Betser-Zilevitch v. Petrochina Canada Ltd.

Betser-Zilevitch v. Petrochina Canada Ltd.
Court (s) Database
Federal Court Decisions
Date
2021-01-26
Neutral citation
2021 FC 85
File numbers
T-1158-18
Decision Content
Date: 20210126
Docket: T-1158-18
Citation: 2021 FC 85
Ottawa, Ontario, January 26, 2021
PRESENT: The Honourable Mr. Justice Manson
BETWEEN:
MAOZ BETSER-ZILEVITCH
Plaintiff
and
PETROCHINA CANADA LTD.
Defendant
JUDGMENT AND REASONS
TABLE OF CONTENTS
I. Introduction 5
II. Background 5
A. The Parties 5
B. Technical Background: SAGD and Modularization 6
C. The 627 Patent 7
D. The Allegedly Infringing MRCP Well Pads 10
E. The Invention Story and the Current Proceeding 11
F. Other Heavy Oil Recovery Projects in Alberta 13
III. Issues 14
IV. Fact Witnesses 15
A. Plaintiff’s Fact Witnesses 15
(1) The Plaintiff: Maoz Betser-Zilevitch 15
(2) Andrew Herbst 15
(3) Graham Baugh 16
B. Defendant’s Fact Witnesses 17
(1) Ashley Leroux 17
(2) Paul Sudlow 17
(3) Dean Milner 18
(4) Deborah Jaremko 18
(5) Derek Wilkinson 19
(6) Kevin Ursu 19
(7) Wasim Huq 20
(8) Bob Shepherd 20
V. Expert Witnesses 21
A. Plaintiff’s Expert Witnesses 21
(1) David Bishop 21
(2) Prem Lobo 22
(3) Richard Beale 23
B. Defendant’s Expert Witnesses 24
(1) George Brindle 24
(2) Paul Goolcharan 26
(3) Paul Matthews 27
VI. Preliminary Issues 28
A. The Relevant Date 28
B. Ownership and Standing 28
(1) The Nexen Action 29
(2) Privity of Contract 31
(3) Expiry of Limitations Periods 31
(4) The Consulting Agreement 32
VII. Claim Construction 37
A. Person of Ordinary Skill in the Art 38
B. Essential Nature of the Claim Elements 40
C. Common General Knowledge 41
D. Construction of the Asserted Claims 43
(1) Claims 1 and 4: A system for heavy oil production 43
(2) Claims 1, 4 and 11: First level having a plurality of flow lines 43
(3) Claims 1, 4 and 11: A “first level” and “second level” 44
(4) Claims 1 and 8: Cable trays 47
(5) Claims 2 and 9: Having a walkway 48
(6) Claims 3 and 10: A stairway 49
(7) Claim 4: Joined in end-to-end relationship 49
VIII. Infringement 51
IX. Validity 53
A. Unsubstantiated Claims 53
B. Obviousness 54
(1) The Legal Framework 54
(2) The Parties’ Positions 57
(3) Obviousness Analysis 58
X. Remedies 67
XI. Conclusion 67
XII. Costs 68
I.
Introduction
[1] The Plaintiff seeks declarations that claims 1 to 17 of the Canadian Patent No. 2,584,627 [the “627 Patent”] are valid and subsisting and that the Defendant has infringed claims 1 to 8. The Plaintiff further requests damages in the form of royalties resulting from the allegedly infringing activities of the Defendant and seeks an injunction, restraining the Defendant from further infringement.
[2] The Defendant’s counterclaim seeks declarations under subsections 60(1) and (2) of the Patent Act, RSC, 1985, c P-4 [Patent Act], that all claims 1 to 17 of the 627 Patent are, and have always been, invalid or void and that it has otherwise not infringed the 627 Patent. The Defendant further requests a direction under section 62 of the Patent Act, voiding the 627 Patent.
I. Background
A. The Parties
[3] The Plaintiff, Maoz Betser-Zilevitch, is a professional engineer and is listed as the sole inventor and owner on the face of the 627 Patent.
[4] The Defendant, PetroChina Canada Ltd., is incorporated under the laws of the province of Alberta and is the owner and operator of the allegedly infringing modularized steam-assisted gravity drainage [SAGD] well pads for bitumen recovery at the MacKay River Commercial Project [MRCP].
