2016 FC, 2016 FC 1279

Date: 20161117 Dockets: T-1741-08 T-1946-09 Citation: 2016 FC 1279 Ottawa, Ontario, November 17, 2016 PRESENT: The Honourable Mr. Justice Manson BETWEEN: EXCALIBRE OIL TOOLS LTD, EXCALIBRE DOWNHOLE TOOLS LTD, KUDU INDUSTRIES INC, CARDER INVESTMENTS LP, CARDER MANAGEMENT LTD AND LOGAN COMPLETION SYSTEMS INC Plaintiffs and ADVANTAGE PRODUCTS INC, LYNNE P. TESSIER, JAMES L. WEBER AND JOHN P. DOYLE Defendants Docket: T-1946-09 AND BETWEEN: ADVANTAGE PRODUCTS INC, LYNNE P. TESSIER, JAMES L. WEBER AND JOHN P.

DOYLE Plaintiffs and EXCALIBRE OIL TOOLS LTD, EXCALIBRE DOWNHOLE TOOLS LTD, KUDU INDUSTRIES INC, CARDER INVESTMENTS LP, CARDER MANAGEMENT LTD AND LOGAN COMPLETION SYSTEMS INC Defendants JUDGMENT AND REASONS Table of contents I. The Pleadings . 4 II.

Summary of Results in these Actions . 8 A. Ownership of the Patents . 8 B. The ‘467 Patent . 9 C. The ‘734 Patent . 9 D. The ‘026 Patent . 9 E.

Section 7(

a) of the Trade-marks Act . 9 F. Remedies . 9 III. The Parties . 10 A. Background . 10 B. The Technology . 15

(1) Oil Production . 15

(2) Torque Anchors . 17 IV. The API Patents . 18 A. Canadian Patent No. 2,264,467 (the ‘467, or Jaw Patent) . 18 B. Canadian Patent No. 2,373,734 (the ‘734, or Spring Patent) . 21 C. Canadian Patent No. 2,386,026 (the ‘026, or Stop Patent) . 22 V. API Fact Witness Evidence . 24 A. Lynn Tessier . 24 B. John Doyle . 27 C. Kerry Van Metre . 27

D. Kelly McGowan . 28 E. Jack Bootsman . 29 VI. Excalibre Fact Witness Evidence . 30 A. Michael Burton . 30 B. Colin Aldridge . 31 C. Kevin Kelm .. 32 D. Edward Moore . 33 E. Dan Echino . 35 F. James Esposito . 36 G. Leanne Wichmann Cohen . 37 H. Lisa Redhead . 38 VII. API Expert Witness, Dr. Robert Sorem .. 40 VIII. Excalibre Expert Witnesses . 41 A. Dr. Wooley . 41 B. Mr. Skoczylas . 45 IX. Claim Construction . 46 A. Relevant Dates . 46 B. The Person Skilled in the Art (POSITA) . 48 C. Common General Knowledge . 49

(1) Relevant dates for considering common general knowledge as it relates to anticipation and obviousness – the claim date (priority documents) . 49

(2) Common General Knowledge . 50

(3) Prior Art . 52 D. Claim Terms Needing Construction . 54

(1) Tubular . 54

(2) Housing . 55

(3) Casing-engaging wall 59 (4) “First Stop” and “Second Stop” . 61 X. Ownership of the API Patents . 64 XI. The Tests of the TorqStopper TM Torque Anchors . 64 A. Excalibre Parties testing at the C-FER Laboratories on July 30, 2014 and July 31, 2014 . 65 B. Testing at the API Facilities on January 12, 2015 . 68 C. Demonstrative Testing at C-FER on January 13, 2015 . 70 XII. The Law – Principles of Utility, Anticipation, Obviousness, and Infringement . 71 A. Utility . 71 B. Anticipation . 72 C. Obviousness . 73 D. Infringement . 75 XIII. The ‘467 Patent . 77

A. Utility . 77 B. Infringement . 81 XIV. The ‘734 Patent . 85 A. Anticipation – ‘843 Burton Patent . 85 B. Anticipation – Prior Use . 86 C. Obviousness . 86 XV. The ‘026 Patent . 91 A. Utility . 91 B. Anticipation . 94 C. Obviousness . 94 D. Infringement . 96 XVI.

Section 7(

a) of the Trade-marks Act . 99 XVII. Remedies . 105 XVIII. Costs . 105 I.

The Pleadings [ 1 ] Two actions are brought before the Court concerning the validity and/or infringement of a number of claims in three Canadian Patents, which are owned by Lynn Tessier (“Tessier”), James Weber (“Weber”), and John Doyle (“Doyle”): Canadian Patent No. 2,264,467 (the “‘467 Patent”); Canadian Patent No. 2,373,734 (the “‘734 Patent”); and Canadian Patent No. 2,386,026 (the “‘026 Patent”) (collectively, the “API Patents”). [ 2 ] The plaintiffs in the patent impeachment action (T-1741-08), who are the defendants in the infringement action (T-1946-09), are the companies Excalibre Oil Tools Ltd. (“Excalibre Oil”), Excalibre Downhole Tools Ltd. (“Excalibre Downhole”), Kudu Industries Inc. (“Kudu”), Carder Investments LP and Carder Management Ltd. (together, “Carder”), and Logan Completion Systems Inc. (“Logan”) (collectively, the “Excalibre Parties”). [ 3 ] The defendants in the patent impeachment action, and plaintiffs in the patent infringement action, are the companies Advantage Products Inc. (“API”) and MSI Machineering Solutions Inc. (“MSI Offshore”) , and the individuals Weber, Tessier, and Doyle (collectively, the “API Parties”).

Former defendant to the patent impeachment action, and co-plaintiff in the patent infringement action, is the former company MSI Machineering Solutions Inc. (“MSI Alberta). [ 4 ] In the first action, the Excalibre Parties assert that each of the API Patents is invalid: the ‘467 Patent because of inutility; the ‘734 Patent because of anticipation or obviousness; and the ‘026 Patent because of anticipation, obviousness and because claim 1 fails to recite a means to actuate the jaw and is, therefore, broader than the invention made and is inoperable. There is also a claim under

section 7(

a) of the Trade-marks Act , RSC, 1985, c T-13 , wherein the Excalibre Parties assert that the API Parties damaged the Excalibre Parties’ business relations through false and misleading statements. [ 5 ] In the second action, the API Parties against the Excalibre Parties assert that various versions of a torque anchor sold by the Excalibre Parties (the “CTA Torque Anchor”) infringe the API Patents. [ 6 ] The API Patents all relate to a torque anchor tool designed to prevent the rotation of a rotary pump stator (or downhole tool) that is part of a Progressing Cavity Pump system (“PC Pump”) designed to extract oil from subterranean reservoirs (the “TorqStopper TM ” torque anchors). [ 7 ] The following issues are raised in the two actions: 1 .

Ownership of the ‘467 and ‘026 Patents a. What is the legal effect of the assignments relating to the ‘467 and ‘026 Patents? 2 . Patent Infringement and Validity a. The ‘467 Patent: b. What is the proper construction of claims 1 to 17 of the ‘467 Patent? c. Is the tool recited in claims 1 to 17 of the ‘467 Patent inoperable and lacking utility, in that each of claims 1 to 17 fails to recite an essential and necessary feature for the tool to operate, namely: i. each of claims 1 to 17 fails to recite a spring to bias the jaw outwardly?; and

ii. each of claims 1 to 17 is inoperable or lacks utility in that each of the claims fails to recite a stop to limit rotation or movement of the jaw? d. Do any of the versions of the CTA Torque Anchor (i.e., versions 1 to 6, and the offset version) infringe claims 1 to 9 and 12 to 17 of the ‘467 Patent? e. If infringed, who of the Excalibre Parties is liable for infringement of the asserted claims of the ‘467 Patent? b. The ‘734 Patent: f. Are claims 1 to 19 anticipated by US Patent 4,739,834 (the “‘843 Burton Patent”)? g.

Are claims 1 to 19 obvious in view of US Patent 4,699,224 (the “‘224 Burton Patent”); the ‘843 Burton Patent; US Patent 6,037,693 (the “‘693 Aldridge Patent); and/or the ‘467 Patent and prior public use(

s) of tools embodying the ‘467 patented invention? c. The ‘026 Patent: h. Is claim 1 broader than the invention made, inoperable and lacking utility, in that claim 1 fails to recite the essential and necessary feature for the tool to operate, namely that the jaw be outwardly biased by means of a spring? i. Are claims 1 to 7 anticipated by the ‘843 Burton Patent? j. Are claims 1 to 7 obvious in view of the ‘224 Burton Patent, the ‘834 Burton Patent, the ‘693 Aldridge Patent, and/or the ‘467 Patent and prior public use(

s) of tools embodying the ‘467 patented invention? k. Do any of the versions of the CTA Torque Anchor (i.e., versions 1 to 6, and the offset version) infringe claims 1 or 2 of the ‘026 Patent? l. If infringed, which of the versions and models of the CTA Torque Anchor infringe either claim 1 or 2? m. If infringed, who of the Excalibre Parties is liable for infringement of claim 1 or 2 of the ‘026 Patent? d. False and Misleading Statements n.

