Court Allows Amended Statement of Claim to Include Patent Infringement Allegations Related to Export of Kits Outside Canadian Jurisdiction
Varco Canada Limited, Varco L.P., Wildcat Services L.P., and Wildcat Services Canada, ULC v. Pason Systems Corp. and Pason Systems Inc. 2009 FC 555
(Mandamin, J.)

May 28, 2009

W. Grant Worden and Justin Neepal for the Plaintiffs, Varco Canada Limited, Varco, L.P., Wildcat Services L.P., and Wildcat Services Canada, ULC (“Varco”)
Peter W. Choe and Selena Kim for the Defendants, Pason Systems Corp. and Pason Systems Inc. (“Pason”)

The Defendants, Pason, brought forward an appeal of a Prothonotary’s Order allowing the Plaintiffs, Varco, to amend their statement of claim to include claims of patent infringement arising from the manufacture and export of the alleged infringing device, the Pason AutoDriller, to foreign countries, as well as to claim for related damages or accounting of profits.

The Plaintiffs initially became aware of the Defendant’s alleged infringing activities outside of Canada during the discovery phase of proceedings related to alleged infringement within Canada of the Plaintiff held patent for an automatic drilling system. The Plaintiffs subsequently applied to amend the statement of claim to include the alleged foreign infringing activities, namely the export of the Canadian manufactured Pason AutoDriller to foreign countries. The Prothonotary allowed the Plaintiffs’ application, finding, in the instance, it was not plain and obvious that the proposed amendments to the statement of claim were improper. On appeal, the Defendants submitted that the Prothonotary erred in law by finding that patent infringement in Canada arises from activities outside of Canada.

The Court reiterated the standard of review of Prothonotary decisions as outlined in Merck & Co. v. Apotex Inc., 2003 FCA 488, that discretionary orders of Prothonotaries ought not to be disturbed on appeal unless the question raised is vital to the final issue of the case, or the orders are clearly wrong, based on a wrong principle or misapprehension of fact. Each party relied on differing views within the case law. The Defendants alleged that since the components composing the AutoDriller were shipped from Canada separately, and the components assembled to form the AutoDriller outside Canadian jurisdiction, the manufacture and export of the components did not constitute infringement of the Canadian patent held by the Plaintiffs. The Plaintiffs relied on prior case law rejecting the notion that patent infringement can be avoided by selling and shipping parts as components of a kit for later assembly.

The Court dismissed the Defendant’s appeal of the Prothonotary’s order finding it was not plain and obvious that the Plaintiff’s proposed amendments disclosed no reasonable cause of action. Rather, the Court found that the determination of fact and reconciliation of the differing jurisprudence were issues best left to the trial judge to consider within the context of the infringement and damages allegations raised by the amended statement of claim.

The Defendants also alleged that the amended claims for remedies based on activities in the United States represented an abuse of process as a related U.S. Court judgement exhausted the Plaintiff’s claims for remedies for infringement in the United States. The Court found the amended claim for damages did not overlap with damages awarded to the Plaintiffs in the United States as the action was against a different Defendant, Pason Systems USA Corp. Moreover, the Court found that determining whether overlap existed represented a question of fact to be addressed by the trial judge.

By: Kelly McClellan, Borden Ladner Gervais LLP