Baker Petrolite Corp. et al. v. Canwell Enviro-Industries Ltd. et al., (2001) 210 F.T.R. 161 (TD)

• Judge: Gibson, J.
• Court: Federal Court (Canada)
• Case Date: August 15, 2001
• Jurisdiction: Canada (Federal)
• Citations: (2001), 210 F.T.R. 161 (TD)

Baker Petrolite v. Canwell Enviro-Ind. (2001), 210 F.T.R. 161 (TD)

MLB headnote and full text

Temp. Cite: [2001] F.T.R. TBEd. AU.030

Baker Petrolite Corporation, Petrolite Holdings Inc. and Baker Hughes Canada Company (plaintiffs) v. Canwell Enviro-Industries Ltd., Clive Titley and The City of Medicine Hat (defendants)

(T-913-95; 2001 FCT 889)

Indexed As: Baker Petrolite Corp. et al. v. Canwell Enviro-Industries Ltd. et al.

Federal Court of Canada

Trial Division

Gibson, J.

August 15, 2001.

Summary:

The plaintiffs held a patent for an invention entitled "Composition and Method for Sweetening Hydrocarbon", used in the oil and gas industry to scavenge the hydrogen sulphide from sour gas. The plaintiffs sued the defendants for damages and declaratory and injunctive relief, submitting that the defendant Canwell's gas sweetening product infringed the patent. Canwell challenged the validity of the patent and counterclaimed for damages and injunctive relief.

The Federal Court of Canada, Trial Division, allowed the plaintiffs' action and dismissed the counterclaim. The defendants failed to establish the patent was invalid and were found liable for patent infringement. The court granted a permanent injunction against the defendants to restrain them from infringing the patent. The defendants were ordered to deliver up all infringing products and to account for all profits earned, which were assessed by the court. The court awarded nominal damages for compensation under s. 55(2) of the Act. Although the individual defendant (sole shareholder and director of the corporate defendant Canwell) was not personally liable for damages awarded for profits, he was liable in trust for all bonuses paid to him by Canwell after the patent infringement action was commenced.

Company Law - Topic 4187

Directors - Liability of directors - For breach of trust - [See Patents of Invention - Topic 3046 ].

Patents of Invention - Topic 1128

The specification and claims - The description - Sufficiency of disclosure - The validity of a patent was challenged for insufficient disclosure (Patent Act, s. 27(3)) - A full and complete description was required of both the invention and the operation or use of the invention as contemplated by the inventor - The plaintiff alleged that any deficiencies raised by the defendant were mere technical objections, which did not affect the substantive description of the invention and its use or operation - The Federal Court of Canada, Trial Division, held that the patent was not invalid for lack of sufficient disclosure - The court stated that "the evidence is clear that a person reasonably skilled in the art to which the patent is directed, reading the specification and setting out to utilize the invention, would understand what the inventor really means and would thus be able to give the public the benefit of the invention" - See paragraphs 99 to 107.

Patents of Invention - Topic 1507

Grounds of invalidity - General - Untrue material allegations in petition, specification or drawings - Section 27(2) of the Patent Act required that a patent be filed by the inventor or his legal representative and be accompanied by a petition - Section 53(1) provided that a patent was void if a material allegation in a petition was untrue, subject to relief under s. 53(2) for involuntary errors - The validity of a patent was challenged for failing to name a co-inventor - The Federal Court of Canada, Trial Division, held that, assuming there was an unnamed co-inventor, that failure to name a co-inventor was not a material allegation under s. 53(1) - The challenge to the validity of the patent was rejected - See paragraphs 108 to 113.

Patents of Invention - Topic 1602

Grounds of invalidity - Anticipation - Test for - The defendant claimed that the plaintiffs' patent was invalid on the ground of anticipation based on prior knowledge or use - The Federal Court of Canada, Trial Division, referred to the test for anticipation: "when prior knowledge or use is alleged, 'evidence of this character should be subjected to the closest scrutiny' and 'anyone claiming anticipation on that basis assumes a weighty burden' ... [The principles] which should be applied to determine whether the prior use or prior art anticipated the invention [were]: (1) does it teach the combination of all the elements claimed; (2) does it give the same knowledge as the specification of the invention itself; (3) does it contain clear and unmistakable directions so to use it; (4) whatever is essential to the invention or necessary or material for its practical working and real utility must be found substantially in the prior publication; and (5) an impractical and inoperable device cannot be an anticipation" - See paragraph 72.

