2023 FC, 2023 FC 1486

Date: 20231107 Dockets: T-1420-18 T-567-20 Citation: 2023 FC 1486 Ottawa, Ontario, November 7, 2023 PRESENT: The Honourable Madam Justice McVeigh Docket: T-1420-18 BETWEEN: NCS MULTISTAGE INC. Plaintiff/ Defendant by Counterclaim and KOBOLD CORPORATION, KOBOLD COMPLETIONS INC. AND 2039974 ALBERTA LTD. Defendants/ Plaintiffs by Counterclaim Docket: T-567-20 AND BETWEEN: NCS MULTISTAGE INC. Plaintiff/ Defendant by Counterclaim and PROMAC INDUSTRIES LTD. Defendant/ Plaintiff by Counterclaim Table of Contents I. Introduction 4 II. Background 7 A. Pleadings and History of the Proceeding 7 B. Trial 10 C.

Technical Background 11 III. Issues 13 A. Common and Legal Issues 13 B. NCS Patents 15 C. Kobold Patents 20 D. Analytical Framework 22 IV. Evidence 23 A. Fact Witnesses 23 B. Expert Witnesses 26 V. Legal Principles 33 A. Claim Construction 33 B. Validity 42 C. Infringement 75 VI.

Summary of Prior Art 75 A. NCS’s 676 and 652 Patents 75 B. NCS’s 907 and 026 Patents 78

C. NCS’s 704 Patent 80 D. Kobold’s 571 Patent 84 VII. Common Issues 87 A. The POSITA 87 B. CGK 92 C. Interpreting Terms in Common 100 VIII. Claims Construction 142 A. NCS’s 676 Patent 142 B. NCS’s 652 Patent 174 C. NCS’s 907 Patent 197 D. NCS’s 026 Patent 226 E. NCS’s 704 Patent 243 F. Kobold’s 571 Patent 273 IX. Validity 283 A. NCS’s 676 Patent 283 B. NCS’s 652 Patent 313 C. NCS’s 907 Patent 336 D. NCS’s 026 Patent 370 E. NCS’s 704 Patent 377 F. Kobold’s 571 Patent 409 X. Infringement 433 A. Kobold’s 571 Patent 433 XI. Other Legal Issues 438 A. Induced Infringement 438 B. Common Design 439 C.

Does the Agreement affect this action? 439 D. Estoppel, Acquiescence, and Other Doctrines 440 XII. Remedies 440 XIII. Costs 442 A. The Law on Costs 442 B. Submissions and Considerations 445 C. Decision as to Costs 448 XIV. Conclusion 449 APPENDIX A 452 APPENDIX B 490 APPENDIX C 493 APPENDIX D 512

JUDGMENT AND REASONS I. Introduction [ 1 ] This action and counter-action pertain to a number of patents (seven, now reduced to six) relating to tools and sleeves used to drill multistage horizontal oil wells for hydrocarbons.

The Plaintiff and Defendant by counterclaim, NCS Multistage Inc [NCS], and the Defendants and Plaintiffs by counterclaim, Kobold Corporation, Kobold Completions Inc, and 2039974 Alberta Ltd (collectively, " “Kobold” " ), and Promac Industries Ltd [Promac] (collectively, the " “Defendants” " ), provide equipment to the oil and gas industry for hydraulic fracturing. [ 2 ] NCS sued the Defendants for infringement of the following of NCS’s patents (collectively, the " “NCS Patents” " ).

As well, NCS claimed induced infringement and infringement by common design: Canadian Patent No. 2,693,676 [676 Patent or 676]; Canadian Patent No. 2,820,652 [652 Patent or 652]; Canadian Patent No. 2,738,907 [907 Patent or 907]; Canadian Patent No. 2,766,026 [026 Patent or 026]; and, Canadian Patent No. 2,820,704 [704 Patent or 704]. [ 3 ] In response, Kobold asserted that NCS’s patents were invalid, and counter-sued claiming that NCS infringed Kobold’s Canadian Patent No. 2,856,830 [830 Patent or 830] and Canadian Patent No. 3,027,571 [571 Patent or 571].

Kobold subsequently abandoned its action for infringement of the 830 Patent. [ 4 ] Due to the complexity of this case, the number of patents at issue and the detailed submissions of the parties, these reasons are lengthy. First, there is a description of the complex history of this matter, followed by a note on the trial. Next, briefly is set out the nature of each patent and the relevant claims at issue.

Finally, a list of the issues decided, and then the witnesses who appeared as part of this trial and their backgrounds is provided. [ 5 ] It is necessary to comment on the number of issues raised in these actions. I am mindful of a similar discussion by Justice Locke: [9] Before continuing, I feel compelled to say a few words about the lack of wisdom of raising so many issues on appeal, especially so many issues that are so factually suffused, without due attention to the standard of review on such issues.

Firstly, the appellants’ approach suggests that they themselves cannot identify any issues that are particularly strong. This suggestion was compounded at the hearing of the appeal when, despite the Court’s suggestion that the appellants focus on their strongest points, the appellants insisted on addressing all of the issues raised in their memorandum of fact and law. Not only did this approach miss an opportunity to highlight certain of the issues, but it also prevented the appellants from delving deeper into points that might have merited more discussion.

In addition to hurting the appellants’ own case on appeal, this approach also made unnecessary additional work for the Court and delayed the release of this decision… Western Oilfield Equipment Rentals Ltd v M-I LLC , 2021 FCA 24 at para 9 [ Western Oilfield ]. [ 6 ] A helpful combination of some of the experts’ primers on fracking tools and methods will be found in Appendix A. Excerpts of all Patent Act sections referenced will be found in Appendix B. Any Figures referenced from the patents at issue or the prior art will be found in Appendix C.

The Joint Statement of Issues will be found in Appendix D. [ 7 ] The Joint Statement of Issues provided to this Court on December 21, 2021, contained 128 separate issues, many with their own sub- issues.

After closing submissions, the parties had narrowed the scope of claims at issue down from approximately 145 claims across seven patents to approximately 123 claims at issue across six patents, still with 128 separate issues. [ 8 ] There is no doubt this case is deeply complicated and highly technical – it has been referred to by counsel as " “perhaps the most complex intellectual property matter before the Federal Court” " and " “more patent construction than most judges engage in during their entire judicial career.” " There is no way to be certain, but I am inclined to agree with counsel’s sentiment.

I am, as Justice Locke was, of the opinion that putting all these issues before the Court was an unwise litigation strategy. [ 9 ] Lest this become a trend for this Court, or for the parties before it, I feel compelled to state that, in my view, putting these countless issues before the Court for simultaneous determination was detrimental to the aims of the parties in presenting the most clear and effective arguments.

It is also contrary to the general principle of this Court to secure the just, most expeditious and least expensive outcome of every proceeding. [ 10 ] This manner of presenting a case is akin to trial by everything but the kitchen sink. It unnecessarily obscured the points made by each party, took the parties’ and experts’ time and focus away from the determinative issues. II. Background A. Pleadings and History of the Proceeding

(1) The Parties [ 11 ] NCS and Kobold are competitors in the oilfield services industry; they provide equipment to the oil and gas industry for hydraulic fracturing [fracking]. [ 12 ] Promac provides custom machining services, primarily to businesses in the oil and gas industry. Promac primarily machines components for subsurface equipment, including sliding sleeves and components for tools.

Relevant here, Promac manufactured sleeves and tools for Kobold. [ 13 ] A Bottom Hole Assembly [BHA] typically has one or more " “packers” " , used to isolate different zones of the wellbore, and perform other operations such as opening sleeves or perforations through the casing. [ 14 ] The NCS Patents, reviewed in further detail below, can be broken down into three groups: (1) downhole tools (the 676 and 652 Patents), (2) methods of shifting frac sleeves (the 907 and 026 Patents), and (3) frac valves (the 704 Patent). The NCS and Kobold Patents are reviewed in greater detail below.

The 571 Patent owned by Kobold can likewise be described as a downhole tool.

(2) The Actions [ 15 ] On July 24, 2018, NCS filed its Statement of Claim for Court File T-1420-18, commencing a patent infringement action against Kobold in respect of the NCS Patents. Kobold commenced its counterclaim by filing its initial Statement of Defence and Counterclaim on July 12, 2019, including allegations of impeachment respecting the NCS Patents and infringement of Kobold’s 571 Patent. [ 16 ] On May 21, 2020, NCS filed its Statement of Claim for Court File T-567-20, commencing an infringement action based on common design against Promac.

On July 22, 2020, Promac filed its Statement of Defence and Counterclaim, including claims impeaching the NCS Patents. (3) 2015 Lawsuit and Settlement Agreement [ 17 ] There was a previous lawsuit [T-1942-15] filed for infringement between the two parties in 2015, when NCS sued Kobold (operating as a prior Kobold company named Kobold Services Inc) for infringement of the 907 Patent and the 676 Patent. The action was brought with respect to Kobold’s G3 technology. After several years of negotiation, the parties ultimately settled the dispute by way of a Settlement Agreement dated January 7, 2016 [Agreement].