B. Technical Background: SAGD and Modularization
[5] The tar sand deposits in Canada are typically heavy oil reservoirs that cannot be produced by standard recovery methods. SAGD is a method for heavy oil production by in-situ underground extraction. It employs two separate horizontal wells, known as a well pair. This includes both a steam injection well and a heavy oil production well. Produced steam is injected at the surface into the steam injection well. The heavy oil is heated, reducing its viscosity and allowing it to drain into a lower production well, where it is transported to the surface. A collection of well pairs is referred to as a well pad. The well pads are connected to a central processing facility through kilometers of flow lines.
[6] Cyclic steam stimulation [CSS] is another method of heavy oil production, by in-situ underground extraction, whereby a single well is subject to alternating periods of steam injection and bitumen recovery.
[7] Modularization refers to a method of well pad construction, where modules for use at the well pad are pre-assembled off-site prior to being transported and connected to each other on-site. A well pad that has been built on-site may be referred to as “stick built”. Both modularized and stick built components may be incorporated within a well pad design. The benefits of modularization principally concern the anticipated cost savings associated with reduced labour requirements and facilitated construction once on-site.
[8] In this respect, the location of equipment and flow lines on the modules, as well as the orientation of the modules, are relevant considerations in this litigation. In assessing the location and orientation of these elements on various modules, this Court was directed to photographs, as well as 3D models and screenshots contained in or originating from Navisworks, a software program that allows for the navigation of such 3D models.
C. The 627 Patent
[9] The 627 Patent is entitled “System and Method for Steam-Assisted Gravity Drainage (SAGD)-Based Heavy Oil Well Production”. It was filed on April 4, 2007, and was issued to the Plaintiff on January 26, 2010. The 627 Patent has a claimed priority date of April 21, 2006.
[10] The 627 Patent generally relates to a modularized SAGD well pad for heavy oil production and a method for its installation, describing the structure and orientation of equipment, flow lines and instrumentation used on the modules and at the well pad site. This includes, for example, the placement of cable trays, walkways, stairways, piping and the location of flow lines on various levels of the modules. The 627 Patent teaches a system and method for producing heavy oil or bitumen economically by SAGD.
[11] The “Background of the Invention” section of the 627 Patent discusses an unmet need to reduce both the costs and labour involved in SAGD well site construction, occurring on-site or in the field. Specifically, the non-exhaustive objects of the 627 Patent include a system that: (1) avoids the need to separately construct and connect pipes in the field; (2) can be easily transported to the desired location; (3) can be manufactured off-site; (4) minimizes costs; (5) shortens the construction schedule; (6) minimizes hydro-testing requirements in the field; (7) allows for the relocation of equipment after the well site is depleted; and (8) improves safety for those involved with the assembly, manufacture and production activities at the well pads.
[12] For reasons that will be explained in greater detail below, a key aspect of the 627 invention is the presence of both the steam injection flow line and the heavy oil production flow line on a lower, first level of the modules.
[13] While the Plaintiff only asserts claims 1 to 8, the Defendant challenges the validity of all 17 claims of the 627 Patent, which may be broken down into: (1) claims 1 to 10: system claims for heavy oil production; and (2) claims 11 to 17: method claims for installing the piping systems for heavy oil production.
[14] There are three independent claims, claims 1, 4 and 11, which provide:
1. A system for heavy oil production comprising:
a first well having a first well head;
a second well having a second well head;
a first means connected to said first well head of said first well, said first means for injecting steam into said first well; and
a second means connected to said well head of said second well for producing heavy oil from said second well, said first and second means arranged in parallel flow relationship, each of said first and second means comprising:
a first level having a plurality of flow lines extending therealong, said flow lines being exposed on opposite sides thereof; and
a second level located above said first level, said second level having piping connected to said flow lines of said first level, said second level having a valve and controller cooperative with said piping, said second level supporting cable trays receiving electrical and communication cables thereon, said piping having a swivel head connection suitable for joining to the well head or to a swivel head of an adjacent piping.
…
4. A system for heavy oil production comprising:
a first piping assembly having a first level and a second level, said first level having a plurality of first flow lines extending longitudinally therealong, said second level having a piping thereon in communication with said flow lines of said first level, said second level located above said first level, said first and second levels of said first piping assembly are simultaneously transportable and supported by a single frame; and
a second piping assembly having a first level and a second level, said first level of said second piping assembly having a plurality of second flow lines extending longitudinally therealong, said second level of said second piping assembly having a piping thereon in communication with said flow lines of said first level of said second piping assembly, said first and second levels of said first piping assembly are simultaneously transportable and supported by a single frame, said piping of said second piping assembly selectively connected to said piping of said first piping assembly, said first piping assembly being joined in end-to-end relationship with said second piping assembly and being formed into a string of basic units connected to each other with said flow lines, each unit being parallel to a line of injection or production and having connection pipes perpendicular to said line of injection or production wells.
