Jay-Lor International Inc. v. Penta Farm Systems Ltd.

Jay-Lor International Inc. v. Penta Farm Systems Ltd.
Court (s) Database
Federal Court Decisions
Date
2007-05-14
Neutral citation
2007 FC 358
File numbers
T-103-05
Notes
Digest
Decision Content
Date: 20070514
Docket: T-103-05
Citation: 2007 FC 358
BETWEEN:
JAY-LOR INTERNATIONAL INC. and JAY-LOR FABRICATING INC.
Plaintiffs
and
PENTA FARM SYSTEMS LTD. and PENTA ONE LIMITED
Defendants
Restriction on publication:
“These are the public version of reasons, dated April 3, 2007, which were sealed pursuant to the Directions of this Court dated April 3, 2007.”
AMENDED REASONS FOR JUDGMENT
Snider J.
1. Introduction
[1] Both the Plaintiffs and the Defendants in this action are in the business of manufacturing and selling vertical feed mixers, mainly to the agricultural market. Almost exclusively, this useful machine is purchased by farmers who use the vertical feed mixer to mix the components of feed for their livestock. Its operation is quite simple. Bales of hay and other substances, such as grains, corn and medications, are dumped into the top of the tub of the mixer in measured amounts. A centre, vertical, rotating auger, having helical flighting edged with cutting blades, acts to evenly mix the components. The mixed feed is ultimately delivered from the bottom of the vertical feed mixer to the livestock.
[2] Canadian Patent No. 2,316,092 (the '092 Patent) describes a vertical feed mixer which was the invention of Mr. Jacob Tamminga, the principal of both JAY-LOR International Inc. (JAY-LOR International) and JAY-LOR Fabricating Inc. (JAY-LOR Fabricating) (collectively referred to as JAY-LOR or the Plaintiffs). JAY-LOR Fabricating has been manufacturing and selling a vertical feed mixer as described in the '092 Patent since 1999. The '092 Patent has a claim date of August 13, 1999, was laid open for public inspection on February 13, 2001 and was issued on April 22, 2003 in the name of JAY-LOR Fabricating. By Patent Assignment dated August 10, 2000 and registered on January 17, 2005, JAY-LOR Fabricating assigned its interest in the '092 Patent to JAY-LOR International. Diagrams of the patented vertical feed mixer and its centre auger are included as Figures 1 and 2 in Appendix A.
[3] Mr. Glenn Buurma is the principal of both the defendants in this action – Penta Farm Systems Ltd. (Penta Farm) and Penta One Limited (Penta One) (collectively referred to as Penta or the Defendants). From 1995 until 2001, before the Defendants’ relationship with JAY-LOR ended, Penta was a dealer for the JAY-LOR vertical feed mixer. Beginning in 2001, Penta began building and selling its own brand of vertical feed mixer, using one design up to April 30, 2005 (the original Penta vertical feed mixer) and with a design change after that date (the redesigned Penta vertical feed mixer).
[4] While the patent in issue describes the whole of a vertical feed mixer, the portion of the mixer that is of the most interest in this trial is the auger inside the drum portion of the machine. In particular, the Plaintiffs submit that, primarily because of the auger used in both the original Penta vertical feed mixer and the redesigned mixer, the Penta vertical feed mixers infringe the '092 Patent. The Defendants argue that: (a) neither of their designs infringes on the '092 Patent; and, (b) in any event, the '092 Patent is invalid on the grounds of both being obvious and anticipated.
[5] If both validity and infringement are established, the Plaintiffs have elected to be compensated by damages. The Defendants dispute the level of damages sought by the Plaintiffs.
[6] For assistance to the reader, I have set out an outline of these reasons for judgment.
