Pollard Banknote Limited v. BABN Technologies Corp.

Pollard Banknote Limited v. BABN Technologies Corp.
Court (s) Database
Federal Court Decisions
Date
2016-07-28
Neutral citation
2016 FC 883
File numbers
T-407-14
Decision Content
Date: 20160728
Docket: T-407-14
Citation: 2016 FC 883
Montréal, Québec, July 28, 2016
PRESENT: The Honourable Mr. Justice Locke
BETWEEN:
POLLARD BANKNOTE LIMITED
Plaintiff
(Defendant by Counterclaim)
and
BABN TECHNOLOGIES CORP. and SCIENTIFIC GAMES PRODUCTS
(CANADA) ULC
Defendants
(Plaintiffs by Counterclaim)
JUDGMENT AND REASONS
TABLE OF CONTENTS:
I. Overview.. 3
II. Parties. 3
III. The 551 Patent and its Background. 4
IV. Issues in Dispute. 11
V. Witnesses. 14
A. Pollard’s Expert Witnesses. 15
(1) Yih Lerh Huang. 15
(2) Nicholas Fazzano. 16
B. Pollard’s Fact Witness. 18
(1) Lyle Scrymgeour 18
C. SG’s Expert Witnesses. 20
(1) Fred Finnerty. 20
(2) James Trask. 22
D. SG’s Fact Witnesses. 26
(1) Carla Schaefer 26
(2) Pierre LaPlante. 27
VI. Claim Construction. 29
A. Applicable Law.. 29
B. Person Skilled in the Art 33
C. Analysis. 33
(1) Claim 1. 34
(2) Claim 2. 44
D. Conclusion on Claim Construction. 45
VII. Invalidity Issues. 46
A. Standard of Review.. 46
B. Ambiguity. 49
(1) Applicable Law.. 49
(2) Analysis. 50
(3) Conclusion on Ambiguity. 52
C. Overbreadth and Inutility. 52
(1) Applicable Law.. 52
(2) Analysis. 53
(3) Conclusion on Overbreadth and Inutility. 54
D. Anticipation. 54
(1) Applicable Law.. 54
(2) The Camarato Application. 56
(3) Analysis. 58
(4) Conclusion on Anticipation. 60
E. Obviousness. 60
(1) Applicable Law.. 60
(2) Person Skilled in the Art 63
(3) Common General Knowledge. 63
(4) State of the Art 68
(5) Inventive Concept 71
(6) Differences between the Prior Art and the Inventive Concept and Whether those Differences Constitute Obvious Steps. 72
(7) Commercial Success. 78
(8) Prosecution History of the 551 Patent and Other Extrinsic Evidence. 81
(9) Conclusion on Obviousness. 85
F. Conclusion on Invalidity. 85
VIII. Infringement Issues. 85
A. Applicable Law.. 86
B. Analysis. 86
C. Conclusion on Infringement 89
IX. Remedies. 89
X. Conclusion. 89
I. Overview [1] This action concerns security features on instant lottery tickets. The plaintiff, Pollard Banknote Limited (Pollard), challenges the validity of Canadian Patent No. 2,752,551 (the 551 Patent). The owner of the 551 Patent, Scientific Games Products (Canada) ULC (SG) defends against this validity challenge and counterclaims against Pollard for infringement of the 551 Patent. The other defendant, BABN Technologies Corp. (BABN), is a predecessor of SG.
[2] For the reasons set out below, I have concluded that the claims of the 551 Patent are invalid. Therefore, I grant Pollard’s request for a declaration impeaching the 551 Patent. In the event that I am wrong, and the claims of the 551 Patent are valid, I conclude that said claims are not infringed by Pollard. In either case, I dismiss SG’s counterclaim for infringement.
II. Parties [3] Both sides in this litigation are major players in the business of marketing, printing and distributing instant lottery tickets. This has become a consolidated market. The Court has heard that there are currently only three major players in this market in the world: Pollard, SG and another company called GTECH Corporation (now International Gaming Technology, or IGT). Pollard and SG are the dominant players in the Canadian market.