…
11. A method of installing piping systems for heavy oil production comprising:
forming a first platform having a first level and second level with flow lines extending along said first level and piping communicating with said first flow lines and extending along said second level, said first platform constructed from a single frame, said first and second levels of said first platform being simultaneously transportable;
forming a second platform having a first level and second level with second flow lines extending along said first level and piping communicating with said flow lines and extending along said first level and piping communicating with said flow lines and extending along said second level, said second platform constructed from a single frame, said first and second levels of said second platform being simultaneously transportable;
transporting said first and second platforms to first and second well heads;
connecting said piping of said second platform to the piping of said first platform;
connecting said piping of said first platform to the first well head; and
connecting said piping of said second platform to the second well head.
…
D. The Allegedly Infringing MRCP Well Pads
[15] The MRCP is a bitumen recovery project located within the Regional Municipality of Wood Buffalo, Alberta. The design and construction of the MRCP facility began in 2012. It was operational by no later then December of 2016 or early 2017. Through the operation of the MRCP facility, the Defendant sells synthetic bitumen (known as Synbit, which is a blend of bitumen and a dilutent). The MRCP facility includes 42 operational well pairs on 8 well pads [collectively, the “MRCP Modules” or “MRCP Well Pads”], which have the same design and configuration: (1) there are 6 well pairs on Well Pads AA, AE and AF; (2) there are 5 well pairs on the Well Pads AB, AD, AH and AJ; and (3) there are 4 well pairs on Well Pad AC.
[16] The Defendant contracted Worley Parsons Canada Services Ltd. [Worley Parsons] to design Well Pads AA, AB, AC, AD, AE, AF, AH and AJ at the MRCP well site. These modules were transported over public roadways from an off-site fabrication facility to the MRCP facility for installation.
E. The Invention Story and the Current Proceeding
[17] The Plaintiff was a principal of Excrude Inc. [Excrude], a consulting company he established on April 5, 2005 (the name of which was changed to Ex-Tar Technologies Inc. [Ex-Tar] in February of 2006). On May 9, 2005, Excrude and Nexen Inc. [Nexen] entered into the Long Lake Consulting Agreement [the “Consulting Agreement”], where the Plaintiff was engaged to perform a variety of services related to the Nexen Long Lake Project, a SAGD field facility, in the manner set out in Schedule A to the Consulting Agreement.
[18] While engaged under the Consulting Agreement, the Plaintiff conceived of the subject matter of the 627 invention, as described in US Patent Application Serial No. 11/408,117 [US Patent Application]. The Plaintiff filed the US Patent Application in his own name on April 21, 2006. He further requested that the US patent office not publish the patent application.
[19] The Plaintiff described that his motivation for the 627 invention was derived from the harsh on-site conditions faced by workers at well sites in northern Alberta and the productivity issues created by these circumstances.
[20] The Plaintiff disclosed the general concept of the 627 invention to the Construction Management Team at Nexen, which initiated a series of events that led to the commissioning of the Nexen Long Lake Upgrader Project Phase 2 – Well Pad Modularization Report or the “Fluor Report”, dated September 18, 2006. This was a study that evaluated the Plaintiff’s concept. The Fluor Report claimed cost savings of 30% of the total incurred costs and a reduction of 3 to 4 months in the field construction schedule when comparing Nexen’s stick built to the Plaintiff’s Well site Basic Block Module [WBBM] design. The 627 design was presented to management at Nexen, including Roy Atkinson, Nexen’s modular manager.
[21] When Nexen demonstrated a lack of interest in the design concept, the Plaintiff approached Suncor Energy Services Inc. [Suncor]. On August 14, 2006, the Plaintiff made an offer to present and license the technology to Suncor. Suncor did not engage in further negotiations for a license. Additional offers of a similar nature were made to other third parties. However, they were not pursued.
[22] Nexen terminated the Consulting Agreement with Excrude, effective October 31, 2006, by way of a letter addressed to Ex-Tar, dated September 29, 2006.
[23] The Plaintiff then emailed Gary Nieuwenberg at Nexen, an individual he perceived had authority within Nexen, on October 13, 2006, advising him personally of the 627 invention. The Plaintiff did not receive a response to this email and sent a follow-up email on October 26, 2006, offering a one-time licensing fee of 0.6% of the estimated cost savings for his WBBM design. This would result in a single payment of $150,000 for the right to use all WBBM design information, including the license to use the US Patent Application. It was within this timeframe that Nexen was first made aware of the US Patent Application.