1. Introduction……………………………………………………………………………..[1]
2. Issues……………………………………………………………………………............[7]
3. Background.…………………………………………………………………………….[8]
3.1 Identification of the problem…………………………………………………….....[9]
3.2 Mr. Tamminga’s solution to the problem……………………………………….. ..[14]
3.3 Impact on the vertical feed mixer market……………………………………….. ..[17]
3.4 Relationship between JAY-LOR and Penta…………………………………….....[19]
4. Standing of JAY-LOR Fabricating…………………………………………………... ..[23]
5. Construction of the '092 Patent…………………………………………………….......[39]
5.1 Claims in Issue………………………………………………………………….. ..[40]
5.2 Principles of Construction……………………………………………………… ..[44]
5.3 Evidence on the construction of the '092 Patent……………………………….….[50]
5.4 View of the Court on Construction…………………………………………….... ..[53]
5.4.1 Characteristics of an “essential element”………………………………...... ..[53]
5.4.2 The purpose of the invention……………………………………………… ..[55]
5.4.3 Claim 1……………………………………………………………………. ..[57]
5.4.4 Claim 2……………………………………………………………………. ..[67]
5.4.5 Claims 4, 8 and 11……………………………………………………….... ..[71]
6. Validity of the '092 Patent……………………………………………………………...[72]
6.1 Obviousness……………………………………………………………...………...[73]
6.2 Anticipation…………………………………………………………………….... ..[93]
7. Infringement………………………………………………………………………….. [100]
7.1 Infringement by the original Penta vertical feed mixer…………………………... [104]
7.2 Infringement by the redesigned Penta vertical feed mixer.………………………. [105]
7.3 Conclusion on Infringement………………………………………………………[108]
8. Damages……………………………………………………………………………… [109]
8.1 General Principles of Damages…………………………………………………... [113]
8.2 Reasonable Royalty…………………………..………………………………….. [125]
8.2.1 Relevance of published royalty rates……………………………………….. [127]
8.2.2 Expert Witnesses………………………………………………………….... [130]
8.2.3 Methodologies for assessing a royalty……………………………………... [136]
8.2.3.1 AlliedSignal Approach…………………………………………….. [137]
8.2.3.2 Analytical Approach………………………………………………. [138]
8.2.3.3 Anticipated Profits Approach……………………………………… [141]
8.2.3.4 Preferred Approach………………………………………………... [144]
8.2.4 Application of anticipated profits methodology…………………………... [150]
8.2.4.1 Determination of Penta’s anticipated profit………………………... [150]
8.2.4.2 Appropriate royalty………………………………………………... [159]
(a)Transfer of technology………………………………………… [160]
(b) Differences in the practice of the invention…………………….. [161]
(c) Non-exclusive licence…………………………………………... [162]
(d) Territorial limitations………………………………………….. [163]
(e) Term of the licence……………………………………………... [164]
(f) Competitive technology………………………………………… [165]
(g) Competition between licensor and licensee…………………….. [166]
(h) Demand for the product………………………………………… [167]
(i) Risk……………………………………………………………... [168]
(j) Novelty of invention…………………………………………….. [169]
(k) Compensation for research and development…………………... [170]
(l) Displacement of business……………………………………….. [171]
(m) Capacity to meet market demand……………………………… [172]
8.2.5 Royalty determination – the conclusion…………………………………..... [174]
8.3 Period 1 Damages………………………………………………………………... [176]
8.4 Period 2 Damages………………………………………………………………... [183]
8.4.1 Apportionment……………………………………………………………... [190]
8.4.2 Number of Penta sales and comparable JAY-LOR models……………….. [200]
8.4.3 Number of lost sales……………………………………………………… [206]
8.4.4 Estimated lost profits……………………………………………………… [222]
8.4.4.1 Capacity…………………………………………………………… [226]
8.4.4.2 Cost/Expense adjustments for lost sales…………………………… [231]
(a) Rebates and Promotions………………………………………... [236]
(b) R&D Expenses…………………………………………………. [237]
(c) Administrative Wages………………………………………….. [239]
(d) Telephone expenses……………………………………………. [241]
(e) Office expense…………………………………………………. [244]
(f) Bad debt………………………………………………………… [246]
(g) Additional expenses……………………………………………. [247]
8.4.4.3 Conclusion as to lost profits……………………………………….. [249]
8.4.5 Royalty on remaining Period 2 sales ……………………………………… [251]
9. Punitive Damages…………………………………………………………………….. [256]
10. Summary of Findings………………………………………………………………… [259]
11. Conclusion…………………………………………………………………………..... [261]
2. Issues
[7] The issues to be determined are as follows:
Does JAY-LOR Fabricating have standing to bring this action and claim damages?
What is the proper construction of the claims of the '092 Patent?
Is the '092 Patent invalid for the reason that:
It was anticipated; or
It was obvious having regard to the prior art described in five documents pleaded by the Defendants?
Do either or both of the original Penta vertical feed mixer or redesigned Penta vertical feed mixer infringe any of the claims of the '092 Patent?
If at least one claim of the '092 Patent is found valid and infringed, then what are the Plaintiffs’ damages?