NCS alleges that further infringement occurred after the Agreement was entered into by the parties. Kobold disputes what the agreement covered and there was extensive evidence led regarding the negotiation between the parties as to the agreement.

(4) Alberta Court of King’s Bench Action [ 18 ] There is currently other litigation stemming from the Agreement ongoing between the parties at the Alberta Court of King’s Bench. Kobold began the manufacture and sale of a technology known as the G5 Sleeve. The parties dispute whether NCS was aware of this during their settlement negotiations.

Regardless, the Alberta Court of King’s Bench action stems from NCS’s belief that the G5 Sleeves breach the settlement agreement. [ 19 ] In that matter, NCS brought an application for an interlocutory injunction, which was ultimately dismissed by Justice Horner on June 21, 2018: NCS Multistage v Kobold Corporation, 2018 ABQB 485 . The question on that matter was whether the G5 Sleeve is of the " "general design" " of the G3 Sleeve as outlined in the Settlement Agreement.

Justice Horner, in dismissing the injunction application, found that that there was no clear breach but that serious issues about the scope of the Agreement are present in view of the evidence of the negotiations leading up to the Agreement that was submitted by Kobold. The matter is presently stayed pending the outcome of this litigation. [ 20 ] A related dispute at the time of the trial is in the Alberta Court of King’s Bench between Kobold, Kicking Horse Oil & Gas Ltd [Kicking Horse], and a number of third parties including RM Engineering Inc [RM Engineering].

This dispute relates to claims in product liability. Though NCS is not party to that dispute, it submits that the facts are at least somewhat relevant to the instant case as it pertains to the allegedly infringing technology having been used on Kicking Horse well sites as well, and providing evidence with respect to Kobold’s control over wellsite operations. In addition, the President of RM Engineering, Ian Ross, was a witness in this trial and felt constrained in his answers given the ongoing litigation.

(5) Ongoing Federal Action [ 21 ] On April 6, 2020, Kobold brought an action in this court against NCS for infringement of its Canadian Patent No. 2,919,561 relating to its invention for a Tension Release Packer for a BHA. This action was being litigated at the time of the trial. In September 2021, NCS brought a motion for

summary judgment seeking dismissal of the action. This motion was dismissed by Justice Zinn on December 17, 2021: Kobold Corporation et al v NCS Multistage Inc, 2021 FC 1437 .

(6) Appeal of Constructive Trust Amendment [ 22 ] Finally, NCS is appealing the decision of Justice Manson in NCS Multistage Inc v Kobold Corporation , 2021 FC 1395 . In that decision, Justice Manson affirmed the decision of Prothonotary Ring in the underlying action of this matter, where she denied NCS’s motion to amend its pleading to include an allegation of constructive trust. The Federal Court of Appeal granted NCS’s motion to stay the appeal proceedings pending the issuance of the judgment in the present action: NCS Multistage Inc v Kobold Corporation , 2022 FCA 42 . B. Trial

[ 23 ] Throughout the trial the Plaintiff brought several motions, on which orders were rendered during the trial so I will not include further discussion on those motions. [ 24 ] The Plaintiff provided five fact witnesses: Robert Nipper, Marty Stromquist, John Ravensbergen, Ian Ross, and Richard Finney, and two expert witnesses: Doug Lehr and Dr. Rex Mennem. The Defendants provided four fact witnesses: Shawn Deugo, Per Angman, Tom Watkins, and Chris Baudistel, and three experts: Michael Chambers, Sean David, and Dr. William Fleckenstein.

I note that all the Defendants retained the same counsel. [ 25 ] The trial was originally scheduled to proceed in-person; however, due to a spike in cases of COVID-19 in December 2021 and January 2022 the bulk of the trial was conducted virtually, with the exception of closing arguments. I wish to commend counsel for their flexibility in this, as it was by this flexibility and ingenuity that they were able to make their cases effectively in a manner unaffected by the changing circumstances. C.

Technical Background [see also: technical primers Appendix A] [ 26 ] Fracking is a method of extracting oil and gas from beneath the earth’s surface. Hydrocarbons such as oil and natural gas are contained in underground formations. In order to access these hydrocarbons and bring them to the surface, a well is drilled. However, the formation may require additional treatment, such as " “fracking” " to stimulate the extraction of the hydrocarbons.

This typically involves pumping large amounts of fluid at high pressure into the well. [ 27 ] These formations may require horizontal drilling to allow the formation to be stimulated with multiple stages.

The two forms of multistage horizontal stimulations are " “Perf and Plug” " and " “Frac Sleeves.” " Frac sleeves can actuate with balls dropped from the surface or with tools run on coiled tubing, which open the sleeves and allow the formation to be stimulated either down the coiled tubing or by pumping the stimulation fluid at high pressure down the annulus of the coiled tubing. [ 28 ] Well treatment may be done in stages in order to selectively treat different zones of the formation. To do so, a completion tool, referred to as a BHA, can be run into the wellbore.

(1) Well Drilling and Completion [ 29 ] Casing is joined together to run from the surface to a well’s total depth. When several joints of casing are connected, this is often referred to as a " “string” " of casing. [ 30 ] As explained by Mr. Chambers, Kobold’s expert, in the late 1980’s many wells began to be drilled horizontally. Horizontal drilling exposed more of the formation but also allowed the driller to intersect natural fractures in the rock which could transport oil and gas to the wellbore.

Canada has since seen a movement from vertical to horizontal drilling. [ 31 ] Where the well has low permeability (known as " “tight” " ), it will require stimulation to produce oil and gas. Rocks such as tight sandstone, carbonate, or shale require fracturing using large volumes of water and/or proppant to keep the created fracture open. [ 32 ] Mr. Lehr, NCS’s expert, explains that fracking involves injecting fluids under high pressure through perforations in the casing and into the rock formations to create new fractures in the rock.

(2) Tools and Sleeves [ 33 ] Two critical terms in this decision are " “tools” " and " “sleeves.” " As noted by the experts, tools refer to devices that perform an intended function in a wellbore. This may refer to a single function, or multiple functions. Multiple tools together, chosen for a specific job, form a BHA. The BHA is assembled at the well site by threading the tools together. For example, perforating guns and abrasive jet perforation devices are tools that are run downhole to achieve perforation.

Sliding sleeves are a tubular that is covered by at least one more tubular which can slide along the length of the first tubular. III. Issues [ 34 ] I have divided the issues into three categories: Common and Legal Issues, NCS Patents, and Kobold Patents. [ 35 ] Even though some issues were worded differently between the parties’ closing submissions, pleadings, and the Joint Statement of Issues, the issues listed below in this

section fully encompass the issues left to decide at the end of the trial. Further note should be taken that not all issues will be addressed, only those found to be determinative or of particular significance to the matter at hand. Where issues are not addressed in the analysis, there are brief reasons in the appropriate sections for why they were not addressed. A.

Common and Legal Issues [ 36 ] While it is rare for cases involving multiple patents to have common issues between the patents and other legal issues, the remarkable similarity between the patents at issue, resemblance of the submissions between the parties, and (mostly) general agreement between the experts, it is a better use of resources to consolidate like issues to avoid unnecessary duplication. As will be discussed in the analysis, the Common Issues are replicated issues arising from each patent. [ 37 ] The Common Issues are as follows: A .

What is the person of skill in the art [POSITA] relevant to the NCS and Kobold patents?

B . What is the common general knowledge [CGK] relevant to the NCS and Kobold patents? C . What construction do I adopt of relevant claim terms repeated among multiple patents? [ 38 ] The Legal Issues raised by the parties include whether Kobold induced Promac to infringe NCS’s Patents, whether " “common design” " is a viable cause of action under Canadian patent law, if the Agreement affects this action, if NCS is estopped by res judicata or any equitable remedy from asserting infringement claims and misrepresentation and Patent ownership.

Some of these and other legal issues raised were addressed and some are not in the legal analysis. As previously mentioned, where issues were raised and are not addressed in the analysis, there are brief reasons in the appropriate sections for why they were not addressed. B. NCS Patents

(1) The 676 Patent [ 39 ] In the context of stimulation operations within a wellbore (fracturing or fracking), debris is a common problem. The 676 Patent relates to a downhole tool assembly with debris relief, and a method for using it for completing a well.

The debris relief features, including forward and reverse circulation pathways, allow it to be used in solids-laden environments. [ 40 ] Canadian Patent No. 2,749, 636 [636 Patent] is a forced division of the 676 Patent and relates to multi-function valves for downhole assemblies and pressure equalization assemblies comprising such valves. [ 41 ] The independent claims are Claims 1, 18, and 34. [ 42 ] The Joint Statement of Issues suggests Claims 1-34 are at issue. In their closing submissions, the Plaintiff maintains this is the case, though the Defendants only frames Claims 1-32 as being at issue.

