Impending Importance of Patent Office Procedures to Canadian Patent Litigation

A recent decision of the Federal Court^[1] explicitly and repeatedly criticized a lottery ticket patentee for taking a "remarkable" "breathtaking" position on construction in an infringement action that was "entirely opposite" with prior representations to the Canadian Intellectual Property Office ("CIPO"). At the same time, the court refused any inference of a "greater presumption of validity" because the patent had withstood 12 protests over 13 years brought by the impeacher/alleged infringer, and surprisingly (although reluctantly) accepted the patentee's "new" construction approach in any event. The court found Scientific Games' ("SG") patent for lottery ticket codes to be obvious, ambiguous and not infringed by Pollard.^[2]

The fact that the prosecution of the patent played such a prominent role in the infringement action and subsequent decision (albeit in obiter) suggests an area ripe for judicial activism to, in some circumstances, "go behind" the issuance of a patent and defer back to Patent Office proceedings. Although the court was careful to officially state that its findings on construction and validity were not based on the file wrapper, it is equally clear that the court carefully examined the repeated protests, their apparent bona fide effect on prosecution, and subsequent responses and claim construction by the patentee.

This willingness to look behind an issued patent may be contrasted with the Federal Court of Appeal's ("FCA") reluctance to do just that, although in different circumstances, in Corlac Inc. v Weatherford Canada 2011 FCA 228 ("Corlac"). In finding there was no "misleading/bad faith prosecution" invalidity argument available in Canada, the FCA in Corlac refused to grant the draconian remedy of invalidating a patent because an inventor had wrongly removed a co-inventor. The FCA stressed the demarcation between a pending application and an issued patent, and the separate applicable statutory regimes:

[150]    To be clear, the concept of abandonment in paragraph 73(1)(a) operates during the prosecution of the application for a patent. Its operation is extinguished once the patent issues. Post-issuance, the provisions of subsection 53(1) must be utilized with respect to allegations of misrepresentation. To conclude otherwise would result in absurdity. An issued patent would be subject to retroactive scrutiny by the courts in relation to the submissions made by an applicant to the Patent Office during prosecution (generally many years prior), judged against unknown criteria. It is for the Commissioner to determine whether an applicant's response to a requisition from an Examiner is made in good faith, not for the courts. The courts do not issue patents. ...[emphasis added]

In contrast, in Pollard v BABN, the court was clearly interested in committing the patentee to its earlier proposed construction, many years prior:

[80]      The SCC [in Free World Trust v Électro Santé Inc, 2000 SCC 66] did not address the possibility that the Patent Office may fail to insist on amendments to claims to reflect representations made by the applicant. The SCC also did not explain how the patent gives public notice of the claims, but the prosecution history, which is likewise available to the public, does not. I note also that, unlike in 2000, when the Free World Trust decision was released, prosecution histories in many jurisdictions (including Canada) are now available on the internet. This raises the question whether it is time to revisit the rule against using extrinsic evidence in claim construction.

...

[238]     I would expect that SG's argument would never have made it to a trial in the U.S. where the principle of file wrapper estoppel applies. There, SG would likely not have been allowed to argue a claim construction that attempts to recapture ground conceded during prosecution of the patent application to avoid prior art.

The court in Corlac was careful to limit s. 53 of the Patent Act to wilful and material misstatements in a petition, and reluctant to follow the U.S. approach of inequitable conduct - the "atomic bomb" of patent law. The court in Pollard v BABN recommends opening up the Pandora's box of U.S. file wrapper estoppel contrary to Free World, and seems keen to second guess the Patent Office's acceptance of an applicant's representations. (The implication being that the Examiner should have required claim amendments that reflected the patentee's definition of a claim term and did not).

The court in Pollard v BABN characterized the case before it as illustrating the risk of ignoring the file wrapper, which would have resulted in a "very different" claims construction. Distinct from the focused purposive construction approach of Free World, the court in Pollard v BABN appears to imply that this different construction would in fact be a better construction if the patentee in a later infringement action was limited by definitions it provided to the Patent Office years earlier.

As part of the file wrapper debate, it is interesting to consider what the consequences should be of file wrapper estoppel given construction is meant to be an issue of law for the court, with input as required from experts. Limiting the patentee to its initial "file wrapper construction," in a later court action after having the benefit of excessive scrutiny by counsel, court and experts alike (in the overheated engines of patent litigation as per Free World), may seem misplaced.

