[1] This is an appeal and cross-appeal from the judgment of the Trial Division dated August 15, 2001, dismissing the appellants' claims for a declaration of validity and for infringement by the respondent of Canadian Letters Patent 2,101,884, and allowing the respondent's counterclaim for a declaration that the patent is void ab initio as between the respondent and the appellants.

Background

[2] As the learned Trial Judge found, during the late 1980s Fleming Oil Field Services Ltd., through its Reef Mud Division, was the supplier of drilling mud to the oil and gas well industry. At about the same time the company, which was jointly owned and controlled by James K. Fleming, its President, and his brother Harold C. Fleming, its Vice-President, began to make use of "fertilizer" grade or "commercial" grade calcium nitrate as a tracer and, later, as a flocculent in water-based drilling muds. To this end, Fleming Oil Field Services Ltd. entered into an arrangement for distribution of calcium nitrate with a supplier in the State of Washington, U.S.A., by which Fleming Oil Field Services was permitted to distribute this calcium nitrate in bags under the name "Envirofloc" throughout western Canada.

[3] Q'Max's product at the centre of this dispute, known as "Envirovert", is a "water-in-oil invert emulsion drilling mud". It contains the salt ammonium calcium nitrate decahydrate.

[4] According to the record, invert emulsion drilling mud is made by a step-wise procedure. A base oil is mixed with lime or other alkaline material, emulsifiers, surfactants and other additives. An aqueous solution is made by mixing water and a salt to form a brine. The brine is then blended in with the oil mixture to form a drilling mud. Drilling mud is used by the oil and gas industry in the course of well drilling operations. It lubricates and cools the drill bit. It also functions to remove cuttings, created by operation of the drill bit, from the borehole to the surface. A problem which can occur with the use of drilling fluid is that water in the mud causes subsurface strata to become hydrated. This can lead to stability problems in the borehole itself. Oil-based invert muds solve this problem by using a brine solution in the aqueous phase of the mud which produces a water activity level equal to that in the subsurface strata through which the borehole is being drilled. This keeps water from migrating from the drilling mud into the rock being drilled. Traditionally, the salts calcium chloride and sodium chloride were used to make the brine for the aqueous phase.

[5] When invert drilling mud is returned to the surface from the borehole, cuttings are removed from it by the use of screens. The composition of the drilling fluid is then analysed, adjustments are made if necessary, and the mud is reused. The rock cuttings that have been extracted must be disposed of. The practice of "landfarming" is a means of disposal in the industry. This involves removing a layer of topsoil from an area around the drill site, spreading the cuttings in the area and covering them with the topsoil. The cuttings and the topsoil are mixed in order to increase the contact between the oil and indigenous micro-organisms in the soil which break down the oil residue. The salt is diluted and leaches away into the soil naturally. This practice has some negative environmental effects, as the oil from the cuttings is not environmentally friendly, and neither are the chloride salts that are commonly used. During the l980s, environmental concerns connected to landfarming increased. This provided an impetus for the development of an effective drilling mud that would be more environmentally friendly.

[6] The invention provided for an invert emulsion drilling mud which utilized nitrogen-containing double salts. This formulation "killed two birds with one stone". It eliminated the use of chloride salts to prevent hydration during drilling with consequential reduction of chlorides in land farming operations. At the same time, it provided a "built-in" nitrogen fertilizer to speed degradation of oil residue when land farming the cuttings from borehole drilling. As we shall see, the preferred salt was ammonium calcium nitrate decahydrate (ACND), a salt contained in the "Envirofloc" product.

The Patent

[7] By their petition dated August 4, 1993 (the "petition"), signed and filed by their agents the same day, James K. and Harold C. Fleming made application to patent an invention entitled "INVERT EMULSION DRILLING MUD" as described and claimed in the accompanying specification. It was asserted in paragraph 1 of the petition that "your Petitioner made the invention", and in paragraph 3 that the petitioners believed they were "entitled to a patent for the said invention". The patent was laid open September 30, 1993 and was granted May 16, 1995 as Canadian Letters Patent 2,101,884 (the "patent"). Named in the patent as "inventors" were James K. and Harold C. Fleming. Named as beneficial owners were J.F.K. Investments Ltd. and Hour Holdings Ltd., which were the personal holding corporations of James K. and Harold C. Fleming, respectively.

[8] On October 16, 1997, in response to a further petition, the Canadian Intellectual Property Office made a number of small corrections in the patent pursuant to section 8 of the Patent Act, R.S.C. 1985, c. P- 4. These consisted of substituting the words "aqueous phase" for "water" or "water content" at various places in the disclosure and for the word "water" in the last lines of claims 1, 4 and 7. On February 9, 1998 a further petition was filed with that Office, this time for reissue of the patent. The petition was granted March 24, 1998. The primary aim of the reissued patent was to clarify the phrase "hydrated nitrogen-containing complex salt" in the claims as meaning "a hydrated nitrogen-containing double salt as that term would be understood by one of ordinary skill in the art" and, correspondingly, the meaning of "complex salt" and "complex salts" as referring to "double salt" and "double salts", respectively. Introduced at the same time was an "Abstract" that is accurately recited in paragraph 10 of the Trial Judge's reasons for judgment.

[9] The patent contains eighteen specific claims, the text of which were reproduced by the Trial Judge in Schedule 1 to his reported reasons for judgment (671905 Alberta Inc. v. Q'Max Solutions Inc. (2001), 14 C.P.R. (4^th) 129, 210 F.T.R. 24). It will be useful at this juncture to recite the text of the first seven of the patent claims:

1. A water-in-oil invert emulsion drilling mud comprising an emulsifier, a surfactant, a clay, an alkaline substance and a hydrated nitrogen-containing complex salt for reducing or preventing hydration of subterranean formation clays, wherein the concentration of water in the mud is in the range of from about 5 to 50% by volume and the concentration of the nitrogen-containing complex salt is in the range of from about 5 to 80% by weight of the aqueous phase.

2. A water-in-oil invert emulsion drilling mud according to claim 1, wherein the nitrogen-containing complex salt is a hydrated ammonium calcium nitrate or nitrite.

3. A water-in-oil invert emulsion drilling mud according to claim 1, wherein the nitrogen-containing complex salt is ammonium calcium nitrate decahydrate.