[4] SG is the result of a series of consolidations that took the ownership of the rights in the 551 Patent (and its application) from the applicant BABN to Oberthur Gaming Technologies, Inc. (OGT) in 1999, and then (in 2007) from OGT to F.C.O.I. Canada Inc., then to Scientific Games Products (Canada) Inc., and then to the defendant/plaintiff by counterclaim, Scientific Games Products (Canada) ULC.
III. The 551 Patent and its Background [5] The history of the 551 Patent in suit is extraordinary in two respects. Firstly, though the 551 Patent was issued not long ago on September 17, 2013, it is set to expire later this year on October 14, 2016. This is because the application for the 551 Patent was filed as a divisional (under section 36 of the Patent Act, RSC 1985, c P-4) of Canadian Patent Application No. 2,234,775 (the 775 Application) which was filed back on October 14, 1996. Pursuant to subsection 36(4) of the Patent Act, the divisional has the same filing date as the original application. The prosecution of these applications lasted more than 17 years. In accordance with section 44 of the Patent Act, the term of the 551 Patent is limited to 20 years from the filing date.
[6] The second extraordinary aspect of the history of the 551 Patent is arguably related to the first. It concerns a series of protests (submissions under section 34.1 of the Patent Act) that were filed with the Patent Office on behalf of Pollard against the 775 Application and the divisional application that led to the 551 Patent, beginning on May 27, 1999. In all, no fewer than 12 such protests were filed. Hence, the dispute between the parties about the patentability of the 551 Patent dates back to near the beginning of the prosecution of the 775 Application. That prosecution, including the protests filed in the context thereof, and the continued prosecution and accompanying protests of the divisional application, are discussed in greater detail later in these reasons. For now, I turn to a discussion of the 551 Patent as issued.
[7] The 551 Patent claims priority from a US patent application that was filed on October 16, 1995, and which issued as US Patent No. 6,308,991 (the US 991 Patent). This is therefore the “claim date”, as defined in section 28.1 of the Patent Act. Pursuant to section 10 of the Patent Act, the 775 Application was published on April 24, 1997.
[8] The 551 Patent is entitled “Printed Document Including Bar Code Authentication System”. Though the prosecution of the application for this patent as well as the parent application was extraordinarily long and complicated, the specification is mercifully short.
[9] The 551 Patent concerns instant lottery tickets having an opaque scratch-off layer (sometimes called a latex coating) over game data printed onto a substrate, generally paper or card. The game is played by removing the scratch-off layer to reveal whether or not a prize has been won. Instant lottery tickets are commonly sold at the checkout counter of retail establishments and are generally pre-determined as either winners or non-winners.
[10] Though there is no discussion to this effect in the 551 Patent, another well-known form of instant lottery ticket is a pull tab ticket. On this kind of ticket, the scratch-off layer over the game data is replaced by pull tabs which are secured to the ticket substrate by perforations that create tear lines. The pull tabs are removed by pulling them along the tear lines. Pull tab ticket are generally less expensive to manufacture and tend to be used with lower value lottery games.
[11] Another form of lottery that is not discussed in the 551 Patent is called online gaming. Whereas instant lottery tickets are predetermined as winners and non-winners, tickets for online games (also called draw games) are not determined as winners or non-winners until a draw has been made after the ticket has been purchased. A well-known version of such a game is Lotto 6/49.
[12] Instant lottery tickets have generally included information, in the form of numbers and/or a code (such as a bar code), that may be used for online validation using a central database. This could include information concerning the game, book and ticket numbers of the individual ticket, together with information as to whether it was a winner and the amount of any prize. This information could be used to consult the lottery’s online system to confirm that the ticket had been legitimately sold, that it was indeed a winner, and that it had not previously been redeemed. This was intended to secure lottery tickets against counterfeiting, forgery and/or alteration. The introduction of machine-readable bar codes containing the validation information permitted faster ticket validation as compared to keying in a lengthy series of digits.
[13] The parties are agreed that it was known prior to the claim date of the 551 Patent to cover some or all of the validation information with a scratch-off layer. This would prevent people from benefiting from having information associating validation numbers with winning tickets. For example, in a process called skimming, an unscrupulous retailer might scan the exposed validation information of many tickets in order to find the winners. The retailer could then keep the winners and sell only the non-winners. Lotteries apparently had processes in place to detect skimming by flagging repeated unsuccessful validation attempts, but it appears that those processes were fallible.