Pending guidance from higher courts, certain strategic considerations may flow from the Pollard v BABN decision:

• File wrappers are often relied on by an infringer in arguing a patent is void for material misrepresentations per section 53 of the Patent Act. In this way, a patentee's representations may "unofficially" inform the trial judge's construction and validity analysis in any event.
• Ironically, it appears the patentee SG was the party who brought the file wrapper to the attention of the Court with the intention of singularly highlighting Pollard's many protests. However, the end result appears to be that the court found the protests had a bona fide effect on subsequent Examiner's actions, and the court was then led by the patentee to examine its own change of position on construction of "continuous" coating.
• Why did SG change its mind to broaden the construction of its claim? The court does not suggest any reason, and certainly infers that its "first construction" at the Patent Office made some sense and was directed at avoiding the one key piece of prior art that was again in issue in the action. At the same time, in the end the court found both the first construction (that was also proposed by the infringer) and second construction (that the court ultimately accepted) problematic (para. 114). The traditional reason (i.e. expanding a claim term so that it covers an infringer) does not seem to be a factor. Instead, it appears the new second construction may have been designed to try to save the construction of other terms in the main claim 1^[3], as well as save the one dependent claim 2. Both efforts failed. Following the court's construction findings on other terms (unrelated to the "new construction" issue), it was clear there was no infringement (paragraphs 96, 249, 251). The patent was determined to require a lottery ticket where the scratch off play area was to exclude a special barcode (that was to be kept covered for validation), and Pollard's ticket clearly scratched off such bar code.
• What is the proper forum for ultimately determining construction and the meaning of prior art? Although Justice Locke provides detailed obiter analysis of the patentee's position on construction in its Office Action responses and evaluates the problem with not being able to properly review the file wrapper, the judgment does not address this issue. With judicial representation of opposing sides, extensive expert evidence as to the common knowledge and prior art, a court may be better placed to decide the ultimate issues of validity and infringement.
• There is a dearth of Canadian case law on the interplay between the Patent Office route (re-examination) and judicial route (impeachment) to challenge a patent. The Federal Court in 2010 held that a defendant in a pre-existing infringement action could not try to divert the validity of a patent back to the Patent Office. The court stayed the defendant's requested re-examination proceeding until a final judgment of the Federal Court^[4]. The court was critical of the defendant for trying to rely on a significant prior art document at the Patent Office where problematic credibility issues (that the alleged prior art was stolen from the patentee) would most certainly not be dealt with by the Patent Office's "summary consideration" of the prior art. Instead, the court was the proper forum to assess credibility given the availability of oral evidence and cross-examination:

[44]           By filing its Re-examination Request after the commencement of the present infringement action before this Court, the defendant is merely attempting to avoid dealing with the issue of credibility surrounding its alleged prior art. This Court can already entertain any and all the invalidity arguments made in support of the defendant's Re-examination Request, which are already contained in its Statement of Defence and Counterclaim and, in particular, it can address the significant credibility issues, which only this Court is capable of hearing.

...

[48]           Moreover, as stated earlier, when determining whether to grant a stay, preference should be given to the proceedings which are more comprehensive of the two. In this regard, for reasons expressed above, re-examination proceedings are unequivocally less comprehensive as compared to an infringement/invalidity action before this Court.

Query whether CIPO's procedures should/will gain more traction in view of the increased use of new/modified post issuance challenges available at the United States Patent and Trademark Office ("USPTO") since 2011, some of which permit the use of cross-examinations/oral testimony. Designed to remove/narrow questionably valid patents at the USPTO level, co-pending U.S. impeachment actions are stayed, and challengers are estopped from subsequently re-arguing the same invalidity grounds raised or that could have been raised before the USPTO. At the same time, under current procedures, one must keep in mind the necessarily limited ability of CIPO to comprehensively initially evaluate patent validity, and balance the public interest in not having to engage in expensive litigation or re-litigation of matters (such as construction) previously determined during patent prosecution. In practice, CIPO is in many respects a preliminary gatekeeper who releases potentially valid patents. A select few of these patents make it to the ultimate gatekeeper (the courts) for consideration.

[1] Pollard Banknote Limited v BABN Technologies 2016 FC 883 (Locke J), under appeal A-350-16.

[2] As referred to briefly by the court, the parties are two of the three major players in the global lottery business. To date, the parties have been active in litigating lottery ticket patents. SG previously sued Pollard for infringement of its Canadian patents on security code and a security film. Both 1993 and 2002 actions settled just prior to trial.

[3] Interestingly, the court only comments on the patentee's representations to CIPO regarding one claim term -"continuous"- implying that the patentee's position at trial regarding all other terms was consistent with the file wrapper.

[4] Prenbec v Timberline 2010 FC 23. As the action was eventually settled, the re-examination never occurred.