Baker Petrolite Corp. ET AL v. Canwell Enviro Industries Ltd.

Baker Petrolite Corp. ET AL v. Canwell Enviro Industries Ltd.
Court (s) Database
Federal Court Decisions
Date
2001-08-15
Neutral citation
2001 FCT 889
File numbers
T-913-95
Notes
Reported Decision
Decision Content
Federal Court Reports Baker Petrolite Corp . v. Canwell Enviro-Industries Ltd. (T.D.) [2002] 2 F.C. 3
Date: 20010815
Docket: T-913-95
Neutral Citation: 2001 FCT 889
BETWEEN:
BAKER PETROLITE CORPORATION, PETROLITE
HOLDINGS INC. and BAKER HUGHES CANADA COMPANY
Plaintiffs
- and -
CANWELL ENVIRO-INDUSTRIES LTD., CLIVE
TITLEY AND THE CITY OF MEDICINE HAT
Defendants
REASONS FOR JUDGMENT
GIBSON J.:
INTRODUCTION
[1] The plaintiffs, as owner in the case of Baker Petrolite Corporation ("Petrolite"), as predecessor in title to Petrolite in the case of Petrolite Holdings Inc., and as exclusive licensee for Canada in the case of Baker Hughes Canada Company ("Petrolite Canada"), seek relief against the defendants for infringement of Canadian Letters Patent 2,005,946 ("the Patent"). The Patent issued on the 7th of February, 1995 for an invention of Edward P. Dillon entitled "Composition and Method for Sweetening Hydrocarbon".
[2] The defendant Canwell Enviro-Industries Ltd., ("Canwell"), as plaintiff by counterclaim, seeks relief against the plaintiffs on the ground that the Patent is invalid and that it has suffered damage by reason of the plaintiffs' actions in holding out, over many years commencing before the Patent issued, that the Patent is valid, and that Canwell infringes the Patent in the course of its business.
THE PATENT IN SUIT
[3] As previously indicated, the Patent is entitled "Composition and Method for Sweetening Hydrocarbon". The application for the Patent was filed the 19th of December, 1989 by Quaker Chemical Corp. (Delaware). The application was laid open on the 23rd of June, 1990. Quaker Chemical Corp. (Delaware) assigned its interest in the application to Petrolite Holdings, Inc. on the 27th of July, 1993. Petrolite Holdings Inc. in turn assigned its interest in the application to Petrolite Corporation on the 8th of July, 1994. The Patent issued to Petrolite Corporation on the 7th of February, 1995. Petrolite Corporation changed its name to Baker Petrolite Corporation on the 9th of July, 1997.
[4] The field of the invention disclosed by the Patent, the background of the invention and a summary of the invention are well described in the disclosure to the Patent in the following terms:
Field of the Invention
The present invention relates to a method and composition for sweetening gaseous and/or liquid hydrocarbon streams. More specifically, this invention relates to a method and composition for reducing the hydrogen sulfide and organic sulfide levels in such streams, particularly natural gas streams.
Background of the Invention
Natural gas is a naturally occurring mixture of hydrocarbon and non-hydrocarbon gases found in geologic formations beneath the earth's surface, often in association with petroleum. As obtained from oil and gas wells, raw or sour natural gas contains a number of impurities which must be removed before being introduced into a pipeline. The principal impurities in natural gas are water, carbon dioxide, hydrogen sulfide and condensable hydrocarbons, such as propane, butane and pentane. These undesirable components are conventionally removed from raw natural gas streams in gas processing plants. The processing plants are normally located in the field and vary in size from small units to large, centrally located plants.
The composition of raw natural gas varies widely from field to field. For example, the methane content can vary between 45 percent and 96 percent by volume, while the hydrogen sulfide content may range from 0.1 ppm to 150,000 ppm. Since hydrogen sulfide is corrosive in the presence of water and poisonous in very small concentrations, it must be almost completely removed from natural gas streams before use and preferably before transport. As a result, many pipeline specifications limit the amount of hydrogen sulfide to less than 0.25 gr per 100 cu. ft. of gas.
The technology known in the art for removing hydrogen sulfide from raw natural gas was developed for large processing plants to remove hydrogen sulfide in continuous processes. These large processing plants are fed by one or more natural gas wells, each of which produces over 10 million cubic feet of natural gas per day. Many of these processes utilize commodity chemicals or proprietary materials to lower the hydrogen sulfide levels in natural gas to pipeline specifications. Also, many of these processes not only sweeten sour natural gas to pipeline specifications, but also regenerate most, if not all, of the sweetening compositions involved.