[24] The Plaintiff received a response on October 30, 2006 from Nexen’s Senior Legal Counsel, Tim Friesen, reminding him of the provisions of the Consulting Agreement with Nexen. In a letter dated November 12, 2006, the Plaintiff responded stating that the WBBM design is his personally and requested that Nexen avoid delivery or use of the confidential information related to the WBBM design that had been disclosed by the Plaintiff.
[25] As indicated above, the application for the 627 Patent was filed on April 4, 2007 and claims priority from the US Patent Application. The 627 Patent was published on October 21, 2007.
[26] The Plaintiff’s legal counsel sent a letter to the President of the Defendant, Mr. Jilin Fu, on January 19, 2018, informing the Defendant of the 627 Patent. The Defendant had no communication with the Plaintiff seeking a license to use the 627 Patent prior to the construction of any well pads at its MRCP facility, nor prior to the start of this litigation.
F. Other Heavy Oil Recovery Projects in Alberta
[27] The larger context of SAGD technology development and modularization in Alberta is relevant to this litigation. The Defendant relies on two heavy oil recovery projects located in Alberta as prior public uses in attacking the validity of the 627 claims on the basis of obviousness. Both were designed by IMV Projects Inc. [IMV Projects] (acquired by Wood Group Mustang [Wood Group] in 2007). They were allegedly available to the public prior to the construction of the allegedly infringing MRCP Well Pads. These include:
Cenovus Energy Inc. [Cenovus] (previously part of Encana Corporation [Encana]) Foster Creek Well Pads F, G and the B Pad Expansion [collectively, “Cenovus Foster Creek Modules”]; and
Canadian Natural Resources Limited [CNRL] Primrose South Well Pads 29 to 31 and Primrose North Well Pads 51 to 54 [collectively, “CNRL Modules”].
[28] Notably, IMV Projects also created the design for BlackRock’s (later Osum Energy) Orion SAGD heavy oil well pads [Orion Modules]. However, this is not relied on as a prior public use for the reasons outlined below.
II. Issues
[29] The parties agreed in the substance, but not in the framing of the issues. The issues are as follows:
Is the Plaintiff the owner of the 627 Patent or is the Defendant otherwise barred from raising ownership of the 627 Patent as an issue?
Did the Defendant infringe claims 1 to 8 of the 627 Patent by constructing and operating its MRCP facility for bitumen recovery?
Are claims 1 to 17 of the 627 Patent invalid on the basis of obviousness?
If there is infringement and the 627 Patent is valid, what remedies is the Plaintiff entitled to?
III. Fact Witnesses
A. Plaintiff’s Fact Witnesses
(1) The Plaintiff: Maoz Betser-Zilevitch
[30] The Plaintiff is a professional engineer. He graduated as a mechanical engineer in 1989 from Tel Aviv University in Israel, immigrated to Canada in 2003 and established his own consulting company, Excrude, in 2005. As indicated above, he worked as a consultant for Nexen for the duration of the Consulting Agreement.
[31] He testified as to his passion for inventing and the conditions in northern Alberta that led him to conceive of and patent the 627 invention. He further testified as to his experiences in the oil and gas industry, his ownership of the 627 Patent, his work as a consultant for Nexen and how he would approach the negotiations of a licencing agreement. The Plaintiff was credible.
(2) Andrew Herbst
[32] Mr. Herbst currently runs a consulting practice for engineering projects, as President of Neerzweknow Ltd. He was an employee of IMV Projects, and then of Wood Group, from October 2002 to December 2012, in various positions related generally to the management of project engineers. He testified as to the confidentiality obligations of employees hired by IMV Projects. However, it became clear on cross-examination that Mr. Herbst was not aware of the circumstances of the fabrication, transportation or installation of the Cenovus Foster Creek Modules and CNRL Modules, nor did he have direct knowledge of the marketing and business development practices in relation to the modules. Mr. Herbst was a credible witness, but his evidence failed to undermine evidence led by the Defendant related to the public visibility or availability of the modules.
