Alberta patent infringement claims: Two-year and not a six-year limitation period - Seriously? Comments on the recent JL Energy Transportation decision

The recent Alberta Court of Kings Bench summary judgment decision in JL Energy Transportation Inc. v. Alliance Pipeline Limited Partnership^[1]("JL Energy"), relying on its interpretation of  certain passages in an earlier Alberta Court of Appeal decision in Secure Energy Services Inc. v. Canadian Energy Services Inc^[2]., dismissed an action for combined breach of a license and patent infringement brought within six years but not within two years of Plaintiff's knowledge of the Defendants' activities, expressly stating the limitation period for bringing patent infringement claims in Alberta is two years^[3].

In doing so, as regards the portion of the claim relating to patent infringement, the Court effectively gave paramountcy to a general limitation period of two years under the Alberta Limitations Act^[4] over a limitation period of six years for patent infringement specifically provided under the federal Patent Act^[5].

Not only is such result as to the dismissal of the patent infringement claim in JL Energy contrary to the lex specialis doctrine which states that if two laws govern the same factual situation the law governing the specific subject matter (lex specialis) overrides a law governing only general matters, respectfully it further ignores federal paramountcy principles particularly where the Crown has already legislated and "occupied the field" with respect to limitations periods specifically for patent infringement under the Patent Act, "Patents of Invention" being a specific heading of exclusive legislative authority of the Parliament of Canada under the Constitution Act, 1867, formerly the British North America Act^[6].

As a result, a $638-million claim for damages by the Plaintiff JL Energy in May 2016, which included a claim for infringement of a Canadian patent brought against a series of defendants and former licensees whose activities were pleaded as flowing fluids through their respective pipelines in accordance with the Plaintiff's patented method which activities allegedly commenced in 2010 and continuously thereafter, was held to be "limitation expired" as not having been brought within two years of the date when the Plaintiff was held to have reasonably suspected infringement was occurring. Parenthetically, one of the Defendants had separately challenged the validity of the patent in suit in Federal Court, and the Federal Court had held method claims 1-8 of the Canadian patent in suit for the conducting of such activities to be valid^[7].

There is some further interesting history to the case - Bentham IMF Capital Limited, the Canadian arm of global litigation funder IMF Bentham, now Omni-Bridgeway, was funding the plaintiff's actions against the defendants.

The decision is currently under appeal^[8].

The facts of this action are relatively straightforward.

The Plaintiff JL Energy Transportation Inc. ("JL Energy") owned Canadian patent 2,205,670, containing claims to a pipeline transmission method comprising adding certain additives to natural gas mixtures to improve efficiency of high pressure pumping of fluids through pipelines at pressures greater than 1000 psi,^[9] and claims to a pipeline fluid mixture having such compounds added thereto^[10].

The '670 Patent had issued to the Plaintiff JL Energy on Nov. 16, 1999, but expired on May 16, 2017, namely one year after the action against the Defendants had been filed on May 11, 2016. The claim of patent infringement arose in respect of infringing activities of the Defendants which were pleaded as having commenced in 2010 (i.e. within six years of commencement of the action on May 11, 2016).

In the context of this, ABKB action the Defendants brought a motion for summary judgment seeking dismissal on the basis that not only the claims for breach of license but also the claims for damages arising from patent infringement, were all time-barred by the Alberta Limitations Act.

The Alberta Court of Kings Bench held not only claims for breach of license (i.e. breach of contract) to be statute-barred under the Alberta Limitations Act but also specifically the claims for infringement of the Plaintiff's patent.

While that aspect of the decision determining the claims for breach of license (i.e. breach of contract) to be statute barred under the Alberta Limitations Act for being brought more than two years after the Plaintiff reasonably could be said to be aware of the Defendants' activities likely appears unassailable, the further dismissal of the patent infringement claims as likewise being statute-barred under the Alberta Limitations Act in a situation where the patent infringement claim was brought within six years of initial claimed commencement of patent infringement, is not on a similar footing.