3. Background
[8] To place this litigation into context, it would be helpful to describe some of the factual background to the dispute.
3.1 Identification of the problem
[9] Every invention solves a problem. This is so even if the problem is not universally recognized or encountered by all users. Thus, I begin by identifying the problem.
[10] Vertical feed mixers were first introduced into the North American market in the mid-1980s. It appears that they were enthusiastically accepted as an improvement over the older horizontal mixers. Mr. Glenn Buurma testified that the reason that vertical feed mixers came into the market was that they can handle the large round and square hay bales. As I understand the market, the early designs were similar and included a flat, dome or cone cap on the centre auger post. According to Mr. Tamminga, a problem with these early mixers, including those with dome, cone or flat-topped augers, was that feed material could get stuck at the top of the auger as the auger rotated or could be wedged between the top of the auger and the mixer side wall.
[11] The existence of this problem was confirmed by Mr. Carl Alexander, a witness for the Plaintiffs, who has been employed for 22 years in Alabama as a dealer in farm machinery. He has sold JAY-LOR mixers for about 15 years. Mr. Alexander described the problem with the early vertical feed mixers with a flat top auger as follows:
[. . .] it took for ever to process a bale of hay. When you put a bale of hay in it took for ever to get it to go down in the machine where it would process it.
[. . .]
[The bale of hay] would sit on top. In other words it couldn’t get to the bottom where it could process.
[12] For purposes of these reasons, it will become important to consider whether there was a problem with early vertical feed mixer designs. Not all of the evidence supports the existence of a problem as described by Mr. Tamminga and Mr. Alexander. In his testimony, Mr. Buurma stated that he had never seen a bale of hay jam, no matter what shape of top was used, unless the bale was “way too big for the tub”. Mr. Franklin Martin is a dairy farmer and a dealer for Penta vertical feed mixers. He testified that he was not aware of any issues in his sales area regarding the jamming of large bales. I note first that Mr. Buurma is not a disinterested party to these proceedings and that his comments may well have been made with respect to the present day mixers, which have or may have features in addition to the auger top which would overcome any jamming problem. Mr. Martin has a much smaller dealer area and has been a dealer for far less time than Mr. Alexander. Thus, it may be that Mr. Martin has simply not the experience – either geographically or with time – to opine on whether there was a problem in the mid-1980s with jamming.
[13] Accordingly, I accept that, as of the date of the invention, there was a problem with the jamming of hay bales in the vertical feed mixer designs in the market. However, it also appears that the extent of the problem was not universal. If a farmer had (or has today) no need to process large bales, the use of a dome, flat or cone-shaped auger top may not cause a problem. That does not mean that the problem seen and solved by Mr. Tamminga did not exist.
3.2 Mr. Tamminga’s solution to the problem
[14] JAY-LOR Fabricating began building vertical feed mixers in 1992, with its first vertical feed mixer produced in 1993. As Mr. Tamminga testified, he identified the problem of jamming hay bales and attempted to solve the problem in many ways, none of which really worked:
Q. At that time did you consider designing anything to assist with that problem, to solve the problem?
A. We went to Kansas. We tried to build posts on top of the auger, on the side of the auger so the auger would actually be off centre or the post was off centre so it would knock the bale loose.
We failed in that because the tube, whatever we welded on top would keep bending or breaking off. I then basically took the mixer back and we did a lot of prototyping on this at home over the next several years. We tried bigger posts. We tried smaller posts. We tried on different spots at the top of the auger, thinking that it would make a difference. It did not. Not enough anyways.
[15] Finally, after one and a half to two years of trying, Mr. Tamminga accidentally stumbled upon a solution to the problem:
A. […] Then at one point we decided to put a very heavy post on as a result we actually bent and twisted the top of the auger so we cut it out to replace it and when we cut it out, it was like light bulbs come on. Said what happens if we try it like this so that the bale no longer has anything to sit on except for the flight with the knife on it.
[. . .]
A. […] So what we did is put the post on there, because there you had room there, but we twisted the actual tubing of the auger. So we cut it out to replace it and then we got to looking at it and saying the flight itself is till immensely strong but the bale doesn't have anything to sit on any more, with the exception of the actual flight, like it is shown there. We left it open for the next loads and it worked absolutely awesome. It was impossible for the bale to stay up on top.
