François Guay of Smart & Biggar’s Montreal office and Jeremy Want of Smart & Biggar’s Ottawa office recently successfully represented the plaintiffs, Bauer Hockey Corp. (“Bauer”) and Nike International Limited, in Bauer Hockey Corp. and Nike International Limited v. Easton Sports Canada Inc., 2010 FC 361, a patent infringement action involving hockey skates. In the decision, the Federal Court found the patent at issue to be valid and infringed by the defendant, Easton Sports Canada Inc. (“Easton”), both directly and through inducing and procuring a third party to manufacture hockey skates in Canada that incorporate the invention of the patent.
The plaintiffs were awarded each category of remedy sought in the action, including:
- an injunction against manufacturing, using or selling to others, or inducing and procuring others to manufacture, infringing skate boots;
- delivery up to the plaintiffs of all infringing skate boots in Easton’s possession or under its authority or control;
- damages or an accounting of profits, as the plaintiffs may elect, the quantum of which is to be determined on a reference;
- reasonable compensation in the form of a reasonable royalty for acts of infringement after publication of the patent and prior to issuance;
- pre-judgment and post-judgment interest; and
- costs.
In rendering its decision, the Federal Court considered for the first time whether prior knowledge of the patent at issue was a requirement for finding a party liable for inducing and procuring infringement.
The patent at issue related to a quarter for a skate boot and a method of manufacturing skates comprising such a component. The inventive component was first incorporated into Bauer’s VAPOR line of ice hockey skates launched in the 1997-98 hockey season, which enjoyed significant and rapid commercial success both at the NHL level and with consumers. Easton entered the hockey skate market in 1998 and began selling hockey skates that were alleged to incorporate the patented component in 2000. From 2000 to 2003, various models of Easton’s skates were manufactured in Canada by a third-party Canadian company (although by 2004 the manufacture of Easton’s skates had been entirely transferred to China).
Easton was found to be liable for direct infringement for the skates it sold in Canada. However, several models of Easton’s skates that were alleged to infringe were manufactured by Easton’s third party Canadian manufacturer and then shipped directly to international markets, primarily in the U.S. and Europe, based on purchase orders placed by third parties. The plaintiffs asserted that Easton had induced and procured its Canadian manufacturer to infringe the patent, and Easton was therefore liable for all infringing skates constructed by the manufacturer in Canada, regardless of where or to whom the skates were sold.
In considering the issue of inducing and procuring infringement, the Court applied the test set out in MacLennan v. Produits Gilbert Inc., 2008 FCA 35, namely that:
- the acts of infringement must have been completed by the direct infringer (Easton’s Canadian manufacturer);
- the completion of the acts of infringement must be influenced by the acts of the alleged inducer (Easton); therefore, without said influence, the infringement would not otherwise take place; and
- the influence must knowingly be exercised by the inducer (Easton) — meaning that the inducer must know that its influence will result in the completion of the acts of the infringement.
With respect to the first two elements of the test, the Court found on the evidence that: the patent was infringed by Easton’s Canadian manufacturer, the acts of infringement were influenced by Easton, and the infringement would not have taken place without Easton’s influence. In this regard, the Court referred, inter alia, to Easton’s involvement in the conception and design of the skates, the development of prototypes, the adjustment of patterns for the skates, and Easton’s ownership of the dies that the manufacturer used to cut the components. The Court was also influenced by the fact that an employee of Easton worked out of an office located on the premises of the Canadian manufacturer.
With respect to the third element of the test, namely that “the influence must knowingly be exercised by the inducer,” Easton argued that it could only be found to have induced and procured infringement if it had prior knowledge of the patent at issue and knew that the patent was valid and infringed by the skates manufactured at the Canadian company. Easton’s position was tantamount to suggesting that in the case of inducing and procuring infringement, there was a requirement of an intention to infringe. The plaintiffs disagreed, arguing that “knowingly” merely referred to Easton’s knowledge that its influence would result in the acts of the direct infringer — knowledge of the patent was not a requirement.
In reviewing the jurisprudence, the Court noted that there were no previous cases where the Court had stated clearly that a defendant could not infringe by inducement or procurement unless it knew of the patent at issue. The Court commented that it is important to consider that inducing and procuring another to make or construct a patented invention is not a tort distinct from that of direct infringement.
The Court held that there was no legal rationale for requiring an intention to infringe on the part of an inducer or procurer when there was no such requirement for a direct infringer. By contrast, and consistent with the interpretation of the third element of the test suggested by the plaintiffs, the Court agreed that the inducement must be done knowingly or deliberately. In effect, it would be unjust to find a party guilty of infringement by inducement if that party did not know that its actions would induce another to do something that would later be held to constitute infringement. The Court ultimately concluded that to require infringement by inducement and procurement to not only be done deliberately but also with knowledge of the patent at issue would be to create an unwarranted and unjustifiable distinction between companies who manufacture their own products (direct infringement) and those who choose to have them manufactured by others according to their detailed specifications (inducing infringement).
As a result, the Court found that, in the circumstances of the case, Easton was liable for all of the skates manufactured by the Canadian third party in accordance with Easton’s directions and specifications. This decision establishes for the first time that the test for establishing infringement by inducement and procurement does not require the inducer to have prior knowledge of the patent at issue.
The decision is presently under appeal.
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