The FCA denied appeals by a company that should have put 'its best foot forward' at summary trial
An Alberta-based company does not own two patents and, therefore, cannot sue another company for infringing on them, the Federal Court of Appeal ruled last week, adding it would not order a new trial just because a lower court incorrectly struck parts of an affidavit supplied by the first company.
The lower court case largely hinged on the rival testimonies of two witnesses. The court found the witness provided by the appellant, Mud Engineering Inc., to be “clearly less credible.” Mud Engineering had moved the lower court for a summary trial to determine who owned the patents at the center of the dispute.
“Summary trials are not a time for parties to engage in strategic behaviour as far as the evidence is concerned. They are not a time to hold back evidence for later,” Justice David Stratas wrote for the majority. “Instead, the parties must put their best foot forward. If there are evidentiary shortcomings in a party’s case in the summary trial, that party may well lose.”
Justice John Laskin concurred. Justice Siobhan Monaghan wrote a dissenting opinion.
Emilie Feil-Fraser, a lawyer with Seastone IP who represented the respondent, Secure Energy (Drilling Services) Inc., told Canadian Lawyer a major takeaway from the decision is its “implication on summary trials and how we view that procedure.”
Patrick Smith, a lawyer and founder of Seastone who worked with Feil-Fraser on the case, agreed. “The bottom line for people involved in litigation and who are contemplating summary trials, or bringing a summary trial motion, is that you really should take great efforts to make sure that the case you’re presenting is the best case you can possibly present,” Smith said.
Counsel for Mud Engineering declined to comment.
The dispute began when Mud Engineering filed a federal lawsuit against Secure Energy, alleging the latter infringed on two patents. Secure Energy responded by saying that it owned the patents.
Following the summary trial, the lower court declined to grant ownership of the patents to either company, citing insufficient evidence in both cases. Mud Engineering appealed the ownership ruling and an order striking significant portions of an affidavit the company supplied. Secure Energy did not appeal the lower court’s ruling.
The appellate court dismissed Mud Engineering’s claim that the lower court departed from its task of assessing the company’s ownership of the patents and began assessing the validity of the patents instead. While the appellate court agreed there were issues with the lower court’s choice of words in its reasoning, “appellate review is not an exercise in literary criticism,” Stratas wrote. Read holistically, the lower court did not commit legal errors.
The majority also dismissed Mud Engineering’s allegation that it was “absurd” for the lower court to conclude that no one owned the patents. The lower court was entitled to find that “both sets of parties fell short of the mark,” Stratas wrote, adding that the companies could dispute infringement of the patents by third parties in the future and attempt to establish ownership again.
The appellate court agreed with Mud Engineering that the lower court may have made several errors in its decision to strike portions of an affidavit the company provided. However, these errors were not substantial enough to change the trial outcome.
“A summary trial is meant to be a single litigation event that, if possible on the facts and the law, will end the proceedings or one or more issues: quickly, one way or the other, once and for all,” Stratas wrote. “An unwarranted, improper and pointless re-do and rerun of a summary trial runs against its purpose – to determine disputes quickly and finally.
“If parties such as the appellants can fail on the ownership issue at the summary trial but then can rerun the ownership issue at a full trial in order to have standing to bring an infringement action, what value is a summary trial in the litigation process?” Stratas added. “It would be nothing more than a consequence-free dress rehearsal for a later trial.”
The appellate court noted the parties weighed in “on the unsettled legal issue of who bears the burden of proof in summary trials.” While the issue has never been explicitly decided in the Federal Court of Appeals, it is unnecessary to address it in this case, the court said.
In her dissent, Monaghan opined that the lower court misunderstood its task. The court addressed whether the two companies owned the patents, but its answers did not address the substance of the issue.
The court failed to “approach the motion for adjudication of title as one brought in the context of the respondents’ challenge to validity of the patents in defence of an infringement claim,” Monaghan said.
Monaghan wrote that Secure Energy needed to prove it owned the patents to have Mud Engineering’s infringement lawsuit dismissed. However, the lower court did not explicitly say that Mud Engineering is not the owner of the patents, only that the company was “not entitled to a declaration of ownership based on the evidence they led.
“The Federal Court did not order any change to the records at the patent office,” Monaghan said. Under patent law, this means “Mud is the owner of the disputed patents” until a court explicitly decides otherwise.
However, rather than ordering a new trial, Monaghan said she would simply amend the wording of the lower court’s order.
