Date: 20100719
Docket: A-150-09
Citation: 2010 FCA 190
CORAM: EVANS
J.A.
LAYDEN-STEVENSON
J.A.
STRATAS
J.A.
BETWEEN:
SHMUEL HERSHKOVITZ,
SYSTÈMES DE SÉCURITÉ PARADOX LTÉE –
PARADOX SECURITY SYSTEMS LTD. and PINHAS SHPATER
Appellants
and
TYCO SAFETY PRODUCTS CANADA LTD
Respondents
REASONS FOR JUDGMENT
STRATAS J.A.
[1]
This is an
appeal from the judgment of the Federal Court (per Justice Martineau):
2009 FC 256. The Federal Court dismissed the appellants’ action for patent
infringement against the respondent. It found that the appellants’ patents,
said to be infringed by the respondent, were actually invalid.
[2]
The
Federal Court identified a number of grounds for invalidity of the patents. For
the purposes of this appeal, it is only necessary to concentrate on the Federal
Court’s consideration of certain disclaimers filed by the appellants.
[3]
Disclaimers
can only narrow the scope of the claims in patents, not broaden them. The
Federal Court found that the appellants’ disclaimers added new inventive
elements to the claims in the patents, broadening them. Therefore, the
disclaimers were invalid. Further, the disclaimers were not prompted by
mistake, accident or inadvertence, as required by section 48 of the Patent Act,
R.S., 1985, c. P-4 (the “Act”). When the appellants filed the disclaimers, they
effectively admitted that the original claims in their patents were too broad.
With the disclaimers ruled invalid, the original claims in the patents
remained, claims that were too broad. So the Federal Court found that the
patents were invalid on account of overbreadth.
[4]
In my
view, the Federal Court did not commit any reviewable error on its disposition
of these issues and so I would dismiss the appeal, with costs.
A. Preliminary observations
[5]
In order
to understand the issues in this case and to understand the decision of the
Federal Court, it is necessary to deal briefly with some basic questions. What
is a patent and when can it be invalid? What is a disclaimer and when can it be
invalid? How does a disclaimer relate to a patent?
The basics of the patent
system
[6]
At its
essence, the patent system is a bargain between the public and inventors: Free
World Trust v. Électro
Santé Inc., [2000] 2
S.C.R. 1024, 2000 SCC 66 at
paragraph 13. The Act and the common law define that bargain in detail.
[7]
The generalities
of the bargain can be described in the following way. An inventor can obtain a patent
for any “new and useful art, process, machine, manufacture or composition of
matter”: section 2 of the Act (definition of “invention”). The patent gives its
holder, the patentee, a time-limited exclusive right to make, construct, use
and sell the invention: section 42 of the Act. There is a quid pro quo.
The inventor must disclose the details of the invention in enough detail so
that a person skilled in the art – i.e. an uninventive person knowledgeable
in the field of the invention – can recreate it. Others, armed with the
information previously disclosed, may make, use and sell the invention when the
patent expires. The information disclosed may also give rise to inventions by
others. This bargain is socially useful because it encourages research and
development and broader economic activity: Free World Trust, supra at paragraph 42.
[8]
The scope
of the subject-matter protected by the patent matters. It can affect this
bargain drastically. If the scope is too wide, the inventor will get too much
protection.
[9]
The scope
of the subject-matter protected by the patent is determined by the “claims” that
are set out in the patent. Claims “are frequently analogized to ‘fences’ and
‘boundaries’”: Free World Trust, supra at paragraph 14.
[10]
Courts
trying to determine the scope of the subject-matter protected by the patent – i.e.
locating the fences and boundaries – engage in what is called “claims
construction.” Courts do this from the perspective of a person skilled in the
art and receive evidence from such persons.
[11]
The
inventor can enforce her or his exclusive right to make and exploit the
invention within the scope of the patent by suing for patent infringement. A
person infringes a patent by performing all of the essential elements found
within the claims of the patent. The essential elements of a claim are all the
elements required for the invention in the claim to function as contemplated by
the inventor. Put another way, those elements that can be substituted or
omitted without having a material effect on the invention’s function are
non-essential. Clearly, adding essential elements to a claim narrows it.
[12]
A common
defence to an infringement suit is to establish that the patent is invalid.