Q. So how did you cut that post?
A. The first one was just cut on an angle and subsequently we put the cap on it also.
[16] The sloped top auger, in the context of the rest of the vertical feed mixer, solves the problem of hay bales getting jammed in two ways. First, the sloped top, by virtue of its angle, does not allow hay bales to sit on top of the auger. Second, the asymmetrical design of the auger top, relative to the centre axis, imparts a significant force on any stuck bale as it rotates. The cumulative effect is that a bale is unlikely to get stuck. This function of the auger with the sloped top was confirmed by two witnesses. Mr. Craig Hanson, an expert for the Plaintiffs (whose credentials are outlined below), described the passive function of the sloped top, while the auger is rotating, as “to bump or dislodge a bale as it sits on top of the auger”. In the words of Mr. Carl Alexander, a dealer in JAY-LOR machines:
[…] Then they came up with a slope top which eliminated the bale sitting on top of the screws. In other words, now is that slope, that hay is sitting on it and it's turning. Not only does it let the hay fall down but it pushes the hay. Instead of just a smooth cylinder spinning on the hay like a top.
3.3 Impact on the vertical feed mixer market
[17] JAY-LOR began selling the vertical feed mixers with the newly designed sloped top in September 1999. Mr. Tamminga’s testimony was that the introduction had a “great impact” on JAY-LOR’s sales. The impact is borne out by the evidence of JAY-LOR sales history.
[18] In light of JAY-LOR’s success with the '092 Patent, competitors in the industry began to adopt the same design. Two of these competitors began marketing vertical feed mixers with sloped top augers, but decided to stop after being alerted to JAY-LOR’s '092 Patent.
3.4 Relationship between JAY-LOR and Penta
[19] Penta was a dealer for JAY-LOR vertical feed mixers from about January 1995 to January 2001. Initially, Penta’s sales territory included New York, Michigan and most of Ontario. Over time, the sales territory diminished as JAY-LOR placed more dealers into the territory. Penta’s sales of JAY-LOR vertical feed mixers declined dramatically from 1999 (about 45 new JAY-LOR units) to 2000 (six units). Mr. Buurma attributed the decline to the reduction in his sales territory. In October 2000, Penta made the decision to design and sell its own vertical feed mixer. After only three months and only one or two prototypes, the first Penta vertical feed mixer was in the marketplace in March 2001.
[20] Although Penta had hoped to maintain some relationship with JAY-LOR, JAY-LOR terminated the dealership relationship in a telephone call on January 19, 2001 and by letter dated January 22, 2001.
[21] In his testimony, Mr. Buurma acknowledged that the original Penta mixer used a sloped top auger design, although he conceded that he could have used a more conventional dome or cone top. Overall, Penta’s design was not identical to JAY-LOR’s patented design. Penta redesigned some aspects of the vertical feed mixer to incorporate a lower profile, a stainless steel conveyor and certain other components, and smoothly-curved flighting (rather than the square-cut flighting used by JAY-LOR). Penta continued using the sloped auger top design in spite of being aware of JAY-LOR’s patent application as early as December 2002.
[22] It is agreed that Penta used this original design until April 30, 2005, when it redesigned the auger top. The redesigned stainless steel auger top was flat with a stainless steel wedge or prism welded on top. A sketch of the redesigned auger is included in Appendix A, Figure 3. When asked about why he changed the auger top design, Mr. Buurma testified that it was redesigned in response to a problem on one farm where the sloped top auger did not provided adequate mix of the feed.
4. Standing of JAY-LOR Fabricating
[23] The first issue to consider is the standing of JAY-LOR Fabricating to bring this action.
[24] The Defendants argue that JAY-LOR Fabricating failed to meet its onus to establish that it has an entitlement to sue under s. 55(1) of the Patent Act, R.S.C. 1985, c. P-4. More specifically, Penta urges me to conclude that the failure of JAY-LOR International, as holder of the patent, to demonstrate the existence of a licence agreement, is fatal to the action by JAY-LOR Fabricating. In short, their submission is that, absent a licence, JAY-LOR Fabricating has no standing to bring this action. Such a finding would be of serious consequences for JAY-LOR International’s claim for damages. This is because, in the view of the Defendants, JAY-LOR International cannot prove that it has suffered any damages as a result of infringement (if any) by the Defendants.