[14] Even with validation information covered, an unscrupulous retailer with familiarity with the location and format of the validation information could attempt to gain information for the purpose of skimming by making tiny, virtually invisible holes or fine lines in the scratch-off coating to reveal just enough information to hint to the retailer which tickets might be winners. This is sometimes called pinpricking.
[15] There were two ways to cover the validation information under a scratch layer. It could be done by placing it under the same scratch-off layer as the game data, or it could be located elsewhere on the ticket under a separate scratch-off layer. In the latter case, the scratch-off layer covering the validation information would typically bear an indication that it should not be scratched off. A number or code hidden in this way is often referred to as a VIRN (void if removed number). The scratch-off covering the VIRN would be removed only by a lottery agent upon redemption of the ticket.
[16] Though the parties agree that a human-readable validation number had been placed under scratch-off, it is less clear whether it was also commonly known to cover validation information in the form of a machine-readable bar code with a scratch-off layer. Here, the parties do agree that an exposed bar code on an instant lottery ticket typically would not contain all of the information necessary for validation, and would be accompanied by a VIRN for validation. Placement of at least some of the validation information under scratch-off was intended to improve the security of the lottery system.
[17] Even here, retailer fraud was possible: a player presenting a winning ticket could be told by the retailer that the ticket was not a winner, or that the amount of the prize was smaller than the actual amount. The retailer could then take the ticket for him or herself and redeem it for the full prize amount. Even the introduction of specific sounds played by the retailer’s lottery machine was apparently insufficient to eliminate retailer fraud. It should be noted, however, that this is not the problem that is addressed in the 551 Patent.
[18] Another challenge with instant lottery tickets concerned their relatively small size compared to the size of the bar code needed to contain all of the information required for ticket validation. The Court heard evidence of the importance of the graphics on the front face of an instant lottery ticket to its marketing and sales. Space used for a bar code, especially on the front side of the ticket, limits the space for such graphics. The 551 Patent mentions the significant advantage of reducing the area occupied by the bar code.
[19] The 551 Patent proposes to improve the integrity of instant lottery tickets by hiding the entire bar code from view until such time as authentication is necessary. This permits all of the information necessary for validation to be included in the bar code. Though it is not mentioned in the patent, having all of the validation information in the bar code can also facilitate self-checking of winning tickets, which could potentially reduce retailer fraud.
[20] The patent also proposes to reduce the amount of space taken by the bar code by using a two-dimensional (2D) bar code instead of the one-dimensional (1D) bar code that was then usual. A typical example of a 1D bar code is the interleave 2 of 5, a sample of which is reproduced here:
[21] A typical example of a 2D bar code is the PDF417, a sample of which is reproduced here:
[22] Though the evidence shows that 2D bar codes had not yet been used on instant lottery tickets as of the claim date, they were known generally, and several examples of known 2D bar codes are identified in the 551 Patent. Though a 2D bar code can present greater challenges for proper printing, it permits more data to be provided in a smaller space than a 1D bar code. It also permits more data so as to incorporate redundancies that can alleviate the challenges of misread bar codes due to poor printing quality, damage or incomplete removal of the scratch-off layer.
[23] The 551 Patent describes two distinct embodiments incorporating the concept of the hidden bar code containing all of the information necessary for ticket validation. Figure 3 shows the first embodiment: a ticket on which the game data and the bar code are hidden under separate scratch-off layers. It is contemplated that the scratch-off layer over the bar code would operate as with a typical VIRN, remaining in place until removed by a lottery agent (typically, a retailer) at the time of ticket validation. If the ticket is presented for validation with the scratch-off layer over the bar code removed, that may be a basis for refusing to validate the ticket, as that might indicate that the barcode had been tampered with or subjected to skimming. Figure 3 is reproduced here:
[24] The second embodiment is shown in Figure 4 which shows the game data is printed around the bar code, and both game data and bar code are hidden under a single scratch-off layer. In this embodiment, the bar code would be revealed upon removal of the scratch-off layer at the time the game is played. It follows therefore that the removal of the scratch-off layer over the bar code in this second embodiment cannot be used as a basis for refusing to validate the ticket.