Invalidity can be shown by establishing that a patent is not novel, not useful
or not inventive: section 2 (definition of “invention”) and sections 28.2 and
28.3 of the Act. Put differently, to be valid, a patent must be novel, useful,
and inventive. Case law defines these requirements with great particularity,
but for this broad overview, a few general comments will suffice.
[13]
To be
novel the invention must not have been previously made known to the public.
Information previously made known to the public is called “prior art.”
[14]
To be
useful the invention must be directed toward a practical purpose. Additionally,
the details published by the inventor in the disclosure must permit a person
skilled in the art to recreate the invention as claimed.
[15]
To be
inventive, in general terms the invention must be the product of ingenuity, not
obvious from prior learning.
[16]
However,
an inventor can only claim that which he invented. If an inventor claims more
than was invented, the subject-matter of the patent will be too broad. This
makes the bargain unfair – the inventor ends up with the exclusive right to
exploit subject-matters not invented and not disclosed to the public. Simply
put, patents cannot be overbroad.
The role of the Patent Office
[17]
Inventors
apply to the Canadian Intellectual Property Office for a patent. An inventor’s
application includes the claims and the disclosure. The Patent Office examines
the inventor’s application to determine whether all the requirements under the
Act are met: section 27 of the Act. In this capacity the Patent Office
regulates the bargain between the public and inventors. Regulating the bargain
includes examining the invention for the three criteria of patentability: novelty,
usefulness and inventiveness.
[18]
An
inventor may attempt to remedy deficiencies found by the Patent Office during its
examination of the application. For example, the inventor may change the disclosure
or the claims. If ultimately satisfied, the Patent Office will issue a patent
for the invention.
Disclaimers and reissuances
[19]
After the
patent has been issued, the recipient of the patent, the patentee, can sue
those who perform actions falling within the claims for patent infringement, as
described above. An issued patent is presumed to be valid: subsection 43(2) of
the Act.
[20]
However, a
patentee may later discover that part of the invention falls short on one of
the three criteria for patentability.
[21]
If the patentee
does not address this problem, the patented invention will remain short on one
of the three criteria of patentability. This endangers the patentee’s ability
to maintain a later patent infringement suit, should that become necessary: a defendant
to that suit could allege invalidity of the claims of a patent. If that defence
is successful, those claims would fall away completely. The inventor would lose
the protection of those claims entirely, and not just the protection afforded
by the deficient parts.
[22]
Sometimes
the patentee can address the deficiency upon discovering that part of the
invention falls short on one of the three criteria for patentability. Where the
deficiency is as a result of a mistake, accident or inadvertence, the patentee may
renounce that part of the invention that falls short. In contrast, no
renunciation is possible where the deficiency stems from a desire to mislead
the public. Renunciation is accomplished by filing with the Patent Office a document
called a “disclaimer”: section 48 of the Act. Section 48 provides as follows:
|
Patentee may disclaim anything included in patent by
mistake
48. (1)
Whenever, by any mistake, accident or inadvertence, and without any wilful
intent to defraud or mislead the public, a patentee has
(a) made a
specification [i.e. the claims and disclosure found in the patentee’s
patent application] too broad, claiming more than that of which the patentee
or the person through whom the patentee claims was the inventor, or
(b) in the
specification, claimed that the patentee or the person through whom the
patentee claims was the inventor of any material or substantial part of the
invention patented of which the patentee was not the inventor, and to which
the patentee had no lawful right,
the patentee may, on
payment of a prescribed fee, make a disclaimer of such parts as the patentee
does not claim to hold by virtue of the patent or the assignment thereof.
…
|
Cas de renonciation
48. (1) Le breveté peut,
en acquittant la taxe réglementaire, renoncer à tel des éléments qu’il ne
prétend pas retenir au titre du brevet, ou d’une cession de celui-ci, si, par
erreur, accident ou inadvertance, et sans intention de frauder ou tromper le
public, dans l’un ou l’autre des cas suivants:
a) il a donné trop d’étendue à son
mémoire descriptif, en revendiquant plus que la chose dont lui-même, ou son
mandataire, est l’inventeur;
b) il s’est représenté dans le mémoire
descriptif, ou a représenté son mandataire, comme étant l’inventeur d’un
élément matériel ou substantiel de l’invention brevetée, alors qu’il n’en
était pas l’inventeur et qu’il n’y avait aucun droit.