Generally, there are several methods for sweetening sour gas, i.e., for reducing the hydrogen sulfide content of new gas. For example, various chemicals may be added or injected "in-line" to natural gas pipelines. For example, these sweetening products may be injected at the well head, separators, glycol units, coolers, compressors, etc., to provide contact with the natural gas.
Materials used with such "in-line" injection systems include, e.g., various aldehydes. The hydrogen sulfide reacts rapidly with the aldehyde compounds producing various types of addition products, such as polyethylene sulfide, polymethylene disulfide and trithiane. Such a process is disclosed, e.g., in Walker, J.F., Formaldehyde, Reinhold Publishing Company, New York, page 66 (1953).
U.S. Patent No. 4,748,011 [the "Baize Patent"] discloses a method for the separation and collection of natural gas comprising the use of a sweetening solution. The sweetening solution consists of an aldehyde, a ketone, methanol, an amine inhibitor, sodium or potassium hydroxides and isopropanol. The amine inhibitor includes alkanolamines to adjust the pH.
Although the aldehydes (e.g., formaldehyde) are effective in the reduction of the hydrogen sulfide level of natural gas and selective for sulfide compounds, they are known to form trithiane compounds upon reaction with the sulfides. The trithianes are solids which do not easily dissolve and therefore, clog gas lines.
Also, aldehydes are unstable, temperature sensitive and have the tendency to polymerize. Moreover, aldehydes are known carcinogens and environmental hazards. Accordingly, the use of aldehydes for sweetening natural gas has come under disfavor.
Alkanolamines may also be used to sweeten sour gas streams, e.g., in such "in-line" injection systems. Various alkanolamines may be used in such systems, e.g., monoethanolamine, diethanolamine, methyldiethanolamine and diglycolamine. For example, U.S. Patent No. 2,776,870 discloses a process for separating acid components from a gas mixture comprising adding to the gas an absorbent containing water-soluble alphatic amines and alkanolamines, preferably ethanolamine.
However, the alkanolamines are not selective in their reaction with hydrogen sulfide. That is, alkanolamines absorb the total acid-gas components present in the gas stream, e.g., carbon dioxide, as well as H2S. Such non-selectivity is not desirable in many applications and therefore, the usage of alkanolamines has also come under disfavor for this reason.
Another method used for the reduction of the hydrogen sulfide level in gas streams is the use of an H2S scrubber tower which causes the gas to contact a sweetening medium. The bubble tower processes are batch or one-step processes which increase the opportunity for contact between the natural gas and the sweetening product by providing a gas diffusion zone by way of, e.g., disparges, pall rings, wood chips, etc.
Sweetening materials used in such scrubber tower apparatuses include, e.g., the so-called "iron-sponges". The iron-sponge is actually a sensitive, hydrated iron oxide supported on wood chips or shavings. The iron oxide selectively reacts with the hydrogen sulfide in the gas to form iron sulfide. Although effective, the iron-sponge method is disadvantageous in that the final product is not easily disposed of (see, e.g., The Field Handling of Natural Gas, p 74, 3rd Ed (1972)).
Slurries of zinc oxide and iron oxides have also been used in such scrubber towers to effect sweetening in much the same way as the iron-sponge. However, disposal problems also exist with these slurries.
Caustic-based systems, such as those containing nitrites, may also be used in scrubber towers. Although effective, such systems produce elemental sulfur solids. An example of such a system is marketed by NL Industries under the trademark "SULFACHECK" and disclosed in U.S. Patent No. 4,415,759. "SULFACHECK" is a buffered aqueous solution of sodium nitrite which is injected into scrubber towers to sweeten natural gas. This solvent is designed for use in a one-step batch process, wherein the hydrogen sulfide is removed from a raw natural gas stream through a reaction with the sodium nitrite.
Such caustic-based sweetening materials are undesirable since, as noted above, they produce solids (i.e., elemental sulfur). Accordingly, such systems cannot be used in "in-line" injection systems and may only be used in bubble towers. Moreover, such caustic-based sweetening systems are not regenerable, i.e., they must be used in a batch process.
Another known method for sweetening natural gas is the chemical solvent process. The chemical solvent process is a continuous process, whereby a sweetening solution is contacted with the gas stream in an absorber tower. In such a process, the total acid gases, including hydrogen sulfide and carbon dioxide are stripped off of the sweetening solution which is then regenerated. The chemical solvent processes cannot be performed in-line.
