The Diaper Wars, Episode 2: FCA Finds US Parent Company Liable For Patent Infringement

MT
McCarthy Tétrault LLP

Contributor

McCarthy Tétrault LLP provides a broad range of legal services, advising on large and complex assignments for Canadian and international interests. The firm has substantial presence in Canada’s major commercial centres and in New York City, US and London, UK.
The Federal Court of Appeal ("FCA") decision of Munchkin, Inc. v. Angelcare Canada Inc., 2024 FCA 156 concerned two appeals of Justice Roy's...
Canada Intellectual Property

The Federal Court of Appeal ("FCA") decision of Munchkin, Inc. v. Angelcare Canada Inc., 2024 FCA 156 concerned two appeals of Justice Roy's trial decision that held Munchkin, Inc. and Munchkin Baby Canada Ltd. ("Munchkin") liable for infringement of six patents asserted by Angelcare Canada Inc., Edgewell Personal Care Canada ULC., and Playtex Products, LLC. ("Angelcare"). Our discussion of the trial decision is here.

Munchkin appealed the trial judge's conclusions of validity and liability by the US parent company, Munchkin Inc. ("Munchkin US"). For its part, Angelcare appealed the finding of non-infringement with respect to Munchkin's Generation 4 products. Justice Locke, writing for the Court, dismissed Munchkin's appeal and allowed Angelcare's appeal.

This post focuses on the FCA affirming the liability of Munchkin's US parent company, upholding the presumption of manufacturer confidentiality, and conducting its own infringement analysis after finding the trial judge erred in construing one of the claims.

US Parent Liable for Patent Infringement

Munchkin appealed the Federal Court's ruling that the Munchkin US. should be held jointly and severally liable for patent infringement with its wholly owned Canadian subsidiary. Munchkin argued this was an error, as the parent had no office or employees in Canada and had not committed any infringing activity in Canada.

The FCA dismissed these grounds, stating that "a person cannot avoid liability for infringement by setting itself up outside Canada, and then making arrangements from there that result in infringement of a patent in Canada."1 The FCA held that in assessing the liability of foreign affiliates, the issue to consider is whether the entity located outside Canada is in "common cause" or "party" to the infringement taking place in Canada.

In this case, the trial judge concluded that Munchkin US sufficiently participated in the infringing activities to ground liability, based on the following facts:

  • Munchkin Canada had never had any designers;
  • all of the products distributed in Canada were designed by Munchkin US;
  • Munchkin Canada had only seven employees, whose roles were limited to sales, marketing and warehousing; and
  • Munchkin US made no distinction between decisions undertaken for the US market and the Canadian market.2

Presumption of Prototype Manufacturer Confidentiality

Munchkin alleged anticipation on the basis of the inventor requesting a price quote for a prototype of one of the patented products (the "Morand Disclosure") from a potential manufacturer ("Initial").

Munchkin submitted that the Morand Disclosure was non-confidential (and thus anticipatory) because the communication was unsolicited, made between arm's length parties without a previous relationship, and no non-disclosure agreement had been signed. The FCA held that this argument was properly dismissed by the Federal Court on the basis that the presumption of manufacturer confidentiality described in Corlac3 applied.

The issue of confidentiality is a factually suffused question based on a reasonable person test. In this case, the nature of the recipient's business supported the key factual findings. First, it was part of Initial's business model to treat information received in the context of a quote request for the manufacture of a prototype as confidential. Second, Initial implicitly solicited confidential information by being a manufacturer of prototypes.4

FCA Decided Infringement Instead of Remitting the Issue to the Trial Judge

In the decision, one of the findings of non-infringement of Munchkin's Generation 4 products turned on the claim construction of a claim term "formed integrally". Having agreed with Angelcare that there was an error of construction of this term, the FCA considered whether it should decide infringement based on the proper claim construction or remit the issue back to the trial judge.

In deciding whether to remit, the FCA considered whether the issue: (a) was factually suffused, voluminous, and complex; (b) involved documentary evidence or live evidence and assessments of credibility; (c) remained uncertain; and (d) had been briefed by the parties. The Court also considered whether the further delay associated with remitting the matter would be contrary to the interests of justice.5

The FCA held that only the first factor, the factual complexity, weighed against deciding the matter, but that the remaining factors favoured rendering a decision immediately.

In this case, the FCA determined it was appropriate for it to decide the infringement issue instead of remitting. The FCA noted that the parties "have had an opportunity to address the outstanding infringement issues."6 They also held that the trial judge had made sufficient factual findings and conclusions such that the result would not be uncertain, nor require them to weigh evidence or assess credibility. Further, it was in the interests of justice to avoid further delay.

Having determined the issue of infringement, the Court of Appeal also issued a permanent injunction in the form proposed by Angelcare in its memorandum of fact and law.

Footnotes

1. Para 72.

2. Para 68

3. Corlac Inc. v. Weatherford Canada Inc., 2011 FCA 228, para 28 [citing Coco [v. A.N. (Engineers) Ltd., [1969] R.P.C. 41 (Ch.) and Lac Minerals Ltd. v. International Corona Resources Ltd., 1989 CanLII 34 (SCC)].

4. Para 34.

5. Para 88.

6. Para 89

To view the original article click here

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.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More