4. A water-in-oil invert emulsion drilling mud according to claim 1, 2 or 3, wherein the concentration of the nitrogen-containing complex salt in the mud is in the range of from about 25 to 40% by weight of the aqueous phase.

5. A water-in-oil invert emulsion drilling mud according to claim 1, 2 or 3, wherein the concentration of water in the mud is in the range of from about 10 to 40% by volume.

6. A water-in-oil invert emulsion drilling mud according to claim 1, 2 or 3, wherein the oil is crude oil or diesel oil.

7. In a method of drilling a borehole, comprising the steps of providing a water-in-oil invert emulsion drilling mud in the borehole, recirculating the drilling mud to the surface, screening rock cuttings from the drilling mud and returning the screened drilling mud to the borehole, analysing the properties of the drilling mud, the improved step of supplementing the drilling mud with a hydrated nitrogen-containing complex salt for reducing or preventing hydration of subterranean formation clays, wherein the concentration of water in the mud is in the range of from about 5 to 50% by volume and the concentration of the nitrogen-containing complex salt is in the range of from about 5 to 80% by weight of the aqueous phase.

Assignments

[10] The record in these proceedings includes a number of relevant documents filed with the Canadian Intellectual Property Office. The first of these is an assignment dated August 11, 1993 of James K. and Harold C. Fleming as "inventors" to J.F.K. Investments Ltd. and Hour Holdings Ltd. of their respective right, title and interest "in and to our invention relating to INVERT EMULSION DRILLING MUD as fully described and claimed in the application for patent for such invention and to all our corresponding right, title and interest in and to any patent which may issue therefor". Two further assignments dated January 1, 1996 were also filed. First, J.F.K. Investments Ltd. assigned all of its interest, right and title "in and to Canadian Letters Patent #2101884...granted on the 16^th day of May, 1995" to 671905 Alberta Inc., one of the appellants herein, and which was controlled by Harold C. Fleming. Second, Hour Holdings Ltd. assigned all of its interest, right and title in the patent to the same company. By a separate assignment dated October 15, 1997, 671905 Alberta Inc. assigned all of its interest, right and title in the patent to Fleming Oil Field Services Ltd. The record also reveals that by Certificate of Amalgamation dated July 1, 1998, Fleming Oil Field Services Ltd. and M-I Drilling Fluids Canada, Inc. were amalgamated pursuant to the Canada Business Corporations Act, R.S.C. 1985, c. C-44 under the name of "M-I Drilling Fluids Canada, Inc.", the other appellant herein.

Development of the invention

[11] In January 1989, an experimental test was conducted in the laboratory of Fleming Oil Field Services Ltd. to see whether the calcium nitrate decahydrate salt contained in "Envirofloc" would be suitable to use as a substitute for chloride salts in the aqueous phase of a water-in-oil invert emulsion drilling mud.

[12] Harold C. Fleming testified at trial with respect to the involvement of he and his brother, James K., in a company called DOC Environmental Control Inc. with two business acquaintances, and which was formed for the purpose of providing oil spill services. He further testified that the knowledge they acquired from the DOC experience in the use of a nutrient to create bacteria led them to discuss the testing of "Envirofloc" in the development of a drilling mud invert with Richard Smith, the laboratory manager or supervisor employed by Fleming Oil Field Services Ltd. Mr. Fleming testified that the testing, which occurred in January 1989, was agreed upon jointly by him, his brother James and Richard Smith, and that Mr. Smith "had our approval" to go ahead with the testing [Trial Transcript, vol. 1, p. 116, ll. 15-18].

[13] Mr. Smith testified that it was he who "put the formulations together" while working for Fleming Oil Field Services Ltd. and that the testing in January 1989 was carried out by a laboratory technician under his supervision using a mineral oil external phase and calcium nitrate brine as the internal phase [Trial Transcript, vol. 5, p. 648 et seq.]. He further testified that the idea of using calcium nitrate had come to him from one Darryl Lucas, an employee at the time of a company called Harrison and Crossfield. Mr. Smith concluded from the test that the use of calcium nitrate in an invert was "viable". However, he had yet to determine whether the calcium nitrate would provide the proper water activity for shale stabilization during drilling operations. Mr. Smith pursued this question by referring to available literature, from which he satisfied himself that use of proper concentrations of calcium nitrate could be incorporated into the brine or aqueous phase of the invert to stabilize formations.

[14] Nothing further occurred in developing the invert emulsion drilling mud until May 1991 when Mr. Smith did further testing by introducing diesel oil in place of mineral oil. The first on-site field testing of the invention occurred in the autumn of 1992 at the Morrison Well in Alberta.

Trial judgment

[15] The learned Trial Judge identified the issues in dispute as: construction of the patent; validity of the patent; the right of the appellants to sue on the patent; infringement by the respondent of the patent, and the appropriate remedy.

[16] Among the issues of construction he considered was the meaning of the phrase "person skilled in the art". That issue was the subject of some evidence and argument at trial. The appellants contended that a "drilling fluid technical engineer" should be viewed as the notional skilled person. However, the Trial Judge found at paragraphs 40 and 41 that such a person would be overqualified. He accepted evidence that a person skilled in the art would be one who understands the chemistry of an oil mud composition, what ingredients are included in an invert and what they do, and how to conduct appropriate testing.

[17] The Trial Judge then turned to the respondent's contention that the patent was invalid for lack of novelty or anticipation, obviousness, lack of utility, insufficiency of disclosure and ambiguity. He concluded that none of these defences had been made out.

[18] The Trial Judge had also to determine whether the Flemings were the "inventors" as had been asserted in the petition. A defence, raised by way of counterclaim, was that the Flemings were not the inventors and, moreover, that the assertion in the petition that they were the inventors constituted a "material allegation" that was "untrue" and that was "wilfully made for the purpose of misleading" within the meaning of subsection 53(1) of the Patent Act. The Trial Judge accepted the argument that the Flemings were not the "inventors" and, accordingly, found the patent to be "void ab initio" as between the parties pursuant to that subsection. He concluded on the authorities that it mattered not to the application of subsection 53(1) that the claim to inventorship in the petition was not "wilfully made for the purpose of misleading".

