VARCO CANADA LIMITED VARCO, L.P. WILDCAT SERVICES, L.P. v. WILDCAT SERVICES CANADA, ULC, 2013 FC 750

Date: 20130812 Docket: T-436-05 Citation: 2013 FC 750 BETWEEN: VARCO CANADA LIMITED VARCO, L.P. WILDCAT SERVICES, L.P. and WILDCAT SERVICES CANADA, ULC Plaintiffs/ Defendants by Counterclaim and PASON SYSTEMS CORP. and PASON SYSTEMS INC. Defendants/ Plaintiffs by Counterclaim PUBLIC VERSION OF THE CONFIDENTIAL REASONS FOR JUDGMENT TABLE OF CONTENTS Para . I. Introduction......................................................................................................... 1 A. Parties/Patent Ownership............................................................................ 7 B.

Nature of Problem to be Solved................................................................. 21 II. History of Invention............................................................................................ 34 A. Introduction................................................................................................ 34

B. Credibility................................................................................................... 35 C. Testing........................................................................................................ 44

(1) First Test............................................................................................ 47

(2) Second Test....................................................................................... 51

(3) Third Test........................................................................................... 54 III. Bates Letter and File........................................................................................... 67 IV. Pason Invention................................................................................................... 96 V. Issues................................................................................................................... 143 VI. Analysis............................................................................................................... 144 A.

Claim Construction..................................................................................... 144

(1) Legal Principles.................................................................................. 148

(2) Person of Ordinary Skill.................................................................... 158 (3) “ONLY” re changes in drilling fluid pressure (Claims 1, 11 and 14)............................................................................................... 164

(4) Inverse Relationship – Mandatory (Claims 1 and 11)....................... 173

(5) Selecting Automatic/Manual (Claim 14)........................................... 182

(6) Other Claims Construction Issues..................................................... 189 B. Infringement............................................................................................... 206

(1) Claim 1............................................................................................... 209

(2) Claim 11............................................................................................. 232

(3) Claim 14............................................................................................. 241

(4) Inducement........................................................................................ 250

(5) Infringement by Exportation............................................................. 257 C. Validity of Patent....................................................................................... 267

(1) Anticipation – Prior Art..................................................................... 268 (

a) Brett/Warren Paper................................................................... 273 (

b) Le Compte Patent..................................................................... 279 (

c) The Hobhouse Patent (#3,550,697).......................................... 285

(2) Anticipation – Prior Use.................................................................... 289

(3) Obviousness (Absence of Inventiveness).......................................... 309

(4) Inutility.............................................................................................. 324

(5) Overbreadth....................................................................................... 339 D. Deemed Abandonment............................................................................... 341

(1) US Proceeding................................................................................... 345

(2) Re: European Proceeding.................................................................. 365

(3) Determination.................................................................................... 377 E. Conclusion.................................................................................................. 381 VII. Remedies............................................................................................................. 383 A. Overview.................................................................................................... 383 B. Expert Witnesses........................................................................................ 386 C.

Accounting for Profits................................................................................ 395 D. Calculation of Pason Profit......................................................................... 411 E. Proper Approach to Disgorging Profit........................................................ 416 F. Alternative Remedies................................................................................. 427

(1) Damages............................................................................................ 428 VIII. Costs.................................................................................................................... 471 IX. Conclusion........................................................................................................... 472 * * * * * * PHELAN J. I. INTRODUCTION [ 1 ] This action relates to the infringement of Canadian Patent No. 2,094,313 [the 313 Patent], the rights to which are held by the Plaintiff, Varco L.P.

The 313 Patent relates to the braking function in automatic drilling systems used principally in the petroleum industry.

The Patent is more particularly focused on automatic drilling systems used in drilling rigs to regulate the release of a drill string during the drilling of a borehole. [ 2 ] The Defendants, Pason Systems Corp. and Pason Systems Inc. [collectively “Pason”], both individually and collectively, make and rent in Canada an automatic drilling system known as the Pason AutoDriller. [ 3 ] The Plaintiffs claim that Pason infringes the 313 Patent by manufacturing, selling, renting and exporting the Pason AutoDriller as well as inducing Pason’s customers to use the Pason AutoDriller.

The Plaintiffs claim damages or an accounting of profits as well as punitive and exemplary damages. [ 4 ] Pason denies infringement and attacks the validity of the Patent on almost as many grounds as it is conceivable to assert, including some novel twists on known grounds. [ 5 ] In addition to the usual matters of a complex patent trial, this litigation was influenced by parallel or similar litigation in various US courts, but most particularly an action in the US District Court in Denver.

The most striking influence was the seepage out of documents in the US processes which were relevant to the Canadian litigation. As a result, after final argument this litigation had to be re-opened, evidence taken in the United States and further arguments made on key aspects of this case. For ease of understanding and consistency of findings, the “new evidence” is incorporated into these reasons as part of the narrative and

analysis and not as a stand alone topic. [ 6 ] The most relevant portions of the 313 Patent are attached as

Schedule A to these Reasons. A. Parties/Patent Ownership [ 7 ] The Plaintiff Varco L.P. [Varco LP] is a limited partnership organized under the laws of Delaware, Maryland with its principal office and place of business in Houston, Texas. [ 8 ] The Plaintiff, Varco Canada Limited [Varco Canada] is a corporation organized under the laws of Alberta, having its registered office in Edmonton, Alberta. It is a subsidiary of Varco LP. [ 9 ] The Plaintiff Wildcat Services L.P. [Wildcat Services LP] is a limited partnership organized under the laws of Texas with a principal office in Cypress, Texas.

The company and its subsidiary were acquired by Robert Prejean. [ 10 ] The Plaintiff Wildcat Services Canada ULC [Wildcat Services ULC] is an unlimited liability company organized under the laws of Nova Scotia with its registered office at Halifax. [ 11 ] Unless otherwise specified, the Plaintiffs are collectively referred to as Varco. [ 12 ] The Defendant Pason Systems Inc. is a corporation organized under the laws of Alberta with its principal place of business at Calgary. [ 13 ] The Defendant Pason Systems Corp. is also a corporation organized under the laws of Alberta with its principal place of business at Calgary.

It is a wholly owned subsidiary of Pason Systems Inc. [ 14 ] The Defendants are collectively referred to as Pason unless otherwise specified. Pason is a Canadian oilfield services company that specializes in developing software and hardware to improve the drilling process. It designs and manufacturers integrated systems for data acquisition, well site reporting, remote communications and internet information management. [ 15 ] Pason’s two principal products, at issue in this litigation, are its Electronic Drilling Recorder [EDR] and the Pason AutoDriller. [ 16 ] The 313 Patent was issued on August 24, 1999.

The first owner, and the inventor of what is known as the Wildcat autodriller [Wildcat], was Bobbie Bowden [Bowden].

He did business, at the time, under the name Wildcat Speciality. [ 17 ] On July 1, 2001, Bowden, doing business as Wildcat Specialty, assigned the Patent to Wildcat Services LP. [ 18 ] On or about March 12, 2003, Wildcat Services ULC, a newly created wholly owned subsidiary of Wildcat Services LP, became a licensee of the Patent and took over the business of renting Wildcat Autodrillers in Canada. [ 19 ] On June 30, 2004, Wildcat Services LP assigned the Patent to Varco LP as part of Varco LP’s purchase of all of Wildcat Services LP’s major assets.

Thereafter, Varco Canada became a licensee of the Patent and the sole entity that rented Wildcat Autodrillers in Canada.

[ 20 ] Varco LP is the current owner of the 313 Patent. B. Nature of Problem to be Solved [ 21 ] The experts confirmed that there are basically three types of oil wells: 1) vertical wells which are drilled straight down; 2) directional wells which are drilled at an angle from vertical, and 3) horizontal wells – a type of directional well. The sketch below is an approximate visual representation of those wells. Figure 1 (Red shading is Court’s notation of area of curve) [ 22 ] Directional drilling became a popular method of drilling because it could increase the productivity of a well.

