Federal Court of Appeal comments on standard of review and expert evidence in patent infringement action

On Aug. 18, 2015, the Federal Court of Appeal dismissed two appeals by ABB Technology AG, ABB Inc., and ABB AG (collectively, "ABB") in the context of a patent infringementdispute against Hyundai Heavy Industries Co, Ltd ("HHI") related to gas-insulated electrical switchgear assemblies used in electrical power transmission.¹ One appeal related to the Federal Court's dismissal of ABB's infringement action,² while the other appeal related to a costs award in favour of HHI with respect to the infringement action.³ In dismissing the main appeal regarding the infringement action, the Court of Appeal addressed in some detail the standard of review to be applied and the role of expert evidence with respect to patent claim construction.

Background

In the underlying action, ABB alleged that two of its patents were infringed by HHI. The 781 Patent addressed the problem of visually verifying switch positions in an enclosed gas-insulated switchgear assembly. Verifying switch positions in a switchgear assembly is done for operational and maintenance reasons, and involves important safety issues. For example, explosive and life-threatening arc faults can occur if a switchgear assembly is not operating or configured properly. The 781 Patent described and claimed windows for viewing switch contact positions from outside the switchgear, as well as markings for precisely confirming positions.

The 772 Patent described and claimed a particular arrangement of certain components found within a switchgear assembly. The particular arrangement allowed for a compact design that simultaneously satisfied component-related requirements for the North American market.

Trial judgment: 772 and 781 Patents are obvious

The Federal Court found that both patents were invalid for obviousness and that they were not infringed. These findings were largely based on the Federal Court's construction of claim 1 in each patent.

For the 781 Patent, claim 1 claimed a viewing window in a gas-insulated switchgear assembly to determine the positions of a "moveable switch contact element." The Federal Court's obviousness finding turned on its construction of the claim element "movable switch contact element." ABB argued this claim element was restricted to sliding contact switches only based on the state of the art, as well as the description and drawings of the 781 Patent. However, the Court construed the element to include both knife blade switches and sliding contact switches. As gas-insulated switchgear assemblies comprising viewing windows to view knife blade switches were known in the art, and the 781 Patent was declared obvious in light of the Federal Court's construction of claim 1. Claim 4, which relates to markings for precisely confirming switch positions, was not explicitly addressed in relation to the issue of obviousness.

The 772 Patent was found to be obvious by the Federal Court on the basis that rearranging components within a gas-insulated switchgear was held not to be inventive. According to the Federal Court, the fundamental problem with ABB's assertion of inventiveness was that the 772 Patent did not discuss the problems that ABB was required to overcome in obtaining the novel arrangement.

Appeal of the trial judge's findings of obviousness

The Federal Court of Appeal discussed in some detail the standard of review for issues related to claim construction. While citing Whirlpool and noting that the standard is correctness, the Federal Court of Appeal suggested that the application of the correctness standard on questions of claim construction should be substantially limited or changed to "palpable and overriding error." The Federal Court of Appeal reasoned that the trial judge is entitled to deference in its appreciation of the expert evidence, then noted that issues related to claim construction often revolve around the expert evidence. Therefore, "the standard of review of palpable and overriding error will often apply on questions of patent construction."⁴ Nonetheless, the Federal Court of Appeal stated that it would apply the correctness standard and left the question of the proper standard for claim construction to be dealt with by the Supreme Court of Canada.⁵

The Federal Court of Appeal followed established jurisprudence in noting that issues of obviousness and infringement raised questions of mixed fact and law and should be subject to review for palpable and overriding error except in the cases of legal errors.⁶

In assessing the construction of the term "movable switch contact element" in claim 1 of the 781 Patent, the Federal Court of Appeal largely agreed with the Federal Court's findings. In doing so, the Federal Court of Appeal expressed that "caution" should be used with respect to the concept of "purposive construction", and accepted grammatical-based findings that lead to the Federal Court's finding of obviousness. Ultimately, the Court of Appeal noted that the Federal Court's construction depended to a large extent on the Court's assessment of the credibility of the experts. As no palpable and overriding error in the Federal Court's credibility findings was demonstrated, the Court of Appeal upheld the Federal Court's finding of obviousness.

Regarding inventiveness of the 772 Patent, the Federal Court of Appeal found no legal error or palpable and overriding error in the Federal Court's assessment of the evidence on its construction of claim 1. It was open to the Court below to favour the evidence of certain experts. It was also not open to an appellant, on appeal, to attack the weight the Court below gave certain expert reports where the appellant did not object to the admissibility of the reports. An Appeal Court could not engage in a reweighing of the evidence.

Appeal of the costs judgment

With regard to the costs appeal, the Federal Court of Appeal emphasized the discretionary nature of a Rule 400 costs award. As a discretionary order is a question of mixed fact and law, the standard of review applicable was palpable and overriding error. On the basis of this "high standard" of review, the Federal Court of Appeal found no obvious error and dismissed the appeal.