As they were all argued at trial, and given the parties appear at odds about which claims are still at issue, I will construct Claims 1-34. [ 43 ] The following specific allegations are levied against the claims of the 676 Patent: A . Anticipation: Claims 1, 4, 8-12, and 18-31; B . Obviousness: Claims 1-32; C . Overbreadth: Claims 1-32; and, D . Inutility: Claims 1-32. [ 44 ] NCS alleges the Defendants infringed Claims 1-32 of the 676 Patent.

(2) The 652 Patent [ 45 ] The 652 Patent discloses the same invention as the 676 Patent, directed at downhole tools and debris relief therein. [ 46 ] The 652 Patent is a forced division of the 636 Patent and relates to downhole assemblies that include a debris relief passageway within a J-slot and methods of using the assemblies to improve stimulation operation in a debris-laden environment. [ 47 ] The Joint Statement of Issues suggests Claims 1-26 are at issue. In their closing submissions, the Plaintiff maintains this is the case, though the Defendants only frames Claims 4 and 6-26 as being at issue.

As they were all argued at trial, and given the parties appear at odds about which claims are still at issue, I will construct Claims 1-26. [ 48 ] The following specific allegations are levied against the claims of the 652 Patent: A. Anticipation: Claims 1, 4, 6, 8-10, 13, 19, 20, 22, and 24; B . Obviousness: Claims 4 and 6-26; C . Overbreadth: Claims 4 and 6-26; D . Inutility: Claims 1-26; E . Insufficiency: Claims 1-26; F . Ambiguity: Claims 19-23; G . Double Patenting: Claims 1-18 and 24-26; and, H . Prior Disclosure: Claims 1-26. [ 49 ] NCS alleges the Defendants infringed Claims 4 and 6-26 of the 676 Patent.

(3) The 907 Patent [ 50 ] In the context of an oil or gas well, it is common for the sleeve to shift in order to enable or disable flow from varying portions of the

assembly. The 907 Patent claims a system and method for a shifting sleeve in stimulation operations within a wellbore in which a ported tubular provides selective access to the adjacent formation through, among other means, being opened or isolated. [ 51 ] The parties agree on Claims 1-28 being at issue for the 907 Patent, and this is also reflected in the Joint Statement of Issues. I shall construct all 28 claims. [ 52 ] The following specific allegations are levied against the claims of the 907 Patent: A . Anticipation: Claims 16-23; B . Obviousness: Claims 1-28; C . Overbreadth: Claims 1-28; D .

Inutility: Claims 1-28; E . Insufficiency: Claims 1-28; and, F . Ambiguity: Claims 22, 23, and 26-28. [ 53 ] NCS alleges the Defendants infringed Claims 1-3-, 8-10, 12-18, and 20-28 of the 907 Patent.

(4) The 026 Patent [ 54 ] The 026 Patent discloses the same invention as the 907 Patent (i.e. it is a forced division), directed at methods of shifting frac sleeves to open one or more ports in a tubular. [ 55 ] The Defendants and the Joint Statement of Issues suggest Claims 1-14 are at issue. In their closing submissions, the Plaintiff frames Claims 1-14 and 24-26 as being at issue. I take it this must be a typo, as there are only 14 claims in the 026 Patent, and I will only construct those 14 claims. [ 56 ] The following specific allegations are levied against the claims of the 026 Patent: A.

Anticipation: Claims 1, 2, 6, 7, 11, and 12; B . Obviousness: Claims 1-14; C . Overbreadth: Claims 1-14; D . Inutility: Claims 1-14; and, E . Insufficiency: Claims 1-14. [ 57 ] NCS alleges the Defendants infringed Claims 1 and 6-14 of the 026 Patent.

(5) The 704 Patent [ 58 ] The 704 Patent claims a valve for the fracturing of a wellbore. The valve comprises a tubular mandrel and a frac window. A valve may be closed to prevent fluid communication from the tubing string out the frac window, or opened to enable this. This tool may be installed in a downhole tool which has a perforation device, and can be used with either one or two sealing elements. [ 59 ] There was some back and forth regarding the invention story of this patent, but it will have no material impact on the issues at hand. [ 60 ] The Joint Statement of Issues suggests Claims 1-30 are at issue.

In their closing submissions, the Plaintiff suggests Claims 1-26 and 28-30 are at issue, and the Defendants frame Claims 1-16, 18-23, and 28-30 as being at issue. As only Claims 1-23 and 28-30 were argued at trial, and given the parties appear at odds about which claims are still at issue, I will construct Claims 1-23 and 28-30. [ 61 ] The following specific allegations are levied against the claims of the 704 Patent: A . Anticipation: Claim 1; B . Obviousness: Claims 1-30; C . Overbreadth: Claims 1-30; D . Inutility: Claims 1-30; E . Insufficiency: Claims 1-30; F .

Ambiguity: Claims 4, 5, 10, 18, and 21; and, G . Double Patenting: Claims 1-30. [ 62 ] NCS alleges the Defendants infringed Claims 1-16, 18-23, and 28-30 of the 704 Patent.

C. Kobold Patents

(1) The 830 Patent [ 63 ] The 830 Patent claims an apparatus for a downhole tool with a shock-absorbing sleeve, particularly for use in absorbing or dampening the effects resulting from the actuation of a shifting sleeve during downhole operations. [ 64 ] The action regarding infringement of this patent is no longer being pursued.

(2) The 571 Patent [ 65 ] The 571 Patent describes a shock-absorbing dampening system for a sliding sleeve that uses viscous dampening to control the speed of the sleeve and is titled " “Downhole Tool Having a Shock-Absorbing Sleeve.” " The inventors of the 571 Patent are Per Angman, Kevin Graf, Chris Baudistel, and Mark Andreychuk. [ 66 ] The 571 Patent was filed on July 10, 2014, and has a priority date of July 10, 2013. It is not in dispute that it is a voluntary divisional the 830 Patent. [ 67 ] Kobold called Mr. Angman as a fact witness and he explained the 571 Patent invention background.

Kobold also called Dr. Fleckenstein as its expert and NCS called Dr. Mennem. I note that the Court struck portions of Dr. Mennem’s report related to measurements taken by Mr. Watson. Mr. Finney also acted as a fact witness for NCS. He is NCS’s VP of manufacturing and explained the LP3 sleeve that is alleged to infringe the 571 Patent. [ 68 ] Kobold is only alleging that those embodiments without a seal are infringed. [ 69 ] The Joint Statement of Issues suggests Claims 1-27 are at issue. In their closing submissions, NCS argues Claims 1-16 are at issue.

Kobold argues across all the issues that Claims 1-27 are still at issue. Out of an abundance of caution, I will construct Claims 1-27. [ 70 ] The following specific allegations are levied against the claims of the 571 Patent: A . Anticipation: Claims 1-3, 25, and 27; B . Obviousness: Claims 1-27; C . Overbreadth: Claims 1-27; D . Inutility: Claims 1, 25, and 27; E . Insufficiency: Claims 1, 24, 25, and 27; F . Ambiguity: Claims 1, 6, and 25-27; and, G . Double Patenting: Claims 1-27. [ 71 ] Kobold alleges NCS infringed Claims 6, 11, 12, and 16 of the 571 Patent. D.

Analytical Framework [ 72 ] Below is an outline of the framework of the analysis: A . Evidence: A discussion of the Fact and Expert Witnesses whose submissions were heard and received, including issues with the evidence from those witnesses; B . Legal Principles: An overview of all the legal principles required to reach a conclusion in this case; C .

Summary of Prior Art: Given there is repetition and overlap in prior art for each patent there is a general

summary of the applicable prior art for each patent with references back to those summaries; D . Common Issues: the Common Issues are addressed as outlined in the Issues

section above; E . Claims Construction: A claim-by-claim construction for each patent, bearing in mind the weight of the evidence and the Common Issues findings; F . Validity: A patent-by-patent analysis for each head of validity issues raised, following the order laid out in the Issues

section above; G . Infringement: For claims that survive the validity analysis, there is a fact-specific analysis of whether or not the valid claims have been infringed by the other party; and, H . Other Issues: The various other issues are dealt with. [ 73 ] Following this analysis are the findings on Remedies and Costs, followed by the Conclusion, and Judgment.

IV. Evidence A. Fact Witnesses [ 74 ] The Court had the benefit of helpful fact witnesses, all of which were found to be credible.