Horizontal drilling increased starting in the late 1980s in part due to advances in technology, such as the downhole mud motor. [ 23 ] In directional wells, the preferred method of rotating the drill bit was to use a downhole mud motor (rather than rotating the entire drill string). [ 24 ] A downhole mud motor is affixed above the drill bit and drilling mud (a drilling fluid) is pumped inside the drill pipe from the top of the standpipe down to the mud motor and back to the top. The circulation of the drilling mud up and down the pipe causes the drill bit to turn and cut through the formation.

The pressure of the drilling fluid provides the power to the mud motor. A schematic from Exhibit 521 shows the basics of the rotary bit with mud motor. Figure 2

[ 25 ] The pressure of the drilling fluid is directly related to the amount of torque that the mud motor applies to the drill bit. The greater the drilling fluid pressure, the greater the torque on the bit – the cutting power. When contact with the formation is increased, there must be an increase in drilling fluid pressure to continue the drilling function. The change in pressure is measured by a pressure gauge on the standpipe at the surface of the rig. [ 26 ] Vertical wells generally were drilled using weight on bit [WOB] as the basis to advance or retard the drill string.

WOB is the amount of force between the drill bit and the formation being drilled. The increase in WOB allows the drill bit to drill into the formation – akin to the force used to push a home automatic drill into the drywall in one’s basement. [ 27 ] In vertical wells, the WOB is proportional to the weight of the drill string (known as a “hook load”) as shown on the weight indicator in the driller’s console.

In this type of well, the WOB is the hook load with the bit just off bottom minus the hook load while drilling where the formation takes some of the hook load. [ 28 ] In the 1960s the drilling process of vertical wells was automated. These automatic drillers worked off the WOB readings and by release of the drill bit to engage the formation. [ 29 ] While the term “release” is often used, it is synonymous with “brake”.

Gravity would pull the bit down the vertical shaft, the driller would regulate the engagement of the bit with the formation by braking the drill to prevent further downward movement or releasing the bit to facilitate the downward movement. There are a number of WOB autodrillers including “the Satellite” which was covered by a US patent in favour of J.E. Bowden, Bowden’s father – US Patent No. 3,265,359 [the 359 Patent]. [ 30 ] WOB worked well in vertical wells but were problematic for directional wells.

Because of the curve in a directional well, part of the weight of the drill rested in the curve which distorted the WOB calculation. Therefore, without the functionality of WOB autodrillers , drillers in directional wells had to manually control the drill string brake in response to changes in drilling pressure. [ 31 ] Drillers knew that, in directional wells, drilling fluid pressure generally related to the torque delivered by a mud motor which related to the contact force between the bit and the formation.

[ 32 ] For directional wells, drillers began to look at drilling fluid pressure to understand what the WOB might be in a directional well. [ 33 ] Since autodrillers were generally more efficient, more precise and cost effective than manual drilling, there developed a need for an automatic drilling system that worked effectively in horizontal and directional drilling. The expert evidence which the Court accepts concludes that the 313 Patent was designed to address this need.

The primary improvement of the invention described in the 313 Patent is the ability to automate the drilling process in directional wells using drilling fluid pressure in conjunction with WOB. II. HISTORY OF INVENTION A. Introduction [ 34 ] The history of the invention and the patenting of the invention are largely told through Bowden. The history covers his own development of the device, the testing of it and the interactions with patent attorney/agents Donald Comuzzi and Marcus Bates. Some of the pertinent events will be described in other sections of these Reasons. B.

Credibility [ 35 ] The Defendants take issue with Bowden’s story. Although they had little or no evidence from witnesses which challenged Bowden’s version, they have attacked Bowden’s credibility and consistency principally through circumstantial evidence, alternate

interpretation of documents, and through cross-examination. They postulate a different theory of the case which essentially calls Bowden a liar, a fraudster and one who engaged in substantial skulduggery. [ 36 ] The case for invalidity, other than the interpretative aspect of the patent, turns substantially on whether Bowden’s story is “more probable than not” as the civil burden of proof is sometimes described. The invalidity attack challenges Bowden on whether he publicly disclosed the invention more than one year before the patent filing date.

It also challenges how Bowden went about the process of filing his US patent and Canadian patent applications. [ 37 ] There is no doubt that there are gaps in Bowden’s version of the facts. His forgetfulness about events led this Court to re-open the trial so as to obtain the complete evidence of the US patenting process.

Bowden’s recollection was subject to the frailties of memory influenced by the length of time between events and the time he had to testify either in this Court or in similar or related cases in the United States District Court and state courts in the USA. [ 38 ] Bowden was “a marketer” for his invention and remained “a marketer” even on the witness stand. He also suffered from the not uncommon failing of seeing events in the most favourable light from his own perspective and dismissing less favourable matters as unimportant.

However, he is not, at least in the evidence before this Court and in my opinion, any of the things of which the Defendants accuse him. At the end of the day, his story remained generally consistent, plausible and credible.

While the Court approaches his evidence with caution, it generally accepts his version of events over the Defendants’ theory, in large part because the Defendants could only advance a theory (or theories) attacking Bowden’s evidence. [ 39 ] The Defendants’ theory of the case on this point would require a finding that Bowden lied under oath in US and Canadian court proceedings, misrepresented facts to numerous people over an extensive period of time, even to the extent of possibly committing bankruptcy fraud in the United States.

There is insufficient evidence to make that type of finding. [ 40 ] Bowden had been around drilling rigs from his earliest years. His father was a driller who invented a WOB autodriller described in the 359 Patent, which was marketed as the Satellite driller.

Upon returning from the US Navy where Bowden worked as a machinist’s mate, he returned to his father’s business. [ 41 ] About 1971, Bowden formed his own company to distribute his father’s autodriller and to run his own business in the refurbishment of airfield instrumentation equipment. [ 42 ] In late 1991 and early 1992, Bowden conceived of and built his first autodriller. He conceived the idea because he had seen drillers release the drill string in directional wells based on indications in a pressure gauge.

Since his father had automated a driller using WOB in vertical wells, Bowden thought he could do something new – develop an autodriller for directional wells. This would necessitate using WOB and pressure to regulate the drilling function.

[ 43 ] Work on a prototype began in that period using his shop, his garage and spare parts he had from his work in the oil industry. By February 1992 he had built his initial prototype, but Bowden did not know if it would work on a rig or how it would function with a mud motor. He had no test facility of his own. The utility of the prototype needed to be confirmed through testing. C. Testing [ 44 ] The Patterson rig was owned by Union Pacific Resources Corporation [Union Pacific] or Patterson Drilling (the evidence is not clear) in the Austin Chalk area of Texas.

Bowden asked Gene Finney, the Union Pacific drilling foreman, for permission to test his prototype. To secure permission, Bowden disclosed that his autodriller worked off both bitweight or pump pressure.

There is no evidence that Bowden disclosed how the device was built or how it worked in any detail. [ 45 ] The issue of whether Bowden disclosed his invention during the period when it was on the Union Pacific rigs is critical to the Defendants’ allegation of invalidity due to public disclosure. [ 46 ] There were no confidentiality agreements or other forms of non-disclosure obligations created, but rig operators in this business would from time to time allow a product to be used on a rig before it was fully developed.

(1) First Test [ 47 ] Initially Finney agreed to allow testing on one full well but required that at the end of testing, Bowden would have to remove the prototype. [ 48 ] In the test drilling on the first well there were three employees of Patterson Drilling, the drilling contractor, and two employees of the mud motor company. [ 49 ] It was Bowden’s testimony that he personally did all the drilling using the pressure mode, that he disconnected the pressure hoses when the drillers used the prototype in WOB mode and that he locked the prototype so no one could examine it when he was not on the rig to ensure that no one could examine the device. [ 50 ] The testing on the first well occurred between February 19, 1992 and March 6, 1992.