Alkanolamines of various types may also be used in these chemical solvent processes. However, as discussed above, the use of alkanolamines is limited due to their lack of selectivity for hydrogen sulfide and other organic sulfides in the gas streams.
Other chemicals solvents known in the art and used for sweetening gas streams include piperazinone, as disclosed in U.S. Patent No. 4,112,049; 1-formylpiperidine, as disclosed in U.S. Patent No. 4, 107, 270; iron (III) complexes of N-(2-hydroxyethyl) EDTA, as disclosed in U.S. Patent No. 4, 107,270; and iron complexes of nitriloacetic acid, as disclosed in U.S. Patent Nos. 4,436,713 and 4,443,423.
Accordingly, there is a need in the art for a method for the reduction in the levels of hydrogen sulfide and organic sulfides from sour hydrocarbon streams which not only substantially reduces the sulfide levels therein, but which is also unaffected by storage temperature, stream temperature or the sulfide reaction temperature; which causes little or no health hazards; which selectively reacts with hydrogen sulfide; and which does not form a precipitate upon reaction with hydrogen sulfide and organic sulfides.
Summary of the Invention
The above objectives have been obtained by the present method for selectively reducing the levels of hydrogen sulfide and organic sulfides from gaseous and/or liquid hydrocarbon streams which comprises contacting the stream with a composition comprising the reaction product of (i) a lower alkanolamine with (ii) a lower aldehyde. This method may be used in a variety of installations, including for example, in-line injection systems, H2S scrubber systems or chemical solvent systems. There is also disclosed a method for reducing the levels of hydrogen sulfide, organic sulfides and water, using the present method with the addition of a glycol.
[5] The disclosure of the Patent goes on to provide a detailed description of the preferred embodiments. The preferred lower alkanolamine is indicated to be monoethanolamine ("MEA"). The preferred lower aldehyde is indicated to be formaldehyde or acetaldehyde. While the disclosure indicates that the molar ratio of the lower alkanolamine to the lower aldehyde may be from about 1:0.25 to about 1:10, the preferable molar ratio is indicated to be from about 1:1 to about 1:1.5. The reaction product of monoethanolamine and formaldehyde is indicated to be N, N1-methylene bisoxazolidine ("bisoxazolidine"); 0,1,3,5 tri-(2-hydroxyethyl)-hexahydro-S-triazine ("triazine") and mixtures thereof.
[6] The expert testimony before me was unanimous in indicating that bisoxazolidine has never been conclusively identified as a reaction product of MEA and formaldehyde. By contrast, the expert testimony was unanimous that a predominant reaction product of MEA and formaldehyde is triazine.
[7] Following disclosure of a "Preparation Example" and a "Use Example", there follow 77 process claims the first of which is in the following terms:
A method for selectively reducing the levels of hydrogen sulfide and organic sulfides present in gaseous or liquid hydrocarbon streams or mixtures thereof comprising contacting said streams with a composition comprising the reaction product of (i) an alkanolamine comprising 1 to about 6 carbon atoms with (ii) an aldehyde comprising 1 to about 4 carbon atoms, in an amount and for a period of time sufficient to substantially reduce the levels of hydrogen sulfide and organic sulfides in said streams.
[8] In his opening statement, counsel for the plaintiffs identified the claims at issue as falling into four (4) series. The first series consists of claims 44 to 50 and the second series consists of claims 19 to 21, 28 and 29 and 34. The third series consists of claims 3 to 6, claims 8 and 10, claims 13 to 16, claims 24 and 25 and claims 32 and 36. The fourth series consists of claims 57, 58, 66 and 67.
[9] The chemical structure of the predominant reaction product of MEA and formaldehyde, that is to say triazine, is depicted as follows:
THE PLAINTIFFS
[10] The plaintiff Baker Petrolite Corporation is a corporation incorporated under the laws of Delaware. Its principal place of business is in Houston, Texas. It is, for the purposes of these reasons, the same corporation as Petrolite Corporation to whom the Patent issued. As earlier indicated, Petrolite Corporation changed its name to Baker Petrolite Corporation on the 9th of July, 1997.