IV. Issues in Dispute [25] The parties provided a Statement of Issues in which they agreed on a number of the issues in dispute, but disagreed on a few. There were also some changes to the list of issues during trial. Having now considered the parties’ Statement of Issues and heard from the parties, I have prepared my own modified list of issues:
Claim Construction
Who is the person skilled in the art (the “skilled person”) of the 551 Patent? How would the skilled person as of April 24, 1997, construe the following terms in the claims of the 551 Patent:
i. “play area”;
ii. “printed indicia of the play area”;
iii. “non-play area”;
iv. “spaced apart”;
v. “said 2D bar code containing all information necessary to authenticate the lottery ticket, said 2D bar code being readable by a reading device by an agent of the lottery ticket, such that when the 2D bar code is read by the reading device, the lottery ticket may be authenticated without the input of additional information provided by the agent of the lottery ticket or directly from the printed document”;
vi. “a removable continuous scratch-off coating covering both the printed indicia in said play area and the bar code in said non-play area”;
vii. “wherein the absence or alteration of the scratch-off coating covering the bar code may be a determining factor as to whether the lottery ticket is authentic”;
viii. “game data”;
ix. “printed around the bar code”?
Invalidity Issues
Standard of Review – Is any deference owed to the patent examiner who allowed the patent to issue? Ambiguity – Are the claims of the 551 Patent invalid for not defining distinctly and in explicit terms the subject-matter of the claimed invention, pursuant to section 27(4) of the Patent Act? Overbreadth and Inutility – Are the claims of the 551 Patent invalid for being broader than the purported invention, if any, as set out in the disclosure and for lacking utility? Anticipation – Was the subject matter of claim 1 of the 551 Patent anticipated by Canadian Patent Application No. 2,119,190 (the Camarato Application)? Obviousness – Was the subject matter of the claims of the 551 Patent obvious in view of one or both of the following:
i. Common General Knowledge;
ii. The Camarato Application.
Infringement Issues
If the 551 Patent is valid, has Pollard infringed the 551 Patent? Can Pollard rely upon the defence of licence with respect to any infringing tickets made, sold or supplied to British Columbia Lottery Corporation (BCLC), Western Canada Lottery Corporation (WCLC), Interprovincial Lottery Corporation (ILC) and Lotto-Québec? If the 551 Patent is valid, has Pollard induced infringement of the 551 Patent?
Remedies
If the 551 Patent is valid and infringed, is SG entitled to:
i. elect as between its damages or an accounting of Pollard’s profits arising from Pollard’s infringement of the 551 Patent (whether direct or induced), to be determined on a reference?
ii. reasonable compensation for a period of time prior to grant of the 551 Patent, and if so, for what period of time?
iii. injunctive relief?
iv. delivery up?
v. aggravated, punitive or exemplary damages?
vi. pre-and post-judgment interest, compounded, on any monetary relief awarded to SG?
Should costs be awarded and if so, at what scale?
[26] In addition to the foregoing list of issues, I must also consider Pollard’s argument that the report and testimony of one of SG’s experts, James Trask, should be ruled inadmissible.
V. Witnesses [27] This section outlines the testimony of the witnesses who testified during the trial, as well as my impressions after having heard said testimony. Some witnesses were experts while others were fact witnesses. One key difference between experts and fact witnesses is that only experts may provide opinion evidence. There is also a requirement that each expert provide a report in advance of trial of the testimony they intend to give. All of the experts provided such reports, and the Court was provided copies thereof to review prior to the commencement of the trial. This was very helpful to the Court in preparing for the trial and to have a general understanding of the issues addressed by the experts as they testified.
[28] In order to avoid unnecessary repetition, I state here that all of the experts addressed each of the following issues to some extent:
The characteristics of the skilled person; The common general knowledge of which the skilled person would have been aware; A description of the 551 Patent; How the claims of the 551 Patent should be construed; and The inventive concept of the 551 Patent.
[29] In addition, all experts except James Trask addressed the Camarato Application and the issue of obviousness.
A. Pollard’s Expert Witnesses (1) Yih Lerh Huang [30] Dr. Huang was employed in the lottery industry for over 25 years. In 1984, he co-founded grouptheory systems incorporated (grouptheory), a lottery print and production company where he worked in ticket production, print process control, and game generation. His responsibilities included designing algorithms for validation numbers, bar codes, and secure database access. Between 1989 and 1995, his company supplied tickets to Pollard. In 1999, grouptheory was acquired by Canadian Bank Note, for whom Dr. Huang became Vice President and Chief Technology Officer. He worked in this capacity until his retirement in 2010.