After the first test concluded, Bowden took the device off the rig and returned it to his shop where he made improvements to the device. A key change was the addition of a three-way switch to allow an operator to select pressure or WOB or a combination of both at the same time.

(2) Second Test [ 51 ] Bowden then tested the device on a second well between March 15, 1992 and April 3, 1992. [ 52 ] The test on the second well disclosed a problem with gas pockets which allowed the brake to be suddenly released, dropping the bit and damaging the motor. Bowden addressed this problem by adding a wellhead pump pressure compensating valve.

He also realized that he could set the pump pressure as the primary control and set WOB as the secondary control and then use the limiter to restrict the fall of the drill string in pressure pockets. [ 53 ] Bowden was not allowed to test his device when the curve was drilled on the second device. The curve, as shown in Figure 1, is where the use of WOB drilling becomes problematic as earlier described. To Bowden this was a critical limitation of the test because drilling the curve was critical to directional drilling.

Bowden felt that he had to do further testing to ensure that his device would work as he intended. Bowden did admit that by April 13, 1992, the device “was pretty well perfected”.

(3) Third Test

[ 54 ] Testing on the third well occurred between April 13, 1992 and April 27, 1992. Bowden was now allowed to drill the curve which he did successfully on April 20, 1992. In Bowden’s opinion this was the proof that the device worked and that testing was completed. On that same day Bowden and Finney agreed on a daily rental rate for the autodriller of $48.

Finney, according to Bowden, offered to compensate Bowden for the use of the prototype during the testing phase although that had not been part of the original testing agreement. [ 55 ] Thereafter Bowden started to build and market the autodriller through the summer of 1992. [ 56 ] I have concluded that it was on April 20, 1992 that Bowden’s invention was finally proven and completed. Bowden was clear that until he could test the device in the curve, he could not know that he had invented a workable device that solved a problem no one else had solved.

It is “20/20 hindsight”, not a convenient thesis for the Defendants, that the device was in all material respects complete at some prior date. However, the judgment of the inventor on this issue is an important factor. The concern Bowden had was significant; it was of substance, not merely form. [ 57 ] Pason contends that Bowden had disclosed his invention prior to April 20, 1992.

It suggests that there was prior disclosure to Finney, that Bowden had trained the Patterson drilling crew and the mud motor company directional drillers in such a manner as to disclose the invention; that Bowden was fully paid for the use of the autodriller during the “supposed” test phase; and that the testing was part of Bowden and his later associate Prejean’s business model of letting customers use the device for free for a period and then rent it backdated for the trial period if they liked it. [ 58 ] While Bowden admitted that he told Finney and people on the rig generally what the device would do, he did not either tell them or show them how the device worked.

He denied that he showed or explained the internal workings of the device. [ 59 ] There was no evidence from either Finney or the drillers or anyone else that there was such prior disclosure. While the Defendants ask that the Court draw an adverse inference from the Plaintiffs’ failure to call these individuals, prior disclosure is the Defendants’ allegation to prove and they did not call those people either. [ 60 ] It is not to say that Bowden’s story is trouble free.

He outlined a scheme where he ran the rental payments in 1992 through a company called Lampo’s Steam Cleaning for obscure reasons of insurance and bookkeeping. This was an organization that Bowden claimed he knew nothing about, did not know who owned it, yet gave them approximately 20% of the rental revenue. [ 61 ] As troubling as this evidence may be, it does not materially assist on the issue of prior disclosure. It does touch on Bowden’s own credibility, but not sufficiently for the Court to reject the core aspects of his evidence. [ 62 ] Bowden’s device, the Wildcat, had a number of advantages.

It was more efficient, reliable and cost saving than other drills. Even the Defendants’ own patent expert acknowledged its qualities. [ 63 ] The Wildcat was commercially successful, growing from 40 Wildcats rented in 1999 to 500 by 2004. [ 64 ] The business model for Wildcats was described as “try it for a few weeks. If you like it, then you pay for it”. This was the model used by Bowden and Prejean.

Prejean started in sales and marketing the Wildcat eventually took over ownership of the company in 2001. [ 65 ] Between 1999 and March 2003, the Wildcat was marketed and serviced in Canada by Alberta Gauge and Drillers Service Corp. Prejean formed Wildcat Services Canada ULC in March 2003 and bought out Alberta Gauge and Drillers Service Corp.

The impetus for the “buy out” was Prejean’s concern for Alberta Gauge’s ability to market and Prejean’s plan to ramp up Wildcat rentals aggressively. [ 66 ] Having put 50 Wildcats on rigs in Canada in 2003 and expecting to go to 100, such plans were impacted when the Defendants started deploying its Autodriller.

III. BATES LETTER AND FILE [ 67 ] Before turning to Pason’s AutoDriller and maintaining a general chronological theme to this Background, it is necessary to address the above topic. [ 68 ] To say that the Defendants’ claim Bowden to be a scoundrel, whose evidence is to be wholly rejected, is an understatement. The Defendants suggest that Bowden’s evidence is largely a fabrication.

A critical aspect of its attack is that Bowden made public disclosure well prior to April 20, 1992 – even to the point of suggesting that Bowden had his invention in October 1991 and that the testing in March-April 1992 was really part of the business strategy of offering customers a free trial period after which they had to buy the product. [ 69 ] As part of these alleged shenanigans, the Defendants contend that Bowden had received advice from a patent attorney (a patent agent in Canadian terms) Marcus Bates Sr [Bates] in a letter [Bates Letter] that his invention was not likely patentable because of prior art.

They further alleged that Bowden hid the letter from his lawyer who prosecuted the patent application [Comuzzi] and failed to disclose the prior art to the US Patent and Trademark Office [USPTO] thereby committing fraud on the patent Office (a US legal concept much in debate) and otherwise engaging in inequitable conduct. [ 70 ] The evidence surrounding the pre and post patent search in September 1992 to the filing of the patent application in April 1993 is at times confusing; both the oral evidence and document trail is missing critical parts. [ 71 ] At the original trial, Bowden outlined a series of events starting with retaining Bates in September 1991 to do a patent search, having received the Bates Letter of September 1992, to having retained a patent lawyer Comuzzi in March-April 1993 to prepare the US patent application before the one-year grace period had expired.

Most germane is that Bowden said that he had not described to Bates the invention or idea in any detail. [ 72 ] At trial, the Bates Letter of September 1992 was produced. It identified 29 prior art references including Le Compte, Dillon and US Patent No. 3,223,183 to Varney [the Varney Patent].

The Bates Letter also contained a specific description of Bowden’s embodiment of invention and advice that based on the prior art, patentability was doubtful. [ 73 ] While the Bates Letter was produced at trial, the whole of Bates Sr’s file concerning Bowden’s invention [Bates File] had never been produced in any of the related litigation in the US.

It appears that all parties assumed that the Bates File was either lost or destroyed. [ 74 ] After this trial had concluded and argument made, but prior to release of a decision, counsel for the Plaintiffs advised the Court that the Bates File had finally been located. Counsel also advised that Bowden, having now seen the file, informed that his recollection has been faulty and that the evidence before the Court was not entirely accurate.

Of particular significance was the record of a meeting between Bates and Bowden at Bates’ airport home/office on June 19, 1992. [ 75 ] As the Court was faced with admittedly inaccurate evidence on what the Defendants contended was critical evidence, the trial was re-opened to admit evidence disclosed by the Bates File. [ 76 ] It was intended that both Bowden and Bates would given evidence in Austin. It turned out that Bates was unable to testify due to declining health and mental capacity. However, his deposition recorded on video taken in the parallel US Federal District Court was admitted in evidence.