Did API or MSI Offshore through their solicitor make false and misleading statements, in letters referenced at paragraphs 25 to 27 of the Further Amended Statement of Claim in Court File No. T-1741-08, which tended to discredit the business goods or services of the Excalibre Parties, contrary to subsection 7(

a) of the Trade-marks Act ? e. Remedies o. Are the API Parties entitled to injunctive relief, declaratory relief, an Order for the delivery up of infringing products, and/or an election of profits from the Excalibre Parties? p. Are the Excalibre Parties entitled to a permanent injunction restraining each of the API Parties from making representations to third parties, including customers and potential customers of the Excalibre Parties, that any of the Excalibre Parties’ CTA Torque Anchors infringe the claims of the API Patents? q. Are the Excalibre Parties entitled to declaratory relief against the API Parties? II.

Summary of Results in these Actions A. Ownership of the Patents [ 8 ] The API Patents were validly assigned to Weber, Tessier, and Doyle. B. The ‘467 Patent [ 9 ] The claims of the ‘467 Patent are valid; however, none of asserted claims 1 to 9 or 12 to 17 are infringed by any version of the CTA Torque Anchors. C. The ‘734 Patent [ 10 ] The ‘734 Patent is invalid because claims 1 to 19 are obvious. D. The ‘026 Patent [ 11 ] Claim 1 of the ‘026 Patent is invalid for inutility, because claim 1 is broader than any invention made or disclosed, and lacks utility. Claims 2 to 7 are valid; however, neither asserted claim 1 nor claim 2 is infringed by any version of the CTA Torque Anchors.

E.

Section 7(

a) of the Trade-marks Act [ 12 ] API made false or misleading statements tending to discredit the business, goods, or services of the Excalibre Parties, which caused damage to the business of the Excalibre Parties, contrary to

section 7(

a) of the Trade-marks Act . F. Remedies [ 13 ] Given the findings on validity and infringement, the API Parties are not entitled to any of the relief sought. The Excalibre Parties are entitled to damages against API resulting from the misleading statements made, pursuant to

section 7(

a) of the Trade-marks Act, which are to be determined in a reference after trial. III. The Parties A. Background [ 14 ] Excalibre Oil was an Alberta-incorporated company, who in the past distributed and sold CTA Torque Anchors (CTA stands for “Centralized Torque Anchor”). These CTA Torque Anchors were manufactured by the company Tebo Industries Ltd. (“Tebo”). Both Excalibre Oil and Tebo have been struck from the Alberta Corporate Register: Excalibre Oil on August 7, 2009; and Tebo on May 2, 2012.

Presently, the business of both companies is being carried on by Excalibre Downhole. [ 15 ] Excalibre Downhole is a company incorporated in Alberta, with an office at 5007-23 Avenue, S.E., Calgary, Alberta. From 2009 to 2012, Excalibre Downhole sold the CTA Torque Anchors manufactured by Tebo. Excalibre Downhole currently manufactures and sells, among other products, these CTA Torque Anchors. [ 16 ] Kudu is a company incorporated in Alberta that manufactures and supplies artificial lift technologies, including PC Pumps.

Since July 2007, Kudu has purchased CTA Torque Anchors from Excalibre Oil and, later, Excalibre Downhole, and sold them to the oil well servicing and operating industry. [ 17 ] Carder Investments LP, formerly known as Tanroc Equipment LP, is a registered limited partnership in Alberta. Carder Management Ltd., formerly known as Tanroc Management Ltd., is a corporation incorporated in Alberta, which was at all material times the general partner of Carder Investments LP. Carder is in the business of selling downhole products to the oil well servicing and operating industry, particularly in Western Canada.

Since July 2007, Carder has purchased CTA Torque Anchors from Excalibre Oil and, later, Excalibre Downhole, and sold these devices to the oil well servicing and operating industry. [ 18 ] Logan, formerly known as Source Energy Tool Services Inc., is a company incorporated in Alberta that is in the business of selling downhole products to the oil well servicing and operating industry, particularly in Western Canada. In February 2011, Source Energy Tool Services Inc. amalgamated with Complete Oil Tools Inc., and began operating under the name Logan.

Since July 2007, Logan has purchased CTA Torque Anchors from Excalibre Oil and, later, Excalibre Downhole, and sold these devices to the oil well servicing and operating industry. [ 19 ] API is, and was at all material times, an existing company incorporated in Alberta. API designs and manufactures oilfield tools, including tools designed for PC Pumps. API sells torque anchors, in competition with the CTA Torque Anchor, under the trademark TorqStopper TM . API is, and has been at all material times, the Canadian licensee of the API Patents.

From December 31, 2002 to January 16, 2014, API held a sublicense to the API Patents from MSI Alberta, who was the licensee of MSI Offshore. Since January 16, 2014, API has been licensed to make, use, and sell the subject matter of the API Patents, pursuant to a license granted by the current owners Weber, Tessier, and Doyle. [ 20 ] Weber is listed owner of the API Patents and is, and was at all material times, a director and officer of API. [ 21 ] Tessier is listed owner of the API Patents and is, and was at all material times, a director and a shareholder of API. [ 22 ] Doyle is listed owner of the API Patents.

Doyle was at one time an employee and part of management at API. [ 23 ] MSI Alberta was a company incorporated in Alberta. It was struck from the Alberta Corporate Register on June 7, 2013. MSI Offshore is a company incorporated under the laws of the Turks and Caicos, a British Overseas Territory in the Caribbean, having a registered office c/o the Hallmark Trust Company, Tropicana Plaza, Leeward Hwy, P.O. Box 656, Providenciales, Turks and Caicos, British West Indies.

Prior to January 16, 2014, when MSI Offshore assigned the API Patents to Weber, Tessier, and Doyle, MSI Offshore was recorded by the CIPO as the owner of the API Patents. [ 24 ] The Excalibre Parties manufacture and/or sell CTA Torque Anchors. In July 2007, Tebo created Interim CTA Torque Anchor versions 1A and 1B. Excalibre Oil sold Interim CTA Torque Anchors from July 2007 to approximately April 2008. In or about April 2008, Excalibre Downhole created CTA Torque Anchors which were available in versions 2A, 2B, 3, 4, 5, and 6.

Excalibre Downhole also created a single “offset” version of the CTA Torque Anchor, at the request of Kudu, for a specific Kudu customer (the “offset CTA Torque Anchor”). [ 25 ] The different versions of the CTA Torque Anchor can be described as follows: • Interim CTA Torque Anchor version 1A – a torque anchor with a tubular housing, having a single moveable slip and two rigid slips, spaced equidistant around the housing, and possessing “milled out” portions on both side of the moveable slip and a pad for stopping over-rotation of the moveable slip.

• Interim CTA Torque Anchor version 1B – a torque anchor similar to Interim CTA Torque Anchor version 1A, but possessing a pair of moveable slips placed vertically one above the other along a longitudinal axis of the torque anchor. • CTA Torque Anchor version 2A – a torque anchor with a tubular housing, having a single moveable slip and two rigid slips, spaced equidistant around the housing, and possessing a singled “milled out” portion on one side of the moveable slip.

The unmilled side of the moveable slip prevents over-rotation. • CTA Torque Anchor version 2B – a torque anchor similar to CTA Torque Anchor version 2A, but possessing a pair of moveable slips placed vertically one above the other along a longitudinal axis of the torque anchor. • Offset CTA Torque Anchor – a modified version 2A torque anchor, wherein the rigid slips are shorter than the moveable slip, causing the torque anchor to be decentralized in the casing. • CTA Torque Anchor version 3 – a torque anchor with a tubular housing, having a single moveable slip and two rigid slips, spaced equidistant around the housing, where the moveable slip is mounted upon a mount block, which prevents the over-rotation of the moveable slip. • CTA Torque Anchor version 4 – a torque anchor similar to CTA Torque Anchor version 3, but where the rigid slips include multiple holes such that the slips can be attached at different depths in the tool housing. • CTA Torque Anchor version 5 – a torque anchor similar to CTA Torque Anchor version 4, but where the recesses for the rigid slips include steps to afford deeper threads for increased fastening strength. • CTA Torque Anchor version 6 – a torque anchor similar to CTA Torque Anchor version 5, but where the moveable jaw has three teeth, rather than two. [ 26 ] API has manufactured and sold different models of the TorqStopper TM torque anchors: the “T” series model, since on or about April 1999, which is an embodiment of the ‘467 Patent; the TS model, since on or about March 2000; the TN model, since on or about June 2001, which has an internal torsional spring and is an embodiment of the ‘734 Patent; and the TX model, since on or about March 2002, which has a stop feature and is an embodiment of the ‘026 Patent. [ 27 ] In or about September 2006, Tebo (now Excalibre Downhole) created a single prototype torque anchor (the “Prototype”).