[25] The Plaintiff companies are related in that International owns Fabricating. Mr. Jacob Tamminga is the sole shareholder of International and is the President of both companies. JAY-LOR Fabricating, the subsidiary, makes the vertical feed mixers. JAY-LOR International is a holding company with title to the property and equipment that JAY-LOR Fabricating uses to manufacture the vertical feed mixers. JAY-LOR International also holds title to the '092 Patent, through an assignment of the patent dated August 10, 2000 and registered on January 17, 2005. JAY-LOR Fabricating pays rent to JAY-LOR International for the use of the manufacturing facilities and profits of Fabricating flow through to International. Although the Plaintiffs took care to draft corporate documents to evidence the financial relationship between the two companies, there is no written licence agreement between International and Fabricating. This, in the Defendants’ submission, is a fatal flaw in the claim of JAY-LOR Fabricating.
[26] The Defendants point to the “planned and deliberate decision made by Mr. Tamminga” that there would be two separate companies. They argue that, because this and other corporate decisions – such as the assignment of the patent – were consciously made and documented, the decision not to license the patent must also have been “planned and deliberate”. They argue that I should draw an adverse inference from the failure of International to formally license the use of its patent to JAY-LOR Fabricating. I am not prepared to draw this inference.
[27] I agree with the Defendants on the question of whether JAY-LOR International and JAY-LOR Fabricating had a verbal licence; there was no such agreement. In spite of Mr. Tamminga’s statement in cross-examination that there was a verbal licence agreement, no evidence exists of a conscious or specific event that constitutes the granting of a licence by JAY-LOR International to JAY-LOR Fabricating. When questioned, Mr. Tamminga was unable to identify any terms of such a verbal agreement.
[28] However, what is clear is that the two companies organized their affairs in a manner consistent with the existence of a licence for the '092 Patent. JAY-LOR International received rent from JAY-LOR Fabricating for the use of the plant facilities and profits from the sale of vertical feed mixers. While there was no fee for the use of the licence reflected in the financial statement of either company, the fact that the profits of JAY-LOR Fabricating were sent to JAY-LOR International is strong evidence, in my view, that the companies intended their relationship to be one of licensee and licensor. In other words, a reasonable conclusion is that there was an implied licence in place.
[29] Nor do I believe that there was a deliberate decision by JAY-LOR International not to make JAY-LOR Fabricating a licensee under the patent, as suggested by the Defendants. It is true that Mr. Tamminga took concrete steps to incorporate JAY-LOR International and to assign the '092 Patent from JAY-LOR Fabricating to JAY-LOR International. Further, it is also correct that Mr. Tamminga and Mr. Arnold Ludwig, the Accounting Controller for JAY-LOR, provided vague and somewhat confusing answers during cross examination on this point. However, I did not find these witnesses to be “evasive” as suggested by the Defendants. Rather, they both appeared unable to assist the Defendants’ counsel simply because they were unfamiliar with the legal concept of licensee and licensor. On the stand, they did their best to explain the relationship between JAY-LOR International and JAY-LOR Fabricating, which relationship involved some legal, documented decisions as to company structure and other arrangements that seem not to have been documented. In my view, the evidence does not support a conclusion that Mr. Tamminga made a conscious decision, on behalf of JAY-LOR International, not to license the technology of the '092 Patent to JAY-LOR Fabricating.
[30] The argument of the Defendants on this issue is, in effect, that, absent a licence, JAY-LOR Fabricating has no standing to bring this action. In my respectful view, the Defendants give too narrow an interpretation of the words of s. 55(1) of the Patent Act. That provision of the Patent Act provides as follows:
55.(1) A person who infringes a patent is liable to the patentee and to all persons claiming under the patentee for all damage sustained by the patentee or by any such person, after the grant of the patent, by reason of the infringement. [Emphasis added.]
55.(1) Quiconque contrefait un brevet est responsable envers le breveté et toute personne se réclamant de celui-ci du dommage que cette contrefaçon leur a fait subir après l’octroi du brevet.
[Non souligné dans l’original.]
[31] The available jurisprudence appears to support the Plaintiffs on this issue. Electric Chain Co. of Canada Limited v. Art Metal Works Inc. et al., [1933] S.C.R. 581, [1933] 4 D.L.R. 240, has been cited for the proposition that the existence of a parent-subsidiary relationship is sufficient evidence of a licence. However, I agree with the Defendants that each case falls to be determined on its own facts. Electric Chain does not, in my view, stand for the proposition that simply because two parties are related, each will automatically qualify under s. 55(1) of the Patent Act.
