On August 6, 2024, the Federal Court of Appeal (per Gleason JA; Stratas and Monaghan JJA, concurring) held that two patents owned by Rovi Guides [Rovi] were invalid. Nonetheless, in obiter, the FCA provided clarification on the circumstances in which an accounting of profits and a permanent injunction are available as remedies for patent infringement. The FCA also provided guidance on the role of counsel in writing or editing expert reports.
Rovi Guides, Inc. v. Telus Corporation – Federal Court of Appeal (fca-caf.gc.ca)
Background
Rovi sued Bell Canada [Bell] and Telus Communications [Telus] for allegedly infringing four of its IPG patents in Canada [Patents].
The Patents relate to “interactive program guide” [IPG] and “internet protocol television” [IPTV] technology. An IPG consists of “software that generates for display television program listings… [that] allows the user to interact with the displayed content”, for example, by “navigating the listings by scrolling up and down using a remote control or other input device.” In an IPG, “information on available programming content is downloaded or sent to a user’s television equipment, typically a set-top box [STB], and the information is then stored in memory.”
Rovi had relied on more than two hundred claims when the actions commenced. However, by trial, Rovi had “whittled down” its allegations to four sets of Asserted Claims. Those claims encompass various features such as the ability to manage a digital directory of recordings, view a recording from another device, schedule more than one recording at a time, retrieve on demand media data to improve user experience, and the ability to restart a broadcast program after it has commenced.
Bell and Telus denied the allegations of infringement, sought declarations that each of the Asserted Claims was invalid, and argued that Rovi was not entitled to the remedies sought. One of the Patents had expired by the time the trial commenced, while the other had another three years of term remaining.
The Bell and Telus trials were heard together with common evidence. The evidentiary phase of the trial lasted sixteen days. Rovi led evidence from two lay witnesses, one named inventor, two technical experts, and two financial experts. Bell and Telus called two fact witnesses, two technical experts, and one expert on the issue of remedy.
Trial Decision
By Judgment dated October 7, 2022 (2022 FC 1388), the Federal Court (per Lafrenière J.) dismissed Rovi’s infringement action, holding that each of the Asserted Claims was invalid and/or not infringed. In obiter, the Court stated that, had any of the Asserted Claims been found to be valid, Rovi would not have been entitled to an accounting of profits or a permanent injunction.
Appeal Decision
Rovi appealed in respect of two of the four Patents and focused its arguments on three alleged errors: anticipation, obviousness, and remedies (denial of right to elect; denial of permanent injunction).
Standard of Review
In Canada, errors of law in patent cases are reviewed on a standard of correctness, i.e., the trial judge is not afforded any deference. As such, if the trial judge applied the wrong legal test, or misconstrued the claims, or failed to discern the inventive concept, the FCA typically intervenes and substitutes the correct decision. However, in several decisions over the last decade, the FCA has observed that the construction of patent claims and the determination of the inventive concept are not questions of law, per se, but are rather factually suffused inquiries in which the trial judge reaches a legal conclusion based on an assessment of how a skilled person would have understood the patent and the state of the art as of a relevant date (a factual matter). This has led some appellate judges to ponder whether a more deferential standard of review ought to apply to questions that are effectively matters of “mixed fact and law” (see Reasons at paras. 63-66 and 82).
In the present case, the FCA provided further clarity on the standard of review in cases involving anticipation and obviousness. The Court held that if a trial judge makes an extricable error of law, such as applying the wrong legal test, the decision will be reviewed on a standard of correctness. However, if the interpretation of a patent claim or the inventive concept turns on the weight given to the expert evidence, or on the trial judge’s preference for one expert over another, the FCA will only intervene if there has been a “palpable” and “overriding” error. Palpable means an error that is obvious and overriding means that the error affects the outcome. The FCA noted that it is not its role to “re-decide cases”, or “re-conduct the obviousness inquiry”, to “sift through and reweigh the evidence”, or to “re-decide which expert is to be preferred”. The fact that an alternative factual finding could have been reached based on a different ascription of weight to the evidence does not mean a palpable and overriding error has been made.
