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On October 20, 2025, the Federal Court of Appeal (FCA) partially overturned the lower court's decision in the ongoing patent litigation between NCS Multistage Inc. and Kobold Corporation (2025 FCA 187). This ruling provides important guidance on claim construction and double patenting in Canadian patent law.
Background
NCS and Kobold are competitors in the oilfield services sector, specializing in downhole equipment for hydraulic fracturing. The dispute centered on Kobold's 571 Patent, titled "Downhole Tool Having a Shock-Absorbing Sleeve", describing a shock-absorbing system for a sliding sleeve that uses viscous dampening (pressurized fluid in the space between the housing and sleeve, called the "annular space") to control the speed of the sleeve. The 571 is a voluntary divisional patent of the 830 Patent, which itself claims an apparatus for a downhole tool with a shock absorbing sleeve.
The parties agreed that the 571 Patent covers two embodiments—a "gap" embodiment and a "seal" embodiment—used in sliding sleeves for fracking operations.
At trial, NCS' wide-ranging validity allegations were rejected, and they were found to have infringed certain claims of the 571 Patent, resulting in a permanent injunction.
On appeal, NCS narrowed its challenge to claim construction of the 571 Patent and double patenting in view of Kobold's 830 Patent.
Claim Construction: Gap vs. Seal Embodiments
The key claim construction issue related to whether the Asserted Claims encompassed only the "gap" embodiment (as found by the trial judge), or both the "gap" and "seal" embodiments. In finding that the trial judge had erred, the FCA clarified that:
- Independent claims are broader than dependent claims and must encompass all subject matter of the claims that depend on them. Thus, claim 12, from which claim 13 depends, must necessarily include both the gap and seal embodiments, and not just the gap element as found by the trial judge.
- The trial judge's error stemmed from a misapplication of the principle of claim differentiation. The FCA clarified that limitations from dependent claims should not be read into independent claims, but independent claims must encompass the subject matter of their dependents.
Double Patenting: Inventive Concept Matters
The FCA reiterated that double patenting remains a valid ground of invalidity, even for divisional patents.
The FCA clarified that the tests for obviousness and obviousness-double patenting are different. For the latter, the key question is whether the differences between the claims of the first and second patents constitute obvious steps to a person skilled in the art. Central to this analysis is whether the inventive concepts of the claims in the two patents are patentably distinct—not merely whether their embodiments overlap.
The FCA remitted obviousness-double patenting to the trial judge, who was better placed to assess the allegation having heard the evidence and testimony at trial.
Costs: Procedural Fairness Required
The FCA found that the trial judge's lump sum costs award ($1.8 million) was not supported by sufficient evidence of actual legal fees. Further, the FCA stated that the parties should have been given notice and an opportunity to respond if the Court intended to award costs on a different basis or in a higher amount than what Kobold had originally requested. The costs award was reduced and the impact of the appeal on the revised costs award was remitted to the Federal Court for further determination.
Key Takeaways
This decision offers several practical lessons for patent holders and litigants:
- Standard of Review for Claim Construction: Legal interpretation, such as the relationship between independent and dependent claims, is a question of law and is reviewable for correctness. Where technical terms are at issue, expert evidence is relevant and reviewable for palpable and overriding error.
- Claim Differentiation: Independent claims are broader than dependent claims and must typically encompass all subject matter of the claims that depend on them.
- Double Patenting: Overlapping embodiments alone do not establish double patenting; the inventive concept of each claim must be considered.
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