[31] The parties agreed upon the following Expert Stipulation for Dr. Huang:
Yih Lerh Huang is an expert in game generation for instant lottery tickets, instant ticket management systems and validation systems. This expertise includes prize structures and the validation of tickets, both instant tickets and online tickets.
[32] In his expert report, Dr. Huang addressed all of the issues identified in paragraph [28] above and concluded, among other things, that the 551 Patent is obvious in light of the Camarato Application. During his examination-in-chief, Dr. Huang elaborated on some aspects of his expert report.
[33] In his cross-examination, Dr. Huang was asked to explain the differences between various types of lottery tickets, ways of forging or counterfeiting lottery tickets and of preventing such activities, and the security measures relied upon in the industry. He was also asked to comment on the common general knowledge as well as several pieces of prior art referenced in his report, including the presence of 2D bar codes during the relevant time period. Further, he was asked to discuss the 551 Patent and the meaning of the elements of claim 1, at which point he confirmed that he found all the elements of the claim to be essential.
[34] Dr. Huang’s testimony was of value in assisting the Court to construe the claims of the 551 Patent and to assess their validity. His answers to questions from counsel for both parties were straightforward. He was consistent in his opinions and made admissions where appropriate. I found Dr. Huang to be a reliable witness.
(2) Nicholas Fazzano [35] Mr. Fazzano entered the lottery business in 1988 and, aside from a six-month period in the early 1990s, has since been employed by GTECH. Mr. Fazzano initially worked as a business manager in charge of purchasing and budgeting for the printing division, and subsequently became involved in customer relations, game development, and sales support. While seconded to a consortium licensed to operate a national lottery in the United Kingdom in the mid-1990s, Mr. Fazzano acted as the local authority on instant tickets, overseeing the testing of each game and developing operational procedures. He continued in his role as an unofficial instant lottery ticket expert upon his return to GTECH. He has since assisted in the start-up of a number of lotteries, particularly with respect to instant tickets. Currently, he is a director in GTECH’s Lottery Marketing Group, where he helps customers grow their instant ticket businesses.
[36] The parties agreed upon the following Expert Stipulation for Mr. Fazzano:
Nick Fazzano is an expert in the lottery industry, especially in the instant ticket area of the industry, which includes game design, manufacturing, operations, selling and implementation of systems for management and validation of instant tickets.
[37] In addition to the issues identified in paragraph [28] above, Mr. Fazzano’s expert report addressed several prior art references and concluded, among other things, that (i) claim 1 of the 551 Patent is anticipated by the Camarato Application; and (ii) the inventive concept of the 551 Patent would have been readily apparent to the skilled person based on the Camarato Application and the common general knowledge. Mr. Fazzano elaborated on some aspects of his expert report during his examination-in-chief.
[38] In his cross-examination, Mr. Fazzano described the differences between scratch tickets and pull tab tickets, and provided additional details on ticket printing and security. He was asked a number of questions about the trade publications and prior art attached to his report, and he confirmed that a 2D bar code could be printed using the technology available in the early 1990s. The remainder of Mr. Fazzano’s cross-examination was spent explaining his account of how the skilled person would understand the 551 Patent and the elements of the claims thereof.
[39] As with Dr. Huang, Mr. Fazzano’s testimony was straightforward. He displayed consistency in his opinions and made admissions where appropriate. His expert report and examination in court have been valuable in understanding the 551 Patent and construing its claims.
B. Pollard’s Fact Witness (1) Lyle Scrymgeour [40] Mr. Scrymgeour acted as Pollard’s representative for examinations for discovery before trial. He was employed by Pollard from 1978 to 2010, most of that time as Vice President – Technical Services. In that role, his principal responsibilities were ticket security, process development, product development and engineering. Since 2010, he has acted as a consultant to Pollard.
[41] It should be emphasized that, despite the depth of his experience in the industry, Mr. Scrymgeour testified as a fact witness, and not as an expert. Therefore, the relevance of Mr. Scrymgeour’s testimony is limited to facts and cannot include any opinions. The same comment also applies to the testimony of SG’s fact witnesses.