His son Bates Jr testified as to the authenticity of the file and deciphered some notations but had no other involvement in this matter. [ 77 ] Bowden’s evidence in light of the Bates File was not particularly useful because he had no independent memory of the meeting on June 19, 1992. He confirmed that the meeting occurred because his son recalled going to Bates’ home/office – a trip made memorable to Bowden’s son because he had just received his driver’s licence. [ 78 ] There is no doubt that the Bates File was genuine. It was detailed and well organized. I do not doubt that the notations reflect

Bates’ understandings and perceptions as well as accurately reflect his own actions. [ 79 ] With respect to Bates’ deposition evidence, there is greater reason to be cautious in accepting it as entirely accurate or complete. On April 11, 2011, when Bates gave his evidence, he had been suffering diminished mental capacity issues.

Bates Jr said that Bates’ mental capacity was day-to-day but at the time of his deposition, it was a “good day”. [ 80 ] Having reviewed the deposition evidence, it is clear that Bates was struggling with mental capacity issues in addition to the normal memory difficulties most witnesses have with events some time past – in this case almost 20 years.

For example, he had trouble recalling his age or remembering that he lived at the Bates airfield in 1992 or that he had an office there. [ 81 ] Bates had no specific memory of many of the key events of his interaction with Bowden and had obvious inaccurate memory of some events, such as believing that he had filed Bowden’s patent application. [ 82 ] These obvious difficulties, which undermine the reliability of Bates’ evidence, were confirmed by medical advice. Within a month of his deposition, Bates was determined to lack medical/legal capacity due to memory loss and dementia.

Within two months thereafter, he was diagnosed with significant progressive dementia affecting his memory, his behaviour, his reasoning and judgment. These difficulties were not new; his son referred to his father’s unusual behaviour as early as US Thanksgiving 2009. [ 83 ] Against this sad state of affairs, I have little confidence in the accuracy of Bates’ testimony. However, his notes and documents in the Bates File have some reliability. [ 84 ] These documents show that portions of Bowden’s evidence were inaccurate.

He was in contact with Bates more frequently than just September 1991 when he suggested that the patent search was ordered. He had the meeting of June 19, 1992 at Bates’ home/office after which the patent search was ordered. The results of that search were reflected in the Bates Letter.

The documents suggest that it was Bates who sent Bowden to Comuzzi because Bates did not have the time to prepare the patent application – rather than Bowden’s evidence that he got Comuzzi’s name from the Yellow Pages and that he had always wanted to use a lawyer. [ 85 ] Bowden explains his current memory problems as stemming from his evidence in parallel US proceedings. His evidence in those proceedings was the basis of his Canadian evidence but he gave his US evidence when his wife was in the late stages of a terminal illness and he was travelling between Denver and his home to attend to his wife.

He says that this stress caused his own confusion. [ 86 ] The Defendants’ ask the Court to totally reject Bowden’s evidence because of its unreliability. While some of the problems of Bowden’s evidence have already been noted, what is striking from the documents is how consistent the Bates File is with the core of Bowden’s story. • Bates’ notation of the June 19, 1992 meeting refers to the invention having been reduced to practice four months ago but that the first part was not public disclosure but testing. Four months from June 19 would be consistent with when Bowden began his testing.

There was even a notation to the date of April 15. • There was a reference to the fact that the patent application had to be filed “about next April” to avoid the statutory bar. It is unclear to what the bar refers, but most likely the one-year rule regarding public disclosure. • Bates’ checklist (used in all his patent files and reflecting the results of a client interview intake) recorded that the idea was reduced to practice four months ago, that it was publicly disclosed two months ago and that the statutory bar is “about 10 months from now”.

These last two references are to April 1992 and April 1993 respectively. [ 87 ] While none of the notations are particularly specific as to a day in April, they tend to point to the mid to latter part of April as the time of public disclosure and time for filing the patent application. [ 88 ] In the Bates File there was a memo of March 8, 1992 from Bowden which describes the invention in patent-type language. Bowden had no recollection of it or the circumstances of its creation. There is nothing in the Bates File or its timesheet that assists. It is just one of the many gaps in the documentation.

[ 89 ] As a result of the re-opened trial and evidence that generally confirmed the core of Bowden’s story, the Defendants developed a new theory of Bowden’s evidence. The Defendants contend that Bowden had to rely on a date in late April 1992 because he had declared bankruptcy on April 7. Presumably if the invention had been developed then, the benefits of the patent would have accrued to his creditors. [ 90 ] Other than this bare allegation of a motive for an April 19 date, the Defendants have produced no real evidence to support this latest theory. It is an allegation at least bordering on criminal conduct.

The Court cannot accept this theory as a fact without more convincing evidence. [ 91 ] Flowing from the re-opened trial, the Defendants raised a new event showing prior disclosure of Bowden’s invention. In October 1991 at Gonzales, Texas, there was a local parade. Bowden entered a float in the parade with an exhibit which consisted of a box on which were mounted some gauges and a decal with the name “Wildcat”. [ 92 ] Bowden testified that the box was empty.

It is impossible to conclude that the provision of an empty and unlocked box with some gauges and a decal contradicts the evidence that Bowden’s story of starting to work on the autodriller began in January 1992. Nor can I see how the empty box constitutes prior disclosure of the invention. [ 93 ] In the end, the Bates Letter and Bates File did little to advance the Defendants’ defence. The evidence shows the frailties of Bowden’s memory and his tendency to put things in the most favourable light as referred to earlier in these Reasons.

However, the re- opened trial evidence is more confirmatory than contradictory of Bowden’s narrative. [ 94 ] To round out the facts, Bowden had advised Comuzzi why he did not think the prior art in the Bates Letter was relevant. In March 1993, Bowden again contacted Comuzzi and began to work with an associate, Chris Makay, on the patent filing. Comuzzi informed Makay of the prior art issue and the belief that it was not relevant.

There is nothing to suggest, as the Defendants have, that Bowden tried to hide the prior art issue from Comuzzi or that somehow Bowden, Comuzzi and/or Makay planned to hide prior art from the USPTO. [ 95 ] It is now appropriate to outline the circumstances of the Defendants’ device which is said to infringe the 313 Patent. IV. PASON INVENTION [ 96 ] Pason, which was incorporated in 1978, is a Canadian oil field services company that specialized in developing software and hardware for the drilling process.

Jim Hill, President and CEO of Pason since 1987 when he acquired the company, was its chief corporate witness. [ 97 ] As noted earlier, one of Pason’s principal products was the EDR, the system for all data capture and monitoring of the equipment at a rig site. It was introduced to the market in Canada in 1994. [ 98 ] The EDR is a computer-based product which collects, stores and displays drilling rig data. It is connected to rig sensors to measure a variety of drilling parameters: WOB, speed, torque, drilling fluid pump rate, drilling fluid pump pressure, rate of penetration and others.

The data is processed in a computer, displayed on the drilling rig floor, networked with other users at the well site, digitally stored and transmitted to an offsite office. [ 99 ] The EDR was successful in Canada. It was employed on 90% of the active drill rigs in Canada by October 2003. [ 100 ] By 1999, Pason had decided to develop an autodriller which could perform directional and horizontal drilling. Pason also knew that of the autodrillers in the market, only the Wildcat was designed for directional and horizontal drilling.

The ability to control the drill using pressure as a parameter was a critical element of any Pason autodriller.

[ 101 ] As a result of patent searches, sometime in 1999 Pason became aware of Bowden’s patents both in Canada and the USA. Hill was informed that the Pason device could infringe the 313 Patent. [ 102 ] Pason directed its attention at the Wildcat because it was the only autodriller that used WOB and pressure parameters as Pason intended its device to do. Toward that end, Pason set up on rigs using the Wildcat system to acquire data on its operation. Pason was benchmarking against the Wildcat particularly in respect of the use of pressure.

It tested its device at places where Wildcats were installed to emulate the same results as the Wildcat. [ 103 ] Pason’s emphasis on pressure as a parameter for horizontal wells was consistent with all of the industry evidence that the use of pressure as a parameter was essential for non-vertical drilling. [ 104 ] In the course of its investigation, Pason retained the services of a Canadian patent agent Terry Leier. Leier was never called as a witness in this trial despite being alive and in Canada.

The purport of his advice comes from such Pason witnesses as Hill and Holt (described later) along with letters of advice. [ 105 ] Fairly summarized, Leier’s advice was: • if the infringing device had all the elements of the patented device and more, the extra elements did not make it less infringing; • infringement is considered in the context of the purpose of the invention; • one must consider the function of each element of the claim and if it is carried out by an equivalent apparatus, like software, there can still be infringement; • the Pason system operated within the parameters of Claim 14, at least some of the time; and • Pason’s software implementation of the elements found in the Wildcat was functionally equivalent to the elements of Claim 1 of the 313 Patent. [ 106 ] Aside from the general points on claim construction, on infringement and in respect of Claim 1, Leier concluded that the Pason system appeared to operate within the parameters of Claim 14 as well.

Leier advised that unless Pason could invalidate the 142 and 313 Patents, the operation of the Pason system fell within Claim 14. [ 107 ] Pason attempted to explain its continued pursuit of its autodriller without addressing the Wildcat claims as being based on Leier’s advice that the Patent was overly broad and invalid. The advice on invalidity was based on the “Varney patent” having anticipated Bowden. However, the Varney patent as a basis for invalidity was never relied on in this Court. [ 108 ] When Pason proceeded with its autodriller, it was fully aware of the patented Wildcat device and its operation.

The only conclusion one can draw is that Pason had been warned that despite the differences between the Wildcat and the Pason device using software, it was at risk of infringement unless it could establish invalidity. [ 109 ] The essential agreed difference between the Pason device and the Wildcat is that the Pason device is electronic whereas the Wildcat is mechanical – similar to one is digital, the other analog. [ 110 ] Pason hired Trevor Holt in 1999, an electrical engineer with experience in programming computerized control systems in the oil and gas industry.

In 2000 he began work on the programming for Pason’s autodriller which was to be electronic, able to interface with Pason’s EDR and would incorporate multiparameters including WOB and pressure. [ 111 ] There were problems developing an algorithm to handle WOB. By 2003 those problems were solved and Holt then developed an algorithm for the pressure parameter. The Pason AutoDriller was released to the public in March 2003. [ 112 ] The Pason Autodriller, as described by Pason, had three major physical components:

(

a) The AutoDriller control box, which includes a microcontroller computer board (on which the algorithm is installed in memory), and a stepper motor driver; (

b) The stepper motor; and (

c) The drawworks drum ticks encoder (a device for measuring the precise movement of a drawworks drum). [ 113 ] The Pason AutoDriller control box must be connected to the EDR.

The EDR consists of a number of components connected around the drilling rig, including a number of sensors (such as sensors for WOB, drilling fluid pump pressure and depth), an EDR junction box for processing the input from those sensors, a server computer for logging data, and a dog house computer which provides the user interface for the EDR and any connected device, including the Pason AutoDriller. [ 114 ] The stepper motor has a wire rope wrapped around its rotating end. The other end of the wire rope is connected to the handle of the drum brake typically found on conventional drilling rigs.

As the stepper motor turns clockwise or counterclockwise, the brake handle will be respectively pulled or released. [ 115 ] The drawworks drum ticks encoder mounts on the shaft of the drawworks on the rig to provide to the Pason AutoDriller microcontroller an indication of the movement of the drawworks. [ 116 ] The stepper motor driver receives its commands from the Pason AutoDriller microcontroller. The stepper motor driver can only process two types of commands: (

a) a quantity of steps dictating the magnitude of movement of the stepper motor (and therefore the brake handle to which it is attached). Each step corresponds to a single unit of rotation of the stepper motor. (

b) direction instructions, which dictate the direction of movement of the stepper motor. A “pull” direction will result in the stepper motor turning clockwise, which will result in pulling up on the brake handle.

A “release” direction will result in the stepper motor turning counterclockwise, which will result in releasing the brake handle and letting the draw-string run. [ 117 ] The commands ultimately sent to the stepper motor driver are the result of data processing performed by a software algorithm stored on the microprocessor, which is used to calculate the precise motion needed to be applied at the brake handle.

This calculation is performed 50 times per second (i.e. every 1/20 th of a second). [ 118 ] The stepper motor driver takes the direction and steps information and in turn energizes the stepper motor to cause it to move the prescribed number of steps and direction over the next 1/20 th of a second.

This turning motion pulls or releases the brake handle by the number of steps calculated by the algorithm. [ 119 ] Varco and its experts contend, as discussed later, that despite the differences between the Wildcat mechanical system and the Pason AutoDriller electronic system, the critical elements of the 313 Patent are performed by the Pason AutoDriller. [ 120 ] In countering the infringement claim, Pason says that if its first algorithm [Old Version] infringes, its second algorithm [New Version] does not.

Varco’s counter through its experts is the colloquial equivalent of “one can dress up a pig but it is still a pig” – the Pason AutoDriller still does what the 313 Patent teaches. However there is no serious disagreement of how the Pason AutoDriller or the algorithms function. [ 121 ] The following description of the two algorithms is set out from the evidence of Holt.

The description of the Old Version is extensive so one can contrast it with the New Version. [ 122 ] The Old Version of the algorithm was used in Pason AutoDrillers from 2003 until 2008 in the United States, and from 2003 to September 2009 in Canada and elsewhere. [ 123 ] [Redacted by Court Order due to claim of trade secret]

[ 124 ] [Redacted by Court Order due to claim of trade secret] [ 125 ] [Redacted by Court Order due to claim of trade secret] [ 126 ] [Redacted by Court Order due to claim of trade secret] [ 127 ] [Redacted by Court Order due to claim of trade secret] [ 128 ] [Redacted by Court Order due to claim of trade secret] [ 129 ] When the Pason AutoDriller was operated using the Old Version of the algorithm, the stepper motor driver signals were not representative of any one of the measured parameters of WOB, pressure or any other parameter.

Although the system measured drilling fluid pressure and considered it (depending on the setpoints selected by the user), due to the influence of the many other measured parameters and values used by the algorithm, the resulting stepper motor driver signals never represented the change in drilling fluid pressure. [ 130 ] It is clear that the Pason AutoDriller used more parameters than the Wildcat but this is not determinative of infringement nor does it uncut the essential parameters of WOB and pressure. [ 131 ] The New Version was deployed in 2008 on Pason AutoDrillers in the United States, and in September 2009 in Canada and the rest of the world.

It is currently in use worldwide. [ 132 ] [Redacted by Court Order due to claim of trade secret] [ 133 ] [Redacted by Court Order due to claim of trade secret] [ 134 ] The issue of infringement will be addressed again later; however, Pason continued to sell its AutoDriller in the face of the Wildcat. It held out to customers that the Pason AutoDriller controlled drilling based on pressure differential, that it also used WOB and that it could use both pressure and WOB at the same time. [ 135 ] Pason had a considerable marketing advantage over others in the autodriller market.

It had a significant presence in the drilling market because of the strength of its EDR product. Because of this market strength, it was able to add its Pason AutoDriller to the suite of products it offered to rig operators who already used the EDR. [ 136 ] The advantage Pason enjoyed is that it could offer, particularly for those rigs with the EDR performing electronic data recording and with Wildcats doing the drilling, an easy way to consolidate drilling and recording under Pason products.

Pason experienced rapid growth in 2003 (81 rigs) to 2004 (431 rigs) and thereafter. [ 137 ] The effect of Pason’s introduction of its AutoDriller on Prejean/Varco was significant. The Plaintiffs did not have the opportunity to deploy its product as expected despite being able to meet the Canadian demand for its product. [ 138 ] The evidence establishes that had Pason not brought its Pason AutoDriller to market, the Plaintiffs could have serviced the entire Canadian market for this type of product, and invested further to meet any expanding demand.

There is no evidence of other serious competition in Canada between autodrillers capable of vertical/horizontal/directional drilling than the Wildcat and the Pason AutoDriller.