On September 14, 2006, a third party distributor, Terra Alta, displayed the Prototype at the 13th Heavy Oil Symposium in Lloydminster Alberta. Although, the Prototype was never sold, it came to the attention of the API Parties. [ 28 ] From July 2007 to about April 2008, Excalibre Oil and Excalibre Downhole sold approximately 320 Interim CTA Torque Anchors to Kudu, Tanroc (now Carder), and Source (now Logan).

These Interim CTA Torque Anchors were then sold to various oil well completion companies in Western Canada, including Husky Energy Inc. (“Husky”) and Bronco Energy Inc. (“Bronco”). [ 29 ] Between January and May of 2008, a number of customers and former customers of Kudu, Tanroc (now Carder), and Source (now Logan), including Husky and Bronco, received letters from Mr. Sean Goodwin (the “Goodwin Letters”), an Alberta lawyer representing API and MSI Offshore.

In the letters, Goodwin expressly stated that “API holds three Canadian patents for anti-rotation tools implementing one jaw” ; “API holds the first patent position in the world for single jaw anti-rotation tools which utilize a pivoting jaw for engaging the casing, jamming the tool against the casing and preventing rotation of the tool and equipment secured thereto” ; and that API is the “sole authorized source [in Canada] of single jaw torque anchors utilizing a single jaw projecting from the tool's circumference” .

Further, Goodwin alleged that should such customers purchase CTA Torque Anchors, they would be infringing API’s patent rights. B. The Technology [ 30 ] The Excalibre Parties and the API Parties provided an agreed joint technical and background

summary for understanding the API Patents, containing information which the parties submit would have been known by a person of ordinary skill in the art (“POSITA”) at the relevant times.

(1) Oil Production [ 31 ] Oil wells are borings into the subterranean reservoir that are designed to bring oil hydrocarbons to the surface, which often have a metal bore/casing, referred to as the wellbore casing, or casing, inside which production tubing moves the produced oil to the surface. If a reservoir lacks the pressure to force the oil to the surface, a pumping mechanism is deployed. One example of a pump used to produce oil is a PC Pump. [ 32 ] A PC Pump consists of a helical rotor that turns within a double helix channel formed in an elastomeric stator, which is bound inside a steel tube.

In an oil well application, a PC Pump is located deep down at the bottom of the well (“downhole”), and is attached to a drive unit mounted on a frame at the surface. The drive unit rotates a polished shaft, which is connected to a series of linked rods (the “rod string”) that extend downhole and drive the PC Pump. [ 33 ] The PC Pump is a positive displacement pump. The rotor is coupled to and driven by the bottom of the rod string. A tube surrounds the rod string (the “tubing string”), and as the rotor is rotated, oil is pushed up through the PC Pump and tubing string to the surface of the well.

At the surface, the tubing string is capped and sealed, and the oil is directed down a flowline.

Standard PC Pump System

(2) Torque Anchors [ 34 ] Most PC Pump systems operate such that the rotor turns in a clockwise direction. This rotation can cause vibration and reactive torque. The reactive torque (i.e., friction) in the system can cause the production tubing connections to become unthreaded. This can result in the loss of the PC Pump or the tubing string into the reservoir. [ 35 ] Torque anchors (also known as anti-rotation devices or “no-turn” tools) are frequently used in PC Pump systems to prevent the unscrewing of the tubing string above the PC Pump.

When a torque anchor is attached to the tubing string, above or below the PC Pump, the reactive torque that the PC Pump imparts on the production tubing is neutralized, and transferred to the wellbore casing, which is cemented within the wellbore. A torque anchor thereby prevents the pump stator and the tubing string from rotating in a counter-clockwise direction when the PC Pump is actuated, which prevents the unscrewing of the tubing string above the PC Pump. [ 36 ] Both Parties agree that examples of prior art in the field of torque anchors include, but are not limited to, the torque anchors disclosed in:

(1) Canadian Patent No. 1,274,470 (the “‘470 Patent”), which uses a cam-actuation system to actuate movable cam slips into a casing-engaging position; and

(2) U.S. Patent No. 5,275,239 (the “‘239 Patent”, an embodiment of which is the “Obrejanu Tool”), which uses the rotation of an anchoring member to cause movable anchoring members to bite into the well casing, locking against further rotation. IV. The API Patents A. Canadian Patent No. 2,264,467 (the ‘467, or Jaw Patent) [ 37 ] The filing date for the ‘467 Patent is March 5, 1999. It was published on September 5, 2000, and issued on February 26, 2002.

The ‘467 Patent was invented by Tessier. [ 38 ] A statement of the invention is set out on page 2 of the ‘467 Patent specification: A simplified anti-rotation tool is provided, having only one moving part but which both prevents rotation and stabilizes that to which it is connected. In simplistic terms, the tool connects to a PC Pump or other downhole tool and upon rotation in one direction, causes a jaw to pivot radially outwardly from the tool housing to engage the casing wall and to arrest tool rotation.

This action causes the tool housing to move oppositely and come to rest against the casing opposing the jaw. The tool housing and the downhole tool are thereby restrained and stabilized by the casing wall.

In a broad apparatus aspect, an anti-rotation tool comprises: a tubular housing having a bore and having at least one end for connection to a downhole tool and a jaw having a hinge and a radial tip, the jaw being pivoted at its hinge from one side of the housing, the jaw's pivot being offset from the jaw's center of gravity so that the jaw is pivotable upon rotation of the tool between a first position stowed against the housing for permitting movement within the casing, and a second position wherein the radial tip swings outwardly from the housing to engage the casing for arresting tool rotation and forcing the housing against the casing opposite the jaw. […]

Figure 2. (

a) Figure 1(

a) of the ‘467 Patent, schematic of the preferred embodiment of the ‘467 Patent—(1) housing, (2) bore, (5) jaw, (7) jaw’s hinge edge, and (11) radial tip of jaw; (

b) Figure 3(

a) of the ‘467 Patent, cross-section view of the preferred embodiment of the ‘467 Patent in the casing-engaging position—same numbering as Figure 1(

a) where (6) indicates the casing of the well bore. [ 39 ] The three independent claims are claims 1, 8, and 16: • Claim 1: A tool to prevent rotation of a downhole tool suspended in a wellbore casing comprising: a. a tubular housing having a wall for engaging the casing and having at least one end for connection to the downhole tool; and b. a jaw having a radial tip and which is pivoted from a point on the housing opposing the casing-engaging wall for varying the effective diameter of the tool, the jaw's pivot being offset from the jaw's center of gravity so that the jaw is pivotable upon rotation of the tool between i. a first position stowed against the housing for minimizing the tool's effective diameter and permitting movement within the casing, and ii. a second casing-engaging position wherein the radial tip pivots outwardly from the housing to increase the tool's effective diameter so that both the radial tip and the housing wall engage the casing for arresting tool rotation. • Claim 8: A tool to prevent rotation of a downhole tool suspended in a wellbore casing comprising: a. a tubular housing having a wall for engaging the casing and having at least one end for connection to the downhole tool; and b. a jaw having a hinge and a radial tip, the jaw being pivoted at its hinge from one side of the housing, the jaw's pivot being offset from the jaw's center of gravity so that the jaw is pivotable upon rotation of the tool between a first position stowed against the housing for permitting movement within the casing, and a second position wherein the radial tip swings outwardly from the housing to engage the casing for arresting tool rotation and forcing the housing against the casing opposite the jaw, the jaw having a profile and the tubular housing having a corresponding profile so that when stowed, the jaw only projects minimally from the housing, the jaw further being trapezoidal in shape having sloped top and bottom edges so that the jaw is caused to rotate to the stowed position if contacted with an obstruction in the wellbore during running in and tripping out. • Claim 16: A tool for stabilizing a downhole tool suspended in a wellbore casing comprising: a. a tubular housing having a wall for engaging the casing and having at least one end for connection to the downhole tool; and b. a jaw having a radial tip and which is pivoted from a point on the housing opposing the casing-engaging wall for varying the effective diameter of the tool, the jaw's pivot being offset from the jaw's center of gravity so that the jaw is pivotable upon rotation of the tool between i. a first position stowed against the housing for minimizing the tool's effective diameter and permitting movement within the casing, and ii. a second casing-engaging position wherein the radial tip pivots outwardly from the housing to increase the tool's effective diameter so that both the radial tip and the housing wall engage the casing, wherein the engagement of housing wall and the casing stabilizes the tool and the downhole tool.

B. Canadian Patent No. 2,373,734 (the ‘734, or Spring Patent) [ 40 ] The Canadian filing date for the ‘734 Patent is February 28, 2002. It has a US priority date of September 26, 2001. The ‘734 Patent was published on March 26, 2003, and issued on December 20, 2005. The ‘734 Patent was invented, and is currently owned, by Weber, Tessier, and Doyle. [ 41 ] A statement of the invention is set out on page 2 of the ‘734 Patent specification. The general description of the tool is substantially the same as that of the ‘467 Patent specification, but with the following differences:

[…] The jaw is pivoted at its hinge from one side of the housing, so that the jaw is biased so as to pivot outwardly to a first casing-engaging position, wherein the radial tip engages the casing, and the housing is urged against the casing opposite the jaw. The jaw is also inwardly pivotable to a second compressed position towards the housing to enable movement within the casing during tripping in and tripping out.