[11] The plaintiff Petrolite Holdings Inc. is a corporation also incorporated under the laws of Delaware. Its principal place of business is in the state of Delaware. As previously indicated in these reasons, it was an assignee of the rights to the application for the Patent from Quaker Chemical Corp. (Delaware) which filed the application. Petrolite Holdings Inc. assigned its interest in the Patent to Petrolite Corporation on the 8th of July, 1994.
[12] Petrolite Canada Inc. was a federal corporation when the Patent was first acquired by Petrolite Holdings Inc. in 1993. On the 25th of September, 1997, Petrolite Canada Inc. was continued as an Alberta corporation and discontinued as a federal corporation.
[13] Petrolite Canada Inc. amalgamated with two other corporations as Baker Hughes Canada Inc., an Alberta corporation, on the 1st of October, 1997. Baker Hughes Canada Inc. was continued as a Nova Scotia corporation and discontinued as an Alberta corporation on the 21st of December, 1998. Baker Hughes Canada Inc. amalgamated with a number of other companies as Baker Hughes Canada Company on the 1st of January, 1999.
[14] Since the 27th of July, 1993, Baker Hughes Canada Company, either under its current name or in one of its former incarnations, has been licensed under the Patent, or the application for the Patent, by either Petrolite Holdings Inc. or Baker Petrolite Corporation either by way of oral licence or confirmatory and written licence dated the 18th of September, 1996. Baker Hughes Canada Company has its principal place of business in Halifax, Nova Scotia.
PETROLITE CANADA'S "SULFA SCRUB" PRODUCTS
[15] Petrolite Canada has sales representation in British Columbia, Alberta, Saskatchewan, Manitoba and Newfoundland. It markets products to the oil and gas industry with its largest market being in the province of Alberta. In addition to its hydrogen sulfide scavenging product line, among other things, it markets corrosion inhibitors, demulsifiers, scale inhibitors, paraffin compounds, foamers and anti-foamers.[1] With regard to its hydrogen sulfide scavenging product line, Mr. Don McDougall, Canadian product manager for Baker Petrolite Corporation, a division of Petrolite Canada, testified:
There's three products we have. Currently on the water soluble side they're all triazine base materials. The HSW-705 is the original triazine. The 2001 has an additional formaldehyde product added to it. And the PM-9513 has a little bit of ethylene glycol added to the 705.[2]
Petrolite Canada's hydrogen sulfide scavengers are sold under the trademark or trade name "SULFA-SCRUB".
[16] Petrolite Canada's sale representatives are provided with at least introductory training on the application of SULFA-SCRUB products, together with an extensive marketing support manual[3]. They are also provided with the support of technical support representatives. Before they are in a position to actually make a proposal regarding use of a SULFA-SCRUB product, they would take a three-day training session in gas conditioning. Included in the marketing support manual are the following diagrams illustrating the reaction of the SULFA-SCRUB product HSW-705 with hydrogen sulfide and the process by which, when the product is exhausted, it may be regenerated so that it can be reused.
[17] Sales proposals in relation to SULFA-SCRUB products are designed by "application specialists" within Petrolite Canada. Each sales proposal is uniquely tailored to the needs of a potential customer. The witness Mr. McDougall described the range of pre-sales and post-sales services provided by Petrolite Canada in the following terms:
The first service would be to develop an overall plan and help the customer design a facility that would best treat that particular gas. Because of different gas conditions, pressures, temperatures, flow regimes, liquid streams, et cetera, that join with the gas, it takes a little bit of I'll call it engineering, quote, unquote, I guess, to develop a proper treating program. Once the account has been acquired by our company, then we provide technical support, some training on the - - site training on how to deal with the product, how to deal with issues of health and safety, et cetera. Then we also offer troubleshooting services. If they have problems with the facility, then we would troubleshoot why the problems are there and try to evaluate what may have caused those particular problems. And then we also offer to customers that request it, disposal services for that product, for the spent product.[4]
[18] In response to the question "and does your company offer any periodic servicing of the accounts", Mr. McDougall replied:
Yes. The sales representatives would make routine calls on the customer's facility to make sure that the product is working to their satisfaction. They would take inventory readings of fresh material versus spent product. They would also offer, I would think, some information regarding when the next tower change would be required based on the information that they derive over time.
And who pays for these services?
The customer pays for those services.
How would that be paid for?
That would be in the price of the product.
Does your company also offer guarantee with its scavenger products?