[ 139 ] As a result of the existence of the Pason AutoDriller, the Plaintiffs were forced to cut prices in the face of an expanding market. [ 140 ] Pason also had foreign subsidiaries in the USA, Mexico and Australia. It sells critical components of its Pason AutoDriller to these subsidiaries prior to May 2007. It claims that since May 2007, it has not assembled the individual components together in Canada prior to export. [ 141 ] Following export of the components, these foreign subsidiaries rent the Pason AutoDriller/components to customers in those countries. [ 142 ] Pason earns revenue from these foreign subsidiaries through (

a) mark-up on components, and (

b) a share in the Pason AutoDriller royalties/rentals paid to the foreign subsidiaries. V. ISSUES [ 143 ] There are five issues to be determined; some issues having several subparts: 1. The proper construction of the 313 Patent in particular Claims 1, 11 and 14. 2. Whether the Defendants infringed Claims 1, 11 or 14, either/or as made and used in Canada or in the export of components. 3. Whether Claims 1, 2, 3, 4, 9, 10, 11, 13, 14 or 15 are invalid by reason of anticipation (prior art or public use more than one year before the priority date), obviousness, lack of utility and overbreadth. 4.

Whether the application for the 313 Patent should be deemed abandoned for failure to respond in good faith to the Canadian Intellectual Property Office [CIPO] examiner. 5. The appropriate monetary remedy – damages or an accounting of profits. VI. ANALYSIS A. CLAIM CONSTRUCTION [ 144 ] The parties agree only in part with respect to the crucial issues in the claim construction of Claims 1, 11 and 14 of the 313 Patent. [ 145 ] The relevant claims are set out below: Claim 1.

An automatic drilling system for automatically regulating the release of the drill string of drilling rig during the drilling of a borehole, comprising: a drilling fluid pressure sensor; a drilling fluid pressure regulator coupled to said drilling fluid pressure sensor, said drilling fluid pressure regulator measuring changes in drilling fluid pressure and outputting a signal representing those changes; a relay coupled to said drilling fluid pressure regulator, said relay responsive to the output signal of said drilling fluid pressure regulator to supply a drill string control signal at an output thereof; and a drill string controller coupled to said relay wherein a decrease in drilling fluid pressure results in said relay supplying a drilling string control signal that operates said drill string controller to effect an increase in the rate of release of said drill string and an increase in drilling fluid pressure results in said relay supplying a drill string control signal that operates said drill string controller to effect a decrease in the rate of release of said drill string.

Claim 11.

A method for automatically regulating the release of the drill string of a drilling rig drill, comprising the steps of: measuring drilling fluid pressure; producing a signal in response to changes in drilling fluid pressure, said signal representing the changes in drilling fluid pressure; relaying said signal to a drill string controller; and controlling said drill string controller to increase the rate of release of said drill string when said signal represents a decrease in drilling fluid pressure and to decrease the rate of release of said drill string when said signal represents as increase in drilling fluid pressure.

Claim 14.

A method for automatically regulating the release of the drill string of a drilling rig drill, comprising the steps of: measuring drilling fluid pressure and bit weight; producing a first signal in response to changes in drilling fluid pressure, said first signal representing the changes in drilling fluid pressure; producing a second signal in response to changes in bit weight, said second signal representing the changes in bit weight; selecting any one of said first signal, said second signal, and both said first and said second signals to control the release of said drill string; and relaying said selected signal or signals to a drill string controller which regulates the release said drill string in response to said selected signal or signals. [ 146 ] The Plaintiffs say that the issues of claim construction are: 1.

Whether the “signal representing these changes” (Claim 1) and the “signal representing changes in drilling fluid pressure” (Claims 11 and 14) must represent changes only in drilling fluid pressure; 2. Is the inverse relationship between changes in drilling fluid pressure and the rate of release string mandatory/essential? 3. What is the meaning of “selecting” in Claim 14 (is it manual or automatic)? [ 147 ] The Defendants add to the above issues: 1. What is the meaning of “drilling fluid pressure regulator”? 2.

Are the claims in the 313 Patent restricted to conventional drilling rigs having a gravity-fed drill string that is controlled by a friction brake?

(1) Legal Principles [ 148 ] There is no basic disagreement between the parties as to the legal principles of Claim Construction. Before dealing with either infringement or validity, the claims must be construed by the Court as of the date of publication of the Patent (October 20, 1994). ( Free World Trust v Électro Santé Inc , 2000 SCC 66 , [2000] 2 SCR 1024 [ Free World ] ; Whirlpool Corp v Camco Inc , 2000 SCC 67 , [2000] 2 SCR 1067 [ Whirlpool ] )

[ 149 ] The claims are to be construed purposively which is an objective exercise as to what a “person skilled in the art” [Skilled Person] would have understood the inventor to mean by the words of the claim ( Whirlpool at paras 45-47 ). [ 150 ] It is settled law that a patent must be read by a mind willing to understand, not by a mind desirous of misunderstanding.

Such willing mind plays close attention to the purpose and intent of the author ( Whirlpool at para 49 (c)). [ 151 ] The 313 Patent describes an automatic driller that can be used to drill directional holes with a mud motor that accounts for changes in drilling fluid pressure that occur as drilling fluid passes through a mud motor.

The invention automates the process of controlling the rate of release of the drill string, something which previously had to be done manually. [ 152 ] The invention relates to an automatic drilling system that controls the rate of release of the drill string in vertical, directional and horizontal drilling in response to any one of or any combination of bit weight, drilling fluid pressure, drill string torque and drill string RPM. [ 153 ] The issues of claim construction as well as many of the issues in validity and infringement are dependent on the expert evidence.

In this case, the Plaintiffs put forward Gary Wooley; the Defendants’ principal expert was Tommy Warren. [ 154 ] Both of these experts were well qualified. Their reports were generally clear and they genuinely tried to help the Court. However, as in many of these cases, the Court must accept one expert’s opinion over the others as the Court is in no position to form its own technical opinion. [ 155 ] Gary Wooley is a PhD in mechanical engineering and has worked in drilling on-site and in directional drilling. He has provided research and engineering support to those in the field.

After leaving the oil company ARCO, he was a consulting engineer in drilling and software development and licensing. Subsequently, he established his own engineering consulting company dealing with a multitude of drilling issues and writing software programs. He has also been accepted as an expert witness in numerous US cases. [ 156 ] Tommy Warren has an equally impressive CV and qualifications. For much of his career, he was in the research area at Amoco Technology Center or in research at Tesco Corporation. He has published numerous articles in the field of drilling.

He is also the holder (with others) of a number of US patents in drilling apparatus. He has not previously appeared as an expert witness. [ 157 ] As a general rule, the Court finds Wooley’s evidence more clear, consistent and persuasive. Wooley’s advantage of both practical and academic experience, which is more closely related to these types of products, is preferred over Warren’s more research- based experience.

(2) Person of Ordinary Skill [ 158 ] There are areas of agreement between Wooley and Warren as to the Skilled Person and some areas of disagreement. [ 159 ] As to the areas of agreement, the Skilled Person would have several years of experience in the oil and gas drilling business and have a good understanding of the basic drilling process and the use of drilling equipment.

This would include (but not be limited to) the following types of persons: drilling engineers, on site drilling representatives of oil and gas companies, tool pushers (supervisors of the drilling crew), drillers (persons operating drill rig and directing efforts of the floor hands), floor hands, directional drillers (drillers with special skills and equipment for directional drilling wells), contractors with special drilling skills and others involved in the drilling business. [ 160 ] Where the two experts

part company on this issue is in respect of the knowledge and experience of the Skilled Person. Warren opines that the Skilled Person should have either a bachelor’s degree in Mechanical or Petroleum Engineering with five years’ experience in drilling rig control systems or little to no formal education but at least 10 years of practical experience in using and servicing autodrillers and associated drilling rig equipment.