[19] Having declared the patent void, the Trial Judge in obiter briefly discussed the remaining points in issue. The first of these was whether the appellants could sue on the patent for infringement given the finding that the Flemings were not the "inventors" in that Richard Smith, the true inventor, had not divested himself of his rights, title and interest in the invention in favour of the Flemings. On August 11, 1993, the Flemings purported to assign their respective right, title and interest in the invention and in any patent issued in respect thereof to J.F.K. Investments Ltd. and Hour Holdings Ltd. The Trial Judge concluded that neither J.F.K. Investments Ltd. nor Hour Holdings Ltd. had validly acquired an interest in the 884 patent and therefore that neither was a person for the time being entitled to the benefit of the 884 patent.

[20] Finally, the Trial Judge considered the issue of infringement. The basis of this argument was that the respondent had produced and sold a drilling mud composition known as "Q'Max Mud" to the public in Alberta and that this had resulted in a violation of patent rights because the respondent's mud contained the nitrogen-containing complex salt "ammonium calcium nitrate decahydrate" ("ACND") referred to in claims of the patent. The Trial Judge first noted that the respondent acknowledged in its pleading that it had caused Q'Max Mud to be "manufactured and transported" and that it had sold this mud to the public for well drilling purposes. He concluded on the evidence that the respondent's activities in this regard disclosed "literal infringement of the claims" in the patent with the exception of claim 15. He found that claim for "A kit according to claim 14, wherein nitrogen-containing complex salt is ammonium calcium nitrate decahydrate", not to have been violated because the respondent had not sold a "kit" for formulating an invert as referred to in the claims of the patent.

Issues

[21] The appellants attack the judgment below on several grounds. First, they contend that the Trial Judge erred in construing the patent by failing to recognize the environmental benefit of the invention and the contribution of the Flemings as inventors. Second, naming James K. and Harold C. Fleming as "inventors" in the petition and failing to name Richard Smith as inventor was not an untrue material allegation that was done wilfully with intent to mislead within the meaning of subsection 53(1) of the Patent Act. Third, the appropriate remedy for an error in naming inventors would have been to correct the title pursuant to section 52 of the Patent Act. Fourth, this Court should make an order pursuant to that section rectifying the records in the Patent Office with respect to inventorship and ownership of the patent. Fifth, the Trial Judge erred in finding that the appellants were not the "patentee" or "persons claiming under the patentee" within the meaning of section 55 of the Patent Act.

[22] The respondent by its cross-appeal asserts that the Trial Judge erred by failing to declare the patent void as against the whole world rather than merely as between the parties. Second, he erred in defining the "person skilled in the art". Third, he erred in rejecting the defences of anticipation and obviousness. Finally, the respondent argues that the Trial Judge erred in finding that all of the claims of the patent save for claim 15 had been infringed by the respondent.

ANALYSIS

Inventorship

[23] The analysis should begin with the appellants' contention that the Trial Judge erred in finding that the Flemings were not the "inventors" of the invert emulsion drilling mud here in issue. They contend that in making this determination the Trial Judge overlooked the environmental benefit wrought by the invention and failed to recognize the contribution made by the Flemings in bringing about the invention. In their submission this may be explained by a narrowing of focus on the part of the Trial Judge resulting from the view he expressed at paragraph 58 of his reasons that, "Improved environmental performance was nowhere referenced in the claims" of the patent.

[24] However, it is evident from a fair reading of his reasons for judgment that the Trial Judge resolved the issue of inventorship by preferring the testimony of Richard Smith to that of Harold C. Fleming. His findings in this regard are encapsulated at paragraphs 22, 23 and 24 of his reasons:

As averted to in the immediately preceding paragraphs of these reasons, there was some conflict in the testimony regarding the development of Envirovert. Mr. Harold Fleming, one of the owners of Fleming Oil Field Services Ltd. who was at all relevant times active in the management and operations of the company, testified that the impetus for development of a more environmentally friendly invert emulsion drilling mud than those which employed calcium chloride or sodium chloride was his and that he instructed Rick Smith in the work that he did.

Rick Smith testified that the initiative was his and that, while at all times in the environment of a relatively small corporate office he kept Harold Fleming informed, the inventive ingenuity, if such there was, was his.

I prefer the version of events provided by Rick Smith to that provided by Harold Fleming. While Mr. Fleming's testimony was, in general terms, very helpful, it was decidedly lacking in detail. He acknowledged in the course of his testimony that his recollection of dates and of the sequence of events was not good. By contrast, I found the testimony of Rick Smith to be more direct, detailed and precise...

Later, at paragraph 99, the Trial Judge found Mr. Smith to be "the true inventor".

[25] It has not been shown that in making these findings the Trial Judge committed any palpable and overriding error which affected his assessment of the facts such as would justify this Court interfering with those findings: [1976] 2 S.C.R. 802">Stein v. The Ship "Kathy K", [1976] 2 S.C.R. 802, at 808; N.V. Bocimar S.A. v. Century Insurance Co. of Canada, [1987] 1 S.C.R. 1247; Toneguzzo-Norvell (Guardian ad litem of) v. Burnaby Hospital, [1994] 1 S.C.R. 114; Swartz v. Canada, [1996] 1 S.C.R. 254, at 278; Delgamuukw v. British Columbia, [1997] 3 S.C.R. 1010, at 1064; 2002 SCC 33">Housen v. Nikolaisen 2002 SCC 33.

Subsection 53(1) argument

[26] The appellants dispute the Trial Judge's view that a declaration pursuant to subsection 53(1) of the Patent Act that the patent was void was warranted because the petition signed by James K. and Harold C. Fleming gave their names as the "inventors" rather than that of Richard Smith. Subsections 53(1) and (2) read:

53. (1) A patent is void if any material allegation in the petition of the applicant in respect of the patent is

untrue, or if the specification and drawings contain more or less than is necessary for obtaining the end for which they purport to be made, and the omission or addition is wilfully made for the purpose of misleading.

(2) Where it appears to a court that the omission or addition referred to in subsection (1) was an involuntary error and it is proved that the patentee is entitled to the remainder of his patent, the court shall render a judgment in accordance with the facts, and shall determine the costs, and the patent shall be held valid for that part of the invention described to which the patentee is so found to be entitled.

53. (1) Le brevet est nul si la pétition du demandeur, relative à ce brevet, contient quelque allégation

importante qui n'est pas conforme à la vérité, ou si le mémoire descriptif et les dessins contiennent plus ou moins qu'il n'est nécessaire pour démontrer ce qu'ils sont censés démontrer, et si l'omission ou l'addition est volontairement faite pour induire en erreur.