Yes, they do. If the customer uses the product, the way it was designed or the way we had recommended using the product, then we guarantee that it would bring their H2S levels down to the levels that they require.[5]
[19] Petrolite Canada's hydrogen sulfide scavenging product HSW-705 consists substantially of triazine, the reaction product of MEA and formaldehyde, in water. HSW-2001 is essentially the same as HSW-705 except that it contains some excess formaldehyde so that when the triazine reacts with hydrogen sulfide and frees-up some MEA, that freed-up MEA reacts with the excess formaldehyde to produce a reaction product of triazine. Thus, HSW-2001 is to some extent self-regenerating. Petrolite Canada's hydrogen sulfide scavenging product PM-9513 is, once again, substantially similar to HSW-705 with a small amount of ethylene glycol added to aid in ensuring that the reaction product of hydrogen sulfide and triazine, which is water soluble, remains in a liquid state even in cold temperatures or in circumstances where there might be insufficient water present to otherwise ensure that result.
THE DEFENDANTS, AND CANWELL'S SCAVENGING PRODUCTS
[20] Canwell Enviro-Industries Ltd. is a corporation incorporated under the laws of the province of Alberta and has its principal place of business in Calgary, Alberta. It was incorporated on the 1st of December, 1985. The defendant Clive Titley ("Mr. Titley") has been associated with Canwell since its inception. Indirectly, he is the sole shareholder of Canwell. He is also the sole director and sole officer of Canwell.
[21] Two witnesses commented on Mr. Titley's role at Canwell. The first was Mr. Anthony Galloway, a graduate of the University of British Columbia in chemical engineering and a professional engineer. In 1986, Mr. Galloway went to work for Quaker Chemical Corp. (Delaware) "...as general manager of Quaker Chem. Canada in Oakville, Ontario."[6]
[22] During his employment with Quaker Chem. Canada, which continued until 1992, Mr. Galloway was involved with the introduction of SULFA-SCRUB to Canada. The product was introduced in late 1990. It was produced by a company called Quaker Petroleum Chemical Company, a sister company to Quaker Chem. Canada. It was a product designed to react with hydrogen sulfide to sweeten sour gas. In 1992, Quaker Chemical Corp. (Delaware) closed its Canadian operation. In the result, Mr. Galloway was unemployed. He established his own consulting firm and, through that firm, contracted with Petrolite Canada to facilitate the transfer of Quaker Chem. Canada's Canadian SULFA-SCRUB customers to Petrolite Canada. His role in that regard terminated in 1993 and at that time he was asked by Mr. Titley to join Canwell on contract in the role of operations manager. In his testimony, Mr. Galloway described Mr. Titley's role at Canwell in the following terms:
Clive Titley was certainly the - - the boss. He ran the company, and basically, he supervised my activities.[7]
Mr. Galloway indicated that he had no responsibility for any accounting or financial aspects of the business. He testified:
My understanding was Mr. Clive Titley did that.[8]
When asked whether he had any responsibility for the formulation of the 300 SX product, the only gas sweetening product that Canwell was then marketing, Mr. Galloway testified that that was not his responsibility. He testified that it was his understanding that Mr. Titley "...had that" and Mr. Titley "...really ran the company". Later in his testimony, when asked, generally speaking, what Mr. Titley's role was in the entire Canwell operation, Mr. Galloway testified:
Well, assuming Mr. Titley's role was in the supervisory capacity - - and, as I mentioned, I had no responsibility for accounting and advertising and even - - and the formulation. So Mr. Titley's role was quite an active role in the company. We met on a fairly regular basis. We discussed problems that were coming up and operational items. He dealt - - he communicated, I think, on a regular basis with Ron Levang [Canwell's "...service individual here in Alberta. ..."]in a similar arrangement with me. And Mr. Titley's role, I think, was quite an active one, I would say.[9]
[23] Mr. Vince Downey joined Canwell in December of 1995 and remained with the company until March of 1998. He testified that:
Well, my title was - - on my business card was general manager, but my position was more of a sales manager's job.[10]
In explanation of the foregoing, Mr. Downey testified :
Well, Clive Titley was president and owner of the company, and he was very involved in the day-to-day business, so his position was more general manager than mine was. I looked after the sales and some of the technical aspects of it.[11]
Mr. Downey testified Mr. Titley had been responsible for developing, not only the 300-SX hydrogen sulfide scavenger, but a second hydrogen sulfide scavenging product marketed by Canwell during Mr. Downey's tenure that was known as CW-1000.