[ 161 ] Wooley’s opinion is that a person with somewhat lesser education or experience would constitute a Skilled Person. That person’s education level would vary from engineers with college or university degrees to field hands who did not graduate high school but who had substantial experience in the field. [ 162 ] To the extent that there is a significant different between the two experts, Warren emphasizes education while Wooley focuses on experience. Wooley, by his own qualifications, encompasses both education and experience whereas Warren is more research- focused.

As said previously, the Court prefers Wooley’s evidence generally and in this regard the Court accepts the more practical/experiential emphasis of Wooley without the limiting requirement of advanced education or necessarily a fixed number of years of experience established by Warren. [ 163 ] Therefore, the Skilled Person is as defined by Wooley. (3) “ONLY” re changes in drilling fluid pressure (Claims 1, 11 and 14) [ 164 ] The Defendants’ position is that the signal output from the drilling fluid pressure regulator is a signal representing changes in drilling fluid pressure only .

The Defendants’ expert reaches that conclusion by reading in limitations in dependent Claims 2 and 5 to Claim 1, an unsound approach to claim construction (see Eli Lilly and Co v Apotex Inc , 2009 FC 991 , 351 FTR 1 ). [ 165 ] Warren has read in the word “only” to Claims 1, 11 and 14, a word that does not appear in any of the claims. [ 166 ] As Wooley points out in discussing these dependent claims, a “regulator” is a device for controlling or limiting something or maintaining a designated characteristic by receiving or sensing a signal, processing or producing a response.

In this case the response is to effect an increase in the rate of release of the drill string or to effect a decrease in the rate of release of the drill string. [ 167 ] There is no limitation in the 313 Patent as to the type of device that could be a regulator. The type of regulator in the preferred embodiment was a pneumatic device but Wooley confirmed that Claim 1 is not so limited; the regulator could be hydraulic, electrical, mechanical or electronic. [ 168 ] The preferred embodiment (313 Patent at 7-8) refers to measuring pressure, bit weight and torque.

Considering Claim 12, for example, it is clear that a signal can represent more than one parameter. [ 169 ] In the end, the issue is resolved by reference to what a Skilled Person would understand.

It is appropriate for the Court to use such evidence in its determination of the claim language ( Whirlpool at para 48 ). … In Catnic , as in the earlier case law, the scope of the monopoly remains a function of the written claims but, as before, flexibility and fairness is achieved by differentiating the essential features (“the pith and marrow”) from the unessential, based on a knowledgeable reading of the whole specification through the eyes of the skilled addressee rather than on the basis of "the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge" ( Catnic , supra, p. 243). [ 170 ] As Wooley testified, a Skilled Person would not read the limitation of “only” into the Claims. [ 171 ] Warren ’s evidence to support his

interpretation was strained and not persuasive. While first admitting that a signal (in Claims 11 and 12) could represent multiple parameters, he then concluded that the Patent did not teach how a conflict between one parameter above its set point (the value or number set for a parameter to trigger a response) would be resolved if the other parameter was below its set point.

However, he conceded that the conflict he saw was resolved in the preferred embodiment. [ 172 ] By reference to the preferred embodiment and construing the claims with the mind of a Skilled Person willing to understand, the signal representing changes in drilling pressure does not mean a signal representing only changes in drilling fluid pressure nor is there any conflict in operation of two or more parameters.

(4) Inverse Relationship – Mandatory (Claims 1 and 11) [ 173 ] The “inverse relationship”, as it has been described at trial and in Claims 1 and 11, describes the relationship between changes in drilling fluid pressure and the rate of release of the drill string where an increase/decrease in one results in a decrease/increase in the other. [ 174 ] Claim 1 describes it as “… a decrease in drilling fluid pressure …”.

Claim 11 describes it as “… to increase the rate of release of said drill string …”. [ 175 ] The Defendants claim that this inverse relationship is an essential feature of Claims 1 and 11 and therefore is mandatory in the sense that every time the pressure reaches above the set point, there must be a decrease in the rate of release of the drill string – that the relationship is always followed, without exception. [ 176 ] Both experts agree that the inverse relationship is an essential feature of the invention.

The evidence is that if in normal operations the equipment was not operating in that way – as pressure decreased, the drill string would advance so drilling could continue against the underground wall, meaning that the Patent would not have much utility. [ 177 ] The Defendants’ position has the advantage to them, particularly in terms of infringement, that the Pason Autodriller algorithm measures pressure every 1/50 th of a second and therefore leaves open the possibility that there could be a point in each 1/50 of a second when the relationship did not exist. [ 178 ] This is a strained

interpretation of the Claims which must firstly be considered on the basis of normal operations. The whole purpose of the invention is to set up, on an automatic basis, the relationship of a decrease in one or more parameters (pressure, bit weight, etc.) resulting in the release of the drill string to continue drilling operations. [ 179 ] Further, both experts cite instances of exceptions to the inverse relationship.

Wooley lists instances of an exceptional nature, such as a low setting for the air flow regulator so that there is no reaction from the regulator. [ 180 ] Warren admitted that Claim 1 covers the preferred embodiment and that in the preferred embodiment there are instances where the inverse relationship is not observed. [ 181 ] In any event, applying a purposive

interpretation to the Claims in light of the purpose of the invention and the realities of operation, the inverse relationship, while important, is not mandatory at all times but is normal and to be expected.

(5) Selecting Automatic/Manual (Claim 14) [ 182 ] The Defendants’ position is that the selecting step in Claim 14 (see underlined portion below) is a manual operation. Claim 14.

A method for automatically regulating the release of the drill string of a drilling rig drill, comprising the steps of: measuring drilling fluid pressure and bit weight; producing a first signal in response to changes in drilling fluid pressure, said first signal representing the changes in drilling fluid pressure; producing a second signal in response to changes in bit weight, said second signal representing the changes in bit weight; selecting any one of said first signal, said second signal, and both said first and said second signals to control the release of

said drill string; and relaying said selected signal or signals to a drill string controller which regulates the release said drill string in response to said selected signal or signals. [Emphasis added by Court] [ 183 ] One of the difficulties with the Defendants’ position is that Claim 14 is a “method for automatically regulating the release of the drill string …”.

There is nothing in the wording of Claim 14 to suggest manual operation or selection. [ 184 ] Wooley’s opinion is that the “selecting” step is done after the parameters have been set and the selecting as between two signals is done automatically. [ 185 ] The Defendants rely on a portion of the Specification (313 Patent at 4, first paragraph) to support their position of manual selection. Each of the regulators attaches to a relay which is responsive to that regulator output signal to supply a drill string control signal to a drill string controller.

The relays connect in series so that all the regulators may be utilized concurrently to provide a drill string control signal to the drill string controller via their respective relays.

Furthermore, the relays attach to relay selectors which switch the relays on and off to permit an operator of the automatic driller to select which one of or which combination of the regulators are to control the drilling operation. [Emphasis added by Court] [ 186 ] Wooley explained that the selecting step referred to in the Claim is not the manual selecting done by the user before the device is put into operation – the step of establishing the set points. [ 187 ] Wooley’s opinion is consistent with the United States Court of Appeals for the Federal Circuit’s decision in Varco, LP v Pason Systems USA Corp , 436 F (3d) 1368 (Fed Cir 2006) [ Varco, LP ].

That Court held that the drilling system automatically selects between the primary and secondary controls during operations. To clarify this setup procedure, the specification explicitly states that this initial setup occurs “ before the [selected] regulator . . . will automatically regulate” the release of the drill string. ’142 patent, col. 8, II. 57-61 (emphasis added). The district court relied on this portion of the specification to support its requirement of manual operation.

To the contrary, this portion of the specification sets forth an initial setup or calibration step that precedes the claimed selecting step. In effect, the district court erred by reading the initial setup or calibration step into the claimed selecting step. ( Varco, LP at 9) With this initial adjustment in place, the drilling system then automatically selects between the primary and secondary controls during operation.