Preferably, the jaw is biased to the casing-engaging position by a torsional member extending through the hinge, which is rigidly connected to the housing at a first end and to the jaw at a second end.

Compression of the jaw twists the torsional member into torsion which then acts to bias or urge the jaw outwardly again. […] [ 42 ] There are two independent claims, claims 1 and 16: • Claim 1: A tool to prevent rotation of a downhole tool suspended in a wellbore casing comprising: • a tubular housing having a wall for engaging the casing and having at least one end for connection to the downhole tool; • a jaw having a radial tip and which is rotatable along an axis along a wall of the housing opposing the casing-engaging wall for varying the effective diameter of the tool; and • a spring, acting between the jaw and the housing so as to bias the jaw outwardly to a first casing-engaging position wherein the radial tip is positioned outwardly from the housing to increase the tool's effective diameter so that the radial tip engages the casing and the housing wall engages the casing for arresting tool rotation and further, to permit a second compressed position wherein the jaw is temporarily compressed towards the housing for minimizing the tool's effective diameter and permitting movement within the casing. • Claim 16 An improvement to a tool used to prevent rotation of a downhole tool suspended in a wellbore casing, the tool having a housing and at least one jaw having an edge which is pivotable at a hinge on the housing, the hinge having first and second ends pivotally connected to the housing, the improvement comprising: • a torsional member having first and second ends; • a first holder for pinning the first end of the torsional member to the housing; and • a second holder pivotable with the jaw and for pinning the second end of the torsional member to the jaw so that when the jaw pivots towards the housing, the torsional member is twisted for biasing the jaw outwardly.

C. Canadian Patent No. 2,386,026 (the ‘026, or Stop Patent) [ 43 ] The Canadian filing date for the ‘026 Patent is May 13, 2002. It has a US priority date of September 26, 2001. The ‘026 Patent was published on March 26, 2003, and issued on January 16, 2007. The ‘734 Patent was invented, and is currently owned, by Weber, Tessier, and Doyle. [ 44 ] A statement of the invention is set out on page 2 of the ‘026 Patent specification.

The general description of the tool is substantially the same as the statement of the invention in the ‘467 Patent specification and the ‘734 Patent specification, but with the following differences: […] Preferably, overextension of the jaw during assembly is prevented using cooperating stops in the jaw and the housing.

In a broad aspect, a downhole tool comprises a tubular housing for suspension in a wellbore casing and having a wall which engages the wellbore casing and having at least one end for threaded connection to the downhole tool, a jaw having a radial tip and which is rotatable along an axis along a base of the jaw and along a hinge on the wall of the housing opposing the casing-engaging wall for varying the effective diameter of the tool, a first stop formed on the base of the jaw, and a second stop formed in the wall of the housing at the hinge.

The first and second stops cooperate so as to limit maximum rotation of the jaw, while permitting the effective diameter of the tool to increase to a diameter greater than the casing. [ 45 ] Independent claim 1 provides: • Claim 1: A downhole tool suspended in a wellbore casing comprising: • a tubular housing for suspension in a wellbore casing and having a wall which engages the wellbore casing and having at least one end for threaded connection to the downhole tool; • a jaw having a radial tip and which is rotatable along an axis along a base of the jaw and along a hinge on wall of the housing opposing the casing-engaging wall for varying the effective diameter of the tool; • a first stop formed on the base of the jaw; and

• a second stop formed in the wall of the housing at the hinge, the first and second stops cooperating so as to limit maximum rotation of the jaw and to permit the effective diameter of the tool to increase to a diameter greater than the casing. V. API Fact Witness Evidence A. Lynn Tessier [ 46 ] Lynn Tessier has a Bachelor of Applied Science in Mechanical Engineering, and a Master of Applied Science in Mechanical Engineering, both from the University of Waterloo. He is a Registered Professional Engineer, and a fellow of the Canadian Academy of Engineers.

Between 1998 and 2002, Tessier was an Engineering Advisor for SKF Magnetic Bearings Inc. and was directly involved in the development of the API Patents. Currently, and at all material times, Tessier is/was a shareholder, director, and consultant for API. [ 47 ] Tessier gave evidence that he was approached by Weber to design a torque anchor that was robust, simple to use and easy to manufacture. He also testified that the tool invented, the ‘467 TorqStopper TM torque anchor, was the “ultimate” in simplicity.

Three versions of the ‘467 torque anchors were created by November 1999: (1) a ‘467 TorqStopper TM torque anchor with open bore; (2) a ‘467 TorqStopper TM torque anchor with closed-bore, which could be run above the PC Pump; and (3) a ‘467 TorqStopper TM torque anchor with horizontally oriented, banded extensions protruding from the opposite side the housing from the jaw, to enable the tool to be used with an oversized pump. [ 48 ] By November 2000, Weber, Tessier, and Doyle (together, the “Inventors”) were designing, manufacturing, and selling versions of the ‘467 TorqStopper TM torque anchor with external, coiled springs added to bias the jaw.

This spring was incorporated to help actuate the door of the closed-bore ‘467 TorqStopper TM torque anchor. The closed-bore necessitated that the door could not be milled from the body of the tool; therefore, it was lighter and did not set consistently downhole. In heavy oil, particularly, there would be “stiction” between the door and the housing of the tool, which would lead to difficulty getting the door open. Tessier admitted that the early TorqStopper TM torque anchors that incorporated the spring feature were retrofitted ‘467 torque anchors with coiled springs.

He further testified that the Inventors subsequently moved to make the ‘734 torque anchors, which had an internal torsional member (also called a torsional spring), in order to protect the spring from acidic production fluids in the oil well. [ 49 ] Tessier also stated that the Inventors were getting reports that the doors of both the ‘467 and the ‘734 TorqStopper TM torque anchors were prone to being damaged by the rough treatment of the tools by rig operators, who were assembling the TorqStopper TM torque anchors onto the production tubing.

Rig operators often used the doors as a lever to thread the torque anchor onto the PC Pump or the production tubing up-hole, which would damage the door and could potentially result in the rig operator ripping the door from the housing.

The evidence is that the Inventors of the ‘026 Patent solved this issue by adding a notch feature, called a “stop” , which made the door more robust by transferring the torqueing force to the housing. [ 50 ] Counsel for the Excalibre Parties objected to Tessier testifying to the development of the patented tools, that is, the evolution of the TorqStopper TM torque anchors from the ‘467 TorqStopper TM torque anchors to the ‘026 TorqStopper TM torque anchors.

After hearing submissions from the parties on this point, I decided that this evidence could be a factor when considering the question of obviousness ( Sanofi-Synthelabo Canada Inc v Apotex Inc , 2008 SCC 61 at para 70 [ Sanofi ]) as stated by Mr. Justice Rothstein: Another important factor [regarding obviousness] may arise from considering the actual course of conduct which culminated in the making of the invention. It is true that obviousness is largely concerned with how a skilled worker would have acted in light of the prior art.

But this is no reason to exclude evidence on the history of the invention, particularly where the knowledge of those involved in finding the invention is no lower than would be expected of the skilled person. [ 51 ] Tessier further stated that API touts the fact that the TorqStopper TM torque anchor decentralizes the downhole tool as a benefit of using the TorqStopper TM torque anchor, because it causes the tool to be pressed against the casing, which increases overall stability.

He stated that it is his view that stability is a function of the overall length of contact (i.e. the contact between the casing, and the side of the TorqStopper TM torque anchor and the attached downhole tool). [ 52 ] Finally, Tessier, in his capacity as a director of API, testified that Goodwin had been authorized by API to send the Goodwin Letters, which form the basis of the Excalibre Parties’

section 7(

a) claim.

He confirmed that API and MSI Offshore had directed Goodwin to send the following letters: a . a letter to Kudu explicitly stating that the CTA Torque Anchor infringed the API Patents (the “January 18, 2008 Kudu Letter); b . a letter notifying Husky that single jawed torque anchors infringed the API Patents and advising Husky to determine the extent of their liability (the “January 16, 2008 Husky Letter); c . a letter advising Husky that API had been credibly informed that Husky was planning to source CTA Torque Anchors and warning them to review their exposure under Canadian patent laws (the “February 1, 2008 Husky Letter”); d . a letter advising Husky that they would be included in the present infringement action if they did not stop sourcing CTA Torque Anchors immediately (the “April 28, 2008 Husky Letter”); and e . a letter advising Bronco that they would be included in the present infringement action if they did not stop purchasing CTA Torque Anchors immediately (the “May 16, 2008 Bronco Letter”).