The motions judge in JL Energy, based on her interpretation of paragraphs 16-24 of an earlier decision of the Alberta Court of Appeal in Secure Energy Services Inc v Canadian Energy Services Inc, 2022 ABCA 200 at paras 16-24 ("Secure Energy"), held that she was bound by the earlier Alberta Court of Appeal's decision and went on to specifically thereby conclude that "the applicable limitation period for breach of Licensing Agreements and Patent Infringement is two years in Alberta"^[11] ( bold text added for emphasis) and not the six years under the Patent Act.

The motion's judge thereafter went through a detailed analysis of the facts and determined the Plaintiff had more than two years prior to bringing the action and had reasonable grounds to believe that infringement of its patent was occurring, and accordingly determined that the Plaintiff's entire action was time-barred.

Respectfully, for reasons set out herein, the motion's judge's interpretation of the referenced paragraphs in Secure Energy case do not stand for such a sweeping proposition as to the limitation period for patent infringement being only two years in Alberta.

Moreover, even if the referenced paragraphs in the Secure Energy decision or the Secure Energy decision itself could ultimately be said to stand for such a proposition (the Secure Energy decision being a split decision between the three judges hearing, with Veldhuis, JA dissenting), considering the impugned paragraphs and the circumstances of Secure Energy and indeed recent further developments as between the parties as a result of a further released decision of the Federal Court as more fully set out below, such decision can hardly can be said to be clear authority presently for the conclusion that the limitation period in Alberta for patent infringement claims is only two years.

The circumstances in the underlying action which gave rise to the Alberta Court of Appeal decision in Secure Energy were relatively unique and unusual.

In the underlying action, the plaintiffs Canadian Energy Services Inc. as General Partner for and on behalf of Canadian Energy Services LP and Canadian Energy Services LP together filed a statement of claim in the Alberta Court of Kings Bench in July 2018 seeking to prohibit the defendants Secure Energy Services Inc. and Secure Energy (Drilling Services) Inc. (collectively "Secure") from infringing a Canadian '834 patent owned by Canadian Energy Services Inc. (CES) and purportedly invented by John Ewanek.

The Secure defendants counterclaimed for a declaration that the patent was invented by a Mr. Levey (and not Mr. Ewanek who had later assigned his rights which were eventually acquired by CES) and via assignment from Levey and other predecessor companies was now owner of the '834 patent, and thus sought a declaration that the plaintiffs were infringing on what was their (i.e. Secure's) patent, and further counterclaimed for damages and/disgorgement of plaintiffs profits, as well as alternatively counterclaiming for misuse of confidential information belonged to Secure's predecessor which information Ewanak gained access to and then used in the patent application.

In the underlying action, Secure brought an application inter alia seeking an order severing the issue of ownership of Patent 834, and a stay of all other issues pending the resolution thereof.

In response, CES brought a cross-application seeking summary judgment and, in the alternative, an order striking out Secure's Counterclaim and Defence, or parts thereof, as having no merit and showing no genuine issue requiring a trial, on grounds Secure is barred by the Limitations Act, RSA 2000, c L-12, from alleging breach of confidence and further on the basis that Secure has no standing to allege infringement of the '834 Patent as it is neither the holder of the patent nor a person claiming under the holder of the patent.

In determining which application should be heard first, Secure argued that CES's argument on limitations, even if successful, will not resolve the issue of inventorship and thus ownership of the '834 patent because CES had not established that Ewanek was the inventor.

CES in reply argued, and the judge accepted, that the Patent Act was amended on Oct. 1, 1989. to create a 'first to file" regime. Since the subject matter of the '834 Patent was developed long after 1989, and as CES was first to file its patent application for what became the '834 Patent, the judge could not accept Secure's assertion that it was the owner of the '834 Patent by virtue of Mr. Levey's alleged inventorship The judge pointed out that if Secure was barred by the two-year period under the Alberta Limitations Action in being able to pursue a claim to ownership of the '834 patent, it would then be unable to claim infringement thereof. ^[12]

The motions judge for such reason elected to hear CES's application to strike first, and held, in his decision rendered Aug. 20, 2020^[13] that Secure's predecessor-in-title had actual knowledge back in 2005 of the alleged misappropriation of confidential information upon which Secure's claim to ownership of Patent 834 was founded.