(2) S'il apparaît au tribunal que pareille omission ou addition est le résultat d'une erreur involontaire, et s'il est prouvé que le breveté a droit au reste de son brevet, le tribunal rend jugement selon les faits et statue sur les frais. Le brevet est réputé valide quant à la partie de l'invention décrite à laquelle le breveté est reconnu avoir droit.

[27] It is not contended that this misnaming of the Flemings as inventors was intentional. Indeed, as the Trial Judge noted, it had not been alleged that by naming themselves and not Mr. Smith as "inventor" the Flemings acted "wilfully with the intent to mislead". The appellants therefore contend that it was not open to the Trial Judge to invalidate the patent pursuant to subsection 53(1). In their submission the case law relied upon in support of invalidation under the subsection no longer applies.

[28] The Trial Judge relied in particular on the analysis of Wetston J. in Apotex Inc. v. Wellcome Foundation Ltd., (1998), 79 C.P.R. (3d) 193 (F.C.T.D.) at 264-65, citing Walsh J. in Beloit Canada Ltd. v. Valmet OY (1984), 78 C.P.R. (2d) 1 (F.C.T.D.), to the effect that what mattered to the application of subsection 53(1) is not whether an alleged error was wilfully made for the purpose of misleading but rather whether misnaming the inventor is an untrue "material" allegation. Walsh J. came to that view on his construction of the whole of subsection 53(1). In particular, he held that the words "and such omission or addition is wilfully made for the purpose of misleading" at the end of the subsection, as it then read, referred to something that was omitted from or added to the "specifications or drawings" and not to a "material allegation in the petition". The Trial Judge also took guidance from the views of Thurlow J. (as he then was) in Jules R. Gilbert Ltd. v. Sandoz Patents Ltd. (1970), 64 C.P.R. 14 (Ex. Ct.), at 74, that an allegation that the petitioner made the invention constituted a "material allegation" within the meaning of the subsection. He thus distinguished the case at bar, involving as it does the naming of the wrong inventor, from one of co-inventorship where a petition gives the name of some but not all of the true inventors.

[29] In Apotex Inc. v. Wellcome Foundation Ltd., supra, Wetston J. concluded that a failure to name two outside researchers, Drs. Broder and Mitsuya, as co-inventors did not render the patent void under subsection 53(1) because the failure did not constitute a "material allegation". In arriving at that conclusion, Wetston J. reviewed the earlier Canadian jurisprudence on the point including the observations of Addy J. in Proctor & Gamble Co. v. Bristol Myers Canada Ltd. (1978), 39 C.P.R. (2d) 145 (F.C.T.D.). In Proctor & Gamble, while the inventor Gaiser had received suggestions and recommendations for changes in the invention from a company called Purex, Purex was found not to be a joint inventor. Addy J. disposed of the subsection 53(1) [then subsection 55(1)] argument on the assumption that Purex was a joint inventor by concluding that the failure to name Purex would not have rendered the patent void. He stated at 156-57:

In the present case, Gaiser undoubtedly considered himself as the sole inventor and, from the evidence, it appears quite clear that Purex did not consider itself in any way the inventor. There is absolutely no evidence of any wilful misleading of the Commissioner of Patents. I consider that, in such circumstances, it is really immaterial to the public whether the applicant is the inventor or one of two joint inventors as this does not got (sic) to the term or to the substance of the invention nor even to entitlement. In other words, I do not in such circumstances consider it to be a material allegation as contemplated by s. 55(1) of the Patent Act.

[30] On appeal in Apotex Inc. v. Wellcome Foundation Ltd. (2000), 10 C.P.R. (4^th) 65, this Court (per Sexton J.A.) concluded that Drs. Broder and Mitsuya were not co-inventors. The Court went on to address the argument for invalidity under subsection 53(1) on the assumption that Drs. Broder and Mitsuya were co-inventors, and concluded, at pages 81-2, that the failure to name them in the petition was not fatal. In so doing this Court again found support in the above quoted observations of Addy J. in Proctor & Gamble, supra.

[31] The judgment of this Court was appealed to the Supreme Court of Canada which dismissed the appeal in a judgment that was released well after the judgment under appeal in the present case: 2002 SCC 77">Apotex Inv. c. Wellcome Foundation Ltd. 2002 SCC 77, 21 C.P.R. (4^th) 499. Among the issues canvassed by the Court were whether Drs. Broder and Mitsuya were co-inventors with those named in the petition and, if they were, whether the failure to name them constituted an untrue "material allegation" that was "wilfully made for the purpose of misleading" so as render the patent void. The Supreme Court concluded that Drs. Broder and Mitsuya were not co-inventors. However, Binnie J., for the Court, observed as follows at paragraph 94:

The appellants contend that Drs. Broder and Mitsuya were "co-inventors" and ought to have been so identified in the patent. For this argument to benefit the appellants (as opposed to Drs. Broder and Mitsuya), the appellants must further establish that this omission was a "material" misstatement that was "wilfully made for the purpose of misleading". If so, the patent would be void pursuant to s. 53(1) of the Patent Act.

(emphasis added)

As Drs. Broder and Mitsuya were not co-inventors, Binnie J. concluded , at paragraph 109, that it was not necessary to consider the issue of materiality under subsection 53(1) not only for that reason, "but also because there is no evidence whatsoever that the omission to name them was , 'wilfully made for the purpose of misleading', as required by the concluding words of s. 53(1)." Thus the position today is that an untrue "material allegation" that consists of a failure to name co-inventors in a petition for a patent will not render the patent void if the allegation was not "wilfully made for the purpose of misleading".

[32] It is true that the petition named the Flemings as the sole inventors and did not name Mr. Smith. The respondent says that this case is distinguishable from Wellcome Foundation, supra, because in that case the persons who were named as inventors were in fact inventors whereas here, on the finding of the Trial Judge, the Flemings were not inventors. In my view, however, this distinction does not bring the case within subsection 53(1) where, as it appears here, the naming of themselves as inventors was not done by the Flemings wilfully for the purpose of misleading. In Dec International, Inc. v. A.L. LaCombe & Associates Ltd. (1989), 26 C.P.R. (3d) 193 (F.C.T.D.), it was held that a patent should not be declared invalid pursuant to what is now section 53 of the Patent Act in circumstances where the corporate employer, in good faith, named an employee who was found at trial not to be the inventor rather than the employee who was the true inventor. If, as the Trial Judge found, the Flemings did not intend to wilfully mislead by naming themselves as inventors it is difficult to see how the omission to name Mr. Smith would justify the draconian remedy provided for in subsection 53(1). In the circumstances, the patent should not be found to be void under that subsection.