[…]
|
[23]
The filing
of a disclaimer narrows the scope of the patent. The narrowing of the scope of
the patent happens automatically upon filing the disclaimer: the Patent Office
does not have to assess and approve the disclaimer. As long as the disclaimer
is in the prescribed form, the Patent Office registers it: Monsanto Co. v. Canada (Commissioner of Patents), [1976] 2 F.C. 476 (C.A.); Distrimedic
Inc. v. Richards Packaging Inc., 2008 FCA 4, 371 N.R. 377. The passive role
of the Patent Office in this context makes sense. A disclaimer can only narrow
the scope of a patent. When the patentee files a disclaimer, the scope of the
patent exclusivity enjoyed by the inventor is reduced. Competitors are put on
notice that they may tread in the disclaimed area of the patent. As a result,
the public receives a better bargain.
[24]
A patentee
may change the scope of its patent in another way: reissuance of the patent
under section 47 of the Act. However, in contrast to a disclaimer, reissuance may
be used to broaden the scope of the patent. As one commentator puts it,
“Whereas reissue is an adjustment narrower or broader to achieve what you
allege you originally wanted, disclaimer is a renunciation of something you
originally wanted”: R. G. McClenahan, “Thoughts on Reissue and Disclaimer”
(1968), 7 C.P.R. (2d) 251 at 260. Since reissuance can result in the widening
of a patent’s scope – the scope of the patentee’s exclusivity rights can be increased,
thereby affecting the bargain with the public – the Patent Office must examine
and approve any application for a reissuance.
[25]
Disclaimers
that broaden the scope of a patent are invalid. Section 48 of the Act
says, among other things, that disclaimers are available for “specification[s] [that are] too broad,” not specifications that are too
narrow. Again, this makes sense and is consistent with the bargain in the Act. Were it otherwise, and patents
could be broadened through disclaimer, a patentee could unilaterally add to her
or his benefit under the bargain at the expense of the public, while circumventing
the Patent Office’s regulatory role.
B. The
Federal Court’s decision
[26]
The Federal Court, among other things,
considered the validity of two patents, numbers 2,169,670 and 2,273,148. The
Federal Court found that both were invalid.
[27]
In this Court, the appellants abandoned any
appeal of that Court’s ruling that the '148 patent was invalid. For that
reason, and because of the narrowness of the issues that this Court needs to
determine in this appeal, it is only necessary to review the facts surrounding the
appellants’ '670 patent.
[28]
Patent '670, relates to an electronic circuit
known as a telephone line coupler. A telephone line coupler is used to connect
electronic equipment, such as a telephone or alarm system to a telephone line,
while providing electrical isolation. The electrical isolation is necessary to
protect equipment from power surges and unwanted signals. The electrical
isolation is achieved by using optical-electronic components called “opto-couplers.”
[29]
Soon after the appellants’ '670 patent issued on
October 5, 1999, the appellant, Systèmes de Sécurité
Paradox Ltée – Paradox Security Systems Ltd, sent a
demand letter to the respondent alleging infringement. The respondent denied
all allegations of infringement. It also asserted that the appellants’ '670
patent was invalid.
[30]
On October 6, 2003, Paradox filed a disclaimer.
The portion of that disclaimer relevant to this case disclaimed claims 1 and 2
in the '670 patent, with the exception of one matter. This was a telephone
line coupler circuit as originally claimed “where said signal receive means
comprises a receive opto-coupler connected in series with said transmit
opto-coupler means on a telephone line side to draw a minimum of current to
place a light-emitting diode of said receive opto-coupler in an operational
range.”
[31]
A number of the twenty-three days of trial in
the Federal Court were devoted to whether this disclaimer actually added new
inventive elements to the claims in the patent, and, therefore, was invalid.
The Federal Court found that it did add new inventive elements, and so the
disclaimer was invalid. Further, the appellants did not establish that they
sought the disclaimer because of “mistake, accident or inadvertence” under
subsection 48(1) of the Act and so the disclaimer was invalid on that ground
too. However, when the appellants filed the disclaimer to deal with the
overbreadth of the original '670 patent, they were admitting that claims in the
patent were overbroad. That was a ground for invalidity of the claims.