B. John Doyle [ 53 ] John Doyle is the Vice President, Manufacturing at General Magnetic International Inc. Doyle is a Master Machinist who originally trained at Sir James Farmer Norton & Co. Ltd. From 1998 to 2001, Doyle was employed by SKF/Revolve Mechanical Bearing

as a mechanical designer/technologist. From 2001 to 2010, he was the Chief Designer/General Manager at API. [ 54 ] Doyle testified that the Inventors tested a number of different ideas for the “stop” used in the ‘026 TorqStopper TM torque anchor before settling on the notches that are shown in figure 12(

a) of the ‘026 Patent. C. Kerry Van Metre [ 55 ] Kerry Van Metre is the Chief Operating Officer of Royal Well Servicing Ltd. In 2002, he was self-employed as a contractor to Petrovera Resources Limited, and in the business of servicing oil rigs. He testified that he had personally set many TorqStopper TM torque anchors and other torque anchors. [ 56 ] Van Metre testified that he had never had any difficulty setting the open bore ‘467 TorqStopper TM torque anchor.

Additionally, he testified that the setting protocol used in the API Tests (discussed below) was representative of the protocol that would be used on an oil rig, and that the protocol used in the 2014 C-FER Tests (discussed below) resulted in a turning speed that was slower than a typical turning speed used in the field.

On cross-examination, Van Metre testified that generally the TorqStopper TM torque anchors used on the rigs, with which he was familiar, would set easily by turning the production tubing with a “fairly good snap” , but that sometimes you would have to make more than one attempt to ensure that the torque anchor set. I found him to be a credible witness. D. Kelly McGowan [ 57 ] Kelly McGowan is the owner of Trilogy Oilfield Ltd., a company that rents oilfield tools and services oil wells in British Columbia, Alberta, and Saskatchewan.

McGowan is a shareholder in API, and Trilogy has been in a business relationship with API since 2001, as a distributor of TorqStopper TM torque anchors. [ 58 ] McGowan testified that he first saw a ‘467 TorqStopper TM torque anchor in 1999 while he was working for Magen Oil and Gas Tools, and that the first commercial sale of which he is aware occurred on October 7, 1999. He testified that he had observed Weber set a ‘467 TorqStopper TM torque anchor at a Wascana Energy Inc. oil rig, and that he remembers the ‘467 TorqStopper TM torque anchor setting within a half-turn.

Additionally, McGowan testified that the protocol used at the API Tests was representative of a “normal” setting procedure, and that the turning speed used at the 2014 C-FER Tests was “gentle” , not “oil patch” . [ 59 ] On cross-examination, McGowan stated that he first became aware of API and the TorqStopper TM torque anchor because it was proposed to him as a business opportunity, and that he was promoting the sale of the TorqStopper TM torque anchor as early as August 5, 1999. Again, I found McGowan to be a credible witness. E.

Jack Bootsman [ 60 ] Jack Bootsman is the owner of Jack Bootsman Supervision Ltd., a consulting company that troubleshoots oil production problems, particularly problems with heavy oil and PC Pump production. Between 1999 and 2004, he was a Well Servicing Superintendent with Petrovera Resources Limited. Bootsman testified that he had witnessed TorqStopper TM torque anchors being set at Petrovera wells, and that the setting procedure was to rotate the up-hole tube hanger to the right with a pipe wrench.

He stated that the setting procedure shown in the videos of the API Tests was “standard” . [ 61 ] On cross-examination, Bootsman admitted that he did not start supervising rigs that used the TorqStopper TM torque anchor until after 2004, when he was consulting as a Wellsite Supervisor and the ‘734 TorqStopper TM torque anchor was the main version used by the industry. He was unfamiliar with the ‘467 TorqStopper TM torque anchor, and had no experience with how the ‘467 TorqStopper TM torque anchor would be set. VI. Excalibre Fact Witness Evidence A.

Michael Burton [ 62 ] Michael Burton is an engineer and entrepreneur. He is the inventor of the ‘224 and ‘834 Burton Patents. Burton has a B.Sc. and a M.Sc. in Aerospace from Princeton. In 1983, he switched from the aerospace industry into the oil and gas industry, where he specialized in directional drilling. From 1983 to 1985, he worked to develop the short radius directional tool whose two main embodiments are described by the ‘224 and ‘834 Burton Patents (the “Burton Tool”). [ 63 ] Burton stated that the Burton Tool functions by displacing the drilling string to one side in a borehole.

This directs the drilling string upwards and enables the borehole drilling team to control the angle of the borehole. The body of the Burton Tool is a non-rotating eccentric tool with “fins” that fits around the drill and displaces it in the borehole.

On cross-examination, Burton clarified that the tool does not inhibit the rotation of the drill string, nor does it stabilize the drill string. [ 64 ] He testified that the fins of the Burton Tool are either flexible steel (the ‘224 embodiment of the Burton Tool) or rigid fins that pivot around a spring-loaded hinge (the ‘834 embodiment of the Burton Tool), and that these fins can engage with either the casing or the open borehole, depending on where the drill is set up.

Additionally, the fins only operate in one direction because the design of the blade is such that its rotation is constrained by a “stop” where it buts up against the edge of the tool. This stop is also used to maintain each fin at the proper angle on the tool. On cross-examination, Burton agreed that the stop does not function up-hole because of what it does, and

how the tool is assembled. [ 65 ] Burton’s evidence is that the first commercial use of the Burton Tool was in Kansas in the winter of 1985/1986. He stated that the Amoco Corporation (“Amoco”) asked to test the tool in 1988. In 1990, he sold the technology to an investment group from Switzerland, who sold it to Amoco.

Amoco, in turn, licenses the technology out to various people in the oil well drilling industry. [ 66 ] On cross-examination, Burton agreed that directional drilling was a still a fairly specialized field when he developed the Burton Tool, in 1985, and that the tools used in directional drilling were not used in other areas of oil well operations. He did not quantify the number of Burton Tools in operation in 2003; however, he testified that Amoco was advertising the Burton Tool to individuals in the drilling industry.

Further, he explained that directional drilling has become ubiquitous, since 1985, such that almost all oil well drilling is directional today. Finally, he stated that all workers in the oil and gas industry have had “their hands on the wrenches” , meaning that all of the rig operators know a lot about both drilling and production because they are involved in all steps in the process. B. Colin Aldridge [ 67 ] Colin Aldridge is the owner of Anglo Precision Machining Ltd., and the inventor of the ‘693 Aldridge Patent, which discloses a torque anchor tool (the “Aldridge Tool”).

Aldridge apprenticed in England as a machinist at the Atomic Energy Authority. After moving to Canada, he worked as a machinist at a number of companies, particularly Chriscor from 1993 to 1998. [ 68 ] Aldridge testified that he designed the Aldridge Tool while at Chriscor, around 1995, because they lost the rights to continue manufacturing the torque anchor that they had been machining. He testified that the Aldridge Tool was a “scroll-lock” tool, wherein drag blocks located within a drag housing cause slips to set into the casing when the body of the tool was rotated.

He also testified that these slips are set into slots, which act as “stops” on the rotation of the slips. [ 69 ] On cross-examination, Aldridge clarified that the Aldridge Tool had a plurality of evenly spaced slips, and emphasized that he deliberately set about to create a tool that did not utilize springs, because he felt that springs were unreliable downhole due to the effects of wellbore fluids. C. Kevin Kelm [ 70 ] Kevin Kelm is the owner of Progressive Completions Ltd., a company that, among other things, sells, installs, and fishes out torque anchors from oil and gas wells.

He has experience with many types of torque anchors, including the TorqStopper TM torque anchors and CTA Torque Anchors. He does not have a business relationship with either API or Excalibre. [ 71 ] Kelm has personally fished out ‘467 TorqStopper TM torque anchors from oil wells, and it was his experience that customers did not particularly like the ‘467 TorqStopper TM torque anchors because of reliability issues. His evidence was that the spring-loaded versions of the TorqStopper TM torque anchors were very popular. D. Edward Moore [ 72 ] Edward Moore is a tool technologist, and the owner of Excalibre Downhole.

In 1990, he started Tebo, a company that subcontracted manufacturing for other companies. [ 73 ] Moore testified that, while at Tebo, he saw the Obrejanu Tool and thought that he could come up with his own torque anchor. He testified that the first version that he and his team invented was a torque anchor known as the “Garay Tool” , which was first used in 1996. Moore testified that, by 1999, three thousand to four thousand Garay Tools had been built. These tools were sold directly to Husky, and pump companies in British Columbia, Alberta, and Saskatchewan (e.g., Kudu, Tanroc, and Weatherford International).

Moore confirmed that the Garay Tool had been patented: Canadian Patent No. 2,159,659, filed October 2, 1995 and issued March 19, 2002 (the “Garay Patent”). [ 74 ] Moore testified that he first saw a ‘467 TorqStopper TM torque anchor because one was sent to him by a member of his sales team, who thought that the ‘467 TorqStopper TM torque anchor infringed the Garay Patent. Representatives of API denied that any version of the TorqStopper TM torque anchor infringed the Garay Patent.