Section 52 argument

[33] The appellants contend that the Trial Judge ought to have acceded to their request made in oral argument at trial for an order pursuant to section 52 of the Patent Act declaring Mr. Smith the inventor and M-I Drilling Fluids Canada Inc. the owner. Section 52 reads:

52. The Federal Court has jurisdiction, on the application of the Commissioner or of any person interested, to order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.

52. La Cour fédérale est compétente, sur la demande du commissaire ou de toute personne intéressée, pour ordonner que toute inscription dans les registres du Bureau des brevets concernant le titre à un brevet soit modifiée ou radiée.

The appellants further argue that this Court possesses the jurisdiction under paragraph 52(b) of the Federal Court Act, R.S.C. 1985, c. F-7 to give the judgment that should have been given by the Trial Judge and, therefore, that we should now vary the records of the Patent Office so as to show Mr. Smith as the inventor and M-I Drilling Fluids Canada Inc. as the owner of the patented invention.

[34] The fact that the appellants made their request in the course of the infringement trial is not of itself fatal. It has been held that an "application" under section 52 [formerly, section 54] may be so made. In Clopay Corp. v. Metalix Ltd. (1960), 34 C.P.R. 232 (Ex. Ct.), Cameron J. stated at 235:

Neither the Patent Act nor the Rules of this Court specify the procedure to be followed in applications under s. 54. I am of the opinion, however, that the present application made by an interested party - namely, the beneficial owners of all rights in the patent - is such an application as is contemplated by s. 54, although it is made in pending infringement proceedings. On the evidence before me, I have no doubt that all possible claimants to any rights in the patent were represented at the hearing. The defendant, whose defence would be affected by an order made on the application, was notified and appeared. The Commissioner of Patents, who I think should always be notified of any applications made under s. 54, was present at the hearing and, while not named in the notice of motion, was served with a copy. I am satisfied, therefore, that the Court has jurisdiction to hear the motion.

Cameron J. also noted, at 235, that the section as "very wide", a view that has been repeated in more recent cases: Pitney Bowes Inc. v. Yale Security (Canada) Inc. (1987), 15 C.P.R. (3d) 347 (F.C.T.D.); Comstock Canada v. Electec Ltd. (1991), 38 C.P.R. (3d) 29 (F.C.T.D.), at 50. Indeed, as Cameron J. pointed out in Clopay, supra, at 235, the purpose of the section was,

...so as to enable the rectification by the Court of the records in the Patent Office relating to title in order that the party or parties actually entitled to the grant... might have their rights properly recorded.

[35] It must be noted, however, that the appellants' pleading contained no mention of a section 52 application and, hence, no prior notice was given to the respondent or to any other person in interest. In Esso Petroleum Co. Ltd. v. Southport Corporation, [1956] A.C. 218 (H.L.) at 239, it was wisely observed by Lord Normand, commenting on "the value of the pleadings", that, "To condemn a party on a ground of which no fair notice has been given may be as great a denial of justice as to condemn him on a ground on which his evidence has been improperly excluded". In general, a party is not permitted to raise on appeal a point that was not raised at trial: The Steamship "Tordenskjold" v. The Steamship "Euphemia" (1908), 41 S.C.R. 154, at 163-64. On the other hand, as was more recently decided in Athey v. Leonati, [1996] 3 S.C.R. 458, at 478, "The general rule is that an appellant may not raise a point that was not pleaded, or argued in the trial court, unless all the relevant evidence is on the record".

[36] It seems clear that a section 52 application would affect the respondent in its defence as well as Mr. Smith who was found to be the true inventor. While Mr. Smith was present at trial as a witness for the respondent, there is no evidence that he was notified of a section 52 application before it was presented after the evidence was closed. Nor is it clear that all of the relevant evidence was already on the trial record. Although the appellants assert beneficial ownership of the patent, the assertion depends on a series of assignments and the ultimate amalgamation from which M-I Drilling Fluids Canada Inc. emerged. The respondent was surely entitled to probe into the somewhat incomplete picture that resulted from the 1993, 1996 and 1997 assignments with a view to testing the appellants' claim to ownership of the patent, to adduce relevant evidence of its own choosing and to make discovery.

Chain of title

[37] The Trial Judge concluded that even if the patent was valid and infringed, the appellants could not maintain an action for infringement under section 55 of the Patent Act because, by subsection 55(1), an infringer can only be "liable to the patentee and to all persons claiming under the patentee". The word "patentee" is defined in section 2 as meaning "the person for the time being entitled to the benefit of a patent". It was the Trial Judge's view that the appellants could not be classified as "the patentee" or "persons claiming under the patentee". His analysis on the point appears in paragraph 99 of his reasons where he stated:

As previously noted in these reasons, the patent issued to J.F.K. Investments Ltd. and Hour Holdings Ltd., not to the inventors identified in the petition. On the evidence before the Court, neither J.F.K. Investments Ltd. or Hour Holdings Ltd. acquired any interest in the 884 patent from Rick Smith, the true inventor, or from his employer, Fleming Oil Field Services Ltd. In the result, I conclude that J.F.K. Investments Ltd. and Hour Holdings Ltd. never validly acquired an interest in the 884 patent and that therefore neither ever was a person for the time being entitled to the benefit of the 884 patent. In the result, neither was ever a "patentee" in relation to the 884 patent. In the further result, the plaintiffs are not persons claiming under a patentee. I am satisfied that the line of title from an original "patentee" to the plaintiffs in this action is simply not established on the material before the Court and that thus, there is merit to the argument made on behalf of the defendant that the defendant is not liable to the plaintiffs under section 55 of the Act.