(1) Fact Witnesses for NCS (

a) Robert Nipper [ 75 ] Robert Nipper was the Chief Executive Officer of NCS Multistage, LLC, the publicly traded parent company of the Canadian NCS Multistage Inc. He is listed as an inventor on the 676, 652, 907, and 026 Patents. (

b) Marty Stromquist [ 76 ] Marty Stromquist is a co-founder of NCS Multistage, LLC, serving variously as Chief Operating Officer from 2010-2015, Chief Technology Officer in 2016, and President from 2016-2020. His practical experience is extensive, lacking a formal education is of no discernible disadvantage to him in the oil and gas industry. He worked for a number of companies that are mentioned in this trial as well as doing his own start up companies. Mr. Stromquist is presently a director of NCS Multistage, LLC.

He is listed as an inventor on four of the five patents asserted by NCS: the 676, 652, 907, and 026 Patents. Mr. Stromquist negotiated with Kobold on behalf of NCS regarding the previous patent dispute between the parties. (

c) John Ravensbergen [ 77 ] John Ravensbergen is an engineer and the Chief Technology Officer of NCS Multistage, LLC, having previously served in Research and Development and as Engineering Manager. He joined NCS in 2011, and previously worked for a firm called " “Baker Hughes” " from 2010-2011, and before that at a firm called " “BJ Services” " beginning in 1996. He is listed as an inventor on the 704 Patent, and is additionally an inventor of over 100 patents. (

d) Ian Ross [ 78 ] Ian Ross is the President and one of the founders of RM Engineering. Mr. Ross has experience relevant to this trial because he was on a job site where Kobold tools and sleeves were sold to be installed in a well for a company called Kicking Horse [See: history of proceedings section; actions]. (

e) Richard Finney [ 79 ] Richard Finney is the Vice-President of Manufacturing at NCS Multistage, LLC, handling matters related to supply chain, maintenance, and repair operations.

(2) Fact Witnesses for Kobold and Promac (

a) Shawn Deugo [ 80 ] Shawn Deugo currently serves as technical support for Promac; previously, he was General Manager of Promac for several decades. Additionally, he was Promac’s corporate representative during the discovery process. His knowledge relates to the nature of the services that Promac provides. Mr. Deugo has done manufacturing for both NCS and Kobold in the past as well as numerous other oil and gas related companies. (

b) Per Angman [ 81 ] Per Angman is one of the founders of Kobold, and a listed inventor on the 571 Patent. He possesses a master’s degree in mining engineering, and has worked on designing tools in the oil industry for several decades. Prior to founding Kobold in 2007, Mr. Angman was chief engineer for 15 years at Tesco Corporation where he worked on their casing drilling technology. At Tesco, Mr. Angman was involved in the design and development of downhole tools. (

c) Tom Watkins [ 82 ] Tom Watkins is the Chief Technology Officer at Advance Upstream. He has prior experience with BJ Services [BJ] (which, as noted, became part of Baker Hughes), and, while there, was involved in a project called the " “OptiPort Sleeve.” " (

d) Chris Baudistel [ 83 ] Chris Baudistel is the President of Kobold Completions Inc, and was until recently the General Manager of all three Kobold Defendants. He was also Kobold’s corporate representative during discovery. Prior to working at Kobold, Mr. Baudistel worked with Mr. Angman at Tesco Corporation from 2001 until 2008. At this point Mr. Baudistel joined Kobold, where he worked as Manager of Operations for many years.

B. Expert Witnesses [ 84 ] The Parties had many disputes regarding specific evidence from and general credibility of each expert. Despite these disputes, I found all the experts credible and helpful to the court. There were issues regarding experts co-mingling claims construction issues with validity issues, and using disclosure improperly. I will address particular issues with the experts’ evidence after discussing their qualifications.

(1) Experts for NCS (

a) Dr. Rex Mennem [ 85 ] Dr. Rex Mennem holds a PhD in Mechanical Engineering from Purdue University. He is currently the founder and principal of Touchstone Technology Services LLC, which provides technical and management consulting to companies in the oil and gas industry. Prior to forming Touchstone, Dr. Mennem worked at Schlumberger from 2004 to 2020 in engineering. [ 86 ] Dr. Mennem was qualified as an expert in the design, development and operation of downhole equipment and completion accessories in the oil and gas industry, including but not limited to sliding sleeves. He offered evidence on the 571 Patent. (

b) Mr. Doug Lehr [ 87 ] Mr. Lehr is an engineer with over 40 years of experience in designing tools for oil and gas applications. He holds a Bachelor of Science in Mechanical Engineering from the University of Texas, as well as an MBA in Finance and Marketing from the University of Houston. [ 88 ] He is the Founder and Principle of Integris Technology Services LLC, a consultancy offering services in litigation consulting, product and system development, failure analysis and design assurance in the oil and gas industry.

Previously, he worked at Baker Hughes in various roles for 10 years, and spent more than 15 years at BJ Services. [ 89 ] Mr. Lehr was qualified as an expert in the engineering, design and operation of tools for oil and gas applications, including but not limited to downhole tools and sleeves for use in hydraulic fracturing. He offered evidence on the validity and infringement of the NCS Patents. (

c) Issues Regarding Mr. Lehr’s Opinions [ 90 ] One quirk I must have regard for throughout this decision and in reviewing the evidence is Mr. Lehr’s tendency, both in his reports and in testimony, to rely upon the disclosure in the patents when interpreting claims. This is not in and of itself a problematic practice, but Mr. Lehr repeatedly misuses the disclosure in ways that artificially expand the scope of the claims he interprets. NCS relies on Mr. Lehr’s

interpretations during their construction submissions, and by extension throughout their remaining submissions regarding the patents. [ 91 ] The clearest example, which will be analyzed in depth later in this decision, is Mr. Lehr’s construction of the term " “comprising.” " In his construction, Mr.

Lehr suggested the use of this term in the 676 Patent referenced an open-ended portion of the patent’s disclosure using similar non-exhaustive language such as " “will typically include” " or the inclusion in the disclosure of the ability to make " “modifications to the specified devices and the arrangement of the assembly.” " He further attempts to construe claims which use this recursively non-exhaustive language by suggesting elements which are absent in a claim can be included by extrapolation because the non-exhaustive nature of " “comprising” " permits any element captured in the CGK, necessary or otherwise, to be included in the claim by virtue of this non-exhaustive language.

While a specific discussion on the use and

interpretation of non-exhaustive language follows later in this decision, this is a firm example of misusing language in the patent disclosure to expand the

interpretation of the claim beyond the invention being claimed. [ 92 ] Mr. Lehr frequently relies on the CGK to add elements to claims by extrapolation. In addition to being improper, this brings greater scrutiny to Mr. Lehr’s description of the CGK. It is fair to characterize his description of the CGK as pessimistic. While the other experts were in agreement on the broad strokes of the CGK with respect to the NCS Patents, Mr. Lehr took several positions which appeared at odds with expertise and historical facts. One such example was Mr.

Lehr’s position that downhole tools would often get stuck in deviated wells (particularly in coiled tubing operations) due to debris issues, and that operators were not using coiled tubing for fracturing operations because they were afraid of getting stuck. To the contrary, fracturing using coiled tubing conveyed tools has been used for about 25 years, and was a proven technology by the year 2000. This method was used when it met the operators’ needs and budget. Mr. Lehr’s opinions call into question his description of the CGK. [ 93 ] For these reasons, I am forced to give less weight to Mr.

Lehr’s opinions regarding the construction of relevant claim terms, the CGK, and the claims themselves, as well as NCS’s reliance on them. I will conduct my own construction of the relevant claim terms, the CGK, and the claims themselves to maintain as much fairness to the parties as possible, while considering and weighing each expert’s opinions throughout this decision.

(2) Experts for Kobold (

a) Mr. Michael Chambers [ 94 ] Mr. Chambers holds a Bachelor of Science degree in Petroleum Engineering from Texas A&M University. He has over 35 years of experience as an engineer, manager and consultant in the oil and gas industry. Mr. Chambers has authored over a dozen publications and has given numerous industry presentations. He holds four patents in the United States related to oil and gas technology.

[ 95 ] Mr. Chambers was qualified as an expert in wellbore completions engineering in the oil and gas industry, including the design and supervision of completions operations such as perforating, shifting sleeves, and fracturing, as well as the tools and technology used to carry out such operations. He offered evidence on the validity and infringement of the NCS Patents. (

b) Mr. Sean David [ 96 ] Mr. David is a professional engineer with over 18 years of experience, including as a well-site supervisor. He was the expert for the Defendants in the Alberta Injunction application. He was qualified as an expert mechanical engineer with expertise in drilling, completions and production operations as well as tool design, and with specific experience in managing fracturing operations and selecting tools for coil tube fracturing involving shiftable sleeves. He offered evidence on the validity and infringement of the NCS Patents. (

c) Dr. William Fleckenstein [ 97 ] Dr. Fleckenstein is a professional engineer with a PhD in petroleum engineering from the Colorado School of Mines. He is currently also a professor at the Colorado School of Mines and teaches a course that involves educating students on sleeves, slips, packers, J- profiles and other subject matter that is directly relevant to the issues in dispute in this action. He also has significant experience working in the oil and gas industry, and is a named inventor on two patents relating to sliding sleeves.