[32] More recently, in Apotex Inc. v. Wellcome Foundation Ltd., 79 C.P.R. (3d) 193, 145 F.T.R. 161, [1998] F.C.J. No. 382 (F.C.T.D.) (QL), aff’d on this point 2000, 10 C.P.R. (4th) 65 (F.C.A.), 262 N.R. 137, (referred to as Wellcome), the court considered the relationship between the two related companies who had brought an action for infringement and provided some helpful analysis on the issue of the right to assert rights under s. 55(1) of the Patent Act. In that case, Glaxo Wellcome Inc. (GWI) claimed that it was entitled to bring an infringement action because it was exclusively licensed by the Wellcome Foundation Ltd. to import, manufacture, use and sell the invention described in the patent. Wellcome was listed as the owner of the patent. Although, no written licence was produced to establish GWI as a licensee, GWI maintained that the licence was implied.
[33] The arguments of the plaintiffs in Wellcome were very similar to those made by the Defendants in this case. The plaintiffs asserted that GWI failed to meet its onus to establish that it had an entitlement to sue under s. 55(1) of the Patent Act. They argued that a licence, like any other contract, must be proven according to its terms and effects.
[34] In Wellcome, at paras. 360-361, Justice Wetston provided the following comments on the interpretation of s. 55(1):
Canadian jurisprudence has provided a broad interpretation of "persons claiming under" the patentee. A range of interests is held to have been contemplated, including the exclusive licensee, the non-exclusive licensee, the purchaser of a patented articles and sales agents. This interpretation is embodied in Signalisation de Montréal Inc. v. Services de Béton Universels Ltée et al. (1992), 46 C.P.R. (3d) 199 (F.C.A.) per Hugessen J.A. at p. 211:
It matters not by what technical means the aquisition of the right to use might have taken place. It may be a straightforward assignment of a licence. It may, as I have indicated, be a sale of an article embodying the invention. It may also be a lease thereof. What matters is that the claimant asserts a right in the monopoly and that the source of that right may be traced back to the patentee.
[35] In the Wellcome case, Justice Weston did not find that a parent/subsidiary relationship exist between GWI and Wellcome. However, the two companies were under the ownership, common care and control of Glaxo Wellcome plc. The evidence was that licences were seldom written. Based upon his review of the facts of the case, Justice Wetston concluded, at para. 367, that “GWI is indeed able to trace an interest under the patent to the patentee in virtue of the corporate practices with respect to implied licensing within the group of companies under the care and control of Glaxo Wellcome plc”.
[36] In sum, what I can take from the Wellcome case and other jurisprudence is that the ability of a party to claim under a patentee depends on whether the party can trace an interest under the patent to the patentee and does not necessarily require the existence of an express licence. Where no express licence exists, each case will be determined on its facts.
[37] In the case before me, I am satisfied, on a balance of probabilities, that JAY-LOR Fabricating has met the burden of demonstrating that it can trace an interest under the patent to JAY-LOR International. The key facts supporting this conclusion can be summarized as follows:
Both JAY-LOR Fabricating and JAY-LOR International are under the same control of Mr. Tamminga;
No other licence has been granted – either explicitly or by implication – to any third party; and
The two companies have structured their affairs in a manner consistent with a licensee-licensor relationship.
[38] In conclusion, I am satisfied on this point that JAY-LOR Fabricating has standing to bring this action.
5. Construction of the '092 Patent
[39] Before turning to the issues of invalidity and infringement, as taught by the Supreme Court of Canada, I must construe the patent in question, meaning that I must identify the essential elements of the invention claimed in the '092 Patent (Whirlpool Corp. v. Camco Inc., 2000 SCC 67, [2000] 2 S.C.R. 1067 at para. 43); Free World Trust v. Électro Santé, 2000 SCC 66, [2000] 2 s.c.r. 1024 at para. 15).
5.1 Claims in Issue
[40] The '092 Patent, whose title is “Vertical Feed Mixer with Auger Having Centre Post with Sloped Top”, sets out 13 claims. Claim 1, which is an independent claim, and claims 2, 4, 8 and 11, which are dependent on Claim 1, are at issue in these proceedings.
[41] Claim 1 reads as follows:
A vertical feed mixer comprising a mixing chamber containing a substantially vertical rotatable auger having a center post with a generally helical flight that is tapered to converge from bottom to top, said flight extending around said center post and having a periphery, with power means to rotate said auger about a longitudinal center axis, said mixing chamber having at least one opening to receive and discharge said feed, said center post having an upper surface that is inclined relative to said center axis.
