KOBOLD CORPORATION, KOBOLD COMPLETIONS INC., v. 2039974 ALBERTA LTD., 2023 FC 11

Date: 20230105 Docket: T-451-20 Citation: 2023 FC 11 Ottawa, Ontario, January 5, 2023 PRESENT: The Honourable Mr. Justice Manson BETWEEN: KOBOLD CORPORATION, KOBOLD COMPLETIONS INC., and 2039974 ALBERTA LTD. Plaintiffs and NCS MULTISTAGE INC. Defendant JUDGMENT AND REASONS I.

Introduction [ 1 ] This is a motion brought by the Defendant/Plaintiff by counterclaim, NCS Multistage Inc. [ " “NCS” " ], under Rule 51 of the Federal Courts Rules, SOR/98-106 [the " “ Rules ” " ] appealing an Order of Associate Judge Ring [the " “Order” " ]. [ 2 ] The Order allows the Plaintiffs/Defendants by counterclaim, Kobold Corporation, Kobold Completions Inc., and 2039974 Alberta Ltd. [collectively " “Kobold” " ], to amend their Statement of Claim to continue to include patent infringement allegations against an NCS product called the " “Mongoose” " .

NCS objects to the Amended Statement of Claim because NCS believes all of Kobold’s infringement claims with respect to the Mongoose are barred by Justice Zinn’s earlier

summary judgment decision within this same file ( Kobold Corporation v NCS Multistage Inc, 2021 FC 1437 [ Kobold 2021 ]). II. Background [ 3 ] NCS and Kobold are competitors in the oilfield services industry. Both are involved directly or indirectly in fracking operations. [ 4 ] Kobold started this litigation against NCS through its Statement of Claim dated April 6, 2020. Kobold is the owner of Canadian Patent No. 2,919,561 [the " “561 Patent” " ]. The Statement of Claim alleged that NCS has infringed the 561 Patent by using it in its bottomhole assembly [ " “BHA” " ] tools.

BHA tools are used to prepare a well for production. [ 5 ] Kobold alleged that NCS has infringed the 561 Patent through its use in four of its BHA tools: the Mongoose, Shift Frac Close [ " “SFC” " ], Shift Frac Close 2 [ " “SFC 2” " ], and Shift Frac Close 3/Innovus [ " “SFC 3” " or " “Innovus” " ]. [ 6 ] There are two iterations of the Mongoose; one based on a 2012 drawing [the " “2012 Mongoose” " ] and the other based on a 2018 drawing [the " “2018 Mongoose” " ]. [ 7 ] On February 3, 2021, NCS brought a

summary judgment motion. NCS sought to have Kobold’s claims dismissed based on its defence of prior use pursuant to

section 56 of the Patent Act , RSC 1985, c P-4 . [ 8 ] On December 17, 2021, Justice Zinn granted

summary judgment to NCS with respect to its prior use of " “the Mongoose” " . Paragraph 4 of the Order in Kobold 2021 grants

summary judgment " “with respect to the claims relating to its Mongoose device” " . The decision stemmed from admissions made by Kobold during the hearing that NCS could continue to manufacture and use the Mongoose. [ 9 ] Based on Justice Zinn’s decision on July 5, 2022, Kobold brought a motion to amend its Statement of Claim. NCS contested the amendments as, under its view, the amendments continue to allege infringement of the 561 Patent through the use of the Mongoose. NCS objects to the following amendments relevant to this motion: 16.

At least as early as August 2017, NCS directly or through entities it controls, designed, manufactured, used, offered for rent or lease, rented or leased, offered for sale and/or sold a Bottom Hole Assembly completion tool for deployment in a wellbore (“BHA”) … 18. NCS’ completion tool has BHAs have been marketed and advertised as the “Mongoose BHA Tool ”, the “SFC2 BHA”, and/or the “Innovus BHA” ... 24.