His testimony was corroborated by a letter dated March 30, 2005, sent by Goodwin, on behalf of API, to Dennis Yasui at Brownlee LLP. [ 75 ] Moore further gave evidence that his team developed the CTA Torque Anchor because of a conversation he had with operators at National Oilwell Varco, who indicated that they sometimes needed to run sensors downhole with the tools, and that the large mounting blocks, which held the spring-loaded slips on the Garay Tool, made this difficult.

Further, he testified that he had noticed that, because of the design of the slips on the Garay Tool, when the Garay Tool was in a horizontal well, only one of the three slips would be engaged with the casing because of the weight of the tool and tubing. He stated that to solve these two issues, his team changed two of the mounting blocks with spring-loaded slips to rigid slips, keeping only one moving slip. [ 76 ] Moore’s evidence was that this change from spring-loaded slips on mounting blocks to rigid slips allowed him to keep the tool centralized.

He stated that keeping the tool centralized was important to prevent issues that occur when the tool rests in sand in the wellbore, and to allow additional tubing, such as coil tubing for hot oil, to go down around the tool. [ 77 ] Moore stated that one of the benefits of the CTA Torque Anchor was the fact that the rigid slips were removable and that the tool could be serviced up-hole. Further, the move to CTA Torque Anchor version 4, which has multiple holes on the rigid slips that allow for different slips to be used on different tool bodies, allowed the company to carry fewer inventories.

He stated that this interchangeability allowed him to create the Offset CTA Torque Anchor for Kudu, who had a customer that needed to run large cables

past the pump. Moore also stated that the change in the placement of the “stop” between the different versions was due to the fact he was always looking to improve the tool, not because he was trying to work around the ‘026 Patent. [ 78 ] When asked about the Prototype tool, Moore indicated that this tool did not have rigid slips, and was not a version of the CTA Torque Anchor. He stated that only one tool was ever made, and that this tool was neither sold nor used in the field. [ 79 ] Moore’s evidence was that the Goodwin Letters had a serious and deleterious effect on the sales of the CTA Torque Anchor.

He stated that he had seen a letter written by Goodwin to Husky and that both he and Ray Mills, one of the owners of Kudu, offered Husky an indemnity, but that this was ineffective in getting Husky to change its mind about purchasing the CTA Torque Anchor. He stated that he has continually made efforts to try to convince Husky to reconsider purchasing the CTA Torque Anchor, to no avail.

However, on cross-examination he admitted that he did not keep any documentation of his offer of indemnity or efforts to persuade Husky or Bronco to continue purchasing the CTA Torque Anchor. [ 80 ] Additionally, on cross-examination, Moore admitted that the sales of the CTA Torque Anchor to Kudu did not immediately halt after Kudu received the January 18, 2008 Kudu Letter. He admitted that the sales tapered off, and that the Excalibre Parties did not submit into evidence invoices from that period which would corroborate his testimony about how sales were affected.

He further admitted that sales to Tanroc did not cease immediately upon their receipt of a similar letter from Goodwin. E. Dan Echino [ 81 ] Dan Echino is a businessman in the Calgary area who specializes in tools and equipment used in the oil and gas industry. From 1991 to 2004, he was the owner of Corlac Industries Ltd. (“Corlac”), which was an early supplier of ‘467 TorqStopper TM torque anchors. Echino testified that there was a lot of skepticism about the ‘467 TorqStopper TM torque anchor when it first came on the market, and that they were slow to sell at first.

His evidence was of little value to the issues before the Court. F. James Esposito [ 82 ] James Esposito is a Registered Professional Engineer. In 2008, he was the Chief Operating Officer at Bronco. Esposito testified that Bronco wells used PC Pumps and torque anchors, and that each well had a torque anchor downhole with a replacement in inventory.

He testified that he was familiar with PC Pumps and torque anchors, but that it was his Vice-President of Production, Stephen Terry, who was in charge of day-to-day operations and well completions. [ 83 ] Esposito testified that he remembered getting the May 16, 2008 Bronco Letter. Esposito stated that at first he thought that the letter was a joke.

After realizing that the May 16, 2008 Bronco Letter was real, he discussed options with Terry and they decided that Bronco was going to stop using the CTA Torque Anchor immediately. [ 84 ] Esposito testified that Bronco was particularly sensitive about their image in 2008, because they had just raised money from investors and were working in heavy oil on a First Nation’s Reserve, with a plan to drill 69 new wells.

He stated that, because Bronco had so much going on, at the time, they could not afford interruptions in business or bad publicity and, therefore, they made the decision to quit buying CTA Torque Anchors. He testified that he told Terry to cease purchasing the CTA Torque Anchor immediately, although they did not pull any of the installed CTA Torque Anchors from their operating wells. [ 85 ] Neither he nor Terry wrote back to Goodwin.

Further, he testified that he did not contact his corporate lawyers to get an infringement opinion, because he was loathe to spend the company’s money on a legal opinion, if litigation could be avoided by changing their purchasing practices. He stated that he did not believe that Bronco was infringing, because they were not distributing CTA Torque Anchors, but he felt threatened and took steps to minimize the threat to the company. G. Leanne Wichmann Cohen [ 86 ] Leanne Wichmann Cohen is a lawyer, who was called to the Alberta Bar in 1998.

In 2008, she was a member of the Husky legal department, and was the legal lead for the information technology and intellectual property departments. Wichmann Cohen testified in these actions under subpoena. [ 87 ] Wichmann Cohen testified that, in 2008, Husky was very litigation averse and that its legal strategy was to take the easiest, most non-confrontational route, because the company did not want to spend any money on litigation. She recalled the January 16, 2008 Husky Letter, and the steps taken to investigate how this letter related to and impacted the operations of Husky wells.

At the end of these investigations, she instructed Hector Munoz, who was in charge of purchasing in Lloydminster, to stop purchasing the CTA Torque Anchor and to source a comparable product. [ 88 ] Wichmann Cohen’s position was that Husky made no inquiries into whether the CTA Torque Anchor, in fact, infringed the API Patents because they had a “Plan B” in place, wherein they identified a comparable and clearly non-infringing product.

Her goal at the time was to resolve the issue, and she needed neither an infringement opinion nor assistance from outside legal counsel to take steps that would lead to a resolution. [ 89 ] Wichmann Cohen also remembered receiving the April 28, 2008 Husky Letter. After receiving this letter, she had Munoz confirm that his team was proceeding with her previous instructions to replace their CTA Torque Anchors.

Wichmann Cohen stated that she understood these letters as a threat that they would be added to the litigation. [ 90 ] Wichmann Cohen assured Goodwin that Husky had been removing the CTA Torque Anchors, and that Husky had been taking the appropriate steps to address the alleged infringement by use of CTA Torque Anchors. On cross-examination, she testified that she did not recall receiving documents from Moore or Excalibre, but that an offer of an indemnity would not have changed her mind because she

did not want to enter into a situation where Husky would be vulnerable to litigation. H. Lisa Redhead [ 91 ] Lisa Redhead is a Registered Professional Engineer employed with Husky. From 2007 to 2008, she was a member of the District Projects Group for the Lloydminster District.

Redhead testified that, as a member of the District Projects Group, she provided technical assistance to the Procurement Group, and ensured that the Procurement Group was sourcing the most competitive products on the market to use in Husky’s new well completions. [ 92 ] Redhead stated that she was directly involved in testing the efficacy of the CTA Torque Anchor in Husky wells in August 2007, and in making the decision to switch Husky’s Auto-Purchase Orders for the Lloydminster District to the CTA Torque Anchor in January 2008.

Her team found the CTA Torque Anchor to be reliable, and that using the CTA Torque Anchor saved Husky $150-500 per well. On cross-examination, Redhead stated that the District Projects Group had not tested other torque anchor products at the time to determine if they were better than the Excalibre CTA Torque Anchor. [ 93 ] Redhead explained that all of the torque anchors used by Husky in 2007 and early 2008 were sourced from three pump companies: Kudu, Tanroc, and National Oilwell.

Further, she had directed Howard Staniforth, a Husky Completions Coordinator, to source only Excalibre CTA Torque Anchors from Kudu and Tanroc, both of whom had been providing API TorqStopper TM torque anchors to Husky up to that time. She stated that National Oilwell was not a distributor of CTA Torque Anchors in 2007, and that the District Projects Group had not decided which torque anchor they would recommend the Procurement Group to source from National Oilwell. [ 94 ] Redhead left the District Projects Group in February 2008.

On cross-examination, she admitted that she did not know when the stop-purchase order for CTA Torque Anchors came down. VII. API Expert Witness, Dr. Robert Sorem [ 95 ] Dr. Robert Sorem received a B.Sc. in Mechanical Engineering in 1986, a M.Sc. in Mechanical Engineering in 1988, and a Ph.D. in Mechanical Engineering from the University of Kansas in 1991. He is a named co-inventor of at least 17 U.S. patents. [ 96 ] Dr. Sorem is an Associate Professor of Mechanical Engineering at the University of Kansas School of Engineering.