Therefore, the Federal Court dismissed the appellants’ action for patent
infringement and granted the respondent’s counterclaim for a declaration that
the disclaimers and the patents in suit are invalid.
C. Analysis
Was the
disclaimer invalid because it added new inventive elements to the invention?
[32]
The
Federal Court found that the appellant’s disclaimer broadened the scope of the
patent by adding new inventive elements to it and, therefore, the disclaimer was
invalid. It reached this conclusion by construing the claims in the patent, construing
the claims in the patent as modified by the disclaimer, and then comparing the
two. This was the correct approach.
[33]
Following
this approach, the Federal Court found (at paragraph 81) that the original
claims in the patent specified no connection between the opto-couplers. However,
in the view of the Federal Court, the disclaimer added a new inventive element:
“a minimum of current to place a light emitting diode of said receive
opto-coupler in an operational range.” In fact, the Federal Court found that there
were nine new inventive elements in the disclaimer (at paragraph 82):
The additional inventive elements are: (1) a receive opto-coupler (2)
connected (3) in series (4) with the transmit opto-coupler [means] (5) on the
line side (6) to draw a minimum of current (7) to place a light-emitting diode
(8) of the receive opto-coupler (9) in an operational range. The Court notes
that these newly added elements are considered by the inventor himself as being
(1) inventive elements and (2) resulting in new combinations…
In the view of the Federal Court, this
was an invalid broadening of the scope of the patent through disclaimer.
[34]
In this
Court, the appellants cast their challenge to the Federal Court’s ruling on this
point very narrowly. They challenged the Federal Court’s finding that the
disclaimer introduced, as a new inventive element, a connection between the
receive opto-coupler and the transmit opto-coupler. However, even if the
Federal Court were wrong on that, its finding that the disclaimer improperly
introduced a number of other new inventive elements would remain. For example, in
this Court, the appellants did not challenge the finding that “a minimum of
current to place a light emitting diode of said receive opto-coupler in an
operational range” broadened the scope of the patent. They failed to challenge any
of the other elements that the Federal Court described in the above passage,
which, in its view, broadened the scope of the patent. Whether or not the
appellants’ narrow submission is correct, it does not matter in the end result:
the Federal Court has found that the disclaimer, by broadening the original
claims in the patent, is invalid. Were it otherwise, parties could use
disclaimers to broaden their patents and obtain increased rights of exclusivity
over those elements, thereby changing the overall bargain and circumventing the
oversight of the Patent Office.
[35]
Because of
the rather narrow focus of the appellants’ arguments concerning the above
passage, it is not necessary for this Court to examine each of the nine
inventive elements identified by the Federal Court and assess whether they are
indeed inventive elements. In some cases, this might be necessary. There is a
distinction between inventive elements and essential elements. In a disclaimer,
one cannot add inventive elements, as that will broaden the scope of the
patent. But adding essential elements can narrow the scope of the patent; as mentioned
in paragraph 11, above, the more essential elements there are in the patent’s
claims, the narrower they get.
Was the disclaimer invalid because the
appellants failed to demonstrate mistake, accident or inadvertence under
subsection 48(1) of the Act?
[36]
As
mentioned above, subsection 48(1) of the Act provides that a disclaimer may be
made only where there has been a “mistake, accident or
inadvertence…without any wilful intent to defraud or mislead the public.” The Federal
Court found that the appellants’ disclaimer was not prompted by “mistake, accident or inadvertence.”
[37]
The
Federal Court began by summarizing the law relating to “mistake, accident or
inadvertence” (paragraph 79):
Finally, when the validity of a disclaimer is contested, the onus of
showing that there was mistake, accident or inadvertence is on the patentee,
and the propriety or validity of such disclaimer may be reviewed by the Court
if the patent is litigated. Moreover, according to the case law, the validity
of the disclaimer depends on the state of mind of the patentee at the time he made
his specification. The patentee must be able to demonstrate to the Court that
the disclaimer is made in good faith and not for an improper purpose. Where the
patentee does not discharge this burden, the disclaimer will be held to be
invalid. The fact that the Patent Office had accepted a
disclaimer is not determinative. See Pfizer Canada Inc. v. Apotex, 2007
FC 971, 61 C.P.R. (4th) 305, at paras. 37 nd 38; Trubenizing Process Corp.
v. John Forsyth Ltd. (1941), 1 C.P.R. 89, 2 Fox Pat. C. 11 (Ont. H.C.J.), affirmed
(1942), 2 C.P.R. 89, [1942] 2 D.L.R. 539 (Ont. C.A.),
rev.d on other grounds (1943), 3 C.P.R. 1, [1943] 4 D.L.R. 577 (S.C.C.).
