised when a defendant can show that the allegedly-infringing device is based on technology that existed before the plaintiff's patent was filed. This means that the device either falls outside the patent's claims (in which case the defendant wins for non-infringement), or if the device falls within the patent's claims, the patent is anticipated and thus invalid (in which case the defendant wins for invalidity).
Many Canadian lawyers subscribe to the conventional wisdom that in order to successfully raise the Gillette defence, the defendant must prove that the prior art device anticipates the plaintiff's patent. However, in this case, the Court confirmed that the Gillette defence is available even if anticipation has not been fully made out, ruling that the defence could be based on obviousness.
Arctic Cat v BRP is the first Canadian patent infringement case in which the Gillette defence was successfully made out. Previously, this defence had only been successfully raised in the specialized context of the Patented Medicines (Notice of Compliance) Regulations. Arctic Cat v BRP is thus the first Canadian patent case in which a defendant successfully relied on the Gillette defence for a product which was already on the market.
Due Diligence to Avoid Infringement
When BRP developed its engine control systems, it was well aware of Arctic Cat's patent. The evidence at trial showed that BRP had carefully analysed the patent and had carried out diligent searches, deciding to adopt technology that was different from what was claimed in Arctic Cat's patent, and in fact virtually identical to technology described in a prior, expired, US patent. The judge concluded that in so doing BRP was acting as a diligent corporate citizen. While this is not a central ruling in the case, the lesson to be drawn by clients is that they must take intellectual property rights seriously. When developing new technology, it is essential to carry out a serious freedom to operate analysis in order to get a good idea of the patent landscape into which one is about to venture.
Patent litigation is often a battle of experts. Lawyers will spare no effort in trying to discredit the work of the opposing party's experts. Are they qualified? Was their work thorough, complete, science-based, unbiased, etc.? When retaining an expert for patent litigation, one is often in a quandary about how much to reveal to the expert about the prior art that has been found by the lawyers prior to retaining the expert, or how much research the expert should do in terms of prior art when embarking on the project. Here again, the Court has given practitioners some guidance: the fact that prior art discovered by the lawyers has been given to the experts, or the fact that the expert has found additional prior art that may invalidate the patent, are in no way to be decried as creating an inference that the experts or their work are biased. In fact, the Court was unimpressed by the fact that one of the experts had not examined prior art before submitting his expert report on infringement.
Damages – Reasonable Royalties
Even though the action against BRP was dismissed, the judge delved into the issue of damages since the parties had spent a fair amount of trial time and experts had testified on the issue. While these comments were technically obiter, they are of interest to patent lawyers and their clients, since there are very few Canadian judgments which consider the issue of reasonable royalties for patent infringement. Unfortunately though, this case will not add much to the jurisprudence because the judge did not retain any of the methods put forward by the experts, and did not elaborate a conceptual framework that could be used as guidance in future cases involving damages for infringement of one component in a multi-component product (here, a control functionality for an engine used in snowmobiles). However, the Court did seem inclined to accept the concept of the "smallest salable patent-practicing unit", developed in the USA, as generally being the most appropriate starting point for calculating a reasonable royalty for patent infringement. This is at least the beginning of guidance for Canadian IP bar.
* The parties are still awaiting judgment on the initial BRP v Arctic Cat case.