IT.Can Presentation
October 26, 2015
Outline
1. Patentable Subject Matter: Software and
Business Methods – Canada and US
2. Joint Infringement and Inducing
Infringement – Canada and US
3. Utility
4. Patent Trolls and Non-Practicing Entities
2
Outline of Talk
5. Privilege for Patent Agents: Legislative
Changes from Bill C-59
3
Patentable Subject Matter – Software and Business
Methods

Schlumberger Canada Ltd v
Canada (Commissioner of
Patents) (56 CPR (2d) 204,
1981)

“What is new here is the
discovery of the various
calculations … If those
calculations were not to be
effected by computers but
by men… it would not be
patentable.” (para 6)
4
Patentable Subject Matter – Software and Business
Methods

1998: Amazon.com files patent
for “one-click buying”

Rejected by Commissioner for
being a “business method”

Amazon brings suit to Federal
Court  2011 FCA 328
[Amazon]
5
Patentable Subject Matter – Software and Business
Methods
Issue:

Are business methods and software patentable
subject matter in Canada?

Is Amazon’s “one-click” method patentable
subject matter?
7
Patentable Subject Matter – Software and Business
Methods
Held:
Business methods and software are patentable subject
matter

“the patent claims in issue describe a business
method that has a practical application… no
Canadian jurisprudence determines conclusively
that a business method cannot be patentable
subject matter”
(Amazon at 59-60)
8
Patentable Subject Matter – Software and Business
Methods
Current Canadian Approach

Purposive construction of claims (Whirlpool and Free
World Trust)

Is a computer essential to the method?
• Yes  Likely patentable subject matter
• No  Any claims construed as patentable
subject matter?
•
•
If so: Invention could be patentable subject matter
If not: Invention is not patentable subject matter
9
Patentable Subject Matter – Software and Business
Methods in the US
Alice Corporation Pty Ltd v CLS Bank
International, 134 S. Ct. 2347 (2014),
[Alice]

“The claims at issue relate to a
computerized scheme for
mitigating ‘settlement risk… a
computer system configured to
carry out the method for
exchanging obligations “
Alice at 2-3
10
Patentable Subject Matter – Software and Business
Methods in the US
11
Issue:

Are the claims in issue
patentable subject material?
Held:

No

Concept of “intermediated
settlement” is an abstract
idea
Patentable Subject Matter – Software and Business
Methods in the US

SC of the US  Two step test from Mayo
Collaborative Services v Prometheus Laboratories
Inc (132 S.Ct. 1289 (2012))
Step 1:

“… intermediated settlement is “a fundamental
economic practice long prevalent in our system of
commerce… intermediated settlement… is an
‘abstract idea’” (Alice at 9)
12
Patentable Subject Matter – Software and Business
Methods in the US
Step 2 Mayo Test:

“… the claims at issue amount to ‘nothing
significantly more’ than an instruction to apply
the abstract idea of intermediated settlement
using some unspecified, generic computer”
(Alice at 15).
13
Patentable Subject Matter – Standards since Amazon
and Alice
14
Compare the American and Canadian approaches…

Mayo test step 1  “…determine whether the claims at
issue are directed to one of those patent ineligible
concepts” (Alice at 7)
• The Court “… described step two of this analysis as a search for an
‘inventive concept’” (Alice at 7).

Sharlow J  “… in determining subject matter solely on the
basis of the inventive concept, the Commissioner adopted
an analysis that is incorrect in law” (Amazon at para 47).
Patentable Subject Matter – Standards since Amazon
and Alice
15
Sharlow J:

“the Supreme Court of Canada… requires the
Commissioner’s identification of the actual invention
to be grounded in a purposive construction of the
patent claims” (Amazon at para 43)
• PN2013-02  “Examination Practice Respecting
Purposive Construction”
Patentable Subject Matter – Standards since Amazon
and Alice
16
However…

PN2013-02 cites both Free World Trust and Whirlpool,
but does not instruct examiners to consider inventor’s
intent