(3) Graham Baugh
[33] Mr. Baugh is currently a commercial and legal consultant. Between November 2004 to 2009, he worked within the legal team at Encana, holding progressively senior leadership positions. From 2009 to October 2013, he was the Legal Services Lead and then Vice President of Canadian Legal Services at Encana. He testified as to the confidentiality obligations of employees and contractors at Encana and Cenovus (following the split of Cenovus from Encana in 2009). He further described the access requirements to the Cold Lake Air Weapons Range [CLAWR], the controlled region in which the Cenovus Foster Creek Modules were located.
[34] Similar to Mr. Herbst, Mr. Baugh was credible, but failed to refute the evidence led by the Defendant’s fact witnesses in relation to the confidentiality of the circumstances surrounding the transportation of and access to the Foster Creek Modules and CNRL Modules. He admitted that not all persons who could potentially view the modules would be subject to confidentiality obligations.
B. Defendant’s Fact Witnesses
(1) Ashley Leroux
[35] Mr. Leroux is currently the President of his engineering consulting company, XL Engineering Ltd. He has a Bachelor of Science in Chemical Engineering from the University of Alberta. Since 1999, Mr. Leroux has worked in the Alberta oil and gas industry as an operator and an engineer. He was an employee of Encana, from 2002 to 2013. From 2002 to 2005, Mr. Leroux was physically based at the Cenovus Foster Creek site.
[36] Mr. Leroux testified as to his experiences growing up in La Corey, Alberta and to the public visibility of the Cenovus Foster Creek Modules during transportation through and staging at La Corey, and once on-site. He testified that the Cenovus Foster Creek site or its vicinity was accessed by chemical companies, sales personnel and vendors, military personnel, Indigenous hunters and by friends and family during “family barbeques” (2004 and 2005). Mr. Leroux was a credible witness, having an in-depth personal knowledge of the visibility of modules for use at SAGD operations both during transportation and on-site.
(2) Paul Sudlow
[37] Mr. Sudlow graduated with a degree in mechanical engineering from the University of Waterloo in Ontario. He was a mechanical engineer and project engineer with IMV Projects from 2003 to 2012 and was responsible for the coordination of the engineering and design work for the Cenovus Foster Creek Modules, beginning in 2003 to 2005. His testimony related to this work and the manufacture of the modules at Flint’s Construction Yard, as well as the transportation, installation, promotion and marketing of the Cenovus Foster Creek Modules. Mr. Sudlow was a credible witness.
(3) Dean Milner
[38] Mr. Milner was the manager of business development and marketing at IMV Projects from October 2002 to November 2007, and then of Wood Group, after its purchase of IMV Projects, until 2014. His primary role was promoting IMV Projects within the oil and gas community and making sales presentations, beginning in 2004 or 2005, which would incorporate drawings or renderings of the modules, including of CNRL Well Pad 29. Mr. Milner further testified to touring the Cenovus Foster Creek sites with potential clients. Mr. Milner was a credible witness.
(4) Deborah Jaremko
[39] Ms. Jaremko is an industrial journalist. While working for JuneWarren-Nickle’s Energy Group in 2005, she developed a series of articles relating to SAGD facilities in Alberta. She was not aware of any confidentiality obligations while attending the Cenovus Foster Creek site in July of 2005 with photographer, Joey Podlubny. Portions of Ms. Jaremko’s evidence were based on hearsay and largely irrelevant, although she was otherwise a credible witness.
(5) Derek Wilkinson
[40] Mr. Wilkinson is a professional engineer, providing heavy oil consulting services through his company, Wilkinson Services Inc. He completed a Bachelor of Applied Science in Chemical Engineering from the University of Waterloo. He worked for CNRL from 2003 to 2010, as a project or facilities engineer, overseeing the construction of the well pads for CNRL’s Primrose and Wolf Lake sites (2003-2005). His testimony focused largely on CNRL’s Well Pad 29, which was constructed near the end of 2003 and into 2004. He spoke to Well Pad 29 becoming the subject of a presentation to the Canadian Heavy Oil Association and of site tours in the summer of 2005. Mr. Wilkinson further operated the Nasvisworks program to identify various elements of Well Pad 29 and testified as to the confidentiality of the configuration. Mr. Wilkinson was a credible witness.
(6) Kevin Ursu
[41] Mr. Ursu possesses a Bachelor of Applied Science in Industrial Systems Engineering from the University of Regina. He is the current President of Pinch Process Engineering Inc., an engineering consulting company. He was employed at IMV Projects from approximately 2000 or 2001 and became a contractor from 2003 onwards. Mr. Ursu principally testified as to this work and his involvement as the lead process engineer in the design and configuration of the Orion Modules, beginning approximately in the spring or summer of 2005, based on the module design concepts at CNRL and Encana/Cenovus.