By making, using and selling the NCS completion tool BHAs including the NCS Packers , NCS infringes the claims of the 561 Patent. [ 10 ] NCS also claims that, in the proposed amendments, Kobold mischaracterized Justice Zinn’s holding in Kobold 2021 :

15.1 On December 17, 2021, Justice Zinn issued a decision on the

summary judgment motion filed by NCS: Kobold Corporation v. NCS Multistage Inc., 2021 FC 1437 . As part of that decision, Justice Zinn construed the claims of the 561 Patent and accepted the plaintiff’s admission with respect to the 2012 Mongoose Blue Bullet Packer identified in NCS Production 0099 CEO. [ 11 ] On motion to amend the Statement of Claim, NCS argued that Justice Zinn’s

summary judgment decision forecloses any claims with respect to both the 2012 Mongoose and the 2018 Mongoose; however, Kobold’s above amendments continue to improperly pursue claims related to the 2018 Mongoose. [ 12 ] In an order dated October 6, 2022, Associate Judge Ring rejected NCS’s arguments and granted leave to Kobold to amend its Statement of Claim as proposed. [ 13 ] NCS appeals the Order of Associate Judge Ring, and seeks the following relief: i . An order setting aside the Order of Associate Judge Ring dated October 6, 2022 denying Kobold’s request to amend the Statement of Claim in T-451-20 indicated in

Schedule A to Kobold’s notice of motion in the underlying motion; and ii . costs. III. Decision Under Review [ 14 ] In the Order, Associate Judge Ring rejected NCS’s objections to Kobold’s Amended Statement of Claim and allowed Kobold to amend the Statement of Claim as proposed. [ 15 ] Associate Judge Ring interpreted Justice Zinn’s decision in Kobold 2021 as granting

summary judgment only with respect to the 2012 Mongoose and not the 2018 Mongoose. In doing so, Associate Judge Ring made the following observations: i . The Court’s finding regarding the Mongoose was predicated on Kobold’s admission. Justice Zinn characterized the admission as relating to the " “2012 Mongoose” " ( Kobold 2021 at para 31 ). ii . In a relevant excerpt of the trial transcript, counsel for Kobold took Justice Zinn to drawings of the 2012 Mongoose, and stated on the record, " “so this is the Mongoose 2012. This is the tool that we say, okay, you can keep doing this” " . IV.

Standard of Review [ 16 ] The applicable standard of review to the appeal of the decision of an Associate Judge are the appellate standards outlined in Housen v Nikolaisen , 2002 SCC 33 ( Hospira Healthcare Corporation v Kennedy Institute of Rheumatology , 2016 FCA 215 at para 28 ). For questions of law and mixed fact and law where there is an extricable question of law, the standard is correctness. Otherwise, for questions of fact or mixed fact and law the standard of appeal will be overriding and palpable error. [ 17 ] The

interpretation of a Court order is a question of law ( Fontaine v Canada (Attorney General) , 2020 ONCA 688 at para 20 ). Accordingly, the standard of review for Associate Judge Ring’s

interpretation of Kobold 2021 is correctness. V. Issues [ 18 ] Did Justice Zinn’s decision to grant

summary judgment with respect to the Mongoose device include the 2012 Mongoose and the 2018 Mongoose? VI. Analysis [ 19 ] After reviewing the relevant excerpts from the trial transcripts as well as the Reasons for Judgment, I find that Justice Zinn’s decision to grant

summary judgment to NCS with respect to the Mongoose in Kobold 2021 applies to both the 2012 Mongoose and the 2018 Mongoose. [ 20 ] The following outlines the relevant portion of Kobold’s concession at the

summary judgment hearing: [ Counsel for Kobold ]: The base position I would say in terms of what NCS can or can’t do, is we say the 2012 Mongoose they can keep doing that. There’s no contest here that they have to stop doing it. That is, in fact, the same act, the same commercial product, as it were. What NCS cannot do - [ Justice Zinn ]: Can I just stop you for a minute? You broke up. Just momentarily, can you go back to what you say they can continue to do? [ Counsel for Kobold ]: They can do the 2012 Mongoose. [ Justice Zinn ]: Mongoose, okay. …

[ Counsel for Kobold ]: I always get a little anxious in these cases with branding, because it’s easy to switch names. But that tool that’s, I’ll show you the tool - it’s depicted in one of these pictures. They can keep doing that. There’s no contest here that they can’t. I’m not arguing about that. What we say they can’t do is expand into new commercial products, so they cannot expand into SFC2, they cannot expand into Innovus. That is outside the scope of the protection of 56. [ Counsel for Kobold ]: We'll skip over compendium tab 17 and 18, and we're going to go to 19,21 which is a drawing.