In essence, the Trial Judge took the view that for a change of title in favour of the appellants to be complete it had to begin with a transfer of the interests in the invention of Mr. Smith or of his employer, Fleming Oil Field Services Ltd. This had not occurred. Instead, as we have seen, the Flemings purported to transfer their respective interests in the invention and the eventual patent to their holding companies J.F.K. Investments Ltd. and Hour Holdings Ltd.

[38] The appellants challenge this conclusion. As will be recalled, on August 11,1993, the Flemings assigned their interests in the invention and in any patent issued therefor to J.F.K. Investments Ltd. and Hour Holdings Ltd. This was followed by three further assignments, on January 1, 1996 and October 15, 1997, which were designed to pass the title first from J.F.K. Investments Ltd. and Hour Holdings Ltd. to 671905 Alberta Inc. and then to Fleming Oil Field Services Ltd. which, on July 1, 1998, amalgamated with M-I Drilling Fluids Canada Inc. to become a single company under this latter name.

[39] As subsection 49(1) of the Patent Act provides, "A patent may be granted to any person to whom an inventor, entitled under this Act to obtain a patent, has assigned in writing...his right to obtain it...". Subsection 27(1) requires the Commissioner to grant a patent "to the inventor or the inventor's legal representative". According to subsection 27(2), the application must be filed "by the inventor or the inventor's legal representative". This latter term is defined in section 2 to include "assigns and all other persons claiming through or under applicants for patents and patentees of inventions". The appellants point out that Mr. Smith never asserted ownership of the invention during the time when he was employed by Fleming Oil Field Services Ltd. and afterward, even when he was advised by the Flemings' solicitors that a patent application was pending. Indeed, in cross-examination he was asked whether his work on the invention was "for your own personal benefit", to which he answered, "No". Moreover, the appellants point to an exclusive licence dated January 1, 1996, granted by 671905 Alberta Inc. to Fleming Oil Field Services Ltd. and to an earlier exclusive verbal licence to exploit the invention in the marketplace.

[40] Given the state of the record, however, it is difficult to disagree with the Trial Judge's conclusion on this aspect of the case. While section 27 of the Patent Act allows an application to be made by "the inventor or the inventor's legal representative" and requires the Commissioner to grant a patent to either of them, J.F.K. Investments Ltd. and Hour Holdings Ltd. could not be regarded as the "legal representative" of the inventor because of the finding at trial that the Flemings who purported on August 11, 1993, to assign their interests in the invention to those companies were not themselves inventors. On the evidence, they were granted nothing by the true inventor, Mr. Smith, that they could in turn assign to J.F.K. Investments Ltd. and Hour Holdings Ltd. so as to render those companies the legal representatives of the inventor.

Cross-appeal

[41] Having above concluded that the patent should not have been voided pursuant to section 53 of the Patent Act, there is no need to address the respondent's argument on cross-appeal that the Trial Judge erred in limiting his declaration under that section to the parties in litigation rather than declaring the patent void as against the whole world.

[42] The respondent's second argument concerns the definition of "a person skilled in the art" as accepted by the Trial Judge. This issue may be dealt with shortly. The appellants contend that the issue is not properly before this Court on cross-appeal because no notice of it was given in the respondent's Notice of Cross-Appeal. Rule 341(1)(b) of the Federal Court Rules, 1998, SOR/98-106, lays down that a respondent seeking "a different disposition of the order appealed from" shall serve and file a notice of cross-appeal in prescribed form. Rule 341(2)(b) then requires a respondent to set out in the notice of cross-appeal "a complete and concise statement of the grounds intended to be argued...". The respondent seeks by cross-appeal to alter the disposition of the Trial Judge by this Court declaring the invention invalid for anticipation and obviousness, and declaring that its drilling mud did not infringe the patent. The respondent was thus required to comply with Rule 341(2)(b) in attacking the conclusion of the Trial Judge as to the characteristics of "a person skilled in the art". In any event, even if the point is validly raised it has been held that it is for a trial judge as the finder of fact to determine from his appreciation of the evidence the characteristics of a person skilled in the art: Almecon Industries Ltd. v. Nutron Manufacturing Ltd. (1997), 72 C.P.R. (3d) 397 (F.C.A.), at 401. In making his determination the Trial Judge accepted some of the expert evidence and rejected contrary evidence. There being no palpable and overriding error in his assessment of the facts, his finding should not be disturbed.

[43] In view of the above conclusion that the patent ought not to have been found to be void pursuant to section 53 of the Patent Act, it is necessary to consider the defences of anticipation, obviousness and non-infringement. The Trial Judge considered the defence of anticipation at some length in the light of various pieces of prior art relied upon by the respondent and of conflicting opinions of expert witnesses called by both sides. As was noted by Binnie J. in Free World Trust v. Électro Santé Inc., [2000] 2 S.C.R. 1024, at 1040-1041, the defence of anticipation is not easily made out, requiring as it does a showing that, in the words of Sachs L.J. in General Tire & Rubber Company v. Firestone Tyre & Rubber Company Limited, [1972] R.P.C. 457 (C.A.), at 486, a prior inventor "must...have planted his flag at the precise destination before the patentee". Binnie J. himself made the same point in this way, at 1040:

Anticipation by publication is a difficult defence to establish because courts recognize that it is all too easy after an invention has been disclosed to find its antecedents in bits and pieces of earlier learning. It takes little ingenuity to assemble a dossier of prior art with the benefit of 20-20 hindsight.

The Trial Judge turned for further guidance to this Court's decision in Beloit Canada Ltd. v. Valmet OY (1986), 8 C.P.R. (3d) 289 (F.C.A.) where Hugessen J.A. observed, at 297, that, "anticipation must be found in a specific patent or other published document: it is not enough to pick bits and pieces from a variety of prior publications and to meld them together so as to come up with the claimed invention". As the Trial Judge put it, the "person skilled in the art cannot be required to 'mosaic' the prior art". In the end, he was not satisfied that the respondent had met its burden of establishing that the patent was invalid for anticipation. We should not disturb that finding on this aspect of the appeal.

[44] The respondent contests the Trial Judge's rejection of the obviousness defence. This defence, unlike anticipation, asks the question whether the invention, although new, was nevertheless obvious. As the Trial Judge noted, in order to make out the defence of obviousness a defendant must show that, in the words of Hugessen J.A. in Beloit, supra, at page 294, a person skilled in the art would "have come directly and without difficulty to the solution taught by the patent" in light of the state of the art and of common general knowledge. This in general terms was the test propounded by Urie J.A. in Beecham Canada Ltd. v. Proctor & Gamble Co. (1982), 61 C.P.R. (2d) 1 (F.C.A.), at 27, and represents a variation of the "Cripps question" of English patent law that was alluded to by the English Court of Appeal in Allmanna Svenska Elektriska A/B v. Burntisland Shipbuilding Coy. Ld. (1952), 69 R.P.C. 63.