[24] Unlike Petrolite Canada, essentially the whole of Canwell's business throughout the relevant period of time was the marketing of hydrogen sulfide scavenging products. As noted, those products were designated 300-SX, and more recently a variant on 300-SX, and CW-1000. Canwell's equivalent to Petrolite Canada's designation SULFA-SCRUB was "Cansweet" and that term was used in association with both the 300-SX and CW-1000 products.
[25] It was not in dispute before me that Cansweet 300-SX contains a reaction product of MEA and formaldehyde. The molar ratio of MEA to formaldehyde to produce the 300-SX reaction product is in the range of 1:0.9 (5) to about 1:1.1. Further, it was not in dispute that the reaction product produced is triazine. Like SULFA-SCRUB HSW-2001, Cansweet CW-1000 also contains a reaction product of MEA and formaldehyde with excess formaldehyde present.
[26] Also like Petrolite Canada, Canwell provides a full range of services in relation to the hydrogen sulfide scavenging products that it sells. Canwell refers to its full service policy as "cradle to grave service". Canwell's cradle to grave service is succinctly described in what Mr. Galloway described as "...an advertising piece of literature that was produced at Canwell." That piece is exhibit P-5 in this proceeding and is reproduced as Schedule 1 to these reasons.
[27] The defendant the City of Medicine Hat is a municipal corporation incorporated by or pursuant to the laws of the province of Alberta. It is situated approximately 180 miles southeast of the city of Calgary, on the Trans-Canada Highway and not far from the Alberta/Saskatchewan border. The city of Medicine Hat operates a large number of gas wells indicated in the read-ins from the transcript of the examination for discovery of a representative of the city of Medicine Hat to be approximately 900 in April of 1996. Testimony before the Court during the trial indicates that that number is now substantially higher. As at April of 1996, only one natural gas well operated by the city of Medicine Hat produced gas containing sufficient quantities of hydrogen sulfide that it had to be processed to scavenge the hydrogen sulfide to meet pipeline specifications. That well was drilled in March of 1991 but was left "shut in" for a period of time and was only put on stream in January of 1994.
[28] Some time in 1993, the city, in contemplation of putting the shut in well into production, contacted Alberta Energy ("AEC Oil and Gas") which persons in the employ of the city knew was treating "sour gas", that is to say, natural gas containing sufficient quantities of hydrogen sulfide so that it did not meet pipeline specifications, with a chemical process. AEC Oil and Gas advised the representatives of the city that they were using a Canwell product and loaned the city three barrels of the product for test purposes. Tests conducted by the city using the Canwell product proved successful. In the result, the city contacted Canwell and in November of 1993 Canwell made a proposal to the city using the 300-SX product in a down-hole injection treatment process.
[29] The city of Medicine Hat accepted the Canwell proposal and put the natural gas well in question into production in January of 1994 using Cansweet 300-SX to scavenge the hydrogen sulfide from the gas.
[30] The down-hole injection treatment process that had been proposed by Canwell and accepted by the city proved to be inefficient. Canwell consulted with city officials both at the well site and otherwise. On the 6th of May, 1994 Canwell made another proposal to the city recommending a more cost-effective method of treatment. This proposal made specific reference to Canwell's cradle to grave service program. The revised proposal was implemented in November of 1994 although once again, the treatment process was not implemented and operated without difficulty. Throughout this phase of operation, Canwell provided its full cradle to grave service program to the city.
[31] In November of 1995, on the recommendation of Canwell, the city switched from the use of Cansweet 300-SX to the use of Canwell's CW-1000 product.
PRIOR DISCLOSURE OF THE SUBJECT - MATTER OF THE PATENT
[32] Counsel for the defendants called and examined a witness, Mr. Ray Watts, who had worked from sometime in 1986 for a company in the United States that was purchased by a corporation in the Quaker group of companies. After the purchase, the witness continued in employment with Quaker as a technical representative or technical consultant to salesmen and "the field people" . He acknowledged that he could reasonably be described in his employment as a consultant and a "troubleshooter".
[33] The witness attested that in August or September of 1987, Quaker Petroleum Chemical Company began marketing a hydrogen sulfide scavenging product to gas producers in western Oklahoma, the geographical area in which the witness was employed. He described the scavenging product as a formaldehyde solution that was found to be temperature sensitive so that when the weather began to get colder through the autumn, problems were encountered. The witness felt compelled, in the interest of maintaining sales of the hydrogen sulfide scavenging product, to find a solution to the temperature sensitivity problem.