Are Canadian patent examiners purposively
construing claims or does their construction resemble
the Mayo test (as in Alice)?
Joint Infringement and Inducing Infringement Enforcing patents in the US
17
Two recent US decisions have
developed the law of induced
infringement:

Akamai Technologies v Limelight
Networks [Akamai]

Commil USA LLC v Cisco Systems
[Commil]
Joint Infringement and Inducing Infringement Enforcing patents in the US
18
US Patent Act:

§271(a) (direct infringement)
• …whoever without authority
makes, uses or sells any
patented invention, within
the United States during the
term of the patent therefor,
infringes the patent

§271(b) (induced infringement):
• Whoever actively induces
infringement of a patent shall
be liable as an infringer.
Joint Infringement and Inducing Infringement Enforcing patents in the US
Akamai Technologies v Limelight
Networks

Akamai operates “content
delivery networks” (CDNs)

Content providers host large
music/video files on Akamai’s
servers

Web users access files from
Akamai’s servers
19
Joint Infringement and Inducing Infringement Enforcing patents in the US
20

Akamai “tags” customer’s files
for them
• Process of tagging is
claimed in Akamai’s/MIT’s
patent in issue

Limelight also operates a CDN

Limelight does NOT tag files
for its customers
Joint Infringement and Inducing Infringement Enforcing patents in the US
Issue:

If a defendant performs some steps of the patented
method but leaves others steps up to its customers,
can the defendant be liable for induced
infringement?
• Does a defendant need to be found liable for
direct infringement before induced infringement?
21
Joint Infringement and Inducing Infringement Enforcing patents in the US
Issue:

Muniauction v Thomson Corp, 532 F. 3d
1318 (2008)):
• “A method’s steps have not all been
performed as claimed by the patent unless
they are all attributable to the same
defendant”

Akamai’s patent is a method patent!
22
Joint Infringement and Inducing Infringement Enforcing patents in the US
Issue (Restated):

Since Limelight forces their customers to “tag” their
own files, is Limelight directly infringing Akamai’s
patent?
• If so, is Limelight liable for inducing infringement?
Held:

Limelight is not liable for direct infringement (§271(a))
and is therefore not liable for inducing infringement
(§271(b))
23
Joint Infringement and Inducing Infringement Enforcing patents in the US
24
Reasons:

“If a defendant can be held liable under
§271(b) for inducing conduct that does
not constitute infringement, then how can
a court assess when a patent holder’s
rights have been invaded?”
Akamai at 6
Joint Infringement and Inducing Infringement Enforcing patents in the US
25
Reasons:

“[Akamai ]… criticize[s] our
interpretation of §271(b) as
permitting a would-be infringer to
evade liability by dividing
performance of a method
patent’s steps with another
whom the defendant neither
directs nor controls. We
acknowledge this concern.”
Akamai at 10
Joint Infringement and Inducing Infringement Enforcing patents in the US
However…
United States Court of Appeals for the
Federal Circuit, August 13 2015:

“… liability under §271(a) can
also be found when an alleged
infringer conditions participation
in an activity or receipt of a
benefit upon performance of a
step or steps of a patent
method…”
26
Joint Infringement and Inducing Infringement Enforcing patents in Canada
Three part test (from Windsurfing International Inc v
Trilantic Corp ((1985) 8 CPR 3d 241):
(i)
Act of infringement was completed by the direct
infringer
(ii)
Completion of the act of infringement was
influenced by the acts of the inducer, without which
the infringement would otherwise not take place
(iii)
The seller knows his influence will result in the
completion of the act of infringement
27
Joint Infringement and Inducing Infringement Canadian Entities Held Liable for Inducing Infringement
Bauer Hockey Corp v Easton Sports
Canada Inc, (2011 FCA 83)

“[T]here is no doubt… that Easton
was directly involved in… the
infringing skates made at Rock
Forest…” Trial at 190

“[T]here is no evidence that but
for its relationship with Easton,
Rock Forest would have made
skates embodying the invention
claimed..." at 14
28
Joint Infringement and Inducing Infringement - The
Requirement of “Direct Infringement”
Is knowledge of a patent
necessary for induced
infringement in Canada?

