On September 27, 2024, the Federal Court of Appeal (“FCA”) affirmed that four patents owned by AngelCare Canada (“AngelCare”) are valid and were infringed by the manufacture and sale of diaper pail cassettes by Munchkin Baby Canada Inc. (“Munchkin Canada”) and its US parent, Munchkin, Inc. (“Munchkin USA”). The decision raises important issues relating to anticipation (i.e., confidentiality defense) and infringement (i.e., common cause liability).
Munchkin, Inc. v. Angelcare Canada Inc. – Federal Court of Appeal (fca-caf.ca)
Background
AngelCare and Munchkin are competitors in the diaper pail and diaper pail cassette market. Diaper pails are garbage pails purposed for the disposal of soiled diapers. Diaper pail cassettes line the interior of the diaper pail and facilitate the removal of soiled diapers once the pail is full.
In 2016, AngelCare sued Munchkin Canada and Munchkin USA for allegedly infringing six patents relating to diaper pail cassettes and their use within diaper pails: the 128 Patent (filed by a predecessor company) and the AngelCare Patents (a parent patent and four divisionals). The Munchkin entities denied infringement and counterclaimed for a declaration of invalidity for each of the six patents. The parties’ allegations of validity/infringement and quantification were bifurcated.
Trial Decision
The trial was heard over thirty-five days in early-2021 (per Roy J. by videoconference). The Federal Court (“FC”) rendered its Judgment and lengthy Reasons one year later on April 7, 2022. The FC held that some of Munchkin’s products infringed valid claims of two AngelCare patents and of the 128 Patent. Of note, the FC held that Munchkin’s liability for infringement extended to Munchkin US.
Appeal and Cross-Appeal
The Munchkin entities filed an appeal in May 2022 and alleged that the FC erred in five ways: (1) omitting one of AngelCare’s marketed products from the common general knowledge; (2) applying the wrong legal test for anticipation by prior disclosure; (3) finding that the 128 Patent did not anticipate one of the AngelCare patents; (4) finding that the 128 Patent and AngelCare patents were not obvious; and (5) holding Munchkin USA liable for infringing activities in Canada.
AngelCare filed a cross-appeal in June 2022 and alleged that the FC erred in two ways: (1) by omitting an essential element from its construction of two independent claims; and (b) by applying its erroneous construction to find that a Munchkin product did not infringe.
The appeals were heard together in June 2024 and taken under reserve. The FCA (per Locke JA; Gleason and Walker JJ.A. concurring) released its Judgment and Reasons in both proceedings on September 27, 2024.
Munchkin’s Appeal
- CGK includes knowledge of marketed products
The FCA held that the skilled person is reasonably diligent in keeping up with the diaper cassette market and is aware of products on the market to which the patent relates. The FC erred by excluding “specific knowledge about product line extensions, […] legacy issues that accompany the development of such products, [and information] about the development of disposable or consumable products” from the common general knowledge. However, this error did not affect the outcome of any relevant issue and was not sufficient to warrant allowing the appeal.
- Confidential disclosure is not anticipatory
The FCA held that the AngelCare inventor did not disclose his inventions to the public by sending an email to a third-party manufacturer enclosing a three-dimensional computer-aided design of the proposed cassette that he was developing and by requesting a price quote for a prototype.
The FCA noted that “an invention communicated to a single member of the public who is free to use it as they please will make the invention available to the public for the purposes of anticipation under paragraph 28.2(1)(a) of the Patent Act” (emphasis added); however, a confidential disclosure will not.
The FCA affirmed the FC’s assessment of the law, including its conclusion that a “presumption of an obligation of confidence” has been recognized by the Supreme Court of Canada and has been applied as a defense to anticipation:
In effect, the test asks “whether the information was imparted in circumstances in which an obligation of confidence arises” … Having reasonable grounds that the information was shared in confidence will suffice. [This] test thus puts the nature of the relationship between the parties at the centre of the determination to be made. But the nature of the information is also of great significance: information of industrial value given on a business-like basis, such as the manufacture of articles by one party for another, brings significant weight… [T]he recipient carries a heavy burden if what is sought is “to repel a contention that he was bound by an obligation of confidence” [I]t bears repeating, that the “(i)nformation will be considered to have been exchanged in a confidential relationship where “any reasonable man standing in the shoes of the recipient of the information would have realized that upon reasonable grounds the information was being given to him in confidence …” The manufacture of articles by a party for another would fall prima facie in that category carrying an obligation of confidentiality. [Citations omitted; emphasis added]
The FCA saw no error in the FC’s application of the law to the facts. A reasonable person in the supplier’s position would have understood the disclosure by the inventor to have been made in confidence. The supplier is in the business of making prototypes and preserving the confidentiality of design specificaitons is part of its business model. The supplier was not free to use the information as it pleased, whether or not the email was solicited or whether a CDA was in place.