[38]
In this
Court, the appellants again cast their arguments narrowly. They do not take
issue with the Federal Court’s summary of the law. Instead, the appellants submit
that they adduced sufficient evidence at trial to discharge the onus upon them
to prove “mistake, accident or inadvertence” under subsection 48(1) of the Act.
[39]
This
determination by the Federal Court was one of mixed fact and law. The proper
appellate standard of review for this claim is “palpable and overriding error”:
Housen v. Nikolaisen, [2002] 2 S.C.R. 235, 2002 SCC 33 at paragraph 10.
The appellants essentially ask this Court to reweigh the evidence that was
before the Federal Court and come to a different conclusion. However, under the
“palpable and overriding error” standard of review, this Court cannot reweigh
the evidence and come to a conclusion that the Federal Court did not reach. If
the Federal Court had evidence in support of its finding and if its finding is
not otherwise vitiated by some fundamental error, there is no ground for this
Court to intervene.
[40]
The
Federal Court did not make a “palpable and overriding error” on this issue. It
found that the appellants had not established that their disclaimer was
prompted by “mistake, accident or inadvertence.” The Federal Court had multiple
reasons in support of its finding:
(a) Mr. Shmuel
Hershkovitz, one of the founders of Paradox, could not indicate what the
mistake, accident or inadvertence was.
(b) Mr. Pinhas
Shpater, the other founder of Paradox, a person with substantial technical
expertise relating to the invention, remained silent on the topic of mistake,
accident or inadvertence.
(c) At the
time of the trial, Mr. Shpater persisted in a belief, which the trial judge
found not credible, that certain prior art was not relevant to the '670
patent.
(d) Explanations
provided by Mr. James Anglehart, a patent agent, were entitled to little weight
because they were laborious and showed a lack of memory.
[41]
In this
Court, the appellants tried to overcome these findings by directing this Court
to portions of testimony given at trial by Mr. Shpater and Mr. Anglehart. In my
view, this testimony actually supports the Federal Court’s overall conclusion
that the appellants had not met the onus of demonstrating mistake, accident or
inadvertence. The proffered portions of Mr. Shpater’s testimony do not
demonstrate mistake, accident or inadvertence. Mr Anglehart’s testimony was
sufficiently vague and general to permit the Federal Court to give it low
weight.
[42]
The
appellants urged this Court to accept that the threshold for finding that a
disclaimer was prompted by mistake, accident or inadvertence is low. In their
submission, this threshold can be met by pointing to any evidence whatsoever in
the record showing mistake, accident or inadvertence. In support of this
position they cite the Federal Court’s decision in Pfizer Canada Inc. v.
Apotex Inc., 2007 FC 971, 61 C.P.R. (4th) 305 per Justice Mosley for
the proposition that “[t]he threshold for supporting a disclaimer is not high”.
[43]
I do not
read Pfizer this way. It is true that the Federal Court found mistake,
accident or inadvertence in that case on the basis of what it called “minimal”
evidence. However, it applied the usual balance of probabilities standard (at
paragraph 43). That is the correct standard. As the Supreme Court of Canada has
observed, there is only one standard of proof in civil cases, the balance of
probabilities standard, and “[i]n all
civil cases, the trial judge must scrutinize the relevant evidence with care to
determine whether it is more likely than not that an alleged event occurred”: F.H.
v. McDougall, [2008] 3
S.C.R. 41, 2008 SCC 53 at paragraph 49.
[44]
For the
foregoing reasons, I conclude that the Federal Court’s conclusion that the
disclaimer was invalid must remain undisturbed.
Was the appellants’ patent
invalid?