Therefore, Secure's Aug. 3, 2018, Counterclaim, seeking as noted above a declaration of ownership and claiming infringement of the '834 Patent against CES, was filed outside both the two-year and the 10-year limitation periods under the Alberta Limitations Act, and the counterclaim was struck^[14].

Secure appealed the dismissal of its counterclaim against CES for patent infringement to the Alberta Court of Appeal.

Secure also further brought an application in the Federal Court of Canada seeking that the Federal Court, pursuant to its jurisdiction to do so under s. 52 of the Patent Act, amend the records of the Patent Office to declare Mr. Levey as inventor and Secure as owner of the '834 Patent. Secure's application in the Federal Court however was not yet heard by the time of Secure's appeal of the motion judge's decision to the Alberta Court of Appeal.^[15]

At the Alberta Court of Appeal, in reviewing the motion's judges decision dismissing Secure's counterclaim, and considering whether the judge erred in his application of the Limitations Act, the Court of Appeal noted that nothing the chambers judge did prevented Secure from seeking rectification of inventorship of the '834 Patent under s 52 of the Patent Act.

That said, the Alberta Court of Appeal held in Secure Energy, in the majority decision at paragraphs 19-24, which paragraphs were referred to in JL Energy as support for the two-year and not six-year limitation, stated as follows:

[19] …it is uncontested that the provincial courts have concurrent jurisdiction to hear disputes over patent infringement cases. Section 12 of the Limitations Act is a conflict of laws section which states that the limitations law of Alberta applies to any proceeding commenced in Alberta in which a claimant seeks a remedial order. Moreover, even if Secure had made its claim in the Federal Court, the Alberta limitation periods would apply since the cause of action arose in Alberta: s 39(1) of Federal Courts Act, RSC 1985, c F-7. Section 39(1) states:

Prescription and limitation on proceedings

39(1) Except as expressly provided by any other Act, the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province.

(2) A proceeding in the Court in respect of a cause of action arising otherwise than in a province shall be taken within six years after the cause of action arose

[20] Secure's argument that, regardless, even if a limitation provision applies, the six-year limitation period in s 55.01 of the Patent Act would apply rather than either the two or ten-year limitation period in the Alberta Limitations Act is without merit. Secure provides no authority for that proposition except to argue federal paramountcy generally. This argument completely ignores the Alberta's concurrent jurisdiction in infringement cases as explained above.

[21] What Secure is seeking in the Alberta action is clearly a remedial order. Nothing the chambers judge did prevents Secure from seeking rectification under s 52 of the Patent Act. What it might seek under a s 52 Patent Act application does not change the nature of what it is seeking in the Alberta action. This is not, in the Alberta action, a case of simply seeking title with the later possibility of some unknown, speculative, potential future claim as is the case where declaratory relief is generally sought.

[22] Secure indeed concedes that a patent infringement claim is remedial in nature. …. Secure concedes that if Secure were granted a declaration of ownership, Secure would continue its infringement claim against CES and seek injunctive relief, damages and disgorgement of profits as stated.

[23] The chambers judge held that Secure was seeking to benefit from the rights that flow to a patent owner, including the right to sue for infringement. Secure's claims to ownership of the 834 Patent are remedial in nature, in that they (i) allow Secure to continue its counterclaim alleging CES infringes the 834 Patent and an entitlement to monetary remedies and injunctive relief; and (ii) would require Secure to return to seek additional relief from the Federal Court under section 52 of the Patent Act to vary or expunge title to the 834 Patent.

[24] The finding that a claim is remedial in nature is a question of mixed fact and law, which should not be overturned absent a palpable and overriding error. I see no error in this conclusion.