[42] During his examination-in-chief, Mr. Scrymgeour testified on the history of Pollard as a company printing scratch lottery tickets. He also discussed Pollard’s efforts to oppose patents on the invention of the 551 Patent, including protests before the Patent Office in Canada, an opposition process before the European Patent Office, and correspondence surrounding an opinion obtained from a US lawyer concerning the validity of the US 991 Patent which corresponds to the 551 Patent.
[43] Mr. Scrymgeour also testified concerning Pollard’s testing in 1991, of various bar codes (including 2D bar codes) covered by scratch-off coatings. Copies of both (i) a relevant extract from a Pollard lab notebook, and (ii) the cardstock on which these bar codes were printed, were submitted as trial exhibits. Mr. Scrymgeour went on to describe the first uses of covered 2D bar codes for validation of instant lottery tickets.
[44] During Mr. Scrymgeour’s cross-examination, SG brought to his attention declarations by himself and another Pollard employee named Teri Masson from 2002, describing the testing referred to in the preceding paragraph as involving not bar codes printed on cardstock, but rather “sample lottery tickets”, and indicating that bar codes covered by scratch-off material had thereby been reduced to practice in 1991. In answer to a question as to whether these declarations were misleading, Mr. Scrymgeour acknowledged that “a mistake was made.” Mr. Scrymgeour was also asked, during his cross-examination, some follow-up questions about Pollard’s unsuccessful efforts in the US to have the US 991 Patent declared invalid.
[45] I would have been concerned about the reliability of Mr. Scrymgeour’s statement in his 2002 declaration that the testing that Pollard conducted in 1991, involved sample lottery tickets (rather than bar codes printed on card stock), except that I have concluded that the distinction is not relevant for the purposes of this decision. Moreover, though Mr. Scrymgeour acknowledges that this statement was a mistake, it does not affect the overall reliability of his testimony since I find little, if any, evidence that contradicts any of his testimony on which I rely.
C. SG’s Expert Witnesses (1) Fred Finnerty [46] Mr. Finnerty has worked in the lottery industry for 28 years. He has experience in the development and implementation of instant ticket validation systems, as well as in the design, layout, and systems design for printing and production of instant tickets. From 1988 to 1997, he worked at Dittler Brothers, a printing company specializing in the manufacture of instant lottery tickets. Through a series of transactions, Dittler Brothers was eventually acquired by SG. There, Mr. Finnerty worked initially as a programmer, and eventually as Manager of Research and Development. At SG, Mr. Finnerty eventually became Director of Research and Development. Currently, Mr. Finnerty works as a consultant in the lottery industry.
[47] The parties agreed upon the following Expert Stipulation for Mr. Finnerty:
Fred W. Finnerty is an expert in the development and implementation of validation systems for instant lottery tickets[.] His expertise extends to the design, layout and systems design for the printing and production of instant lottery tickets, particularly scratch off tickets.
[48] In his expert report, Mr. Finnerty addressed all of the issues identified in paragraph [28] above, eventually opining that a skilled person in 1995, would not have been easily led to the idea of using a 2D bar code under a scratch-off layer as a means of improving ticket validation. Mr. Finnerty also commented on the conclusions drawn by Mr. Fazzano and Dr. Huang in relation to obviousness, arguing that they had not considered the practical and technical barriers to be overcome, and that they mischaracterized the prior art. In particular, Mr. Finnerty opined that the Camarato Application was unrelated to the 551 Patent, as it did not include any reference to a validation number for identifying winning tickets.
[49] During his examination-in-chief, Mr. Finnerty provided additional details on his employment history and summarized his disagreement with the Pollard experts regarding how a skilled person would understand the 551 Patent. He also summarized his opinion of why a skilled person would not have found the 551 Patent to be obvious.
[50] In his cross-examination, Mr. Finnerty responded to questions regarding the common general knowledge at the relevant time, and then reviewed the 551 Patent with counsel for Pollard.
[51] Upon being asked about the Camarato Application, Mr. Finnerty abruptly stated (for the first time before the Court) that he had “grossly mischaracterized” the Camarato Application in his report, as he had misunderstood its contents. He asked to retract that section of his report. He did discuss the Camarato Application during his cross-examination, but still did not seem to have a firm grasp of its content, stating incorrectly at one point that it refers to pull tab tickets but not to “lottery” tickets.