He offered evidence on the validity and infringement of the 571 Patent. [ 98 ] Dr. Fleckenstein was qualified as an expert in fracturing operations, including the design of sliding sleeves. (

d) Alleged Issues Regarding Kobold’s Experts [ 99 ] Throughout the trial, NCS raised numerous issues with Kobold’s experts. NCS repeatedly impugned the impartiality and independence of Kobold’s experts, asserting that no weight or consideration should be given to their evidence for a variety of reasons mostly related to their independence and objectivity. These issues largely apply to Mr. Chambers’ and Mr. David’s evidence. [ 100 ] One such issue concerned a shop tour that Mr. David and Mr. Chambers took of Kobold’s facilities along with counsel for Kobold and other Kobold representatives.

During trial, NCS raised concerns about the purpose of the tour after learning that Mr. David and Mr. Chambers attended the tour together and were given a demonstration and explanation from Kobold engineers about the functioning of Kobold’s technology. This tour had been disclosed in Mr. David’s expert report but not in Mr. Chambers’. NCS brought a motion seeking further disclosure from Kobold about the purpose and the events of the shop tour. I granted the motion in part, requiring disclosure of any communication between counsel for Kobold and Mr.

David with respect to the shop tour but did not find the tour tainted the experts in any way or that Counsel was unethical in the situation. [ 101 ] NCS raised another issue with Mr. David and Mr. Chambers with respect to the 676 Patent and the search terms they used when searching for the relevant state of the art. NCS argued that the Court must refrain from relying on the testimony of Mr. David and Mr.

Chambers because it was unclear which search terms had been provided to them by Kobold’s counsel and which they had searched for independently. [ 102 ] I accept that it is preferable for experts to search for material independently and not to be exclusively guided by counsel; however, the fact that some material relevant to determining may have been provided by counsel does not necessarily render expert evidence wholly inadmissible: Excalibre Oil Tools Ltd v Advantage Products Inc , 2016 FC 1279 at para 152 , aff’d 2009 FCA 121 . [ 103 ] Moreover, it is not clear that Kobold overstepped the bounds of permissible involvement, nor do any concerns arise about the objectivity of Kobold’s experts.

NCS had every opportunity to test the foundation of the experts’ opinions and was fully able to cross- examine the witnesses. The Supreme Court in White Burgess Langille Inman v Abbott and Haliburton Co, 2015 SCC 23 at paragraph 61 explicitly rejected the suggestion that " “an expert lacks the threshold qualification … simply because the expert relies on the work of other professionals in reaching his or her own opinion.” " I therefore decline to assign no weight to Kobold’s experts. [ 104 ] NCS has also raised a concern regarding Dr.

Fleckenstein’s analysis with respect to infringement, anticipation, obviousness, and double patenting. NCS submits that Dr. Fleckenstein does not and did not understand the basic principles of claim construction – in particular his understanding of claim dependencies and how limitations in dependent claims narrow the scope of the claim. [ 105 ] I do not share the same concerns as NCS regarding Dr. Fleckenstein and do not find his analysis to be fundamentally flawed. Dr.

Fleckenstein refused to read in later, limiting claims into earlier claims, which in my view is not an error but instead a correct recognition of claim differentiation: it is impermissible to import limitations from dependent claims into the prior claims. Although Dr. Fleckenstein did not explicitly state that dependent claims narrow the scope of a claim, he understood and acknowledged that dependent claims act as limitations. [ 106 ] NCS raised in cross-examination of Dr. Fleckenstein issues regarding his revenue sharing with a University for a series of patents. Dr.

Fleckenstein no longer does this " “business” " . It was clear at the trial that this was not a consideration at all and did not " “taint” " his expert opinion. I do not find Dr. Fleckenstein’s expert evidence of any less weight than Dr. Mennem’s. V. Legal Principles A. Claim Construction

[107] Claim construction is a question of law for the judge that precedes the consideration of validity or infringement: Whirlpool Corp vCamco Inc, 2000 SCC 67 at paras 43, 49, and 61 [Whirlpool]. [108] The construction exercise is guided by the following principles: A.

Claims should be viewed through the eyes of the POSITA as of the relevant date, having regard to the CGK: Whirlpool at paras45, 53-56; Free World Trust v Electro Santé Inc, 2000 SCC 66 at paras 44, 51-54, 58 [Free World Trust]; Tearlab Corporation v I-MED Pharma Inc, 2019 FCA 179 at para 32 [Tearlab]; Consolboard Inc v MacMillan Bloedel (Sask) Ltd, (SCC),[1981] 1 SCR 504 at 521 [Consolboard]. B. In reaching a purposive construction, the Court must identify elements of the invention as essential or non-essential.

Only theformer falls within the legal protection of the patent: Whirlpool at paras 45, 49; Free World Trust at paras 31, 52, 55-57; Tearlabat para 31. The SCC tells us that purposive construction entails determining what an essential element of the claim is. If thepatentee cannot show that a claim element is not essential it is presumed to be essential: Pollard Banknote v BABN tec, 2016 FC883 para 74 [BABN].

If an essential element can be substituted for or omitted from the alleged infringing method or device there isno infringement but if a non-essential element is substituted then infringement may still occur: Free World Trust at para 31. C. The SCC has made clear that purposive construction applies to both infringement and validity: Whirlpool at para 49. D.

Construction should begin with the language of the claims, read in an informed and purposive way with a mind willing tounderstand, paying close attention to the purpose and intent of the author, and the context and use to which the words of the claimsare being put: Whirlpool at paras 49, 50; Free World Trust at paras 31, 39-40, 50-51, 58-60; Tearlab at para 31. E.

If the language of the claims is ambiguous when read in context, the whole of the specification should be considered to ascertainthe nature of the invention, but not to unduly enlarge or narrow the scope of the claims: Whirlpool at para, 51-52; Free World Trustat para 32; Tearlab at para 33; Mylan Pharmaceuticals ULC v Eli Lilly Canada Inc, 2016 FCA 119 at paras 39-43 [Mylan];Hospira Healthcare Corporation v Kennedy Trust for Rheumatology Research, 2020 FCA 30 at paras 21-22 [Hospira]. F.

Extrinsic evidence going to the inventor’s actual intent is irrelevant: Free World Trust at paras 61-67; Bombardier RecreationalProducts Inc v Arctic Cat, Inc, 2018 FCA 172 at paras 22-23. G. The construction of the claims should be neither benevolent nor harsh, but should instead be reasonable and fair to both thepatentee and the public, promoting fairness and predictability: Whirlpool at para 49; Free World Trust at paras 31, 41-43; Tearlabat para 33; Consolboard at 520. H. The SCC has rejected using the vague notion of the "“spirit of the invention”" to reach a purposive construction.

Such constructiondoes not promote predictability. Claim language is paramount to construe the patent, and the SCC noted that adhering to thelanguage of the claims promotes the public notice function: Free World Trust at para 50. I. To reach a purposive construction, the Court must direct itself to the words of the claims interpreted in the context of the patentspecification as a whole: Whirlpool at para 49. The Court must look to the specification for meaning of a word before resorting toa "“dictionary approach”": Whirlpool at para 52.

This does not mean that the Court is to ignore the ordinary rules of grammar andsyntax: ABB Technology AG v Hyundai Heavy Industries Co, 2015 FCA 181 at para 45 [ABB Tech]. The Court must remainvigilant, when using the patent specification to understand the words of the claims, to not use the specification to unduly enlarge orcontract the scope of the claims: Tearlab at para 33 [Emphasis added]. J.

The words chosen by a patentee will be read in the sense the patentee is presumed to have intended; however, if a patenteeinadvertently creates a limitation in the claims, it is a self-inflected wound: Free World Trust at para 51. K. The relevant date for claim construction is the date of publication, or the priority date if it is based on a foreign patent application:Whirlpool at para 56; Free World Trust at paras 31, 52-55.

(1) Claim Differentiation [109] The concept of claim differentiation is an assumption against redundancy between patent claims. The idea presumes that whenpatent claims are drafted, each claim has a different scope so as not to be redundant with another. In Camso Inc v Soucy International Inc,2019 FC 255 [Camso], Justice Locke explained claim differentiation as it applies to dependent claims as follows: [103] It is well understood that where one claim differs from another in only a single feature it is difficult to argue that thedifferent feature has not been made essential to the claim.