Patents of Invention - Topic 1605

Grounds of invalidity - Anticipation - Particular patents - The plaintiffs held a patent for an invention entitled "Composition and Method for Sweetening Hydrocarbon", used in the oil and gas industry to scavenge the hydrogen sulphide from sour gas - The plaintiffs claimed that the defendant Canwell's gas sweetening product infringed the patent - Canwell challenged the validity of the patent on the ground of anticipation by prior art (Baize and Arundale patents) and commercial sale of W-3053 before the grace period preceding the filing of the patent - The Federal Court of Canada, Trial Division, held that the defendant failed to establish anticipation - The plaintiffs' patent was an inventive selection (not anticipated) over the Baize patent - The Arundale patent, dated 1956 and which was never practised, clearly did not anticipate the plaintiffs' patent - Finally, the commercial sale of W-3053 in western Oklahoma before the grace period preceding the filing of the patent did not anticipate the invention disclosed by the plaintiffs' patent - The commercial sales did not make available to the public in Canada or elsewhere the subject matter of the patent - See paragraphs 70 to 93.

Patents of Invention - Topic 1625

Grounds of invalidity - Not true or first inventor - Failure to name all inventors - [See Patents of Invention - Topic 1507 ].

Patents of Invention - Topic 1653

Grounds of invalidity - Anticipation by prior patent - What constitutes anticipation - [See Patents of Invention - Topic 1605 ].

Patents of Invention - Topic 2808

Infringement of patent - General principles - Principle of equivalence - The plaintiffs held a patent for an invention entitled "Composition and Method for Sweetening Hydrocarbon", used in the oil and gas industry to scavenge the hydrogen sulphide from sour gas - The plaintiffs claimed that the defendant Canwell's gas sweetening product infringed the patent, that the products were equivalent and Canwell directly utilized the processes claimed in the patent - The Federal Court of Canada, Trial Division, held that Canwell's product infringed the patent - The products and related processes were essentially equivalent - The defendants could not escape a finding of infringement by incorporating minor or inconsequential variations - Immaterial differences between the patent and the allegedly infringing product did not bar a finding of infringement - See paragraphs 125 to 133.

Patents of Invention - Topic 2890

Infringement of patent - Acts constituting an infringement - Inducing infringement - The Federal Court of Canada, Trial Division, held that a defendant inducing another party to infringe the plaintiffs' patent was liable for infringement - See paragraphs 134 to 139.

Patents of Invention - Topic 3046

Infringement of patent - Persons liable - Liability of officer or director of company - The defendant company was found liable in damages for patent infringement - In the accounting for profits for which the company was liable, deductions were disallowed for large bonuses paid to the sole director and shareholder (Titley) - At issue was whether Titley was personally liable - The Federal Court of Canada, Trial Division, held that Titley's conduct did not warrant a finding of personal liability for the company's liability for the profits made from the infringement - However, the company had a trust obligation to the plaintiffs - Titley, as a stranger to that trust, was personally liable for all bonuses paid since the patent infringement action was commenced - Titley was aware of the plaintiffs' claim for profits - By taking large bonuses, Titley knowingly assumed the risk that he would be impairing the company's ability to meet its trust obligations - See paragraphs 172 to 193.

Patents of Invention - Topic 3102

Infringement of patent - Remedies - Damages or accounting of profits - The defendants were found liable to account for profits respecting a product found to have infringed the plaintiffs' patent - The Federal Court of Canada, Trial Division, set out the considerations applicable to determining profits and assessed the defendants' profits accordingly - In particular, in assessing profits of the defendant Canwell, the court agreed with the disallowance of the deduction of large bonuses paid to Canwell's sole shareholder (Titley) - Canwell failed to discharge the onus of establishing that the bonuses were not sham transactions for the purpose of reducing Canwell's profits (notwithstanding the bonuses had a legitimate motivation for income tax purposes) - See paragraphs 154 to 167.

Patents of Invention - Topic 3105

Infringement of patent - Remedies - Royalties - Section 55(2) of the Patent Act entitled a person whose patent was infringed to "reasonable compensation ... for any damage sustained" - The plaintiffs sought such damages from the defendants - The Federal Court of Canada, Trial Division, stated that "while the plaintiffs may well have sustained damage by reason of the actions of the defendants during the time between the laying open of the Patent application and the grant of the Patent, no damage sustained and no quantum of damages were proved before me. Without evidence, I am not prepared to assume significant damage, as logical as such an assumption might be, or to equate reasonable compensation to some percentage, related to a reasonable royalty rate on the profits or income of [the defendants] in the relevant period. Thus, in this regard, the plaintiffs having simply failed to make out their case for other than nominal compensation, the award as against [the defendants] will be $1.00 each without pre- or post-judgment interest." - See paragraphs 168 to 172.

