Canada: IP Monitor - Under Pressure: Federal Court Finds "Hot Refuelling" System Patent Valid And Infringed In Connection With Well-Site Fracking Equipment

The Federal Court awarded accounting of profits and pre-grant compensation for valid and infringed claims of a patent for hot refuelling of fracking equipment, but declined to award punitive damages.

Frac Shack Inc. v AFD Petroleum Ltd. concerned the infringement and validity of claims for a hydraulic fracturing (fracking) equipment refuelling system in the Frac Shack plaintiffs' Canadian Patent No. 2,693,567 (the '567 Patent). Writing for the Federal Court, Mr. Justice Manson rejected the defendant's argument that the claims of the '567 Patent were invalid for insufficiency or obviousness, but agreed that some of the claims were broader than the invention made and disclosed. The court found that a number of the valid claims were infringed by the defendant's competing product and allowed the plaintiffs' election for an accounting of profits, but rejected their claim for punitive damages.

The problem and solution addressed by the '567 Patent

The invention of the '567 Patent was addressed to an operational problem experienced in the fracking business: the need to run equipment at the well site for the extended periods of time sometimes required to complete the fracture treatment. In some cases, this equipment was needed for longer than the onboard fuel supplies would last and when this occurred, well-site personnel were required to engage in "manual hot refuelling" whilst the equipment was running. This practice was considered personally and environmentally dangerous for many reasons.

The invention of the '567 Patent was a system and method intended to replace manual hot refuelling with parallel and independent delivery of fuel to individual fuel tanks from a remote and semi-permanent, centrally controlled source. The court's analysis of the validity issues in the case was closely tied to its conception of the invention as a solution to this particular problem.

Validity issues: insufficiency, overbreadth, and obviousness

No insufficiency of disclosure. The court rejected the defendant's argument that the '567 Patent described the components of the fuel-delivery system in terms too broad and generic to constitute a sufficient disclosure. In fact, all of the experts agreed they would be able to build the invention of the '567 Patent based upon the disclosure; the court accepted that the skilled person would have been able to do so as well.

Claims overbroad. The court agreed in part with overbreadth arguments advanced by the defendant:

  • Fuel level sensor. Claims 1–6 of the '567 Patent lacked a "fuel level sensor" element, which is required to remotely monitor the level of fuel in the tanks of equipment connected to the refuelling system. The court held that the invention did not include embodiments that lacked a remote means of monitoring the equipment fuel level and invalidated these claims on that basis.
  • Work sites, well sites, and elsewhere. The '567 Patent contains claims that describe the system of the invention (i) "at a well site during fracturing of a well," (ii) "at a work site," and (iii) without reference to any location. The court construed the term "work site" as different and broader than the "well site" limitation using claim differentiation and the disclosure, then held that the work site claims were overbroad. The invention, it held, was specifically tied to hot refuelling in the context of a fracking well site. For the same reason, the court also made the same finding for the claims that contained no reference to the location of the system. This resulted in claims 16–18, 20–26, and 32–37 being declared invalid.

Conversely, the court rejected other overbreadth allegations regarding the placement of valves, the presence of threading on the fuel cap, and the use of dry-break connections between the hose and fuel cap. In the case of the valve placement, the court was satisfied the skilled reader would know where to put them; in the case of the latter two allegations, the court held that they were impermissible attempts to limit the inventors to the preferred embodiments of the invention.

Not obvious. Since all of the components of the invention were used in their conventional manner, the defendant took the position that they were obvious. The court disagreed. It held that the state of the art prior to the '567 Patent was manual hot refuelling; at the time, no one was focussed on how to solve problems associated with manual hot refuelling using technologies like the invention of the '567 Patent. The question — and thus the solution — was not obvious. Notably, the court made this finding over the evidence of the defendant's expert who, when asked the question while blinded, designed a similar system to solve the problem. The court found this exercise unpersuasive because the instruction to consider the question was, itself, based upon impermissible hindsight.

Infringement & remedies

Following a fact-driven analysis of infringement in which it found for the plaintiffs on most issues, the court considered monetary relief of three kinds: (i) pre-grant damages, (ii) post-grant accounting of profits, and (iii) punitive damages, each explained further below. The court also granted a permanent injunction restraining further infringement of the '567 Patent and costs in favour of the plaintiffs.

Pre-grant damages. The court awarded compensation for the pre-grant period based upon a reasonable royalty rate of 29%, as proposed by the plaintiffs' expert, and asked the parties to reach an agreement on the resulting quantum.

Post-grant accounting of profits. The defendant disputed the plaintiffs' election to claim profits over damages for the post-grant period; the court held that there was no reason the plaintiffs should not be allowed this election. In connection with this issue, the court made two findings of note. First, Manson J declined to draw an adverse inference from the fact the plaintiffs did not lead expert evidence showing that their Frac Shack System fell within the scope of the '567 Patent's claims. The defendant led no evidence to the contrary. Second, Manson J rejected the defendant's argument that manual hot refuelling was a non-infringing alternative to using the invention of the '567 Patent for the purpose of reducing the profits awarded. Even though many companies continued to use manual hot refuelling, the court found that the significant difference in risk meant they were not interchangeable.

Punitive damages. The court declined to award the plaintiffs punitive and exemplary damages. It held that although the defendant's actions were blameworthy, they did not merit the court's condemnation.

Link to decision:

Frac Shack Inc. v AFD Petroleum Ltd., 2017 FC 104


About Norton Rose Fulbright Canada LLP

Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.

Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.

Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.

For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.

Law around the world
nortonrosefulbright.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions