INTELLECTUAL PROPERTY - PATENT INFRINGEMENT

Dealing with patent infringement entails two primary acts: (1) understanding the scope of protection provided by a patent; and (2) ascertaining whether the activities of another company or individual fall within that scope.

1. What Constitutes Infringement?

An un-expired patent is infringed if the patented invention is made, used, offered for sale, or sold in Canada or imported into Canada. A Canadian patent also may be infringed for activity that occurs outside Canada. A patent is infringed if a substantial portion of the components of the patented invention are exported outside Canada intentionally to combine such components outside Canada in a manner covered by the patent. An exported component may be an intangible product (e.g. software). A Canadian patent also is infringed if an imported product is manufactured outside Canada in the manner covered by the patent. The patented invention is defined by the patent claims, and a patent is infringed if one or more of those claims are infringed. Each of the claims is construed in light of the file history of the patent's underlying application. Thus, it is essential for a patent owner to understand the proper construction of the claims set forth in a patent for it to truly understand what is protected. A claim set forth in a patent can be infringed either literally or under the doctrine of equivalents. For a claim to be literally infringed, every element recited in that claim must exist within a product that is made, used, offered for sale, sold, or imported by another company. In the absence of literal infringement, a claim still may be infringed under the doctrine of equivalents if the accused product is substantially equivalent to the patented invention. Generally, the doctrine of equivalents expands the literal scope of a patent claim to encompass insubstantial changes to a patented invention. This expansion however is limited by the doctrine of prosecution history estoppel, which provides that a patent owner is estopped from capturing subject matter that had been previously surrendered during the examination stage of the patent. The doctrine of equivalents is further limited by the basic premise that a claim cannot be expanded to cover the prior art.

2. Who Can Be Liable for Infringement?

To uncover potentially infringing activities, a patent owner should periodically search for products sold by other companies, or processes carried out by other companies, that appear to fall within the scope of protection provided by its patents. Competitors and their licensees, distributors, and importers should also be watched. Employees should be instructed to report all potentially infringing conduct of which they become aware. While conducting its investigation, a patent owner should examine the activity of all parties that might be liable for patent infringement, including both direct and indirect infringers. A direct infringer is a party that actually infringes a patent. If a patent covers a product, Canadian-based manufacturers, distributors, wholesales, retailers, and any other party making, using, offering for sale, or selling that product, as well as importers of the product, are direct infringers. Companies that indirectly infringe a patent also are liable for patent infringement. Indirect infringers include parties that contribute to the infringement of a patent or that induce another to infringe a patent. Patent infringement is a tort, and all infringers, direct and indirect, are liable to the patent owner jointly and severally.

3. Contributory Infringement

Contributory infringement covers sellers of components and items that serve only a single purpose – to be used to infringe a patent. Those sellers may be charged with patent infringement, even if no claim is made against the direct infringer(s). To be a contributory infringement exists if: (1) The seller sells a component of a patented device; (2) The item sold constitutes a material part of the invention; (3) The seller knows that the item sold is especially made or especially adapted for use in an infringement of a patent; and (4) The item sold is not a staple article or commodity of commerce suitable for substantial noninfringing use. Direct infringement must have occurred for liability as a contributory infringer to arise. Thus, without evidence of direct infringement, a party cannot be held liable for contributory infringement.

4. Giving Notice – The Cease-and-Desist Letter

After a patent owner ascertained that another company is infringing one or more of its patents, the patent owner may provide a notice in the form of a cease-and-desist letter. This letter charges a company with patent infringement, and specifies the patent being infringed and the other company's product or process that is infringing that patent. The letter also requests that the accused company cease and desist from the infringing conduct. The letter may include further requests, such as payment of damages, and identification of manufacturers and distributors of the product in question. Alternatively, a patent owner can provide another company with notice of the existence of the patent, without any assertion of infringement, possibly combined with an invitation to provide the other company with a license to practice the patent. Providing notice of a patent to another company serves several purposes: (a) Damages for patent infringement begin to accrue upon providing notice of the patent to an infringer; (b) Damages resulting from acts of infringement that occur after a party is charged with infringement may be trebled by a court (for wilful infringement) if the charged party does not promptly seek out opinion of patent lawyer. Lawyer's opinion must provide that the patent is not infringed or is invalid; (c) The charged party may discontinue its activities, without further effort by the patent owner; (d) The charged party may seek out a patent license; and (e) The notice letter may serve as a marketing tool.

5. Defences to Infringement

Both the patent owner's and the accused party's investigation should consider and evaluate the merits of the possible defences to patent infringement. The following represents a non-exhaustive list of defences: (a) The properly interpreted claims of the patent do not read on the accused product or process (that is, the patent does not cover the allegedly infringing activity); (b) The accused product or process is licensed or the accused infringer is acting within the scope of a license; (c) The accused infringer has an implied license (for example, patent exhaustion; permissible repair/prohibited reconstruction; single use restrictions); (d) The allegedly infringing acts are only experimental and noncommercial; (e) The patent is expired or is unenforceable as not being properly maintained; (f) Inequitable conduct before Patent Office (for example, intentional withholding of prior art known to the patentee or a false statement made during the prosecution of the patent application); (g) Patent misuse (for example, use of patent in violation of antitrust laws; (h) Laches; and (i) Estoppel.

6. Defend, License, or Discontinue Activity?

To determine the best course of action, the potential infringer's investigation, and the patent owner's investigation, should consider the following factors: (a) The cost of procuring a defence; (b) The strength of each defence; (c) The propensity of a defence to threaten future enforcement of the claimed intellectual property rights against other parties; (d) The potential expense of patent litigation, which usually is substantial relative to other types of litigation; (e) The cost of modifying or discontinuing the activity, or designing around a patent; (f) The potential cost of a license; (g) The relative sizes of the parties involved; (h) The prior or current efforts of the intellectual property owner against other parties concerning the intellectual property rights (e.g. Is the intellectual property owner litigious?).