Technically, No…
However:

DataTreasury Corp v
Royal Bank et al., 2008
FC 955 (Prothonotary
Aalto)
29
Joint Infringement and Inducing Infringement Knowledge of a Patent and Inducement in the US
31
Commil v Cisco

Commil holds patent for the
“implementation of shortrange wireless networks”

Cisco manufactures and
sells “wireless networking
equipment”

Commil sues Cisco for
direct and induced
infringement
Joint Infringement and Inducing Infringement Knowledge of a Patent and Inducement
32
Commil v Cisco

Commil interprets Global-Tech
as “… explicit[ly] holding that
liability for induced
infringement can only attach if
the defendant knew of the
patent and knew as well that
‘the induced acts constitute
patent infringement.’”
Commil at 6
Joint Infringement and Inducing Infringement Knowledge of a Patent and Inducement
33
Commil v Cisco
Issue:

“As a defense to the claim of inducement, Cisco argued it
had a good-faith belief that Commil’s patent was invalid”
(Commil at 3)

Therefore: Can a good-faith belief in patent invalidity
relieve a defendant’s liability for induced infringement?
Joint Infringement and Inducing Infringement Knowledge of a Patent and Inducement
Commil v Cisco
Held:

A defendant’s belief regarding patent validity is NOT a
defense to a claim of induced infringement
• “The scienter element for induced infringement
concerns infringement; that is a different issue than
validity” (Commil at 9)
34
Utility: Promise, Sound Prediction - Apotex Inc v Pfizer
Canada Inc, 2014 FCA 250
Apotex Inc v Pfizer Canada Inc, 2014 FCA 250 (Appeal from
Pfizer Canada v Apotex Inc, 2014 FC 314 and Pfizer Canada Inc v Mylan
Pharmaceuticals ULC, 2014 FC 38 )


A level of utility commensurate with the promise is
only required where a clear promise has been
made
Otherwise, only a “mere scintilla” of utility is required
35
Utility: Promise, Sound Prediction and Eli Lilly v Canada

Eli Lilly  Chapter 11 arbitration under NAFTA in fall
2013.

Eli Lilly seeks $500 Million in damages relating to the
Federal Court’s invalidation of patents related to
Strattera® (atomoxetine) and Zyprexa® (olanzapine).
• Global Sales of Straterra (2011)  $620M
• Global Sales of Zyprexa (2010)  $5.026B
Utility: Promise, Sound Prediction and Eli Lilly v Canada
•
Eli Lilly  Canadian
doctrine of the “promise of
the patent” is in violation of
NAFTA Chapters 11 and 17.
•
Sound prediction and
sufficiency of disclosure
also at issue.
Utility: Promise, Sound Prediction and Eli Lilly v Canada
claims:

“promise of the patent”  subjective, arbitrary and
prejudicial against pharmaceutical inventions

Invalidation of patents  unlawful expropriation (Art.
1110) and violated Canada’s obligation of minimum
standards of treatment (Art. 1105)

Canada’s law of utility (“promise of the patent”) is not in
accordance with the standards of Chapter 17
(“capable of industrial application”).
Utility: Promise, Sound Prediction and Eli Lilly v Canada
Canada’s position:

“Promise of the patent” is
a longstanding principle
of the Canadian law of
utility

“Promise of the patent” is
in accordance with the
principles of an effective
patent system.
Utility: Promise, Sound Prediction and Eli Lilly v Canada
Next Steps:
•
Canada Rejoinder: December 8, 2015
•
Arbitration hearing scheduled for May 30, 2016 (9
days) in New York
Patent Trolls and Non-Practicing Entities – What are
they?
Former Chief Justice Randall Rader:

“any party that attempts to
enforce a patent far beyond its
actual value or contribution to
prior art”
US President Barack Obama:

Patent trolls “… don’t actually
produce anything themselves.
They’re just trying to essentially
leverage and hijack somebody
else’s idea and see if they can
extort some money out of them”
Patent Trolls and NPEs – Costs of Trolling
Cost of trolling in the USA:

Trolls brought 62% of all patent
lawsuits in the US in 2011 and 2012

Troll victims paid out $29B in 2011,
a 400% increase over 2005

Systemic costs:
• 2014: >5000 patent litigation
filings in US (3rd highest ever)
• “Shakedowns” via C&D letters
to innocent parties
Patent Trolls and NPEs – Why the US?