It follows from this that a dependent claim, which incorporates allof the elements of the independent claim on which it depends, will generally be construed more narrowly than theindependent claim: [Halford at para 90]. The limitations of the dependent claim are generally not read into the independentclaim: Halford at para 93. Moreover, the independent claim should not be construed in a manner that is inconsistent with thedependent claim: Halford at paras 91, 95. [Emphasis added] [110] This Court has explained claim differentiation as a "“contextual method of

interpretation”": Bauer Hockey Ltd v Sport Maska Inc(CCM Hockey), 2020 FC 624 at para 68 [Bauer 2020]. [111] The rebuttable presumption of claim differentiation can be applied to a claim and its dependent claim as well as betweenindependent claims: Camso at paras 103, 186-190. Claim differentiation can assist when determining if an element is essential. Forexample if one claim differs from another in only a single feature it is difficult to argue that the different feature is not essential to theclaim: Whirlpool at para 79. There is a presumption that if different words are used, they are used to distinguish features and not to

express synonyms: ABB Technology AG v Hyundai Heavy Industries Co, Ltd ., 2013 FC 947 at para 29 , aff’d 2015 FCA 181 .

(2) Use of File Histories [ 112 ] ‘File wrappers’ refer to evidence found within the prosecution history of a patent. File wrapper estoppel is a doctrine, often confusing in its application in Canada, which states that patentees may be precluded from recapturing ground conceded during negotiations with the Patent Office. The Supreme Court of Canada in Free World Trust , held that there is no doctrine of file wrapper estoppel in Canada and that the prosecution history pertaining to a patent is extrinsic evidence that generally cannot be considered in construing the patent. [ 113 ] That said, amendments to the Patent Act in 2018 introduced

Section 53.1 of the Act, which provided a statutory exception to this common law prohibition. It permits " “written communications” " between the patentee and the Patent Office during prosecution of the patent to be relied on in litigation to rebut representations made by the patentee during the action or proceeding about construction of a claim in the patent.

(3) The POSITA [ 114 ] In order to construe the claims in issue, the Court must first define the POSITA. The POSITA is a " “hypothetical person possessing the ordinary skill and knowledge of the particular art to which the invention relates, and a mind willing to understand a specification that is addressed to him” " : Free World Trust at para 44 . [ 115 ] The POSITA may be a team of people, rather than a single individual: Teva Canada Limited v Janssen Inc , 2018 FC 754 at para 66 [ Teva FC 2018 ], aff’d 2019 FCA 273 .

The POSITA has qualities of a competent technician, like deduction and dexterity, but lacks inventiveness and imagination: Whirlpool at para 74; Hospira at paras 79-80 . They are reasonably diligent in keeping up with advances in the field to which the patent relates: Whirlpool at para 74.

(4) CGK [ 116 ] The CGK is the knowledge generally known by the POSITA: Free World Trust at para 44 ; Apotex Inc v Sanofi-Synthelabo Canada Inc , 2008 SCC 61 at para 37 [Sanofi]; Bell Helicopter Textron Canada Limitée v Eurocopter, société par actions simplifiée , 2013 FCA 219 at para 65 [Bell Helicopter]; Mylan at para 24 . [ 117 ] It does not amount to all information in the public domain, but is not limited to information that is written down: Bell Helicopter at para 64; Ciba Specialty Chemicals Water Treatments Limited v SNF Inc , 2017 FCA 225 at para 37 [ Ciba ] ; Novopharm Limited v.

Janssen-Ortho Inc , 2007 FCA 217 at para 25 [ Novopharm ]. It has been described as the information that a POSITA would become aware of and accept as a " “good basis for further action” " : Mylan at para 24 . The CGK undergoes continuous evolution and growth: Novopharm at para 25 . [ 118 ] The relevant date for assessing the state of the CGK for the purposes of claim construction is the date of the publication and for the purposes of assessing obviousness the critical date is the claim date: Camso at para 135 .

(5) Purposive Construction and Distinguishing Essential Elements between Claim Construction and Invalidity [ 119 ] Claim elements are presumed to be essential and the party alleging otherwise has the onus to establish they are not: MediaTube Corp v Bell Canada, 2017 FC 6 at para 33 [ MediaTube ] . In reaching a purposive construction of the claims, the Court, with assistance of the skilled reader, will identify the particular words or phrases in the claims that describe what the inventor considered to be " “essential” " of their invention: Whirlpool at paras 45, 49.

If an element is essential and an alleged infringer successfully substitutes that element for another, it will have successfully evaded the patentee’s monopoly and there will be no patent infringement. [ 120 ] Throughout this action, a frequent issue that arose was confusion between essential elements as it pertains to claim construction and essential elements as they pertain to the overbreadth and utility analysis . Kobold’s approach to construction and several portions of the experts’ evidence on occasion confuse essential elements between these contexts.

Although it is understandable that experts are inclined to indicate that the claim will not operate, in my view it is inappropriate to discuss whether the claims are operable or overbroad when construing the claims.

This is because issues pertaining to whether the claims work relate to validity, which is an issue for consideration subsequent to construction: see Janssen-Ortho Inc v Canada (Minister of Health) , 2010 FC 42 . [ 121 ] Whether or not the invention practically works as claimed is only relevant insofar as construction requires a determination of whether a claim element is essential or non-essential: Free World Trust at para 55 .

A claimed element will be non-essential if its variant does not affect the working of the invention: Free World Trust at para 55 . [ 122 ] In its written closing submissions, Kobold sets out the law of overbreadth as follows: 389. There is no specific method for the assessment of overbreadth. Usually, a finding of overbreadth flows from the fact that an essential element of the invention is missing from the claims. However, the search for the missing essential element must not morph into an inquiry into the achievement of the invention’s objectives. 390.

The determining that a feature of an invention is essential is a distinct exercise for the purpose of overbreadth than for the purpose of claim construction. For overbreadth, the focus is not whether omitting or changing the feature avoids the Claim (as it is for claim construction), but rather whether that feature is so key to the invention described in the disclosure that a Claim that omits it encompasses embodiments that were not contemplated in the disclosure.

[ 123 ] Kobold recognizes, based on the Federal Court of Appeal’s guidance in Seedlings Life Science Ventures, LLC v Pfizer Canada ULC , 2021 FCA 154 at paragraphs 51-54 [ Seedlings FCA ], that ascertaining essential elements as they pertain to overbreadth is a distinct exercise from claim construction.

This same logic applies to the utility analysis: a party should not pre-emptively look to inutility and then conclude that an invention provides no utility as it is missing basic structural components when construing the claims. [ 124 ] Counsel for Kobold also explained the following in closing: Claim construction says is [ sic ] essential elements is about what needs to be there to infringe, what are they claiming, what do they think was the important part of their invention and what are they fencing off.

When you’re dealing with overbreadth, you’re looking at what was essential to the way the invention worked… Transcript, 1 March 2023 NCS Volume 23 [ 125 ] Despite the recognition of this distinction in the law, Kobold’s construction frequently conflates essential elements as they pertain to overbreadth with essential elements at the construction stage.

This confusion appears to stem from a failure to account for the purposive construction approach that Whirlpool establishes. [ 126 ] In Western Oilfield , the Court of Appeal explained the following: [129] The concept of Claim invalidity for overbreadth (or overclaiming) arises from the combination of the requirements that a patent specification (

i) correctly and fully describe the invention (see subsection 27(3) of the Patent Act ), and (ii) include “Claims defining distinctly and in explicit terms the subject matter of the invention for which an exclusive privilege or property is claimed” (see subsection 27(4)).

One may also consider overclaiming as a natural consequence of the bargain theory of patent law as described in Free World Trust , at paragraph 13 : “[i]n return for disclosure of the invention to the public, the inventor acquires for a limited time the exclusive right to exploit it.” If a patent claims more than it describes, or more than the inventor has made, it gives the patentee more than the bargain entitles them to. Such a Claim violates the bargain and is therefore invalid. [ 127 ] An example best demonstrates how and why Kobold conflates the essential element analysis.

In closing, Kobold’s counsel explained with respect to the 676 Patent, " “[y]ou can’t read the equalization valve into those earlier claims to save them. If the inventor wanted to include it, it needed to put the valve in those claims. It’s essential.” " [ 128 ] The jurisprudence is clear that the essential element determination asks distinct questions for the purposes of claim construction and for invalidity. At the construction stage, the Court is following Whirlpool ’s direction regarding substitutability in light of a purposive reading of the patent and its claims.

In contrast, when conducting an overbreadth analysis " “the focus is not whether omitting or changing the feature avoids the claim (as it is for claim construction), but rather whether that feature is so key to the invention described in the disclosure that a claim that omits it encompasses embodiments that were not contemplated in the disclosure” " : Seedlings FCA at para 54 .

In my view, at the overbreadth stage, the Court is asking whether the claim is missing a necessary element that goes to the very core of the described invention. [ 129 ] Therefore, if the invention requires a specific element in order to function, that element must be found within the claim, unless on a purposive construction the POSITA would understand that the element is inherently found within the claim. [ 130 ] It appears part of this conflation stems from the use of the word " “comprising,” " which shall be addressed in full later. [ 131 ] Finally, I note that the Court’s determination of essential elements is imperative and may be determinative of infringement findings.