[42] The other Claims in issue are as follows:
2. A feed mixer as claimed in Claim 1 wherein the upper surface lies substantially in one plane.
4. A vertical feed mixer as claimed in Claim 1 wherein said periphery of said flight has cutting means thereon.
8. A vertical feed mixer as claimed in any one of Claims 1, 2 or 3 wherein said periphery of said flight is smoothly curved.
11. A vertical feed mixer as claimed in any one of Claims 1, 2 or 3 wherein said upper surface has a slope greater than a slope of that part of said flight extending around said upper surface.
[43] Included with the description of the invention are a number of diagrams. Figure 1 to the patent is a partial cut-away perspective of the patented vertical feed mixer and Figure 2 is a perspective of the auger. These two figures are set out in Appendix A to these reasons.
5.2 Principles of Construction
[44] In construing this patent, I am mindful of the guidance from the decisions of the Supreme Court of Canada (Whirlpool, above; Free World Trust, above). These cases teach that patent claims are to be construed in an informed and purposive fashion and that excessive literalism is to be avoided. As Justice Binnie explained in Whirlpool, above at para. 45, the “key to purposive construction is therefore the identification by the court, with the assistance of the skilled reader, of the particular words or phrases in the claims that describe what the inventor considered to be the 'essential' elements of his invention”.
[45] Who is the “skilled reader”? Stated in different terms, what level of knowledge or experience should the Court assume when it construes the patent? In Free World Trust, above at para. 44, Justice Binnie provided the following guidance:
The patent is not addressed to an ordinary member of the public, but to a worker skilled in the art described by Dr. Fox as
a hypothetical person possessing the ordinary skill and knowledge of the particular art to which the invention relates, and a mind willing to understand a specification that is addressed to him. This hypothetical person has sometimes been equated with the “reasonable man” used as a standard in negligence cases. He is assumed to be a man who is going to try to achieve success and not one who is looking for difficulties or seeking failure. (Fox, supra, at p. 184)
[46] In this case, each of the parties put forward an expert to assist the Court in the construction of the '092 Patent. The Plaintiffs provided the expert report and oral testimony of Mr. Craig Hanson and the Defendants put forward Mr. Reinhard G. Hartwig.
[47] With specific reference to the patent at issue in this trial, Mr. Hanson described the “worker skilled in the art” in his report (the Hanson Report), at paras. 25 – 27, as follows:
25. In my view, the '092 Patent is addressed to someone with strong practical experience in agricultural machinery generally, as well as a sound understanding of the mechanical and structural aspects of such machinery. In other words, the '092 Patent is addressed to a broad range of people having a wide variety of practical experiences and/or varying levels of education.
26. A skilled addressee would include someone who works with feed mixing equipment on a regular basis, such as a farm operator, but is not involved in the research, development or manufacture of such feed mixing equipment. Such a person would also have a solid familiarity with the components and mechanics of such feed mixing equipment, including terminology of components. A skilled addressee would also include someone who is employed to research, develop, manufacture, test, service and/or repair agricultural machinery generally, such as a welder, machinist or engineer. With respect to this latter skilled addressee, he/she may: (1) have formal training in relevant areas, such as a college or university degree in a mechanical-oriented program and at least a minimal amount (i.e., two years) of practical experience; or (2) have a body of knowledge concerning machinery from extensive years of practical experience.
27. In sum, a skilled person would generally understand how a vertical mixer and its various components work, as well as the result that such a mixer produces a uniform mix of shredded hay and/or additional feed products. Furthermore, such a skilled person would understand the need to prevent bales of hay or parts thereof from becoming stuck or resting on top of the auger, or otherwise get wedged between the auger and the wall of the chamber.
[48] In my view, Mr. Hanson has provided a comprehensive and appropriate description of the “person skilled in the art” for purposes of the task before me.
[49] Finally, in respect of the general principles of patent construction, I note that the relevant date for the construction of the patent is the date of the publication or the date upon which the patent was laid open (Free World Trust, above at paras. 53-54). In this case, that date is February 13, 2001.