Patents of Invention - Topic 3823

Infringement actions - Damages - Rate of royalty - [See Patents of Invention - Topic 3105 ].

Patents of Invention - Topic 3827

Infringement actions - Damages - Profits - Accounting - [See Patents of Invention - Topic 3102 ].

Trusts - Topic 2351

Constructive trusts - Basis for imposition - Where stranger knowingly or dishonestly participates in breach of trust - [See Patents of Invention - Topic 3046 ].

Cases Noticed:

Mentmore Manufacturing Co. et al. v. National Merchandise et al. (1978), 22 N.R. 161; 40 C.P.R.(2d) 164 (F.C.A.), refd to. [para. 48, footnote 15].

Diversified Products Corp. and Brown Fitzpatrick Lloyd Patent Ltd. v. Tye-Sil Corp. (1991), 125 N.R. 218; 35 C.P.R.(3d) 350 (F.C.A.), refd to. [para. 68, footnote 20].

Beloit Canada Ltd. v. Valmet Oy (1986), 64 N.R. 287; 8 C.P.R.(3d) 289 (F.C.A.), refd to. [para. 71, footnote 21].

Pfizer Canada Inc. et al. v. Apotex Inc. et al. (1997), 77 C.P.R.(3d) 547 (F.C.T.D.), refd to. [para. 72, footnote 22].

Free World Trust v. Electro Santé Inc. et al. (2000), 263 N.R. 150; 9 C.P.R.(4th) 168 (S.C.C.), refd to. [para. 73, footnote 24].

Lancashire Explosives Co. v. Roburite Explosives Co. (1895), 12 R.P.C. 470 (C.A.), refd to. [para. 79, footnote 29].

Metropolitan Vickers Electrical Co. v. British Thomson-Houston Co. (1926), 43 R.P.C. 76 (C.A.), refd to. [para. 85, footnote 33].

Wahl Clipper Corp. v. Andis Clipper Co. et al., 66 F.2d 161; 18 U.S. Pat. Q. 179, refd to. [para. 85, footnote 34].

Eli Lilly and Co. et al. v. Marzone Chemicals Ltd. et al. (1977), 37 C.P.R.(3d) 3 (F.C.T.D.), refd to. [para. 85, footnote 35].

Christiani v. Rice, [1930] 4 D.L.R. 401 (S.C.C.), refd to. [para. 92, footnote 39].

Bayer Aktiengesellschaft et al. v. Apotex Inc. (1995), 60 C.P.R.(3d) 58 (Ont. Gen. Div.), affd. (1998), 113 O.A.C. 1; 82 C.P.R.(3d) 526 (C.A.), leave to appeal refused (1999), 239 N.R. 200; 124 O.A.C. 199 (S.C.C.), refd to. [para. 96, footnotes 41 to 43].

Rhone-Poulnec v. Gilbert (1967), 35 Fox Pat. C. 174 (Exch. C.C.), refd to. [para. 100, footnote 44].

Consolboard Inc. v. MacMillan Bloedel Inc. (Saskatchewan) Ltd. (1981), 35 N.R. 390; 56 C.P.R.(2d) 145 (S.C.C.), refd to. [para. 103, footnote 45].

Sandoz Patents Ltd. v. Gilcross Ltd. (1972), 8 C.P.R. 210 (S.C.C.), refd to. [para. 105, footnote 46].

Apotex Inc. and Novopharm Ltd. v. Wellcome Foundation Inc. (1998), 145 F.T.R. 161; 79 C.P.R.(3d) 193 (T.D.), refd to. [para. 110, footnote 47].

Cabot Corp. et al. v. 318602 Ontario Ltd. et al. (1988), 17 F.T.R. 54; 20 C.P.R.(3d) 132 (T.D.), refd to. [para. 128, footnote 48].

Dupont Canada Inc. v. Glopak Inc. (1998), 146 F.T.R. 301; 81 C.P.R.(3d) 44 (T.D.), refd to. [para. 133].

Dableh v. Ontario Hydro (1996), 199 N.R. 57; 68 C.P.R.(3d) 129 (F.C.A.), refd to. [para. 136, footnote 51].

Allied Signal Inc. v. DuPont Canada Inc. and Complax Corp. (1993), 68 F.T.R. 17; 50 C.P.R.(3d) 1 (T.D.), affd. (1995), 184 N.R. 113; 61 C.P.R.(3d) 417 (F.C.A.), refd to. [para. 137, footnote 52].