[45] The respondent contends that the Trial Judge misapprehended pieces of United States prior art upon which the defence of obviousness was based. These included the Menaul Patent of 1954, the Lummus Patent of 1960 and the Chenevert Patent of 1972. In the respondent's submission these taught the use of calcium nitrate in the aqueous phase of an invert to prevent or reduce shale hydration. None of the earlier patents identified the type of "calcium nitrate" to which they referred. However, in the respondent's submission the use of a commercial grade calcium nitrate to reduce or prevent shale hydration is an obvious use of a known product for a known purpose. The respondent asserts that prior to August 4, 1993, the prior art also disclosed the use of hydrated nitrogen-containing double salts, relying in particular on the Chenevert Patent of 1972 and the Mondshine Patent of the previous year. Finally, the respondent further argues that the testing of January 1989 by Mr. Smith amounted merely to the exercise of mechanical skill or verification of previous predictions, and, therefore, that no amount of inventive ingenuity was brought to bear by him in developing the invert emulsion drilling mud that is described and claimed in the patent.

[46] Various pieces of prior art were taken up with the expert witnesses at trial. The respondent's expert, Dr. Thomas Mondshine, was of the view that a person skilled in the art seeking to replace calcium chloride in a drilling mud with another salt would follow a "routine procedure" by first identifying a salt with proper activity capability and then testing "for the activity range that you think is desirable". (Trial Transcript, vol. 5, p. 717, l. 17 p. 718, ll. 1-3). Dr. Martin L. Chenevert, one of the appellants' expert witnesses, was of a different view. At paragraph 63 of his affidavit sworn September 29, 2000, this witness expressed the opinion that none of the prior publications "show that the invention was made known prior to August 4, 1993" and, in paragraph 64, that no combination of one or more of the patents and publications relied on by the respondent with the common general knowledge of the art prior to August 4, 1993 "would lead a skilled but unimaginative person in the art directly and without difficulty to the solution taught" by the patent. He noted, in particular, that none of the prior art "address[es] the chemically complex subject of introducing a hydrated nitrogen containing complex salt such as ACND into the internal phase of an oil-based mud so that both shale stability and environmentally acceptable mud would be achieved". Another expert witness called by the appellants, Robert L. Garrett, expressed views similar to those of Dr. Chenevert in his affidavit of May 6, 2000. As he pointed out at paragraph 30, damage to the environment from disposal of oil cuttings came to the forefront of public concern during the 1980s. He added in paragraph 31 that, "The inventors discovered a substitute for NaCl or CaCl₂ and also one that contained ammonia and nitrate components", and that a "nitrogenous double salt...was selected for practical use in an enhanced environmentally improved invert oil mud". He concluded that, "Obtaining patent protection for this type of salt seems proper, because it was new technology that no one had used previously nor had it been suggested in the literature".

[47] The respondent contends that the invention was obvious because Mr. Smith brought it about by the mere application of mechanical skill in the testing he conducted in January 1989 and subsequent literature review. It has been held that where all that is required of an inventor is the application of mechanical skill, inventive ingenuity is lacking: [1933] S.C.R. 371">Lightning Fastener Co. Limited v. Colonial Fastener Co., Ltd. et al, [1933] S.C.R. 371, at 376-77. This Court was basically of the same view in Apotex Inc. v. 2002 SCC 77">Wellcome Foundation Ltd., supra, at paragraph 33. The Trial Judge was guided by the decision of the General Division of the Ontario Court of Justice in Bayer Aktiengesellschaft v. Apotex Inc. (1995), 60 C.P.R. (3d) 58 that, unlike as in England, a notional skilled technician in Canada is not required to make enquiries or testing. That decision was upheld by the Ontario Court of Appeal (1998), 82 C.P.R. (3d) 526. As has been pointed out above, there was expert evidence before the Trial Judge to the general effect that the invention was not obvious. This would not have been the case if the invention had been brought about by the mere application of mechanical skill.

[48] It has been held that obviousness is a question of fact for a trial judge. Thus in Creations 2000 Inc. v. Canper Industrial Products Ltd. (1990), 34 C.P.R. (3d) 178, Hugessen J. A. stated, at 183:

At bottom, the question of obviousness is a question of fact: see Consolboard Inc. v. MacMillan Bloedel (Saskatchewan) Ltd. (1981), 56 C.P.R. (2d) 145 at p. 167, 122 D.L.R. (3d) 203, [1981] 1 S.C.R. 504">[1981] 1 S.C.R. 504; Johnson Controls Inc. v. Varta Batteries Ltd. (1984), 80 C.P.R. (2d) 1, at pp. 15-6, 3 C.I.P.R. 1, 53 N.R. 6 (F.C.A.); Beloit Canada Ltd. v. Valmet Oy (1986), 8 C.P.R. (3d) 289 at p. 296, 7 C.I.P.R. 205, 64 N.R. 287 (F.C.A.). An appeal court therefore cannot interfere, unless the trial judge committed a manifest error in weighing the evidence or committed an error of law.

In a more recent case, Apotex Inc. v. 2002 SCC 77">Wellcome Foundation Ltd., supra, at 86, this Court reaffirmed those views. Accordingly, this Court should not interfere with the Trial Judge's finding on the evidence that the invention was not obvious in the absence of a showing that he committed a palpable and overriding error in his assessment of the facts. It was for him as finder of fact to prefer the expert testimony of the appellants' witnesses on the point over that of the respondent's witnesses. The respondent has not shown that he erred in so doing.

[49] The respondent's final argument is that by manufacturing and selling its drilling mud known as "Q'Max Mud" it did not infringe the patent. This argument may appear to be somewhat academic in view of the finding at trial that the appellants are not entitled to sue on the patent. Nevertheless, as the point was dealt with at trial and was fully argued on appeal it should be addressed here in the event that the finding at trial should prove to be incorrect.