From 1991 to 1994, he was a development engineer for Dowell Schlumberger in Tulsa, Oklahoma and Huston, Texas. His industry experience encompasses the design, manufacturing, and testing of tubing inflatable packers and running tools for oilfield service. Since 1994, Dr. Sorem has held a tenured position in the Mechanical Engineering Department at the University of Kansas School of Engineering, where he teaches a wide variety of classes, including Introduction to Engineering and Machine Design, Mechanics of Materials, and Mechanics of Composite Materials. [ 97 ] Dr.

Sorem was qualified as an expert in mechanical engineering and downhole tools. However, his downhole tool experience is primarily with downhole packers and inflatable packers, and he has very limited practical experience with PC Pumps and torque anchors. On cross-examination, Dr. Sorem admitted that his first and only experience with torque anchors prior to these actions was during a previous litigation between API and Corlac in or around 2007, in which he was called as an expert witness for API. [ 98 ] Dr.

Sorem conducted the API Tests and provided two expert reports: one addressing the infringement of the ‘467 Patent and the ‘026 Patent; and the other addressing the validity of the ‘467 Patent, the ‘734 Patent, and the ‘026 Patent. VIII. Excalibre Expert Witnesses A. Dr. Wooley [ 99 ] Dr. Gary R. Wooley received his B.Sc. in Mechanical Engineering, in 1969; his M.Sc. in Engineering Mechanics, in 1970; and his Ph.D. in Engineering Science from Louisiana State University, in 1972. He has testified as an expert witness in over 50 trials, in both Canada and the U.S. [ 100 ] Dr.

Wooley is the President of Wooley and Associates, Inc., an American company that offers engineering consulting to the petroleum industry. Prior to founding Wooley and Associates, Inc., in 1986, he worked for Shell Oil, Chevron Oil, Humble Oil (Exxon), Atlantic Richfield Co., and Enertech Engineering. He was also, briefly, an instructor at Louisiana State University. [ 101 ] Dr. Wooley has been qualified as an expert in mechanical tools and tool design, particularly tools used in the oil and gas industry. Dr.

Wooley conducted the 2014 C-FER Tests and provided a single expert report, focusing on the validity of the API Patents. [ 102 ] At the beginning of his examination in chief, Dr. Wooley explained that there were a number of oversights and mistakes in his expert report. Counsel for the Excalibre Parties stated that these were merely clerical errors.

Counsel for the API Parties objected to the admission of these corrections into evidence, arguing that they went beyond mere clerical errors and that their admission would cause substantial prejudice to the API Parties, particularly because they had already closed their case. In the alternative, counsel for the API Parties submitted that Dr. Wooley’s testimony be given no weight. [ 103 ] I agree with counsel for the API Parties that it was improper for Dr. Wooley to make significant corrections to his expert report during the trial.

These corrections were not minor corrections; rather they were corrections of conceptual mistakes going to the heart of the opinion in the report. Some of the corrections changed the meaning of entire sections of the report. Even though Dr. Wooley could be

cross-examined on these corrections, they would clearly prejudice the API Parties and there is no reasonable excuse for not havingcorrected these omissions or errors prior to trial. [104] Counsel for the API Parties also objected to Dr. Wooley’s testimony on claims 2 to 7 of the ‘026 Patent on the basis that therewas no analysis of these claims set out in his expert report.

Counsel for the Excalibre Parties submitted that this testimony was within Dr.Wooley’s right to explain and amplify what was in his report. [105] The scope of an expert’s testimony, outside the four corners of his or her report, is an issue that has recently been considered byMadam Justice Wilson of the Ontario Superior Court of Justice in Moore v Getahun, 2014 ONSC 237, affirmed in 2015 ONCA 55[Moore].

In Ontario, the limits of expert testimony is governed by Rule 53.03(3) of the Rules of Civil Procedure, RRO 1990, Reg 194,which states: An expert witness may not testify with respect to an issue, except with leave of the trial judge, unless the substance of his or hertestimony with respect to that issue is set out in, (

a) a report served under this rule; or (

b) a supplementary report served on every other party to the action not less than 30 days before the commencement of the trial. [106] Although there is no directly equivalent provision in the Federal Courts Rules, SOR/98-106, this Court accepts that Rules280(1) and 280(1.1) are procedurally equivalent to Ontario Rule 53.03(3): Tendering of expert’s evidence at trial 280

(1) Unless the Court orders otherwise,evidence in chief of an expert witness may betendered at trial by (

a) the witness reading into evidence all or part ofan affidavit or statement referred to in paragraph279(b); and (

b) the witness explaining any of the content ofan affidavit or statement that has been read intoevidence. Other evidence with leave

(1.1) Despite subsection (1), an expert witnessmay tender other evidence in chief with leave ofthe Court. Présentation à l’instruction 280

(1) Sauf ordonnance contraire de la Cour, ladéposition d’un témoin expert dans le cadre d’uninterrogatoire principal peut être présentée enpreuve à l’instruction:

a) par la lecture par celui-ci de tout ou

partie del’affidavit ou de la déclaration visé à l’alinéa279b);

b) par son témoignage expliquant tout passage del’affidavit ou de la déclaration qu’il a lu. Déposition avec autorisation

(1.1) Malgré le paragraphe (1), le témoin expertpeut présenter toute autre déposition au cours del’interrogatoire principal avec l’autorisation de laCour. [107] In Moore, above, Madam Justice Wilson applied the approach of the Ontario Court of Appeal in Marchand (LitigationGuardian of) v Public General Hospital Society of Chatham (2000), (ON CA), 51 OR (3d) 97, which articulated thatan “expert may explain and amplify what is in his or her report but only on matters that are ‘latent in’ or ‘touched on’ by the report.

Anexpert may not testify about matters that open up a new field not mentioned in the report” (see also, Kilitzoglou v Cure, 2012 ONSC3411). [108] The principle that an expert can proffer evidence that is touched on, but not explicitly discussed in, his or her report was appliedby Mr. Justice François Lemieux in Canada (Minister of Citizenship and Immigration) v Obodzinsky, 2001 FCT 239. [109] In the present case, Dr. Wooley did not discuss the obviousness of claims 2 to 7 of the ‘026 Patent in the version of his expertreport that was filed with the Court.

Further, his testimony neither expanded on a matter latent in his report, nor helped the Courtunderstand statements in his report, because he erroneously concluded that finding that the independent claim of a patent was obviouswould render the dependent claims obvious. [110] Based upon the above, I give no weight to his evidence on the following issues: a. the validity of the dependent claims of the API Patents;b. the obviousness of the ‘467 Patent with regards to the Burton Tool; andc. the obviousness analysis of claims 2 to 7 of the ‘026 Patent. B. Mr. Skoczylas [111] Mr.

Paul Skoczylas received a B.Sc. in Mechanical Engineering in 1996, and a M.Sc. in Mechanical Engineering in 2001, fromthe University of Alberta. He is a Registered Professional Engineer in the Province of Alberta and a member of the Association ofProfessional Engineers and Geoscientists of Alberta.

He is a Manager of Engineering Services at C-FER Technologies, a subsidiary ofAlberta Innovates – Technology Futures, which is a corporation that works closely with industry, academia, and the Province of Albertato support research and innovation. [112] He is an expert in PC Pump downhole applications, and has taught courses on PC Pump systems and the use of PC Pumpsoftware around the world. Currently, Skoczylas manages a multi-disciplinary group studying the reliability of both PC Pumps andElectrical Submersible Pumps.

He has authored, individually or jointly, more than 14 articles dealing with various aspects of PC Pump

applications. [113] Skoczylas has been qualified as an expert in PC Pumps and PC Pump accessories. However, counsel for the API Parties raisedthe issue of the appropriate weight of his evidence, given his lack of practical experience on oil rigs. Skoczylas conducted theDemonstrative Tests and provided a single expert report focusing on the expert reports of both Dr. Sorem and Gregg Perkin (report notfiled with the Court). [114] Skoczylas testified that he was present at the 2014 C-FER Tests and, in his opinion, the procedures followed by Dr.

Wooleywere slow but not inappropriate, based upon his understanding of the language of the claims of the ‘467 Patent and the physics ofdownhole tool interactions. Skoczylas stated that, in a vertical well, because rotation is applied at the surface, hundreds of meters awayfrom the tool, it may be difficult to ensure that there is a sufficient “inertial response” to ensure engagement of the tool. However, oncross-examination, he admitted that he was not asked to provide an expert opinion on the validity of the API Patents. Therefore, I give noweight to his comments on Dr.