- The 128 Patent did not anticipate one of the AngelCare patents
The FC correctly held that the application for the 128 Patent did not anticipate the co-pending application for the 159 Patent (an “AngelCare Patent” as defined) because the 128 Patent would not have led the skilled person “in every case and without the possibility of error” to the subject-matter claimed in the 159 Patent. The fact that the 128 Patent could encompass the subject-matter of the 159 Patent was not sufficient to be anticipatory.
- The AngelCare Patents were not Obvious
The FCA saw no reviewable error in the obviousness analysis. The FC considered Munchkin’s allegations on a claim-by-claim basis, and did not err by defining the inventive concept in terms of the essential elements of each claim. The FC omitted one AngelCare product from the common general knowledge (see above) and mischaracterized a prior art product (Twistaway), but those errors had no effect on the obviousness analysis and were not palpable and overriding. The fact that several potential options were available to solve a problem is relevant to determining whether there are a finite number of identified predictable solutions known to persons skilled in the art (per PLAVIX SCC).
- Munchin USA is liable for infringing activities in Canada
The FC found Munchkin USA liable for infringement in Canada because its design and marketing decisions (though made outside Canada) “had a direct impact on the resulting infringing activities in Canada”.
On appeal, Munchkin USA argued that for activities to infringe a Canadian patent, they must take place in Canada. Munchkin USA argued that it could not be liable for infringement for several reasons: (a) it had no role in the manufacture, use or sale of the infringing products; (b) it had no office or employees in Canada; (c) it only made design and marketing decisions; and (d) it did nothing in Canada. Munchkin USA also argued that AngelCare did not plead that Munchkin USA was in “common cause” with Munchkin Canada or that it should be held jointly and severally liable for Munchkin Canada’s infringing activities.
The FCA noted the jurisdictional limits to patent infringement in Canada, but held that parties cannot avoid liability simply by setting up business outside of Canada:
“It is true that, to infringe a Canadian patent, infringing activities must take place in Canada. However, a person cannot avoid liability for infringement by setting itself up outside Canada, and then making arrangements from there that result in infringement of a patent in Canada. The key is whether the infringing activities took place (they did in this case), and whether the person located outside Canada (here, Munchkin [USA]) made itself liable therefor, either by having common cause with a Canadian actor (Munchkin Canada) or otherwise being a party to the infringement.”
The fact that AngelCare did not plead infringement by “common cause” or liability on a “joint and several basis” did not preclude the FCA from considering these issues on appeal.
Angelcare’s pleading before the Federal Court alleged that Munchkin [USA] was liable for patent infringement. Munchkin [USA]’s liability was clearly in issue. In addition, the Federal Court heard and considered evidence regarding Munchkin [USA]’s liability, apparently without objection from Munchkin [Canada]. No question as to the sufficiency of Angelcare’s pleading was raised before the Federal Court. The Federal Court was entitled to consider this issue. The real question is whether it erred in its consideration of the law and the facts in that regard.
The FCA held that there was enough evidence for the FC to conclude that Munchkin USA had participated in the infringing activities sufficiently to be liable for infringement. This included evidence that: (a) Munchkin Canada had only seven employees, none of whom were designers; (b) the products distributed in Canada were designed by Munchkin USA: and (c) Munchkin USA made no distinction between decisions undertaken for the U.S. market and those for the Canadian market.
AngelCare’s Cross-Appeal
- The FC erred in law by misconstruing several claims
The FC read a term (“formed integrally”) into two independent claims whose text does not include it and extended this construction to three other claims based on its understanding of the parties’ arguments at trial. This led to a finding of non-infringement in respect of two independent and several dependent claims. The FCA held that this was an error of construction and thus an error of law.
- Munchkin infringed the misconstrued claims
The FCA determined that it had enough information, including relevant evidence and conclusions made by the FC, to apply the correct claim construction and reach its own conclusions on the outstanding infringement issues. The FCA held that several additional claims of two AngelCare Patents were infringed by the manufacture, use and sale of specific Munchkin products. The FCA granted a permanent injunction in the form proposed by AngelCare in its memorandum of fact and law.
Disposition
Munchkin’s appeal was dismissed and AngelCare’s cross-appeal was allowed, each with costs in the agreed amount of $7500. The Munchkin parties have 60 days to apply for leave to appeal to the Supreme Court of Canada.