[50] As the Trial Judge noted at paragraph 101 of his reasons, the respondent admitted in its pleading that it "had manufactured and transported for it an invert mud, made using ACND" and that it sold this drilling mud to the public in Alberta. Claim 3 of the patent is for a water-in-oil invert emulsion drilling mud according to claim 1 "wherein the nitrogen-containing complex salt is ammonium calcium nitrate decahydrate", namely ACND. Claims 4, 5 and 6 are dependent on claim 3. Claim 9 is a method claim according to claims 7 or 8 "wherein the nitrogen-containing complex salt is ammonium calcium nitrate decahydrate". Claims 10, 11 and 12 are dependent on claim 9. Claim 18 concerns the use of ACND in the drilling mud to reduce or prevent hydration in subterranean formation clays.

[51] The thrust of the respondent's argument is that, although it used ACND in making its drilling mud, it did not thereby infringe any of the claims of the patent because after the mud was mixed in a manner taught by the claims the "ammonium" nitrate was no longer "contained" therein. Indeed, the Trial Judge agreed that the ammonium nitrate "comprised within ACND would be instantaneously transformed into an unstable hydrated form of ammonia gas" during mixing. This, of course, is a highly technical argument for it is clear that the ammonium calcium nitrate decahydrate contained in "Envirofloc" is in fact mixed with the oil and other ingredients in order to produce the drilling mud described in the specification. That is its purpose.

[52] It has been held on high authority that whether a patent has been infringed is a question of fact for the Trial Judge. Thus in Consolboard, supra, Dickson J. stated at 514:

A great deal of evidence was directed to the infringement issue during the course of the 20 day trial. The question is essentially one of fact and the respondent has not in my opinion shown any substantial ground on which the finding of infringement should be overturned. The finding of the trial judge should be left undisturbed.

Moreover, the courts have discouraged the taking of an overly literal approach to the construction of a patent and have opted instead for a purposive approach. That approach was re-emphasized in Catnic Components Ltd. v. Hill & Smith Ltd., [1982] R.P.C. 183 (H.L.), which the Supreme Court took as a guide in Whirlpool Corp. v. Camco Inc. [2000] 2 S.C.R. 1067, where Binnie J. observed at 1092:

In Catnic, as in the earlier case law, the scope of the monopoly remains a function of the written claims but, as before, flexibility and fairness is achieved by differentiating the essential features ("the pith and marrow") from the unessential, based on a knowledgeable reading of the whole specification through the eyes of the skilled addressee rather than on the basis of "the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge". (Catnic, supra, p. 243).

Binnie J. made the same point in Free World Trust, supra, when he stated at 1050 that, "The courts have traditionally protected a patentee from the effects of excessive literalism". As well, in [1934] S.C.R. 570">Western Electric Co. v. Baldwin International Radio of Canada [1934] S.C.R. 570, Duff C.J.C. pointed out at 574 that, "where the language of the specification, upon a reasonable view of it, can be so read as to afford the inventor protection for that which he has actually in good faith invented, the court, as a rule, will endeavour to give effect to that construction".

[53] It seems reasonably clear that when the claims of the patent are read in the light of the whole of the specification and of the evidence accepted at trial, they cover a drilling mud which is made using identified components including ACND. The respondent admitted that it used ACND in making its mud and that it sold the mud to the public. It follows that the finding of the Trial Judge on this point should not be disturbed. In view of this conclusion, it is not necessary to address the respondent's further contention that it did not induce infringement of the patent by those who manufactured and transported the drilling mud on its behalf or in the use of the drilling mud at well drilling sites.

Summary

[54] In summary, the Trial Judge's finding that Richard Smith, rather than James K. and Harold C. Fleming, was the true inventor should not be disturbed. However, while the patent ought not to have been set aside pursuant to subsection 53(1) of the Patent Act because the naming of the Flemings as inventors was not wilfully a material allegation that was made for the purpose of misleading, this Court should not give effect to the respondent's request under section 52 of the Patent Act that the records of the Patent Office be varied by declaring Mr. Smith the inventor and M-1 Drilling Fluids Canada Inc. the owner of the invention. As well, the Trial Judge's finding that the appellants could not maintain the action for infringement should not be interfered with. Finally, the arguments on the cross-appeal that the patent is invalid for anticipation and obviousness and that, in any event, no infringement occurred are not persuasive and should be rejected.

Disposition

[55] In the result, the appeal should be allowed in part and the judgment dated August 15, 2001 varied by deleting paragraph 2 and substituting therefor, "The defendant's counterclaim is dismissed", and deleting paragraph 3 thereof and the words "and of its counterclaim" in paragraph 4 thereof, so that the judgment as varied shall read:

IT IS ORDERED AND ADJUDGED THAT:

1. The plaintiffs' action is dismissed.

2. The defendant's counterclaim is dismissed.

3. The defendant is awarded costs of the plaintiffs' action, assessed in accordance with Column III of the Table to Tariff B of the Federal Court Rules, 1998.

Except as so varied, the judgment should be affirmed. Success being divided, there should be no costs on the appeal. The cross-appeal should be dismissed with costs.

"A.J. STONE"

J.A.

"I agree

Marc Noël J.A."

"I agree

J. Edgar Sexton J.A."

FEDERAL COURT OF APPEAL

NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET: A-560-01

STYLE OF CAUSE: 671905 Alberta Inc. and M-I Drilling Fluids Canada Inc.

v. Q'Max Solutions Inc.

PLACE OF HEARING: Ottawa, Ontario

DATES OF HEARING: April 1, 2003 and April 2, 2003

REASONS FOR JUDGMENT BY: STONE J.A.

CONCURRED IN BY: NOËL AND SEXTON JJ.A.

DATED: JUNE 2, 2003

APPEARANCES:

Mr. Donald Plumley and Mr. Mark Mitchell FOR THE APPELLANTS

Mr. Patrick Kierans and Ms. Frédérique Amrouni FOR THE RESPONDENT

SOLICITORS OF RECORD:

Lang Michener

Toronto, Ontario FOR THE APPELLANTS

Ogilvy Renault

Toronto, Ontario

Montreal, Quebec FOR THE RESPONDENT

You are here

671905 Alberta Inc. v. Q'max Solutions Inc., 2003 FCA 241

Citations2003 FCA 241

Case tabs

Citations
2003 FCA 241