[34] The witness consulted with Ed Dillon, a formulating chemist in the employ of Quaker Petroleum Chemical Company and the named inventor on the Patent. The witness attested that Mr. Dillon provided him with two samples of product that might provide a solution to the temperature sensitivity problem and that he and Mr. Dillon together produced two additional samples. Apparently Mr. Dillon also provided the witness with some MEA "...to adjust pH on the samples that I had brought from Houston [where Ed Dillon worked]."
[35] In late November of 1987, the witness field tested the samples in western Oklahoma and found that they did not solve the temperature sensitivity problem.
[36] The witness testified that he experimented with mixing the MEA that had been provided to him by Ed Dillon with Quaker's formaldehyde hydrogen sulfide scavenging product and, he acknowledged quite serendipitously, discovered that the resulting product solved the temperature sensitivity problem. He attested "...it [the mixture] showed some [affinity] for hydrogen sulfide removal, a pretty good [affinity]."[12]
[37] The witness attested that by December 9, faced with continuing problems in the field with regard to Quaker's hydrogen sulfide scavenger, he had mixed up a 500 gallon "batch" of the MEA and formaldehyde mixture, had disclosed the success of the mixture to his superiors and on December 10th delivered the 500 gallon batch for use as a hydrogen sulfide scavenging product at a Standard Oil of Ohio well in western Oklahoma. A delivery receipt indicating the sale of the 500 gallon batch to Standard Oil of Ohio was put into evidence as exhibit B-9. Further delivery receipts and invoices, all dated in December of 1997 and subsequent months, were put into evidence to demonstrate further sales of the hydrogen sulfide scavenging product which was now designated as W-3053. Those sales were to Standard Oil of Ohio and other customers of Quaker in the western Oklahoma region.
[38] In relation to the December sales of W-3053 to Standard Oil of Ohio, the following exchange is recorded between counsel for the defendants and the witness:
And to your knowledge, did Standard Oil sell its gas commercially?
Yes, they did.
Now, we've seen the delivery receipts for your December deliveries. Were there any conditions or restrictions placed on Standard Oil that accompanied the sale of the W-3053 product?
Not to my knowledge, no.[13]
[39] It was not in dispute before me that Quaker's W-3053 product was in commercial sale by the spring of 1988. It was evident from the course of the examination and cross-examination of the witness that two matters concerning W-3053 were at issue: who was the true inventor of the W-3053 product; and whether the sales of the product made during December of 1987 were commercial sales.
RELIEFS REQUESTED
[40] The reliefs sought by the plaintiffs as disclosed in the statement of claim as amended to the 17th of March, 1999, and subsequently limited to delete a claim for damages, as an alternative to an accounting of profits, are the following:
- a declaration that claims 3 to 6, 8 to 51 and 53 to 77 of the Patent are valid and have been infringed by the activities of the defendants;
- a declaration that the defendants have induced or contributed to third parties infringing claims 3 to 6, 8 to 51 and 53 to 77 of the Patent;
- a declaration that the claims of the Patent have been infringed by the defendants' activities from the day the application for the Patent was laid open, namely, the 23rd of June, 1990;
- a declaration that the defendants have induced or contributed to third parties infringing the claims of the Patent from the day the application for the Patent was laid open, namely, the 23rd of June, 1990;
- a permanent injunction restraining the defendants, by themselves, their directors, officers, employees, agents or otherwise, and all those in privity with or under the control of the defendants, from:
(a) infringing the Patent; and
(b) manufacturing, importing, exporting, selling or offering for sale, in Canada or from Canada, any Cansweet and equivalent products;
- delivery up to the plaintiffs of all Cansweet and equivalent products, as well as any apparatus, documents or other things within the possession, power or control of the defendants and which may offend the injunction sought;
- an accounting of profits;
- reasonable compensation for damages sustained after the 23rd of June, 1990 for acts that would have constituted an infringement of the Patent if the Patent had been granted on the 23rd of June, 1990;
- exemplary damages;
- pre- and post-judgment interest on profits from the date they arose to the date of payment;
- pre- and post-judgment interest on such reasonable compensation for damages in respect of the time period from the day the application for the Patent was laid open to grant, all from the date they arose to the date of payment;
- costs of the action; and
- such further and other relief as this Court considers just.
[41] The defendants seek dismissal of the action with costs payable to them.