Obviousness – 870 Patent
Rovi argued that the Federal Court made four reviewable errors in its obviousness analysis:
- It applied an incomplete legal test (no caution against hindsight).
- It misidentified the inventive concept.
- It failed to properly consider whether there was a non-obvious difference between the inventive concept of each asserted claim and the state of the art.
- It misapplied the evidence on an element of the inventive concept.
On the first alleged error, the Court had no concerns with how the trial judge conducted the obviousness analysis. The trial judge compared the inventive concept of each claim against the state of the art and determined whether ingenuity would have been required to bridge the gap. The fact that the trial judge used different language to describe the fourth step of the obviousness analysis was of no consequence.
On the second alleged error, the FCA held that the trial judge did not err in identifying the inventive concept, as the parties had agreed on those issues at trial. The FCA held that Rovi could not contend on appeal that the trial judge erred in its analysis.
On the third alleged error, the FCA held that the trial judge did not err in assessing whether there was a difference between the inventive concept of each asserted claim and the state of the art. There was ample evidence for the trial judge to find that the asserted claims were not inventive. The trial judge considered the relevant evidence and specifically rejected Rovi’s arguments.
On the fourth alleged error, the FCA held that the trial judge did not rely on facts that were not in evidence or that were undermined on cross-examination. There was ample evidence for each of the trial judge’s factual findings and no relevant evidence was overlooked.
Anticipation – 585 Patent
Rovi argued that the Federal Court made three reviewable errors in its anticipation analysis:
- It misconstrued the essential elements of the asserted claims.
- It misidentified the subject-matter of the patent.
- It erred in applying the legal test for anticipation.
On the first issue, the FCA held that the trial judge’s construction of the claims turned in large part on the weight given to the expert evidence. Given that the parties’ experts agreed on the construction of these impugned claims, and Rovi raised no issue with this construction at trial, the FCA held that there could be no palpable and overriding error in the trial judge’s conclusions. There was evidence to support the trial judge’s findings.
On the second issue, the FCA observed that Rovi’s technical expert described the subject-matter of the 585 Patent in exactly the same manner that was impugned on appeal. The trial judge did not make a palpable and overriding error in assessing Rovi’s evidence or its expert’s credibility.
On the third issue, the trial judge did not err in applying the legal test for anticipation. On the issue of disclosure, the trial judge did not: (i) commingle information from two publications to form a single anticipatory reference; (ii) fail to appreciate that several elements of the claims were not disclosed in the prior publication; or (iii) presumptively accept the respondents’ evidence and require Rovi to disprove it. The FCA also held that the trial judge conducted a proper enablement analysis and that Rovi’s argument to the contrary was “specious”.
Remedies
Rovi asserted that the trial judge made two errors in principle in the remedial analysis: (a) denying an accounting of profits; and (b) denying a permanent injunction. The FCA addressed these issues on appeal, even though the Patents were invalid, because it found merit in many of Rovi’s arguments.
- Accounting of Profits
Rovi asserted that the trial judge made two reviewable errors in denying its right to elect profits:
- It mischaracterized the goal of an accounting of profits and key principles underlying this remedy.
- It found that Rovi’s alleged misconduct/delay in patent prosecution was a determinative factor “by itself” to disentitle an accounting of profits.
On the first alleged error, the FCA ruled that the trial judge’s remedial analysis started from the wrong premise. The trial judge should have held that a successful patentee is entitled to an accounting of profits unless there are sufficient compelling reasons to deny the remedy. The FCA incorporated by reference its detailed reasons on this issue in the related case against Videotron (Rovi Guides, Inc. v. Videotron Ltd. – Federal Court of Appeal (fca-caf.gc.ca)).
