The Federal Court of Appeal (per Heckman J.A.) dismissed an appeal by Steelhead LNG (ASLNG) Ltd. and Steelhead LNG Limited Partnership (collectively, “Steelhead”) from a summary trial judgment dismissing Steelhead’s patent infringement action. This appeal turned on the meaning of “use” under section 42 of the Patent Act.
Steelhead LNG (ASLNG) Ltd v Arc Resources Ltd, 2024 FCA 67
Background
The patent at issue (“085 Patent”) relates to apparatus, methods, and systems relating to the near-shore or at-shore liquefaction of natural gas. The three key elements of the invention are: 1) a floating modular design; 2) an air-cooled liquefaction process; and 3) electric-driven compressors. The validity and the essential elements of the claims of the 085 Patent were not at issue before the Court of Appeal.
In 2018, Steelhead disclosed a confidential design of a liquefied natural gas (“LNG”) facility to the respondents (collectively, “Arc”). In and around the period of these discussions, Arc received work product (“Study”) from an engineering firm. The Study included engineering drawings, specifications, and cost estimates for an LNG project. After Arc closed its discussions with Steelhead, they shared the Study with third parties, including potential investors and large-scale industry contractors.
In 2019, Arc also began discussions with a company called Western LNG (“Western”), regarding the design and development of a potential LNG facility. In July 2021, Arc, Western and third parties entered into an agreement to develop an LNG project. This LNG project was not based on the design in the Study. Western relied on its own LNG facility design.
Summary Trial
The Study included the design of an LNG facility which, if built, would include the essential elements of the claims of Steelhead’s patent. Steelhead conceded that Arc did not make, construct, or sell the invention and that the claimed system, method, and apparatus did not exist (nor had ever existed) anywhere in Canada. However, Steelhead argued that Arc made an infringing “use” under section 42 of the Act by disclosing the Study to third parties to obtain a commercial benefit. Allegedly, this disclosure established Arc’s credibility with potential partners and led to the commercially valuable transaction with Western.
The motion judge rejected Steelhead’s argument that the Supreme Court’s decision in Monsanto (2004 SCC 34) supported a finding that Arc’s exploitation of the invention’s purpose or advantage for a commercial benefit constituted an infringing use. The motion judge read Monsanto as indicating that infringement under section 42 required use of an actual apparatus, system, or method, rather than a conceptual design or drawing. Arc’s promotional efforts did not constitute such “use” of Steelhead’s invention. The motion judge found no infringement and dismissed the action.
Appeal
The Federal Court of Appeal held that Steelhead’s interpretation of “use” had no basis in the language of the Patent Act or jurisprudence interpreting the Act.
Steelhead argued that Monsanto supports interpreting “objet de l’invention” (from the French version of section 42) as conveying the meaning of the “goal”, “purpose”, or “advantage” of an invention. Also, Steelhead pointed out that some provisions of the Patent Act use words other than “objet de l’invention” to denote physical goods (e.g. “article” in section 56).
The Federal Court of Appeal found that Monsanto does not stand for the proposition that section 42 of the Patent Act grants exclusive rights to use the “goal, purpose or advantage” of an invention for commercial benefit. Instead, the Supreme Court held that “use” under section 42 pertains to the claimed invention itself, which is consistent with the principle from Free World Trust (2000 SCC 66) that the scope of a patentee’s monopoly is defined by the patent claims. In the case of a patent for an apparatus, the claimed invention is the actual (physical) apparatus described in the claims – not its goal, purpose, or advantage.
The Federal Court of Appeal found that the Supreme Court in Monsanto did not interpret “objet de l’invention” in the French version of section 42 to mean “purpose of the invention”. Furthermore, the Court found that Steelhead’s proposed interpretation is inconsistent with how the terms “objet de l’invention” and “objet” are used in other provisions of the Patent Act. For example, “objet de l’invention” is used in subsection 27(4) to mean “subject matter of the invention”. Similarly, the term “objet” in sections 28.2 and 28.3 refers to the “subject matter” of inventions. Also, section 32 provides that a person who obtains a patent for an improvement on a patented invention does not thereby obtain the right of making, vending or using the original invention. The term “object de l’invention” in section 32 stands for “original invention” – not the invention’s goal, purpose, or advantage.
Steelhead also argued that the motion judge erred by failing to consider the patent bargain principle when interpreting section 42. However, Heckman J.A. stated that the patent bargain only allows the patentee to enjoy a monopoly over the subject matter set out in the patent claims. The monopoly does not extend to the invention’s goals, purpose, or advantage. A patentee’s competitors should not be blocked from developing non-infringing alternatives to accomplish the same benefit as the patented invention.
The Court of Appeal agreed that commercial benefit is relevant to determining whether there has been an infringing use but maintained that the proper question is whether the defendant obtained a commercial benefit from activities involving the patented invention.
In Steelhead’s case, the Court of Appeal held that the allegedly infringing activities did not involve the patented invention. The 085 Patent does not claim the conceptual design of an LNG facility. One of the essential elements of the claimed invention is a physical apparatus. To prove infringement, Steelhead had to show that this essential element was “utilized with a view to production or advantage”. However, none of the essential elements of Steelhead’s invention have existed in Canada, so Arc’s activities did not constitute infringing “use” under section 42 of the Patent Act (note: this was not a quia timet proceeding).
The appeal was dismissed with costs. Steelhead has 60 days from the date of the appeal decision to file an application for leave to appeal to the Supreme Court of Canada.