Excalibre Oil Tools Ltd. v. Advantage Products Inc. concerns the validity and infringement of three Canadian patents. Justice Manson held that the three patents (Nos. 2,264,467, 2,373,734 and 2,386,026) asserted by API were either invalid or not infringed by Excalibre's product.

The technology at issue relates to torque anchors for oil pumps. Sufficient pressure is required to extract the oil from the earth, which can be generated using a subterranean pump. This pump forces the oil to the surface. The use of the pump, however, generates torque. This can cause the connections on the production tubing (through which the oil is brought to the surface) to become unthreaded. Accordingly, torque anchors (also known as anti-rotation devices or "no-turn" tools) are employed to prevent rotation and the unthreading of the production tubing. For an animated video of the operation of API's TorqStopperTM anchors, please see here.

467 Patent – Utility

Justice Manson held that the experts' laboratory testing had little relevance to the real world use of torque anchors. Instead, Justice Manson focused on the real world experience of two fact witnesses that had successfully used API's TorqStopperTM in the field to conclude that the invention was useful. Justice Manson rejected Excalibre's argument that the TorqStopperTM torque anchor was not sufficiently reliable or a commercial success, holding that these considerations were not relevant to the test for utility in the patent sense:

[218] ...Counsel for the Excalibre Parties vigorously argued that ‘467 TorqStopperTM torque anchor was not sufficiently reliable for oil well applications and that it was not a commercial success. That is not the test for patent utility, which is measured on a different threshold, and the evidence before the Court satisfies me that the ‘467 TorqStopperTM torque anchor was useful. As such, the utility requirement of the claims of the ‘467 Patent has been met.

467 Patent – Non-Infringement

The major issue on infringement was the proper construction of the claims, specifically whether the Excalibre torque anchors had a "casing-engaging wall". API's expert argued that the term "casing-engaging wall" was not restricted to a rounded surface but could include protrusions (called "slips") designed to engage the internal surface of the casing (thereby preventing rotation), notwithstanding that all of the figures in the 476 Patent showed the casing-engaging wall to be a round, tubular structure. Justice Manson rejected this construction, holding that the "casing-engaging wall" is the substantially round surface of the tubular housing.

Since the Excalibre torque anchors used rigid slips to engage with the casing, rather than a round tubular wall, Justice Manson held that here was no infringement of the 476 Patent.

734 Patent – Obviousness

The parties agreed that inventive concept of the 734 Patent was the addition of a spring mechanism to bias the jaw of the torque anchor but that his was not sufficient to impart patentability to the claims of the 744 Patent:

[244] I find that there was sufficient evidence adduced at trial to determine that torsional springs were a known biasing mechanism in downhole tools at the relevant date. Based upon the common general knowledge of the POSITA, at the relevant time, which I determined above included the ‘834 Burton Patent and the public use of the spring retrofitted, closed-bore ‘467 TorqStopperTM torque anchor, I find that the alleged inventive step of adding a torsional member or torsional spring in claim 1 of the ‘734 Patent would have been obvious to a POSITA. At best, the addition of the torsional spring was a workshop improvement. Therefore, I find that claim 1 of ‘734 Patent is invalid because of obviousness.

026 Patent – Utility

Excalibre argued that claim 1 of the 026 Patent was inoperable because it failed to recite that the jaw of the anchor was outwardly biased by means of a spring and therefore was broader than any invention made and disclosed. Justice Manson agreed, noting

[254] …An inventor or patentee cannot excuse inoperable claims to an invention or claim too broadly beyond the invention disclosed and hope to sustain validity of that claim—overly broad, poorly drafted claims cannot be encouraged or condoned.

…

[259] Much has been written by our Courts about the POSITA, common general knowledge, and reading claims with a “mind willing to understand”, in order to find utility in what otherwise could be a deficient claim. However, there are no actuating mechanisms suggested by the API Parties that would save claim 1 of the ‘026 Patent from invalidity because of inutility. Claim 1 discloses an incomplete structure. An inventor or patentee cannot properly ask the Court to impart functional language into an overly broad claim, or a claim lacking utility, to try to correct poor drafting and in order to give the claim the necessary scope to be useful and not overly broad. To argue that this is permissible to support “a mind willing to understand” and give a purposive construction in the eyes of a POSITA, is stretching these concepts too far. One only has to look at claim 2 to see how this defective claim should have been and is cured.

026 Patent – Non-Infringement

Like the 734 Patent, the 026 Patent required as an essential element a casing-engaging wall. Since none of the CTA Torque anchors included a casing-engaging wall, Justice Manson held that no claim of the 026 Patent was infringed:

[275] Having considered the elements of all versions of the CTA Torque Anchor, I find that no version of the CTA Torque Anchor infringes claim 1 of the ‘026 Patent. As discussed for the ‘467 Patent, there is no version of the CTA Torque Anchor that has a casing-engaging wall. Further, there is no evidence showing that any version of the CTA Torque Anchor has the ‘026 Stop; however, this is not determinative to my finding of non-infringement. I also find that because claim 1 is not infringed, claim 2 cannot be infringed.

Section 7(a) Trade-marks Claim

In 2008, API wrote letters to some users of Excalibre's CTA Torque Anchors alleging that the product was infringing valid patents and that the users would be sued for infringement unless they immediately stopped using them. As a result of these letters, two users of Excalibre's torque anchors, Husky and Bronco, ceased purchasing torque anchors from Excalibre.

Excalibre sought relief under section 7(a) of the Trade-marks Act for false and misleading statements by API tending to discredit Excalibre's torque anchors. Following S & S Industries Inc. v Rowell, the test under section 7(a), requires:

  1. false and misleading statement;
  2. tending to discredit the business, wares or services of a competitor; and
  3. damages.

Justice Manson, following Justice Hughes in Supertek (see our previous post here) distinguished between 'informative" and 'threatening' ceases and desist letters. While there is nothing wrong with a patentee sending informative letters that will enable the recipient to understand what may constitute infringement, threatening letters, including those giving the impression that the recipient will be sued for patent infringement, will tend to discredit the goods or services of the patentees' competitor where no finding of infringement is ultimately made. Here, API's cease and desist letters to Excalibre's customers contained the following express threats of litigation:

API demands Husky immediately cease sourcing the CTA torque anchor. Husky is encouraged to review the attached SOC and assess their own liability in this infringement of API's exclusive rights. ... Should Husky choose to continue along their current path, API will be compelled to amend their litigation to include Husky.

The Canadian Patent Act also provides API with similar right [sic] of enforcement against purchasers and as against users of patented torque anchors which are not obtained from authorized sources, including Bronco Energy. ... Unless Bronco Energy advises this office, by May 23rd, of their immediate cessation of the above infringing activities, API will amend their litigation to include Bronco Energy.

Notwithstanding that Excalibre adduced no invoices showing that the letter to Husky and Bronco resulted in damage to Excalibre business, Justice Manson held that API acted contrary to section 7(a) with the quantum of Excalibre's damages to be assessed by a subsequent reference.

Lastly, while Excalibre was successful in this litigation, their costs award was reduced by 25% for attempting to amend their pleadings at trial with no reasonable basis for the delay and raising unwarranted objections during the trial which caused needless delay.

A copy of the decision can be found here.

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