Legal costs are not imposed on losing party
• Recent changes…

•
Octane Fitness LLC v ICON Health & Fitness Inc
•
Highmark Inc v Allcare Health Management
Ease of availability of permanent interlocutory injunction
• Recent changes…
•
eBay Inc v MercExchange (2014 SCOTUS)  4-step
test for granting interlocutory injunction
Patent Trolls and NPEs – Why the US?

Plaintiff can select jurisdiction of patent litigation
• 29% of all 2014 US Patent litigation filings were in the
Eastern District of Texas
•
94% of these were NPE-related

No patentee requirement to “work”/”use” patent

Patent trials = Jury trials
Patent Trolls and NPEs – What is being done?
“White House Task Force on High-Tech Patent Issues” 

Require patentees and applicants to disclose the “Real
Party-in-Interest”

Permit more discretion in awarding fees to prevailing
parties in patent cases

Expand the PTO’s transitional program for covered
business method patents to include a broader category
of computer-enable patents
etc.
Patent Trolls and NPEs – Why not Canada?
Why is patent trolling not as
severe in Canada?

Canada is 10% of the size
of the US… less potential
for reward

Legal costs to successful
party

Use requirement
However… Canadian trolls do
exist…
Patent Trolls and NPEs – Canadian Trolls?
Dovden Investments

Started ~28 patent
infringement actions
between June 2012-2013
• ~35% of all patent
actions for this period

Patents relate to vehicle
tracking
• Sued several
developers of free apps
displaying public transit
information
Privilege for Patent Agents - SNF v BASF
SNF v Ciba Specialty Chemicals Water Treatments Ltd,
(2014 FC 616)
Main Issue: Privilege

In prosecuting their Canadian
patent, some documents involved
communication between Ciba’s
European non-lawyer patent
attorneys

Does privilege attach to any of these
communications?
Privilege for Patent Agents - SNF v BASF
Class Privilege (U.K./European Patent Attorney)?

“[T]he privilege accorded elsewhere to European
patent attorneys does not extend to Canadian
litigation…” (at 9)

Comity would unjustly favour foreign vs. Canadian
patent agents (at 20)
Privilege for Patent Agents - SNF v BASF
Litigation Privilege?

Litigation privilege “can only be invoked when litigation
is pending or apprehended and the documents were
created for the dominant purpose of litigation…“(at 21)
• “The dominant purpose of the communications at
issue in this privilege claim was to acquire patent
rights — not litigation” (at 27)
Privilege for Patent Agents - SNF v BASF
Litigation Privilege requires solicitor involvement:

“[m]any of the communications over which [the
defendant] claims litigation privilege do not involve a
solicitor and thus cannot claim the benefit of [the]
privilege.” (at 23)
Privilege for Patent Agents - Bill C-59

Bill C-59 (The Economic Action Plan 2015) was released
on April 21, 2015 and received royal assent on June 23,
2015
Major Changes:

Creation of a statutory privilege (i.e. under the Patent
Act, s.16.1(1-6) to protect confidential communications
between clients and their intellectual property agents

Communications will be privileged “in the same way” as
those subject to solicitor/client privilege
Privilege for Patent Agents - Bill C-59
Major Changes:

A communication between a client and a registered
patent/trademark agent will be privileged if:
• it is between an agent and his or her client, or
individuals acting on their behalf;
• it is intended to be confidential; and
• it is made for the purpose of seeking or giving advice
with respect to any matter relating to the protection
of an invention or trademark

Applies to foreign agents where equivalent privilege
exists