Non-practising entity's allegations of patent infringement against oil sands producer /operator dismissed

27 January 2021


On January 26, 2021, Justice Manson of the Federal Court of Canada dismissed a patent infringement action brought by an individual, non-practising entity, Maoz Betser-Zilevitch against PetroChina Canada Ltd.

The patent in-suit, Canadian Patent No. 2,584,627 ("627 Patent") entitled System and Method for Steam-Assisted Gravity Drainage (SAGD)-Based Heavy Oil Well Production", was summarized by the judge to relate to a modularized SAGD well pad for heavy oil production and a method for its installation and to describe the flow lines and instrumentation on the modules and at the well pad site.

Justice Manson held claims 1-17 of the '627 Patent valid,  but not infringed by the Defendant PetroChina Canada Ltd.

Also at issue in this case was ownership of the '627 Patent. Pursuant to a consulting agreement entered into between Mr. Betser's consulting company and Nexen Inc. ("Nexen"), Mr. Betser was engaged as an independent consultant for Nexen at its Long Lake SAGD field facility, at the time he conceived the invention and filed for a patent in the United States, from which the Canadian patent in suit claimed priority. On such basis, PetroChina took the position, relying on the provisions of the consulting agreement and the common law relating to ownership of inventions,  that Mr. Betser did not have standing to bring the action as Nexen is the true owner of the '627 Patent. Although Justice Manson held PetroChina was not barred from raising the issue of lack of ownership by Mr. Betser on the basis of lack of privity of contract between Nexen and PetroChina Canada or expiration of limitations periods, he found there was insufficient evidence before him to establish Nexen as the owner of the '627 Patent, and refrained from concluding Mr. Betser was not entitled to bring the action.

An aspect of the claims of the '627 Patent was held to be the presence of the steam injection flow line together with the heavy oil production flow line being located on the lowest level of a module, so as to allow workers in the field to connect such flow lines together between the modules without using scaffolding. In fact, the parties agreed that the location of the steam flow line was the only difference between the '627 Patent and the prior art. Justice Manson held PetroChina's modules do not have both heavy oil production lines and steam injection flow line on the lowest level, and thus the modules do not infringe the asserted claims of the '627 Patent.

The validity issue raised by PetroChina was whether the claims in dispute were obvious in view of public disclosures of Cenovus Foster Creek modules and CNRL Primrose modules. Both the Cenovus and CRNL modules have a steam injection flow line on a top, upper level, and a heavy oil production flow line on a lower, first level. At issue was whether (i) the Cenovus and CNRL modules were "made available to the public" prior to the priority date and whether (ii) it would have been obvious to move the steam line to a bottom, first level of the modules, so as to have both the steam injection flow line and heavy oil production flow line together on the lowest level of the module.

With respect to the first issue, Justice Manson held PetroChina's evidence established that the modules were "made available to the public" through site visitations, marketing presentations and during transportation. Mr. Betser however argued that "merely viewing, without more" is not enough and that the evidence must establish that a person skilled in the art could reproduce the well pads "without undue burden". Justice Manson disagreed: "The degree of scrutiny required upon visual inspection is context specific". Justice Manson further noted that the degree of scrutiny required for a design of a hockey skate in a public arena, due to its small size,  would be higher than the scrutiny required to "view the components of a large SAGD module".

With respect to the second issue, after considering factors which he found are considered during module design, including piping sizes, location of expansion loops, condensate build-up and reservoir capacity, Justice Manson held it would not have been obvious to a person skilled in the art, at the relevant time, to move the steam injection flow line to a lower, first level.

As there was no finding of infringement of the 627 Patent, there was no substantive discussion regarding remedies. Costs were awarded to PetroChina.

Gowling WLG successfully represented PetroChina Canada Ltd. in this action with a team at trial that comprised Doak Horne, Patrick Smith, Kevin Unrau and Sharn Mashiana.  

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