On the second alleged error, the FCA held that it was not inappropriate for Rovi to staunchly defend its patent rights, or to adopt a business model of licensing, or to decline to send a cease-and-desist letter before launching an infringement action. However, the FCA refused to “completely foreclose” the possibility that delays during the prosecution of the patent applications without more cannot provide a basis for denying equitable relief. Any such claim would need to be supported by factual and/or expert evidence to demonstrate whether the length of time taken to obtain the Canadian patent was unduly long or short, and evidence from which inferences may be drawn as to the patentee’s intentions in delaying prosecution of its patents. The Court cannot draw inferences about a patentee’s motives without proper evidence.
- Injunction
Rovi argued that the Federal Court made five errors in its denial of an injunction:
- The adoption, for the first time in Canadian jurisprudence, of the U.S. approach to the grant of a permanent injunction set out in eBay.
- The statement of principle that injunctions should not be available to patentees who choose to practice their inventions in Canada through licensees.
- The use of a misapplied U.S. theory of patent holdup as a justification to deny the injunction.
- The refusal to grant the injunction because of “the imminent expiry of the 585 Patent” to spare Bell and Telus the cost of compliance.
- The concern that an injunction would reward “Rovi’s delay through overcompensation”.
The FCA observed that permanent injunctions are rarely denied to a successful patentee if infringement is found. In fact, a permanent injunction is the “principal preventative remedy in patent law” and a patentee “can generally expect to receive injunctive relief in Canada where a valid patent has not expired and has been infringed.” However, the FCA noted that trial judges have discretion to deny this remedy in “exceptional” or “very rare circumstances”, including cases involving the “traditional concerns of equity”, such as delay, unclean hands, hardship and impossibility of performance. The fact that a patentee does not practice the invention, or earns income by licensing its patents, or that the patent is close to expiry, does not necessarily disentitle a patentee to injunctive relief.
The FCA held that the principles underlying the US Supreme Court decision in eBay do not apply because in Canada there is: (i) no separate requirement for an “irreparable injury” in the test for a permanent injunction; and there is (ii) no explicit requirement to balance the potential hardships between the plaintiff and defendant as a precondition to obtaining relief. As such, patentees who do not practice their inventions or who earn revenue through licensing may nonetheless obtain a permanent injunction in appropriate cases.
Expert evidence
The trial judge held that: (i) portions of an expert report tendered by Rovi had been written by counsel; and (ii) the expert’s failure to acknowledge this fact undercut his credibility. Rovi argued on appeal that the Court erred in making these findings. The FCA rejected each of Rovi’s arguments and held that it was open to the trial judge to prefer the evidence of one expert over another. The Court nonetheless took the opportunity to clarify the role of counsel when working with experts in patent cases.
In Canada, it is settled law that an expert’s opinion “must be independent in the sense that it is the product of the expert’s independent judgment, uninfluenced by who has retained him or her or the outcome of the litigation”. However, courts have held that collaboration and consultation between experts and counsel is permitted and should be encouraged. This practice ensures that that reports are framed in a manner that is comprehensible and relevant.
While there can be no criticism of counsel assisting an expert witness in the preparation of giving evidence where the assistance goes to form as opposed to the substance of the opinion itself, Courts have held that there are limits as to how much consultation is appropriate. This line is a “profoundly contextual matter that depends upon the particular circumstances of the proposed expert, the substance of the proposed evidence, and the particular circumstances of the case.”
In the present case, the FCA affirmed the trial judge’s finding that “what happened in this case went well beyond collaboration, consultation, wordsmithing or editing. It was word-for-word copying of a technical expert’s opinions and conclusions on key issues before this Court, all done without any attribution.” As such, the expert did not approach his task with independence and impartiality and his evidence was properly given little weight.
Disposition
The appeal was dismissed with costs. Rovi has 60 days to file an application for leave to appeal to the Supreme Court of Canada.