[52] Mr. Finnerty gave the impression that, in preparing for his testimony, he did not spend sufficient time reviewing the relevant documents, including the patent in suit. For example, he did not seem to know that claim 1 concerns a lottery ticket and not merely a printed document. His approach to his analysis also seemed to lack discipline. He expressed the view that one part of claim 1 concerned the embodiment described in Figure 3 of the 551 Patent, while another part of the same claim concerned the distinct embodiment described in Figure 4. This confusing conclusion is discussed in greater detail below in my analysis of claim construction.
[53] Mr. Finnerty’s admission in cross-examination that he had completely misunderstood what was clearly the most important prior art reference in this case was surprising enough. But I do not understand why Mr. Finnerty’s retraction was not addressed during his examination-in-chief. Based on Mr. Finnerty’s testimony, it appears that he recognized his error well in advance of trial, after reading documents prepared by Pollard’s experts, and that he brought this to the attention of SG’s counsel at the time; he testified that he was told that there was no further opportunity to amend or clarify his report. The failure to address this error during examination-in-chief, leaving Mr. Finnerty’s report unaltered, constitutes not just a strategic misstep by SG, but it also suggests that there may have been a hope that Mr. Finnerty’s confusion would go unnoticed and that the report would be considered without amendment. Proceeding in such a manner would be improper as it would mislead the Court as to the expert’s actual opinion. Pollard’s counsel noted (correctly) that it might have chosen not to cross-examine at all on the Camarato Application, in which case Mr. Finnerty’s confusion would indeed have gone unnoticed. There may have been a reasonable explanation for not correcting Mr. Finnerty’s report at the outset of his testimony, but none was offered.
(2) James Trask [54] Prior to his recent retirement, Mr. Trask had worked in the lottery industry for 38 years, mostly with SG and its predecessors. Over the course of his career, he worked in a variety of senior executive positions, encompassing a range of business and operational responsibilities including sales, marketing, new product development, new market development, production and quality assurance. At the time of his retirement in January 2015, he was President of SG and Assistant to the CEO, Global Operations, of SG’s parent company.
[55] As with other experts, the parties have agreed upon an Expert Stipulation for Mr. Trask. It reads as follows:
James Trask is an expert in the business of instant lottery tickets, including new product development, marketing, sales, operations and production. This expertise extends to operational oversight of secure printing facilities, including those which print lottery tickets.
[56] Despite the stipulation to Mr. Trask’s expertise, Pollard objects to his testimony on the basis that, because of his close association with SG, he is incapable of complying with the duties of an expert witness. After testimony and argument on the question of admissibility, Mr. Trask’s substantive testimony went ahead on the understanding that I would rule on admissibility in my decision on the merits. That ruling appears below after a description of Mr. Trask’s testimony.
[57] In his expert report, Mr. Trask addressed all of the issues identified in paragraph [28] above. Mr. Trask also identified a number of Canadian lottery tickets that he opined contain all of the essential features of the scratch-off ticket defined in the claims of the 551 Patent. Interestingly, however, he did not explicitly identify the features that he found to be essential.
[58] In his initial examination-in-chief on the question of admissibility, Mr. Trask provided some additional details on his professional background, focusing in particular on the period leading up to his retirement from SG. He was then cross-examined on his ability to act as an independent witness. Mr. Trask described his current financial relationship with the company, provided details on the degree to which he was involved in the present litigation prior to his retirement, and commented on various licence agreements that he had signed on behalf of SG in relation to the 551 Patent. Counsel then made submissions on the admissibility of his testimony.
[59] For the remainder of his examination-in-chief, Mr. Trask replied to questions on the common general knowledge in the lottery industry in the mid-1990s, particularly in relation to ticket security and the printing process, and on how a skilled person would understand the 551 Patent. He was shown a number of instant tickets by counsel for SG, and confirmed that each one exhibited all of the essential elements of the claims of the 551 Patent. In his cross-examination on substantive issues, Mr. Trask provided additional detail on scratch ticket validation, and confirmed that he found all the elements of claim 1 of the 551 Patent to be essential. He subsequently confirmed that the bar codes on the tickets he examined were in the play areas to be exposed by the purchaser upon playing.