And just let me know when you have it Justice Zinn. [ Justice Zinn ]: I have it. [ Counsel for Kobold ]: So this is the Mongoose 2012. This is the tool that we say, okay, you can keep doing this. I'm not objecting to that. So if you need to see that on the record, there it is. Tab 20 is the 2018 version. It looks pretty much to be the same tool to me. Again, that tool, I don’t have a problem with, I’m not arguing.

And this is kind of where, you know, I try to help you sort of understand where I think the lines are in the case. [Emphasis added] [ 21 ] When the transcripts are read as a whole and in context, they reveal that Kobold conceded that NCS could use both the 2012 Mongoose and the 2018 Mongoose, as shown in Tab 20 of the materials before Justice Zinn. [ 22 ] While Justice Zinn refers to the " “2012 Mongoose” " in his decision, this too must be read in context. When the decision is read in whole and in light of the submissions of the parties during the

summary judgment hearing, there was no distinction made by Kobold between the 2012 Mongoose and the 2018 Mongoose. [ 23 ] Moreover, Kobold does not dispute this motion on its substance; it disputes it only on semantics. Kobold concedes that the admissions during the hearing of the

summary judgment motion related to both the 2012 and 2018 drawings shown to Justice Zinn. However, Kobold submits that certain of NCS’s other devices such as the SFC 2 and SFC 3/Innovus are also sometimes branded under the " “Mongoose” " name and is wary of being barred from pursuing its claims pertaining to those devices. [ 24 ] There can be no dispute that Kobold can continue to pursue its claims with respect to the, SFC 2 and SFC 3/Innovus BHA tools. Justice Zinn did not grant

summary judgment to NCS with respect to these devices and found that determining whether NCS could rely on prior use under

section 56 as a defence is a matter requiring trial ( Kobold 2021 at paras 143-159 ). Accordingly, whether certain devices used by NCS are consistent or not with the 2012 or 2018 drawings of the Mongoose is a question to be determined at trial, not on this motion. [ 25 ] The motion is granted with respect to the amendment relating to the Mongoose device only. [ 26 ] At the hearing, I encouraged counsel for the parties to come to an agreed resolution of their disputes concerning the pleadings, given the protracted history of countless contested motions concerning pleadings over the past two and a half years.

The parties consequently agreed to a Second Amended Statement of Claim as attached as Annex A hereto, forwarded to the Court on December 29, 2022. [ 27 ] The Second Amended Statement of Claim has been accepted for filing with the understanding the parties can now proceed to discovery. Costs will be in the cause. JUDGMENT in T-451-20 THIS COURT’S JUDGMENT is that : 1 . The motion is granted with respect to the amendment relating to the Mongoose device only, as reflected in the reasons for judgment. 2 . The Second Amended Statement of Claim attached as Annex A is hereby accepted for filing. 3 .

The Defendant shall have two weeks from the date of this decision to file and serve an Amended Statement of Defence. 4 . Costs are in the cause. "Michael D. Manson" Judge

ANNEX A Annex A Second Amended Statement of Claim

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Annex A Second Amended Statement of Claim_13 FEDERAL COURT SOLICITORS OF RECORD Docket: T-451-20 STYLE OF CAUSE: KOBOLD CORPORATION ET AL v NCS MULTISTAGE INC PLACE OF HEARING: Held by videoconference DATE OF HEARING: December 20, 2022 JUDGMENT AND REASONS: MANSON J. DATED: January 5, 2023 APPEARANCES :

William Regan Rachel Meland For The Plaintiffs Patrick Smith Mike Myschyshyn Ben Pearson For The Defendant SOLICITORS OF RECORD : Piasetzki Nenniger Kvas LLP Barristers and Solicitors Toronto, Ontario For The Plaintiffs Seastone IP LLP Barristers and Solicitors Calgary, Alberta For The Defendant