Preformed Line Products Co. and Slater Steel Industries v. Payer (R.) & Co. (1975), 24 C.P.R.(2d) 1 (F.C.T.D.), affd. (1977), 16 N.R. 283; 34 C.P.R.(2d) 141 (F.C.A.), refd to. [para. 138, footnote 53].

Asbjorn Horgard A/S v. Gibbs/Nortac Industries Ltd. et al. (1987), 80 N.R. 9; 14 C.P.R.(3d) 314 (F.C.A.), refd to. [para. 141, footnote 55].

Vapor Canada Ltd. et al. v. MacDonald (1976), 7 N.R. 477; 22 C.P.R.(2d) 1 (S.C.C.), refd to. [para. 141, footnote 56].

Teledyne Industries Inc. et al. v. Lido Industrial Products Ltd. (1982), 68 C.P.R.(2d) 204 (F.C.T.D.), refd to. [para. 154, footnote 57].

Wellcome Foundation Ltd. et al. v. Apotex Inc. (1998), 151 F.T.R. 250; 82 C.P.R.(3d) 466 (T.D.), dist. [para. 160, footnote 59].

Lishman et al. v. Erom Roche Inc. et al. (1997), 125 F.T.R. 311; 72 C.P.R.(3d) 214 (T.D.), refd to. [para. 163, footnote 60].

Canada v. Irving Air Chute Ltd., [1949] S.C.R. 613, refd to. [para. 168, footnote 61].

Allied Signal Inc. v. DuPont Canada Inc. and Complax Corp. (1998), 142 F.T.R. 241; 78 C.P.R.(3d) 129 (T.D.), refd to. [para. 169, footnote 62].

Ital-Press Ltd. v. Sicoli (1999), 170 F.T.R. 66; 86 C.P.R.(3d) 129 (T.D.), refd to. [para. 176, footnote 66].

Monsanto Canada Inc. et al. v. Schmeiser et al. (2001), 202 F.T.R. 78 (T.D.), refd to. [para. 178, footnote 67].

Ductmate Industries Inc. v. Exanno Products Ltd. (1987), 12 F.T.R. 37; 16 C.P.R.(3d) 15 (T.D.), refd to. [para. 186, footnote 68].

Air Canada v. M & L. Travel Ltd., Martin and Valliant, [1993] 3 S.C.R. 787; 159 N.R. 1; 67 O.A.C. 1, refd to. [para. 188, footnote 66].

C.I. Covington Fund Inc. v. White et al., [2000] O.T.C. 865; 10 C.P.R.(4th) 49 (Sup. Ct.), refd to. [para. 190, footnote 71].

Michelin Tires (Canada) Ltd. v. Minister of National Revenue (Customs and Excise) (2001), 271 N.R. 183 (F.C.A.), refd to. [para. 193, footnote 72].

Chase Manhattan Bank N.A. v. Israel-British-Bank (London) Ltd., [1981] Ch. 105 (Ch.), refd to. [para. 193, footnote 73].

Statutes Noticed:

Patent Act, R.S.C. 1985, c. P-4, sect. 27(3) [para. 99]; sect. 28(1), sect. 28.1 [para. 57]; sect. 28.2(1), sect. 28.3 [para. 59]; sect. 43(2) [para. 67]; sect. 55(2) [para. 168]; sect. 78.4(1), sect. 78.4(2) [para. 60].

Trade-marks Act, R.S.C. 1985, c. T-13, sect. 7(a) [para. 140].

Authors and Works Noticed:

Fox, H.G., The Canadian Law and Practice Relating to Letters Patent for Inventions (4th Ed. 1969), p. 90 [para. 81, footnote 31].

Gillese, E.E., The Law of Trusts (1997), pp. 106, 118 [para. 190, footnote 70].

Hughes, R.T., and Woodley, J.H., Hughes and Woodley on Patents (1994 looseleaf), p. 315-3 [para. 54, footnote 17].

Counsel:

Anthony G. Creber and Patrick S. Smith, for the plaintiffs;

David W. Aitken, for the defendants.

Solicitors of Record:

Gowlings, Ottawa, Ontario, for the plaintiffs;

Osler, Hoskin & Harcourt, Ottawa, Ontario, for the defendants.

This action and counterclaim were heard on April 23-26, 2001, at Ottawa, Ontario, before Gibson, J., of the Federal Court of Canada, Trial Division, who delivered the following judgment on August 15, 2001.