Recent commentary by Ron Dimock has noted, " “[s]ince " " the decision in " " Free World Trust " " and the imposition of a one- size-fits-all purposive construction, patentees have been rightly concerned about ensuring that a claim is read as broadly as possible for infringement purposes while, at the same time, avoiding invalidity attacks” " : Ronald E Dimock et al, " “Protection Against Infringement of Patents in Canada” " (2021) 36 Canadian Intellectual Property Review at 58, online: https://ipic.ca/cipr/protection-against- infringement-of-patents-in-canada-2021-36-1.htm [Dimock 2021]; see also Les Laboratoires Servier v Apotex Inc , 2019 FC 616 at para 205 .

The Court is alive to the delicate balance that patent drafters seek in light of the one-size-fits-all construction for invalidity and infringement. [ 132 ] This balance is relevant to the essential elements analysis as it pertains to construction and invalidity. As highlighted by Dimock 2021, in Bombardier Recreational Products Inc v Arctic Cat , 2017 FC 207 [ Bombardier FC 2017 ], there was no doubt that an engine cradle was essential to the working of a functional snowmobile.

However, Dimock 2021 notes " “it is another matter entirely to say that the element is essential to the claims of the patent or the invention claimed.” " Therefore, how patent drafters choose to encapsulate a patent’s essential elements will be pertinent to the Court’s construction and infringement analyses. B. Validity

(1) Anticipation " [ " " 133 " " ] " In order to be patentable, an invention must be new in the sense that it has not been previously disclosed to the public. If an invention has previously been disclosed, then the invention has been anticipated by the prior disclosure. Subsection 28.2 of the Patent Act provides that claimed inventions must not be anticipated. " " [ 134 ] The Federal Court of Appeal jurisprudence directs that, together, sections 28.2, 28.3, and 58 of the Patent Act must be assessed on a claim-by-claim basis: Zero Spill Systems (Int’

l) Inc v Heide , 2015 FCA 115 at para 83 [ Zero Spill ]. [ 135 ] Pursuant to s 43(2) the starting presumption is that an issued patent is valid. The burden is on the party who claims invalidity based

on anticipation to prove its allegation on the balance of probabilities: Angelcare Canada Inc v Munchkin, Inc , 2022 FC 507 at para 287 [ Angelcare ]. [ 136 ] Anticipation is not to be construed from a mosaic of documents or disclosure but should instead be found in a single disclosure: Beloit Canada Ltd v Valmet Oy , [1986] FCJ No 87, 8 CPR (3d) 289 (CA) at 294 [ Beloit ] . [ 137 ] Sanofi is the leading Canadian authority on anticipation and obviousness, which adopted the two-part analysis of the House of Lords in Synthon BV v SmithKline Beecham plc , [2005] UKHL 59 (UK HL) [ Synthon ] : Zero Spill at para 85 .

At paragraphs 28 and 31- 37, Sanofi establishes two requirements to prove anticipation: disclosure and enablement by a single prior art.

Disclosure and enablement are different concepts, each of which has its own rules and must be satisfied to succeed in raising a defence of anticipation: Synthon at para 28. [ 138 ] The disclosure assessment requires " “the prior art document must disclose subject matter which, if performed, would necessarily result in infringement of the patent being challenged” " : Eli Lilly and Company v Apotex Inc , 2009 FC 991 at para 393 , aff’d 2010 FCA 240 . [ 139 ] In Sanofi, the Supreme Court explains that a prior publication must meet every essential element of the claim.

Relying on Synthon , Justice Rothstein commented: [25] …When considering the role of the person skilled in the art in respect of disclosure, the skilled person is “taken to be trying to understand what the author of the description [in the prior patent] meant” (para. 32). At this stage, there is no room for trial and error or experimentation by the skilled person. He is simply reading the prior patent for the purposes of understanding it. [ 140 ] Enablement asks " “whether a [POSITA] would have been able to perform the invention” " : Eli Lilly at para 241; Sanofi at para 26.

Once the prior art establishes the disclosure requirement, it is assumed that the person skilled in the art would be willing to make trial and error assumptions: Sanofi at para 27. [ 141 ] Hospira at paragraph 74 makes clear that " “[w]hat must be enabled are the essential elements of claimed invention in issue, not the particular experiments disclosed in the … patent.” " [ 142 ] When considering novelty, the Court must properly construe the claim and its essential elements: Eli Lilly at para 397.

If the single prior art reference fails to disclose or enable the essential elements of the claim, the patent claim is not anticipated: Apotex Inc v Shire LLC , 2021 FCA 52 at para 36 [ Shire ]. [ 143 ] In Sanofi , the Supreme Court outlined a non-exhaustive list of factors to be considered in the enablement analysis: 1. Enablement is to be assessed having regard to the prior patent as a whole including the specification and the claims… 2. The skilled person may use his or her CGK to supplement information contained in the prior patent.

CGK means knowledge generally known by persons skilled in the relevant art at the relevant time. 3. The prior patent must provide enough information to allow the subsequently claimed invention to be performed without undue burden. When considering whether there is undue burden, the nature of the invention must be taken into account… If inventive steps are required, the prior art will not be considered as enabling.

However, routine trials are acceptable and would not be considered undue burden… experiments or trials and errors are not to be prolonged even in the fields of technology in which trials and experiments are generally carried out… 4. Obvious errors or omissions in the prior patent will not prevent enablement if reasonable skill and knowledge in the art could readily correct the error or find what was omitted. Sanofi at para 37

(2) Obviousness [ 144 ] The test for obviousness comes from s 28.3 of the Patent Act . [ 145 ] Obviousness may be raised as a defence where the claimed subject matter is obvious in light of the " “State of the Art” " : Angelcare at para 360 . The Court is not concerned with novelty as a stand-alone ground of invalidity but " “if a patent does not contain something new, there can be no invention” " : Ciba at para 48 . [ 146 ] The statutory requirement that an invention not be obvious is set out in

section 28.3 of the Patent Act. The Supreme Court set out the four-step approach to this obviousness analysis in Sanofi at paragraph 67: A . Identify: i . The notional " “person skilled in the art” " ; ii . The relevant CGK of that person; B . Identify the inventive concept of the claim in question or if that cannot readily be done, construe it; C . Identify what, if any, differences exist between the matter cited as forming part of the " “state of the art” " and the inventive concept of the claim or the claim as construed;

D . Viewed without any knowledge of the alleged invention as claimed, do those differences constitute steps which would have been obvious to the person skilled in the art or do they require any degree of invention? [ 147 ] The obviousness inquiry is flexible, contextual, expansive, and fact-driven: Apotex Inc v Pfizer Canada Inc , 2019 FCA 16 at paras 39 , 41.

It should be undertaken on a claim-by-claim basis: AFD Petroleum Ltd v Frac Shack Inc , 2018 FCA 140 at para 47 ; Shire at paras 26, 55 ; Zero Spill at paras 83, 95 . [ 148 ] The test should be applied to the combination of the elements of the invention as a whole rather than each element of the invention and a segmented approach to the analysis should be avoided: Teva FC 2018 ; Amgen Inc v Pfizer Canada ULC, 2020 FCA 188 at paras 8- 9 . (

a) The Inventive Concept [ 149 ] The inquiry into the inventive concept follows from and is informed by the claim construction, but is a discrete exercise: Shire at paras 68, 75, 93 ; Tearlab at para 76 . The focus should be on the claims of the patent: Tearlab at para 78 ; Ciba at paras 72-75, 77 ; Shire at para 68 .

The inventive concept of each claim must be determined rather than the inventive concept of the patent as a whole, although the claims may be linked by an overarching inventive concept, which is generally found in the independent claims: Shire at paras 69, 86- 90, 100 . [ 150 ] If the inventive concept is not readily discernable from the claims themselves, recourse may be had to the specification to determine it: Sanofi at para 77; Bell Helicopter at para 124; Shire at paras 68 and 74 .

The inventive concept of the claims should not be restricted by the content of one specific embodiment: Tearlab at para 79 . [ 151 ] The Federal Court of Appeal has generally held that it is not materially different from determining the " “solution taught by the patent,” " and has suggested that its use as an analytical tool should be limited: Tearlab at paras 76-77 ; Ciba at paras 76-77 ; Bristol-Myers Squibb Canada Co v Teva Canada Limited, 2017 FCA 76 at paras 64-69 , 75 [ BMS ]. (

b) Differences from the Prior Art [ 152 ] The third step of the Sanofi test requires a comparison between the inventive concept and the prior art: Ciba at para 59 . The prior art is broader than the concept of the CGK. It can comprise any publicly available teaching, however obscure or not generally accepted: Mylan at para 23 ; Ciba at paras 47, 50-59 . The prior art is not limited to that which would have been uncovered by the POSITA conducting a reasonably diligent search: Hospira at paras 83-87 .