[42] The defendant Canwell, plaintiff by counterclaim, seeks the following reliefs as disclosed in the statement of defence and counterclaim as amended to the 12th of March, 1999;
- a declaration that the Patent and each claim thereof is invalid and void;
- an order expunging the Patent;
- an interlocutory and permanent injunction to restrain the plaintiffs, defendants by counterclaim, by themselves, their directors, officers, employees, agents or otherwise from representing to the customers and potential customers of Canwell that the use of Canwell's CANSWEET product infringes the Patent;
- damages for false and misleading statements contrary to paragraph 7(a) of the Trade-marks Act[14];
- punitive and exemplary damages;
- pre- and post-judgment interest on such damages from the date they arose to the date of payment;
- costs of the counterclaim; and
- such further and other relief as this Court considers just.
THE ISSUES
[43] The issues arising out of the claim by the plaintiffs and the counterclaim by the defendant Canwell go to infringement of the Patent by the defendants, the validity of the Patent and whether or not the plaintiffs have made false or misleading statements that have tended to discredit the business, wares and services of Canwell contrary to paragraph 7(a) of the Trade-marks Act. Further issues arise in relation to the claimed reliefs.
[44] With regard to infringement, the following issues arise:
- the applicable law given amendments to the relevant provisions of the Patent Act that came into effect on the 1st of October, 1989 and on the 1st of October, 1996; and
- whether the City of Medicine Hat and Canwell, or either of them, by their actions, infringed any of the claims of the Patent in any or all of the following four series of claims:
- claims 44 to 50;
- claims 19 to 21, 28 and 29 and 34;
- claims 3 to 6, 8, 10, 13 to 16, 24, 25, 32 and 36; and
- claims 57, 58, 66 and 67.
[45] Claims 1 and 2 of the Patent and the claims set out in each of the four series of claims referred to above are set out in full in Schedules 2 to 6 to these reasons.
[46] In relation to the validity of the Patent, the following issues arise:
- once again, the applicable law; and
- whether or not the Patent is invalid by reason of:
- anticipation;
- obviousness;
- sufficiency; or
- material misrepresentation as to the identified inventor in the petition for the Patent.
[47] With regard to Canwell's claim against the plaintiffs for contravention of paragraph 7(a) of the Trade-marks Act, the issues that arise are first, the jurisdiction of this Court to entertain the claim and secondly, assuming jurisdiction, whether or not the claim of contravention is made out.
[48] The further issues arising out of the claimed reliefs can be briefly summarized as follows: first, assuming infringement by the City of Medicine Hat, what reliefs are appropriate against it and, if liability to the plaintiffs for profits is among the appropriate reliefs, what profits, if any were made by the City arising out of such infringement; secondly, assuming infringement by Canwell, what reliefs are appropriate against it and, if liability to the plaintiffs for profits and/or reasonable compensation is among the appropriate reliefs, what is the measure of profits following the issue of the Patent and what is the measure of reasonable compensation for damages sustained by the plaintiffs after the 23rd of June, 1990 and before the issue of the Patent; thirdly, what is the measure of exemplary damages sustained by the plaintiffs, if such are appropriate; fourthly, what is the appropriate measure of pre- and post-judgment interest on profits and or reasonable compensation for damages determined to be due to the plaintiffs; fifthly, whether Mr. Titley is personally liable to the plaintiffs under principles enunciated in Mentmore Manufacturing Co., Ltd. et al. v. National Merchandise Manufacturing Co. Inc. et al.[15] or otherwise; and finally, if Canwell's claim against the plaintiffs for contravention of paragraph 7(a) of the Trade-marks Act is made out, what is the appropriate measure of damages and, if appropriate, punitive and exemplary damages, and of pre- and post-judgment interest in relation to any such damages.
[49] As in all cases such as this, the issue of an appropriate costs award arises.
ANALYSIS
[50] I will deal first with the issue of the applicable law which is relevant both to the issue of validity and the issue of infringement. I will then turn to the issue of validity as, of course, validity is a condition precedent to infringement. I will then turn to the issue of infringement, to the issue of contravention of paragraph 7(a) of the Trade-marks Act, to issues as to remedies and finally to the issue of costs.
1) The Applicable Law
[51] Three iterations of the Patent Act[16] (the "Act") are, at least arguably, relevant to the issue of validity, or to the issue of infringement, or to both such issues on the facts of this matter: first, the Act as it read prior to amendments that became effective on the 1st of October, 1989 (the "Old Act"); second, the Act as it read when the amend