Thus, the prosecution history confirms that selecting in claim 14 does not encompass the initial setup or calibration of the drilling system, but rather the conflict resolution process between primary and secondary controls during operation. ( Varco, LP at 10-11) [ 188 ] Fairly and purposively read, Claim 14 makes clear that the selecting of the signal to control the drill string is done automatically.

(6) Other Claims Construction Issues [ 189 ] The three previous claims construction issues were at the heart of this litigation.

The Defendants have raised two subsidiary issues. [ 190 ] The issue of whether a drilling fluid pressure regulator can receive only a single input has been previously addressed. [ 191 ] As indicated earlier, on the issues of claim construction which are the purview of the Court, Wooley’s input has been of greater assistance and the Court accepts his evidence on this issue that a Skilled Person would understand that the claims contain no such limitation. [ 192 ] Lastly, the Defendants say that the Patent is intended to cover any drilling rig that lowers a drill string whereas the Plaintiffs argue that the Patent is restricted to conventional drilling rigs having a gravity-fed drill string that is controlled by a friction brake. [ 193 ] The issue turns on the word “release” as used in the Claims.

Wooley opined that a Skilled Person would understand this to mean, in the context of the Patent, reducing brake friction on a conventional brake controlled drilling rig which would have the effect of increasing the rate at which the drill string is lowered. [ 194 ] Warren , on the other hand, opined that the term “release” would cover any “advancement” of the drill string. It is unclear what type of advancement he had in mind other than a system that drives the drill string.

His reliance on the second embodiment is misplaced as its description never uses the word “release”. [ 195 ] The invention considered as a whole is based on releasing a brake that lowers the drill string. It was admitted that the second embodiment was an afterthought and Wooley opined that it was not covered by the Claims. [ 196 ] In the Patent the related art which discussed control of the rate of release of the drill string referred to releasing or applying a brake handle. [ 197 ] The word “control” in the context of the Patent’s prior art meant applying the brake.

The words “control” and “regulating” are used in the context of releasing the drill string in response to changes in one or more parameters. [ 198 ] The Defendants’ position is not persuasive. The Patent is limited to conventional brake-controlled drilling rigs that release a brake and allow the drill string to fall under the force of gravity. [ 199 ] Lastly, with respect to Claims 1, 11 and 14, the further issue is whether the drilling control signal can only be responsive to one parameter, pressure.

While the relay is to be responsive to the signal from the drilling fluid pressure regulator, the Claim does not say that the relay to the controller can only be responsive to the pressure signal. [ 200 ] For example, Claim 12, dependent on Claim 11, shows that the relaying of the “said signal” to the controller represents changes in two parameters, pressure and torque. [ 201 ] Lastly, the Defendants allege that a purposive construction necessitates a finding that reference to “release of the drill string” includes a conventional drilling rig having a gravity-fed drill string that is controlled by a friction brake, a drilling rig having a drill string in the form of a hydraulically driven coil tube with a drill bit, and any other rig that lowers a drill string. [ 202 ] The purport of the Defendants’ submission is that the patent is broader than Varco’s position that the 313 Patent is restricted to conventional rigs having a gravity-fed drill string that is controlled by a friction brake.

The argument depends to some extent on the second embodiment’s reference to the invention being configured to regulate a coil tubing drilling rig.

[ 203 ] Wooley was of the view that while Bowden might have tried to broaden the patent that way, he could not agree that that was how the patent should be interpreted. The background of the Figure 14 and the coil tube was that it was a last minute add-in after the real purpose and descriptions of the patent had been drafted. [ 204 ] The whole basis of the patent application was the control of the drill string.

I concur with the limitation Varco says should be understood in the patent as being more consistent with the inventor’s intent and the purpose of the invention. [ 205 ] Having interpreted the principal claims and the issues arising, the Court is next required to address the infringement issue. B. INFRINGEMENT [ 206 ] The basic principles on the law of infringement are not seriously in issue.

Section 42 of the Patent Act , RSC 1985, c P-4 [ Patent Act or the Act ], sets out the right of the patent holder to exclude others, for the term of the patent, from making, constructing or using the claimed invention or selling it to others to be used. [ 207 ] The Plaintiffs claim that Pason infringed Claims 1, 11 and 14 of the 313 Patent

a) by the manufacture, use and rental of the AutoDriller in Canada and

b) by exporting the Pason AutoDriller, manufactured in Canada, to foreign countries for use in those foreign countries. [ 208 ] The burden of proof on this issue rests with the Plaintiffs. As held in Free World , infringement arises if the offending item takes all of the essential elements of a claim in the invention. As referred to earlier, the addition of features does not avoid infringement if all the elements of a claim have been adopted.

(1) Claim 1 [ 209 ] Claim 1 consists of the following four elements: • a drilling fluid pressure sensor; • a drilling fluid pressure regulator; • a relay; and • a drill string controller. [ 210 ] In concluding that Pason has infringed the Patent, I have relied significantly on the expert evidence of Wooley. [ 211 ] The Pason AutoDriller has a drilling fluid pressure sensor in the form of the pressure transducer and EDR J Box. [ 212 ] It also has a drilling fluid pressure regulator in the form of the microcontroller.

It performs the function of a regulator in Claim 1 because the microcontroller receives the data that comes from the drilling fluid pressure sensor, processes it and then outputs a signal representing the changes in drilling fluid pressure to a stepper motor driver. [ 213 ] The algorithm generates the output from the microprocessor. The microcontroller interprets the parameter (WOB/pressure) and if more or less braking is required to maintain the set points, it sends a signal to the stepper motor to move the brake handle as necessary. [ 214 ] As held in the Claim Construction

section of these Reasons, Warren’s

interpretation that the Patent’s regulator is restricted to only one parameter has not been accepted. [ 215 ] The Court concludes that the microcontroller in the Pason AutoDriller is a regulator that measures changes in drilling fluid

pressure and outputs a signal representing those changes. [ 216 ] The Pason AutoDriller has a relay in the form of the stepper motor. The stepper motor converts the signal from the microprocessor and passes it on to the stepper motor. Even Warren admits that the stepper motor receives a signal and outputs another signal. As concluded by Wooley, there is no requirement that the signals be based on the same parameter.

The fact that the signal received by the stepper motor relates to multiple parameters is not material to this issue. [ 217 ] The last element in the claim is the drill string controller which regulates the release of the drill string. The stepper motor in the Pason AutoDriller directs the action of the brake handle in response to the signal from the stepper motor driver. [ 218 ] In the context of this case, the term “regulate” is synonymous with “control”.

I accept Wooley’s opinion as well that the stepper motor in the Pason AutoDriller performs the function of the controller in the Patent. [ 219 ] The Defendants contend that the Pason AutoDriller does not rely on the inverse relationship referred to in the Claim Construction

section of these Reasons. It was their position that since the inverse relationship was mandatory under the Patent, the Pason AutoDriller did not infringe because its operation, by virtue of the algorithms, was not always dependent on the inverse relationship. [ 220 ] The Court’s conclusion on Claim Construction is sufficient to dispose of this alleged distinction. However, there are further reasons that undermine the Defendants’ position. [ 221 ] Both devices follow this inverse relationship the overwhelming majority of the time. If they did not, neither device would function as intended or have much value.

Momentary disconnects from this relationship are not a basis for distinguishing the devices. As Wooley explained, both the Pason AutoDriller and the Patent’s preferred embodiment have this disconnect from the inverse relationship periodically. [ 222 ] Pason witnesses concede the normal existence of this inverse relationship. This is also consistent with the Defendants’ evidence in US proceedings. [ 223 ] The Defendants place reliance on the algorithms as negating the inverse relationship – if not in the Old Version, then in the New Version. [ 224 ] The evidence with respect to the algorithms is not persuasive.

Pason’s evidence lacked explanations and detail when contrasted with that of Wooley who looked at the details of the computer codes and related material. [ 225 ] Pason relied on demonstrative evidence rather than a detailed explanation of the various steps in the code. The demonstrative evidence contained one admitted fundamental error. [

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