The cumulative effect of multiple pieces of the prior art should be considered in the obviousness analysis: Tearlab at paras 73, 81 ; Ciba at para 60 . [ 153 ] However, obviousness is not determined by reference to the prior art at large. The party alleging obviousness must point to one or more elements of the prior art, or a combination of pieces of prior art, which make the impugned invention obvious: Ciba at para 60 .

The differences between the inventive concept and the prior art should be assessed as of the claim date: Ciba at paras 57-58 . [ 154 ] Justice Manson has relied on Sanofi to state that the prior art should be given the same purposive construction as claims, from the perspective of the POSITA with a mind willing to understand: Biogen Canada Inc v Taro Pharmaceuticals Inc , 2020 FC 621 at para 170 [ Biogen FC ]. (

c) Obvious to Try [ 155 ] At step four of the test in Sanofi , the question is whether the difference between the inventive concept and the prior art can be bridged by the POSITA using their CGK: Ciba at para 68 . This question is assessed objectively and purposively, with regard to the problem addressed by the patent: Shire at para 103 .

When assessing this question it is important to guard against the application of hindsight to bridge the gap: Bridgeview Manufacturing Inc v 931409 Alberta Ltd (Central Alberta Hay Centre) , 2010 FCA 188 at para 50 [ Bridgeview ]. [ 156 ] At paragraph 68 of Sanofi , the Supreme Court held that the " “obvious to try” " test may be appropriate in circumstances where advances are often obtained through experimentation: see also Shire at para 104 ; Hospira at para 88 . [ 157 ] If an " “obvious to try” " test is warranted, the following factors should be taken into consideration at the fourth step of the obviousness inquiry: Sanofi at para 69.

As with anticipation, this list is not exhaustive. The factors will apply in accordance with the evidence in each case: A . Is it more or less self-evident that what is being tried ought to work? Are there a finite number of identified predictable solutions known to persons skilled in the art? B . What is the extent, nature and amount of effort required to achieve the invention? Are routine trials carried out or is the experimentation prolonged and arduous, such that the trials would not be considered routine? C .

Is there a motive provided in the prior art to find the solution the patent addresses? [ 158 ] Another important factor may arise from considering the actual course of conduct that culminated in the making of the invention. It is true that obviousness is largely concerned with how a skilled worker would have acted in the light of the prior art.

However, this is no reason to exclude evidence of the history of the invention, particularly where the knowledge of those involved in finding the invention is no lower than what would be expected of the skilled person. [ 159 ] Not every case requires the " “obvious to try” " test, and it should be applied contextually: BMS at paras 59-62. To satisfy the test, there must be evidence to show on a balance of probabilities that it was more or less self-evident to try to obtain the invention. The mere

possibility that something might turn up is not sufficient: Sanofi at para 66; Hospira at para 88 ; Shire at para 105 . It is not a requirement that what is being tried ought to work, although that is a factor to be considered: Hospira at para 90 . The test does not broaden the scope of the obviousness inquiry into an invention-overall analysis: Shire at para 105 . [ 160 ] In considering the first factor of the " “obvious to try test,” " it is not self-evident that what is being tried must work just because the methods used to obtain the invention were known.

To establish obviousness, it would need to be self-evident to the POSITA that the methods should be applied in light of the prior art and the CGK: Sanofi at para 85. [ 161 ] The Federal Court of Appeal noted that the actual course of conduct leading to the invention is essentially an elaboration of the second factor: BMS at para 44. In considering the actual course of conduct of the inventor, the invention being reached quickly, easily, directly, and relatively inexpensively may suggest a finding of obviousness unless the skill of the inventor was above that of the POSITA.

By contrast, the investment of extensive time, money, and effort may suggest an invention was not obvious, particularly if the knowledge of the inventor exceeds that of the POSITA: Sanofi at para 71. [ 162 ] When considering the third factor, the prior art and CGK should provide the POSITA a specific motivation to pursue the invention: Sanofi at para 90.

(3) Overbreadth (

a) Generally [ 163 ] In AstraZeneca v Apotex Inc , 2017 SCC 36 at paras 45-46 [ AstraZeneca ], the Supreme Court of Canada held that " “overpromising is a mischief” " and as such " “[a]n overly broad Claim may be declared invalid.” " [ 164 ] The specification requirements in the Patent Act, subsection 27(3) provide the legislative framework for overbreadth considerations. The scope of a monopoly " “must be commensurate” " with the invention: Seedlings Life Science Ventures, LLC v Pfizer Canada ULC , 2020 FC 1 at para 167 [ Seedlings FC 1 ].

Otherwise, inventors obtain something more than what they have invented and deserve. [ 165 ] " “A claim is overbroad where it fails to claim an essential element of the invention made or disclosed” " : MIPS AB v Bauer Hockey Ltd , 2018 FC 485 at para 247 [ Bauer 2018 ]. In Bauer 2018 , Associate Chief Justice Gagné explained the overbreadth analysis as follows: [245] The Claims of a patent may not exceed the invention made by the inventor(s), or the invention described in the specification. The nature of the invention made is a question of fact.

What was disclosed is a question of law turning on a construction of the disclosure and a determination of what it says. In both cases, a comparison must be made with the Claims of the patent to determine if the breadth of the Claims exceeds either what the inventor(

s) actually did or what the disclosure actually says ( Pfizer Canada Inc v Canada (Health), 2008 FC 11 at paras 45-46 ). [ 166 ] In Western Oilfield at paragraphs 128-130 , the Court of Appeal explains that there are two ways a patent claim can fail for overbreadth: first, the patent can be broader than the invention disclosed in the specification; or second, the patent can be broader than the invention made by the inventor. [ 167 ] Although there is no specific analysis that a court must follow, generally a claim will be overbroad where it fails to effectively claim an essential element of the invention made or disclosed.

However, this Court has warned against the analysis morphing into an inquiry into the achievement of the invention’s objectives: Seedlings FC 1 at para 173. In Seedlings FCA , the Court of Appeal explained the essential element consideration as follows: [54] It is apparent that determining that a feature of an invention is essential is a distinct exercise for the purpose of overbreadth than for the purpose of claim construction.

For overbreadth, the focus is not whether omitting or changing the feature avoids the Claim (as it is for claim construction), but rather whether that feature is so key to the invention described in the disclosure that a Claim that omits it encompasses embodiments that were not contemplated in the disclosure. [Emphasis added and internal citations omitted] (

b) Overlap with Other Grounds of Invalidity [ 168 ] All parties have noted that while invalidity grounds such as overbreadth can share an overlap with other grounds of invalidity, it is its own distinct ground of invalidity that should be considered separately: Western Oilfield at para 130 . [ 169 ] As a preliminary matter, NCS has raised concerns in relation to Kobold’s utility and overbreadth arguments.

NCS alleges that Kobold has, in respect of the 652 Patent, conflated the overbreadth and inutility analysis by presenting indistinguishable arguments respecting both issues. [ 170 ] Counsel for Kobold explained that their experts’ approach to overbreadth and utility overlaps because the factual matrix on these grounds are the same. [ 171 ] According to Western Oilfield the Court should proceed with the overbreadth analysis separately from other grounds of invalidity: Western Oilfield at para 130 ; see for example Angelcare at para 449 . [ 172 ] Accordingly, the overbreadth and utility concerns will be determined separately, irrespective of whether the factual matrix is similar.

(

c) A Comment on Utility and Overbreadth [173] As previously noted, overbreadth is frequently raised alongside other invalidity grounds: Seedlings FCA at para 52.

However, theFederal Court has made clear that overbreadth can exist as an independent ground of validity: Seedlings FCA at para 50. [174] Kobold combines its arguments on utility and overbreadth, which although acceptable, has led to confusion here. [175] Kobold argues that the 704 Patent describes a "“very specific valve arrangement to shift a tool between perforating and fracturingmodes.”" In Kobold’s view, there are three main components at the core of the fracturing valve described in the 704 Patent – a tubularwith an integral wedge structure, a lower seal, and an equalization plug.

Kobold’s position can be summarized as follows: the 704 PatentClaims have no ability to fracture, despite the claims being directed at a fracturing valve. Specifically, Kobold alleges the 704 Patent isoverbroad on the following grounds: A. Claims 1-10, 11-15, and 16-23 do not include the essential components of a wedge, lower seal, and an equalization plug (i.e. fail toinclude the structural components that are essential of a fracturing valve); B. Claims 28-30 fail to include the structural components necessary to perform the claimed methods; C.

Claims 1-6, 8-23, and 28-30 fail to include an alignment mechanism; D. Claims 28-30 fail to specify how the mandrel is held stationary. [176] In addition, Kobold also alleges Claim 10 is invalid for inutility as it does not direct the skilled person to an operable embodiment. [177] Though the argument is not clear, I infer that its counsel and experts

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