As indicated earlier, the motion's judge in JL Energy, felt these paragraphs clearly indicated a two-year as opposed to a six-year limitation period applied to patent infringement claims in Alberta and felt bound to follow.

Firstly, the upholding by the Court of Appeal that the 10-year limitation period expired makes the issue as to whether the six-year limitation of the Patent Act a moot point, and thus very likely obiter.

Secondly, this series of paragraphs in Secure Energy confirms that the party alleging infringement was not, at least of that date of counterclaim, the registered owner and inventor of the patent had not yet been able to have its claim heard that it owned the patent. This was an impediment to its counterclaim, regardless as to whether the three-year, six-year or  ten-year limitations period had expired, and a similar argument could be made that any decision as to the appropriate limitation period not being six years for a claim of patent infringement, is thus likewise obiter.

Thirdly, Section 3(1) of the Limitations Act which provides that:

3(1) Subject to subsections (1.1) and (1.2) and sections 3.1, 3.2 and 11, if a claimant does not seek a remedial order within

(a)   2 years after the date on which the claimant first knew, or in the circumstances ought to have known,

(i)   that the injury for which the claimant seeks a remedial order had occurred,

(ii)   that the injury was attributable to conduct of the defendant, and

(iii)   that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding,

or

(b)   10 years after the claim arose,

whichever period expires first, the defendant, on pleading this Act as a defence, is entitled to immunity from liability in respect of the claim.

is clearly of a general nature, not dealing specifically with patent infringement (Patents of Invention" being a specific heading of exclusive legislative authority of the Parliament of Canada under the Constitution Act, 1867, formerly the British North America Act^[16]).

In contrast, the relevant limitations period for patent infringement actions is clearly set out in the Patent Act, at s.55.01:

Limitation

55.01 No remedy may be awarded for an act of infringement committed more than six years before the commencement of the action for infringement.

                Accordingly, the wording of S. 39(1) of the Federal Courts Act quoted in the above paragraphs in Secure, namely:

39(1) Except as expressly provided by any other Act , the laws relating to prescription and the limitation of actions in force in any province between subject and subject apply to any proceedings in the Court in respect of any cause of action arising in that province. (underlining added)

alone and of itself would appear to dictate, to the extent a different limitation period is "expressly provided by any other act", namely a Federal enactment being the Patent Act, and require effect be given to the specific limitation period provided in the Patent Act and not a general limitation period set out in the a provincial (the Alberta) Limitations Act.

Lastly, and by way of post-script, after the decision of the Alberta Court of Appeal in Secure Energy was released in June 3, 2022 , the Federal Court on July 28, 2023 in Secure Energy (Drilling Services) Inc. v. Canadian Energy Services L.P., 2023 FC 906, allowed Secure`s application seeking Mr. Levey, and not Mr. Evanek, be declared inventor of the '834 Patent, and declared Mr. Levey to be the inventor and thus Secure the owner of the `834 Patent. Such decision is further now under appeal in the Federal Court of Appeal.

Secure Energy thus, as a result of such recent Federal Court decision, and despite the Alberta Court of Appeal dismissing its counterclaim for patent infringement as being limitation-expired, thus now (depending on the outcome of the appeal) may stand in a position to potentially bring what was its dismissed counterclaim for patent infringement before the Alberta Court of King's Bench in another action in Federal Court for such damages as it may have suffered. This would presumably be for the window extending for the period six years prior to commencement of the action and prior to expiry of the `834 patent, and possibly such further period thereafter in the event circumstances support any "springboarding" of profits argument.^[16]

Summary and conclusion

The ABKB in JL Energy recently held patent infringement claims brought in the Alberta courts are subject to a two-year and not a six-year limitation period.

Accordingly, at least for the time being, and until the appeal in JL Energy is heard and potentially overturned, given the unfavourable interpretation of limitation periods by the Alberta courts in regard to claims for patent infringement, patentees should consider bringing their patent infringement claim before the Federal Court instead, which for the time being, has a more a favourable approach to limitations periods in patent infringement actions.