[42] On cross-examination, Mr. Ursu admitted that the photographs referenced in the schedules to his witness statement, of the CNRL Modules, Cenovus Foster Creek Modules and Orion Modules, were all accessed for the first time in 2019. He did not take the photographs in question and was not present when they were taken. While he testified as to the cost savings associated with moving the steam injection flow line down to the lower level on the Orion Modules, he was unable to testify as to the amount of costs that were saved.
(7) Wasim Huq
[43] Mr. Huq has a Bachelor of Science in Mechanical Engineering from Purdue University and is currently working for Inter Pipeline Ltd. He was a project engineer with Dover OPCO in 2011, which was bought by PetroChina Company Limited in late 2011 or early 2012. It was renamed Brion Energy [Brion] in about 2014, prior to Brion becoming the Defendant. He testified as to the bidding process related to and the design and development of the MRCP Well Pads. Mr. Huq was a credible witness, but much of his testimony was irrelevant with respect to the issues to be decided in this case.
(8) Bob Shepherd
[44] Mr. Shepherd was employed with the Defendant and its predecessors as Senior Vice President, Technical Services and as Executive Vice President and VP Shale Gas. He testified as to the costs and impacts of the MRCP facility on jobs and investments in Alberta and as to the Defendant’s knowledge of the 627 Patent. Mr. Shepherd’s testimony was credible.
IV. Expert Witnesses
A. Plaintiff’s Expert Witnesses
(1) David Bishop
[45] David Bishop has a Full Mechanical Engineering Certificate from the City and Guilds, London (1978) and certificates in Advanced Level Design and Technology and Advanced Level Technical Drawing from the University of London (1974). He recently retired from his role as a piping design lead, with over 40 years of experience in the oil and gas industry, particularly in the design of pipelines for several oil and gas companies, including Nexen, Suncor, Husky Energy, TransAlta Energy and Imperial Oil. He spent approximately 18 years working for Jacobs Canada Inc., a consulting group in the oil and gas industry, including in SAGD technology in Alberta.
[46] Mr. Bishop was qualified as a piping designer who is an expert in the field of piping design, piping layout and modularization in the oil and gas industry, including piping design, piping layout and modularization as used in the recovery of heavy oil or bitumen using SAGD.
[47] Mr. Bishop was asked to opine on the following in his expert report, dated August 10, 2020: (1) who is the person of ordinary skill in the art [the “POSITA”] to whom the 627 Patent is addressed?; (2) the claim construction of claims 1 to 8 of the 627 Patent as of October 21, 2007; and (3) whether the Defendant’s MRCP Modules for their SAGD well pads incorporate elements of claims 1 to 8?
[48] On cross-examination, Mr. Bishop made admissions as to the common general knowledge, as described below.
(2) Prem Lobo
[49] Mr. Lobo, CPA, CA, CBV, CPA (U.S.), CFE, CFF, is a principal at Cohen Hamilton Steger & Co. Inc. [CHS]. He specializes in the quantification of damages, business valuations and forensic accounting, which have been exclusive focuses of his practice since 2001. Mr. Lobo was qualified as a forensic accountant who is an expert in accounting, the quantification of damages and business valuations.
[50] Mr. Lobo was asked to estimate the Plaintiff’s damages in the form of a royalty by: (1) estimating the Defendant’s revenue from the MRCP Well Pads that allegedly infringed the 627 Patent and multiplying it by royalty rates provided by counsel for the Plaintiff; and (2) estimating the cost savings of the Defendant, incurred by infringing the 627 Patent and multiplying these by a royalty rate provided by counsel for the Plaintiff. His opinion was provided in an August 10, 2020 expert report.
[51] On cross-examination, Mr. Lobo confirmed that he did not ascertain the propriety of the royalty rate assumptions provided by counsel for the Plaintiff. He further acknowledged the development of such royalty rates is outside his expertise, neither is he familiar with the factors involved in the negotiations of licenses for well pad designs. While he was adamant that his use of the royalty rate assumptions is appropriate in this case, his position was contradicted by previous articles he had authored, which were raised during cross-examination. Further, while his analysis was based on the contents of the Fluor Report, he demonstrated a lack of understanding of those contents and the purpose of this document. For these reasons, among other fundamental concerns with his approach, no weight can be given to his expert report.