[45]
The
appellants submit that when a disclaimer is adjudged invalid, it does not
follow that the patent is invalid. The appellants submit that Pfizer, supra,
supports this submission. In particular, they rely upon the following passage
(at paragraph 38):
I agree with
the findings of the Ontario High Court of Justice in Trubenizing Process
Corp. v. John Forsyth, Ltd., [1942] O.R. 271-300, 2 C.P.R. 89, rev'd on
other grounds [1943] S.C.R. 422, [1943] S.C.J. No. 35, wherein Chevrier J. held
that the validity of the disclaimer depends solely upon the state of mind of
the patentee at the time he made his specification. Chevrier J. further made it
clear that the onus rests on the party who files a disclaimer to justify the
need for the disclaimer at the time it was filed by reason of mistake, accident
or inadvertence and that there was an absence of intent to defraud or mislead
the public. Where the filing party does not discharge this burden, the
disclaimer will be held to be invalid and the patent will remain in its
original form. [emphasis added]
To me, this does not advance the appellants’ case. A
statement that an invalid disclaimer allows the patent to remain in its
original form says nothing about whether the patent, in its original form, was
valid or invalid.
[46]
What is
relevant in this case is the appellants’ filing of the disclaimer. By filing
the disclaimer in the Patent Office – a significant, formal, public act – the
appellants conceded that their original patent was too broad in scope: Patent
Rules (1996), S.O.R./96-423, Sched. I, Form 2.
[47]
Justice
Hughes of the Federal Court expressed this point succinctly and well in Bristol-Myers
Squibb Canada Co. v. Apotex Inc., 2009 FC 137, 74 C.P.R. (4th) 85 at
paragraph 47:
…The Applicants filed a document [the disclaimer] with the
Patent Office, intending it to be acted upon by that Office and knowing that it
would be seen and relied upon by the public. That document clearly and
unequivocally says that the patentee made the original claims too broad.
Private reservations of in-house counsel or litigation tactics cannot allow the
Applicants to resile from those public statements.
In my view, having asserted that the claims in the pre-disclaimer
patent were too broad, the patentees may not now return to them as a basis for
their infringement suit. They are overbroad and thus void: Harold G. Fox, The
Canadian Law and Practice Relating to Letters Patent for Inventions, 4th
ed. (Toronto; Carswell, 1969) at page 199; Minerals Separation North
American Corp. v. Noranda Mines, Ltd., [1947] Ex. C.R. 306, 12 C.P.R. 99 at
page 111.
[48]
Some
observations can be made based on the discussion at the outset of these reasons
regarding our system of patents and the bargain between inventor and the public.
If we were to allow the appellants to return to the original claims in the
patent, and if we were to regard those claims as valid, despite the appellants’
disclaimer based on overbreadth, we would create a situation inconsistent with
the bargain that lies at the heart of the scheme of the Act. The public notice
function of disclaimed patents would be undermined and competitors would find
it difficult to determine the areas that remain open for innovation: Free
World Trust, supra at paragraphs 41 and 42.
[49]
A
hypothetical example will serve to illustrate the problem. Suppose that a
patentee filed a disclaimer some time ago, notifying the world that its patent
was not as broad as it thought. In effect, the patentee told the world that it
was moving the fences in, giving up territory that was previously inside the
fences. Suppose others start to work in that newly unfenced territory. If the
appellants’ submissions were accepted, upon invalidation of the disclaimer the
fences would suddenly move to their original positions. Such a result does not seem
fair, consistent with the orderly functioning of the Act, nor compatible with
the bargain that lies at the heart of our patent system.
Other issues in the Federal
Court
[50]
The lengthy
reasons for judgment of the Federal Court also examined whether the claims of
the patents in issue were invalid on the grounds of anticipation, obviousness and
mere aggregation or unpatentable combination of known art. The Federal Court also
made a number of other observations. These findings and observations were the
focus of detailed submissions, written and oral, made in this Court. In my
view, it is unnecessary to consider these findings and observations. They do
not change the outcome of this appeal.
D. Proposed disposition
[51]
For the
foregoing reasons, I would dismiss the appeal with costs.
"David
Stratas"
“I
agree
John M. Evans J.A.”
“I
agree
Carolyn Layden-Stevenson J.A.”
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