5.3 Evidence on the construction of the '092 Patent
[50] As noted, JAY-LOR’s expert in matters of claims construction and validity was Mr. Craig Hanson. His qualifications, which include over 25 years of practical experience using agricultural equipment, are impressive. In summary form, I note the following:
· He is the owner and operator of a 4,000 acre grain farm in western Canada;
· He holds a Bachelor of Science in Agricultural Engineering, a Master of Science in Mechanical Engineering and a Postgraduate Diploma in Agricultural and Bioresource Engineering;
· From 1984 to 1987, he worked for John Deere Limited, during which time he assisted in resolving technical problems with agricultural machinery;
· From 1987 to 1997, he was employed by the Prairie Agricultural Machinery Institute (PAMI) as a field test supervisor, project engineer and project manager. Of particular relevance, he was exposed to and conducted testing on a vertical feed mixer in about 1996; and
· On two occasions, he has given expert evidence involving the construction of patents for equipment, before the courts.
[51] Mr. Hanson is qualified to testify as to the matter of claims construction and validity. Of significance at this point in these reasons is his evidence on the issue of the proper construction of the claims in the '092 Patent.
[52] Mr. Hanson provided a detailed and careful analysis of the elements of Claims 1, 2, 4, 8 and 11. His conclusions on patent construction were not materially disputed by the Defendants’ expert.
5.4 View of the Court on Construction
5.4.1 Characteristics of an “essential element”
[53] I begin by considering, in general, what makes an element essential. A useful explanation was provided by Lord Diplock in the House of Lord’s decision in Catnic Components Ltd. v. Hill and Smith Ltd., [1982] R.P.C. 183 at 242-243 (cited in Whirlpool, above at para. 44):
My Lords, a patent specification is a unilateral statement by the patentee, in words of his own choosing, addressed to those likely to have a practical interest in the subject matter of his invention (i.e. "skilled in the art"), by which he informs them what he claims to be the essential features of the new product or process for which the letters patent grant him a monopoly. It is those novel features only that he claims to be essential that constitute the so-called "pith and marrow" of the claim. A patent specification should be given a purposive construction rather than a purely literal one derived from applying to it the kind of meticulous verbal analysis in which lawyers are too often tempted by their training to indulge. The question in each case is: whether persons with practical knowledge and experience of the kind of work in which the invention was intended to be used, would understand that strict compliance with a particular descriptive word or phrase appearing in a claim was intended by the patentee to be an essential requirement of the invention so that any variant would fall outside the monopoly claimed, even though it could have no material effect upon the way the invention worked. [Emphasis added.]
[54] As related to the '092 Patent, an essential element was described by Mr. Hanson as follows:
An element that, if it were changed, would affect how the invention works. If we changed this within a vertical feed mixer to something else, it would affect how it works.
5.4.2 The purpose of the invention
[55] To give a purposive construction to a patent, it is logical to move next to consider the purpose of the invention. As stated by Justice Binnie in Whirlpool, above at para 49, “A ‘mind willing to understand’ necessarily pays close attention to the purpose and intent of the author.” In this case, the purpose of the invention embodied in the '092 Patent is set out in the specifications as follows:
This invention relates to a vertical feed mixer for use in mixing animal feed and, in particular, hay in any form including round bales with other animal feed. In particular, this invention relates to a vertical feed mixer having an auger with a center post and a helical flight extending around said post where the post has an upper surface that is inclined relative to said center axis.
Feed mixers of various forms are known and, in particular, feed mixers for mixing round bales of hay or haylage of any size, including large and small bales with other animal feedstuffs including corn silage, commodities, byproducts and concentrates are known. Previous vertical feed mixers have a vertically mounted auger having a helically-shaped expanding periphery that is narrowest at a top and increases in size towards the base […] Sometimes, with previous mixers, when a large bale is inserted into the mixer, the bale becomes wedged between a wall of a mixing chamber and the auger with one part of the bale resting on the top of the auger. When a bale is inserted in this position, the bale can remain in that position for a relatively long time before ultimately being broken up by the auger. The time involved obviously varies with the positioning of the bale, but the wrong bale positioning can lead to serious problems. For example, the operator of the mixer might physically attempt to dislodge the blockage and that can be dangerous or unsafe. Also, the efficiency of the mixer is greatly reduced when this type of blockage occurs.
[56] There are, of course, certain aspects of a vertical feed mixer that would be common to all such machines. A person skilled in the art construing the patent, as of the date the patent was laid open, would recognize that a number of the features outlined in Claim 1 were common to all vertical feed mixers at that time. Mr. Hanson described what a person skilled in the art would understand by the term “vertical feed mixer”:
One skilled in the art, as is defined above, would understand what a vertical feed mixer is. Such a person would know that it generally includes a tub or container that is typically elongated, but may alternatively be circular in shape. Such a tub or container wo