(3) Richard Beale
[52] Mr. Beale studied Process Piping Design at the Southern Alberta Institute of Technology. He is a senior piping designer with more than 40 years of experience designing piping systems in the oil and gas industry. The majority of his career was focused in heavy oil recovery using SAGD technology and CSS. He spent 5 years working at Encana and 9 years working at Cenovus, exclusively working on the SAGD-related projects at the Foster Creek and Christina Lake facilities.
[53] Mr. Beale was qualified as a piping designer who is an expert in the field of piping design, piping layout and modularization in the oil and gas industry, including as used in the recovery of heavy oil or bitumen using SAGD and CSS.
[54] Mr. Beale was asked to provide opinions on the following, in his November 5, 2020 responding expert report: (1) who is the POSITA to whom the 627 Patent applies?; (2) the claim construction of claims 1 to 17 of the 627 Patent as of October 21, 2007; and (3) Mr. Brindle’s expert opinion, including on the issues of anticipation, obviousness, overbreadth and insufficiency.
[55] Some credibility issues were raised with respect to Mr. Beale’s testimony. He lacked personal knowledge in certain aspects of his opinion, for example, as it relates to condensate build up in the steam injection flow lines. He further overstated his position in certain respects, including in relation to the role of a piping designer in determining the overall configuration of a well pad module design. At paragraph 58 of his expert report, dated November 5, 2020, he indicated he had experience working on the CNRL Primrose site, which was contradicted during cross-examination. His opinion was weighted as discussed further below.
B. Defendant’s Expert Witnesses
(1) George Brindle
[56] Mr. Brindle is a professional engineer, having obtained a Bachelor of Applied Science in Mechanical Engineering from Queen’s University and an executive MBA from the University of Calgary. He worked with MacDonald Engineering Group Ltd, which was purchased by Worley Parsons, from 1999 to 2007. Mr. Brindle described an over 32 year career, claiming continuous involvement in substantially all aspects of heavy oil facilities development. He currently provides professional consulting services to heavy oil companies through his company, Snowdog Professional Services Ltd, based in Alberta.
[57] Mr. Brindle was qualified as an expert in relation to: (1) the design, fabrication, transportation, assembly and operation of modules used in heavy oil extraction, including SAGD and CSS modules and techniques; and (2) piping configurations and modularization in the oil and gas industry.
[58] In an August 10, 2020 invalidity expert report, Mr. Brindle was asked by the Defendant to provide his opinion as to: (1) the POSITA to which the 627 Patent relates on October 21, 2007; (2) the common general knowledge possessed by the POSITA as of that date; (3) the construction of claims 1 to 17 of the 627 Patent; and (4) the validity of claims 1 to 17 of the 627 Patent.
[59] Mr. Brindle further provided a rebuttal expert report on the issue of infringement, dated November 5, 2020. In this report, Mr. Brindle was asked to provide his opinion and expert evidence on the issues of: (1) whether there is any infringement of any of the claims 1 through 8 of the 627 Patent; and (2) the availability and economic feasibility of a non-infringing alternative for use in the preparation of a differential costs analysis. Mr. Brindle was further asked to review and provide comments on the expert report of Mr. Bishop, dated August 10, 2020.
[60] On cross-examination, it was revealed that Mr. Brindle’s assessment of the common general knowledge of the POSITA was based in part on references provided to him by counsel for the Defendant. Mr. Brindle further adopted several alternative claim constructions in his expert report of August 10, 2020, which were not maintained at trial, and raised questions about the weight his opinion on claim construction should be given. The cross-examination revealed points of inconsistency relating to various terms used in the 627 Patent, which also served to undermine Mr. Brindle’s rationale for his opinion on claim construction in some instances. Consequently, less weight was assigned to Mr. Brindle’s expert report and testimony, as discussed below.
(2) Paul Goolcharan
[61] Mr. Goolcharan is a professional engineer, holding a Bachelor of Applied Science in Mechanical Engineering from the University of Alberta. He is currently a consultant to oil and gas companies through his company, Vertikol Solutions Ltd. Mr. Goolcharan described that he possesses extensive experience estimating costs associated with various sized industrial projects and has been involved in a project estimating role in respect of at least 20 SAGD projects, largely of a similar nature to the MRCP. He provides specialized estimating information for clients involved in SAGD projects, including collecting, analyzing and normalizing cost data to benchmark, estimate, forecast and advise clients.
[62] Mr. Goolcharan was qualified as an expert in these proceedings in relation to the costing of well pads, including SAGD well pads, and evaluating the relative costs and methods of determining the costs of well pads.