(a) Admissibility [60] In my view, Mr. Trask did not demonstrate any bias or lack of independence in his testimony. In fact, in some respects, his testimony was more in Pollard’s favour than SG’s.
[61] The parties agree that the applicable jurisprudence on the admissibility of Mr. Trask’s evidence is White Burgess Langille Inman v Abbott and Haliburton Co, 2015 SCC 23 [WBLI]. This is a unanimous decision in which the Supreme Court of Canada (SCC) discussed four threshold requirements for admissibility of expert evidence: (i) the evidence must be relevant, (ii) it must be necessary in assisting the trier of fact, (iii) there must be no exclusionary rule, and (iv) the expert must be properly qualified. The SCC went on to state that, in addition to these requirements, the Court has a residual discretion to exclude evidence based on a cost-benefit analysis (WBLI at para 19). An expert’s opinion must be impartial (it must be an objective assessment), independent (it must be uninfluenced by the party or the outcome), and unbiased. The acid test is whether the expert’s opinion would not change if the party retaining her or him was different (WBLI at para 32). Once an expert swears that these requirements are met, the burden is on the opposing party to show a realistic concern that the expert is unable or unwilling to comply with his or her duty (WBLI at para 48).
[62] As the court in WBLI stated at para 49:
This threshold requirement is not particularly onerous and it will likely be quite rare that a proposed expert’s evidence would be ruled inadmissible for failing to meet it. The trial judge must determine, having regard to both the particular circumstances of the proposed expert and the substance of the proposed evidence, whether the expert is able and willing to carry out his or her primary duty to the court.
[63] In applying this framework to the case at bar, I see no reason for concern about Mr. Trask’s ability and willingness to comply with his duty. The SCC cites a number of examples in which expert testimony might be deemed inadmissible, including when there is a financial interest, a familial relationship, a risk of professional liability, or when the witness assumes the role of an advocate. None of these examples applies to Mr. Trask. I am also satisfied that there are no concerns that the relevance, necessity, reliability and absence of bias of Mr. Trask’s testimony are outweighed by any risks associated with that testimony (WBLI at para 54). For these reasons, I am not persuaded to rule Mr. Trask’s testimony to be inadmissible.
D. SG’s Fact Witnesses (1) Carla Schaefer [64] Ms. Schaefer has worked in the lottery industry for over 30 years, and is currently Vice President – Business Development of SG’s parent company. She discussed the history of SG as a company and how business is done in the lottery industry. In particular, she discussed mechanisms for ensuring ticket security and quality control. She also described the lottery industry as a small industry in which integrity is considered particularly important because of the high potential for fraud and the conservative attitude of clients, who are mostly governments. Ms. Schaefer additionally identified several documents, including (i) marketing materials describing a commercial product related to the 551 Patent, referred to as “FAILSAFE”; (ii) several licensing agreements for the use of the patented invention; and (iii) correspondence regarding SG’s efforts to obtain the payment of royalties from Canadian licensees.
[65] In her cross-examination, Ms. Schaefer confirmed that the marketing materials for FAILSAFE state that either a 1D or a 2D bar code could be used when implementing the FAILSAFE technology, though she emphasized that most people understand FAILSAFE to be associated with 2D bar codes. She indicated that she was unaware of any customer using FAILSAFE with a 1D bar code. She indicated further that it would be illogical for a customer to adopt FAILSAFE using a 1D bar code. She additionally commented on the relevance of bar code placement on scratch tickets, and provided some clarification on the contents of the licensing agreements previously identified.
[66] While Ms. Schaefer provided some useful information on the licensing and promotion of the commercial product associated with the 551 Patent, her testimony seemed at times to be influenced by her close association with SG. For example, her emphasis on FAILSAFE being associated with 2D bar codes (as opposed to 1D bar codes) seemed somewhat at odds with some of the marketing documents she produced which explicitly contemplate both 1D and 2D bar codes. Another example concerns Ms. Schaefer’s statement that a key benefit of the FAILSAFE technology is the ability of consumers to avoid the potential for retailer fraud by validating their own tickets after scratching off the coating over the bar code. Such consumer self-checking is incompatible with the feature of claim 1 of the 551 Patent which contemplates