Supply Chains and Patent Infringement

Allegations of patent infringement are comparatively straight forward when there is one party making and selling the patented product, or performing the patented method in Canada. It gets more complicated when multiple parties are involved in the alleged infringement.

Inducing infringement is well known in Canadian patent law and a defendant can be found liable for inducing someone else to infringe a patent. The three part test for inducing infringement has been summarized, such as in Corlac Inc. v. Weatherford Canada Inc., 2011 FCA 228, as:

  1. the act of infringement must have been completed by the direct infringer.
  2. the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place.
  3. the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement

To establish inducing infringement, the patentee mush prove that there is a direct infringer. Sometimes this isn’t contentious, such as when an end user uses the defendants’ systems according the instructions, but in other cases, it can defeat the allegations of infringement.

In the recent decision of Guest Tek Interactive Entertainment Ltd. v. Nomadix, Inc., 2021 FC 276, the Court noted that a specific configuration of the defendant’s device was required and there was no evidence that any users of the systems, in this case hotels, used this configuration:

“In my view, this evidence indicates that (a) some configuration of the wireless access node itself was necessary to obtain the results shown in Guest Tek’s testing; and (b) this aspect of the configuration was not alone sufficient to result in all packets being forced to the gateway. Guest Tek does not point to any evidence showing hotels in Canada have undertaken such a configuration of wireless access nodes in networks that include a Nomadix gateway.”

As noted above, in addition to establishing there was a direct infringer, the necessary elements of influence must be established.

Canadian courts have rejected “contributory” infringement, where a defendant only contributes to an act of patent infringement, such as supplying a non-infringing component used by the direct infringer short of inducing. Recently, the Court in dTechs EPM Ltd. v. British Columbia Hydro and Power Authority, 2021 FC 190 said, “There is no infringement of a patent in selling an article that does not in itself infringe the patent, even when the vendor knows that the purchaser buys the article for the purpose of using it in the infringement of the patent.”

The law is less definitive on the requirements for infringement where more than one entity are “acting in concert” or working pursuant to a “common design” to perform the actions which constitute infringement. This could arise where ABC Corp performs steps (a), (b) and (c), while XYZ Corp under contract with ABC Corp carries out steps (d), (e) and (f). If a patent is found to require all six steps, then neither ABC nor XYZ may be a direct infringer.

In several cases, allegations of infringement by multiple entities acting together have been discussed – see for example:

  • “As such, while it is not necessary to come to a conclusion in the case at bar, it is worth mentioning for future consideration that in England the courts applied the concept of infringement “by common design”, a notion that also exists in Canada although it has not been applied in the context of a patent infringement action.” – Bauer Hockey Corp. v. Easton Sports Canada Inc., 2010 FC 361.
  • “In this case, the Plaintiffs seek to plead that CTHC was acting in concert with the Additional Defendants toward the common goal of bringing HERZUMA to market, with each of CTHC and the Additional Defendants undertaking various steps in furtherance of that common goal, as detailed in the pleading and noted, in part, above.” – Genentech, Inc. v. Celltrion Healthcare Co., Ltd., 2019 FC 293.
  • “With respect to the method claims, Georgetown notes that Tetra and CN entered into an Equipment Agreement, a Licence Agreement and a Service Agreement. Assuming, without deciding, that Tetra’s provision of equipment to CN and its subsequent processing may be insufficient to support an allegation of infringement of the method claims of the 082 and 249 Patents, in my view the three written agreements satisfy the criteria of Packers for the commission of the impugned acts in concert.” – Georgetown Rail Equipment Company v. Rail Radar Inc., 2018 FC 70.

In Packers Plus Energy Services Inc. v. Essential Energy Services Ltd., 2017 FC 1111, the defendant was found not liable, in part, because no single entity carried out all the steps of the patented method, and “…there is simply no evidence showing any such agreement between [the defendant] and the other companies with whom it acted – operating companies, drilling companies, or fracturing companies. Therefore, [the defendant] cannot be found liable for infringement based on a common design.”

Complications can also arise where the defendant doesn’t actually operate in Canada but may manufacture products outside Canada and others import the widgets into Canada. The Federal Court of Appeal recently said in Hospira Healthcare Corporation v. Kennedy Trust for Rheumatology Research, 2020 FCA 30:

“Accepting that there is indeed no evidence that Celltrion has conducted any activities in Canada, the facts in the present case appear to be indistinguishable from those in the second Saccharin decision. I conclude that there is no evidence to support the conclusion that Celltrion has infringed the 630 Patent, and that the Judge erred in including Celltrion among the companies found to have infringed.”

These various scenarios can arise surprisingly frequently with modern supply chains with many companies involved in the design, advertising, manufacture, sale, importing, distribution and operation of products, systems and methods that may be covered by a patent. It is therefore important to identify what role each entity has, and how it can fits, or does not fit, within the bounds of Canadian patent law.

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