[63] Counsel for the Defendant asked for Mr. Goolcharan’s opinion on the following in his November 5, 2020 expert report: (1) the applicability of the cost savings set out in the Fluor Report (and applied by the Plaintiff’s expert, Mr. Lobo) to this litigation; (2) Mr. Lobo’s calculation of the Defendant’s cost savings; and (3) if the Fluor Report is not applicable, the cost estimates for and a differential cost analysis of the Patent Disputed Areas [PDA] of the Defendant’s well pads and the Cenovus Foster Creek Well Pads [respectively, the “Defendant’s Configuration” and the “Cenovus Configuration”]. Mr. Goolcharan was a credible witness.
(3) Paul Matthews
[64] Mr. Matthews is a professional engineer and a lawyer. Since 2017, he is a partner at Lawson Lundell LLP in Kelowna, British Columbia. Mr. Matthews indicates that he has extensive experience in the areas of licensing and technology commercialization of energy-related technologies in the oil and gas sector, dating back to 2003. He was also a former Principal, Intellectual Property with Cenovus from 2011 to 2016, where he dealt with the inbound and outbound licensing of heavy oil technologies.
[65] Mr. Matthews was qualified as an expert in relation to the licensing of patents, including the basis and appropriate terms for the licensing of patents in relation to Alberta-developed technologies in the oil and gas sector, and the applicable royalties for the licensing of technologies in the oil and gas sector and appropriate factors to consider in determining such royalties.
[66] Mr. Matthews was asked to opine on the following in his November 5, 2020 expert report: (1) the royalty basis and the appropriate royalty rate applicable to the licensing of the invention of the 627 Patent, as between the Plaintiff and the Defendant; and (2) whether the royalty bases and royalty rates applied in Mr. Lobo’s expert report were correct and reasonable.
[67] Mr. Matthews was a credible witness. However, it became apparent in cross-examination that his conclusion in respect of his mandate was significantly influenced by a single factor, being the Defendant’s knowledge of the Plaintiff’s offer to Nexen in relation to licensing the technology and the specific terms disclosed therein.
V. Preliminary Issues
A. The Relevant Date
[68] The parties have agreed that the issues at trial do not turn on the relevant date being either the priority date (April 21, 2006) or the publication date (October 21, 2007) of the 627 Patent. As such, reference to a particular date reflects the submissions of the parties, but is ultimately not determinative.
B. Ownership and Standing
[69] It is the Defendant’s position that the Plaintiff does not have standing to bring this action. This is because Nexen is allegedly the appropriate owner of the 627 Patent, with the requisite standing to bring this claim. While on the face of the 627 Patent, the Plaintiff is listed as both the sole inventor and owner, the 627 invention was conceived while the Plaintiff’s consulting company, Excrude, was engaged by Nexen under the terms of the Consulting Agreement. Pursuant to these obligations, it is the Defendant’s position that the Plaintiff has either assigned title to the 627 invention to, or has held title in trust for, Nexen.
[70] The Plaintiff asserts that the 627 Patent was appropriately filed in his own name and he is the owner, as decided in and evidenced by prior case law (Betser-Zilevitch v Nexen Inc, 2018 FC 735 at paras 3, 70 [Betser FC], aff’d 2019 FCA 230 [Betser FCA]) [the “Nexen Action” or “Nexen Decision”]. Additionally, the Defendant is allegedly barred from challenging the ownership of the 627 Patent because of: (1) privity of contract as it relates to the Consulting Agreement between Excrude and Nexen; (2) the expiry of the regular 2-year and “ultimate” 10-year limitation periods under the Limitations Act, RSA 2000, c L-12 [Limitations Act]; and (3) a lack of evidence supporting an interpretation of the Consulting Agreement that demonstrates an intention of the contracting parties to transfer ownership of the invention to Nexen Inc.
[71] The Defendant was not a party to the Consulting Agreement between Excrude and Nexen and is not seeking to sue on or enforce rights under the Consulting Agreement, except to the extent of raising lack of ownership as a defence to the Plaintiff’s infringement claim. While this position is appropriate, it nonetheless asks this Court to undertake an interpretation exercise in relation to the Consulting Agreement and define the rights assigned between the Plaintiff and Nexen. While the Defendant has raised sufficient evidence to demonstrate that the question of ownership of the 627 Patent may be uncertain, the evidentiary basis is not conclusive and therefore remains insufficient to determine ownership in this case, particularly with respect to an entity other than the Plaintiff, as the indicated owner and inventor on the face of the