Wooley’s testing methods and the validity of the claims of the API Patents in issue. IX. Claim Construction A. Relevant Dates [115] The relevant date for construing the claims of each of the API Patents is the date of publication for each of the API patentapplications: a. ‘467 Patent: September 5, 2000;b. ‘734 Patent: March 26, 2003; andc. ‘026 Patent: March 26, 2003. [116] Construction is a question of law for the Court alone, and should be done before considering the issues of infringement and/orvalidity. The same

interpretation of the claims applies to both infringement and validity: Pfizer Canada Inc v Canada (Minister ofHealth), 2005 FC 1725 at para 10, aff’d 2007 FCA 1. [117] The Supreme Court of Canada determined the canons of claim construction in a trilogy of cases: Whirlpool Corp v Camco Inc,2000 SCC 67 at paragraphs 49-55 [Whirlpool]; Free World Trust v Électro Santé Inc, 2000 SCC 66 at paragraphs 44-54 [Free WorldTrust]; and Consolboard Inc v MacMillan Bloedel (Saskatchewan) Ltd, (SCC), [1981] 1 SCR 504 at paragraph 27[Consolboard]. [118] These decisions state that: a. claims are to be read in an informed and purposive way, with a mind willing to understand and viewed through the eyes of aPOSITA, as of the date of publication, having regard to the common general knowledge;b. adherence to the language of the claims allows them to be read in the manner in which the inventor is presumed to have intended,and in a way that is sympathetic to accomplishing the inventor’s purpose, which promotes both fairness and predictability; andc. the whole of the specification should be considered, in order to ascertain the nature of the invention, and the construction of theclaims must be neither benevolent nor harsh, but instead should be reasonable and fair to both the patentee and the public. [119] This Court recognizes that language is imprecise, and that words will have different meanings in different fields.

Therefore,expert witnesses may aid the Court in construing either terms or elements of the claims, or in identifying “essential” elements of theclaims. However, their assistance is only necessary when the Court deems it helpful or useful. If the meaning of a term is evident fromthe patent specification, the Court may not need expert assistance to determine the proper construction of terms used in the claims. B. The Person Skilled in the Art (POSITA) [120] The experts generally agreed on who would be the relevant POSITA with regards the API Patents. Dr. Sorem and Dr.

Wooleytestified that a POSITA would be either (1) a person with a Bachelor’s degree in Mechanical Engineering, and one to three years ofexperience with downhole tools, which must include experience with torque anchors; or (2) a person without a degree but moresignificant work experience using and designing downhole tools, a period of at least five to ten years, which must include experiencewith torque anchors. Skoczylas testified that a POSITA should be a Registered Professional Engineer, or someone who is working underthe supervision of a Registered Professional Engineer.

Skoczylas appears to have ignored the “ordinary” part of the definition of “personof ordinary skill in the art” at the relevant time, and I find this threshold of being a Registered Professional Engineer inappropriate. [121] The experts disagreed on the level of practical experience a POSITA would have with rotation of downhole tools. Dr. Sorem, onbehalf of the API Parties, stated that a POSITA could not be expected to be aware of, or familiar with, downhole tools used in welldrilling, since drilling and production are two distinct processes in oil well operation.

Based on substantial evidence to the contrary fromother witnesses, I disagree. Moreover, on cross-examination, Dr. Sorem also viewed himself as a POSITA. I have no doubt that, based onhis lack of experience with torque anchors, Dr. Sorem would not be a POSITA.

Therefore, the Court puts little weight on his testimonyregarding the extent of experience needed for a POSITA at the relevant time. [122] Having considered all the evidence before the Court, I find that the POSITA, in order to understand and be able to follow thespecifications of the API Patents, would: a. have a Bachelor’s degree in Mechanical Engineering, or a similar degree, and one to three years of practical experience withdownhole tools used in oil well production, including experience with torque anchors; orb. have no formal degree, but five to ten or more years of experience with downhole tools used in oil well production, particularly the

use of PC Pumps and torque anchors, and could as well have cross-over experience in drilling operations. C. Common General Knowledge

(1) Relevant dates for considering common general knowledge as it relates to anticipation and obviousness – the claim date (priority documents) [ 123 ] The legal test governing a priority claim to an earlier filed application is set out in

section 28.1 of the Patent Act, RSC, 1985, c P-4, which states that the date of a claim in an application (the “Claim Date”) is the filing date of the application (defined in

section 28), unless a proper request for priority to one or more earlier applications has been made. To qualify for a priority date, (

a) the request for priority must have been made within 12 months of the earlier application, and (

b) the subject matter defined by the claim in the application at the time of national entry in Canada must have been disclosed in the earlier filed application(s). [ 124 ] The Claim Date for consideration of anticipation and obviousness for each patent is: a . the ‘467 Patent: March 5, 1999; and b . the ‘734 and ‘026 Patents: September 26, 2001.

(2) Common General Knowledge [ 125 ] Common general knowledge is the knowledge generally known by the POSITA at the Claim Date when considering anticipation or obviousness; and the publication date of the patent when construing the patent’s claims. [ 126 ] What comprises common general knowledge has been articulated by this court in Eli Lilly & Co v Apotex Inc , 2009 FC 991 [ Eli Lilly 2009 ], affirmed in 2010 FCA 240 , at paragraph 97 (adopted from General Tire & Rubber Co v Firestone Tyre & Rubber Co, [1972] RPC 457 (UKHL) at 482-483): 1) Common general knowledge is distinct from what in patent law is regarded as public knowledge.

Public knowledge is theoretical and includes each and every patent specification published, however unlikely to be looked at and in whatever language it is written. Common general knowledge, in contrast, is derived from a common sense approach to the question of what would be known, in fact, to an appropriately skilled person that could be found in real life, who is good at his or her job. 2) Common general knowledge will include patent specifications that are well known amongst those versed in the art.

In particular industries, the evidence may show that all patent specifications form part of the relevant knowledge. 3) Common general knowledge does not necessarily include scientific papers, no matter how wide the circulation of the relevant journal or how widely read the paper.

A disclosure in a scientific paper only becomes common general knowledge when it is generally known and accepted without question by the bulk of those engaged in the particular art. 4) Common general knowledge does not include what has only been written about and never, in fact, been used in a particular art. [ 127 ] With regard to how to prove what comprises common general knowledge, Madam Justice Johanne Gauthier, in Eli Lilly 2009, above, at paragraph 100, quoted Simon Thorley et al., Terrell on the Law of Patents , 16 th ed. (London: Sweet & Maxwell, 2006): Proof of common knowledge is given by witnesses competent to speak upon the matter, who, to supplement their own recollections, may refer to standard works upon the subject which were published at the time and which were known to them.

In order to establish whether something is common general knowledge, the first and most important step is to look at the sources from where the skilled addressee could acquire his information. The publication at or before the relevant date of other documents such as patent specifications may be to some extent prima facie evidence tending to show that the statements contained in them were part of the common knowledge, but is far from complete proof, as the statements may well have been discredited or forgotten or merely ignored.

Evidence may, however, be given to prove that such statements did become part of the common knowledge. [ 128 ] Dr. Sorem stated that he did not believe that a POSITA would have experience in both oil well drilling and oil production, therefore, the ‘224 Burton Patent and the ‘843 Burton Patent would not have formed a part of the common general knowledge. Dr. Sorem opined that a POSITA in the art of anchoring PC Pumps would not look to lateral drilling for solutions.

He further differentiated the fields of the invention by noting that the Burton Patents teach anchoring in an open hole, whereas the API Patents teach anchoring in a cased wellbore. [ 129 ] I find that Dr. Sorem’s testimony on what constitutes the common general knowledge at the relevant time to be unpersuasive. The expert evidence of Dr.

Wooley and Skoczylas supports the position that a POSITA at the relevant times would have typically had some experience and knowledge of both drilling and production operations, or at the very least had the where-with-all to look for solutions to problems in either field, by referring to both areas of operation. [ 130 ] Based on the evidence given by the expert witnesses, the common general knowledge at the Claim Date for the ‘467 Patent (i.e., March 1999) would have included: a . general knowledge of downhole tools used in oil well production and drilling; b . the ‘224 Burton Patent; c . the ‘843 Burton Patent; d . the ‘693 Aldridge Patent; and

e . the ‘239 Patent. [ 131 ] Further, a POSITA would have understood the following, as part of the common general knowledge at the Claim Date for the ‘734 and ‘026 Patents (i.e., September 2001): a . the ‘467 Patent and use of the ‘467 TorqStopper TM torque anchors in oil production; b . the prior art listed in [130] above.

(3) Prior Art [ 132 ] The three key patents that form part of the prior art as relied upon by the Excalibre Parties are the ‘224 Burton Patent; the ‘843 Burton Patent; and the ‘693 Aldridge Patent. (

a) The ‘224 Burton Patent [ 133 ] The ‘224 Burton Patent was filed on May 12, 1986 and granted on October 13, 1987. It teaches a Method and Apparatus for lateral drilling in oil and gas wells involving a tool that is a directional drilling tool, which prevents downhole rotation of a pipe in a well.

It discloses a tool comprising components needed for an improved lateral drilling technique that employs rotary drilling, using a flexible drill string connected by a flexible joint to a drill bit collar equipped with a stabilizer and rotary drill bit. [ 134 ] The ‘224 anti-rotation tool has a radially extending wellbore engaging means to engage the surrounding borehole. The ‘224 Burton Patent states that the phrase “wellbore engaging means” refers to any structure located on the outs

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