Farmobile, LLC v. Farmers Edge Inc.

Farmobile, LLC v. Farmers Edge Inc.
Court (s) Database
Federal Court Decisions
Date
2022-01-10
Neutral citation
2022 FC 22
File numbers
T-449-17
Decision Content
Date: 20220110
Docket: T-449-17
Citation: 2022 FC 22
Ottawa, Ontario, January 10, 2022
PRESENT: Mr. Justice McHaffie
BETWEEN:
FARMOBILE, LLC
Plaintiff/
Defendant by Counterclaim
and
FARMERS EDGE INC.
Defendant/
Plaintiff by Counterclaim
ORDER AND REASONS
I. Overview
[1] These reasons address three interlocutory motions in this patent infringement action: (i) Farmobile’s motion to further amend its pleadings; (ii) Farmers Edge’s motion to further amend its pleadings; and (iii) Farmers Edge’s motion to bifurcate or, alternatively, adjourn the trial scheduled to commence on August 8, 2022. At a case management conference on November 4, 2021, it was recognized that the motions were related and I agreed to hear the three motions together.
[2] For the reasons below, each party’s motion to further amend their pleadings is granted in part and dismissed in part, while Farmers Edge’s motion to bifurcate or adjourn is dismissed, with costs of the three motions payable to Farmobile on the basis set out below.
[3] In summary, Farmobile’s amendments alleging Farmers Edge continues to infringe its patent after recent software amendments are permitted, but its inadequately particularized allegation that Farmers Edge infringes because its current software and system is “functionally equivalent” to the prior software is not permitted.
[4] Farmers Edge’s amendments that are truly responsive to Farmobile’s allegations of infringement of device claims, including those Farmobile consents to, are permitted. However, despite Farmers Edge’s protests, most of its proposed amendments are not responsive to either Farmobile’s new claims or to new circumstances. Rather, they are attempts to raise new defences that could have been raised earlier and/or are based entirely on unsupported speculation. The proposed amendments will result in—and in at least some cases appear designed to result in—extensive further documentary and oral discovery and further expert reports that would jeopardize the current trial dates. Indeed, Farmers Edge’s motion to bifurcate or adjourn the trial is premised largely on the need for such discovery and reports because of its proposed amendments. These amendments are not in the interests of justice and will not be permitted at this stage of the litigation. Nor will Farmers Edge’s request to implement an unworkable and inefficient bifurcation or to again adjourn the trial of this matter be granted.
II. Substantive and Procedural Background
A. General nature of the proceeding
[5] This action revolves around Canadian Patent No 2,888,742 (the ’742 Patent), entitled “Farming Data Collection and Exchange System,” of which Farmobile is the registered owner. Farmobile claims Farmers Edge infringes the ’742 Patent through its farming data exchange system marketed under the name “FarmCommand” and a related data collection device known as the “CanPlug.” Farmers Edge denies Farmobile’s allegations, asserting that it is the rightful owner of the ’742 Patent, that in the alternative it does not infringe the asserted claims, and that in the further alternative the ’742 Patent is invalid.
[6] The ’742 Patent contains both “device claims” (claims 1–19) claiming a relay device with certain features, and “system claims” (claims 20–44) claiming a farming data exchange system or a server system with certain features. As explained further below, both the Farmobile system/Canplug device and the claims at issue have changed over time. This is a significant part of what drives the dispute between the parties about further amendments to the pleadings.
[7] By the time of the currently scheduled trial dates in August 2022, it will be over five years since the action was commenced. Trial of the matter has been scheduled and adjourned a number of times. For present purposes, it is necessary to recount only the more recent procedural history, beginning shortly before the trial was scheduled to commence in April 2021.
B. The April 2021 software update and the adjournment of the trial in April 2021
[8] On August 4, 2020, the action and counterclaim were set down for trial for 15 days beginning April 19, 2021. Heading into the April 2021 trial date, the primary operative pleadings were Farmobile’s Amended Statement of Claim, filed on August 29, 2019; and Farmers Edge’s Twice Further Amended Fresh as Amended Statement of Defence and Counterclaim, filed on February 17, 2021. The Amended Statement of Claim alleged the FarmCommand system infringed a number of the system claims of the ’742 Patent. The allegation of infringement of the system claims replaced the original allegation that eight of the device claims were infringed. The device claims were withdrawn in August 2019 when the system claims were asserted.
[9] In preparation for trial, the parties had filed expert reports both on technical matters pertaining to the patents and on damages. In July 2020, Farmobile filed an expert report from its technical expert, George Edwards, which gave his opinion that the FarmCommand system infringed system claims of the ’742 Patent. In September 2020, Farmers Edge served a report from its expert, Aaron Ault, which gave his opinion there was no infringement of the ’742 Patent. In addition, Mr. Ault’s report is said to have described non-infringing alternatives (NIAs) that Farmers Edge could have implemented even on Dr. Edwards’ approach to construction and infringement of the patent. Dr. Edwards addressed these NIAs in a reply report.
[10] On April 12, 2021, a week prior to the scheduled trial date, Farmers Edge announced it had changed the software running on the CanPlug device to implement what it claimed to be a “non-infringing alternative endorsed by both Mr. Ault and Dr. Edwards.” I will refer to these software changes as the April 2021 Update. The following day, Farmers Edge delivered a further report from Mr. Ault, styled as an “Update” to his September 2020 non-infringement report. Mr. Ault’s Update report maintained his opinion of non-infringement and gave his view that Dr. Edwards’ allegations of infringement were no longer applicable to the April 2021 Update of the software system.
[11] After a trial management conference (TMC) with Justice McVeigh, then assigned as trial judge, the parties agreed the issues arising from the April 2021 Update required adjournment of the April 19 trial. On April 16, Justice McVeigh adjourned the trial on consent.
[12] Having reviewed the April 2021 Update, Farmobile raised the possibility of reasserting the device claims of the ’742 Patent. At a further TMC on April 27, Justice McVeigh required Farmobile to advise by May 14 whether it would be advancing the device claims. The trial was set down for October 4, 2021 with an apparent recognition that that date would not be achievable if the device claims were reasserted.
[13] Farmobile did reassert the device claims, claiming the CanPlug infringed certain of those claims. It put these allegations forward in a draft Further Amended Statement of Claim. Farmers Edge initially refused to consent to the amendments, although they later consented and the Further Amended Statement of Claim was filed in August 2021. In the meanwhile, at a TMC on June 25, Justice McVeigh concluded the matter would not be ready for trial on October 4 and again adjourned the trial. She also ordered that Dr. Edwards’ report responding to Mr. Ault’s Update report be served by July 16 and Mr. Ault’s reply be served by July 30. On July 9, the matter was set down for trial commencing August 8, 2022.
C. The July 2021 software update
[14] The parties served reports in accordance with the schedule set by Justice McVeigh. Dr. Edwards’ July 16 report gave his view that the CanPlug with the April 2021 Update software infringed the asserted device claims. Mr. Ault’s July 30 reply report disagreed, but further gave his opinion that another software change would render the CanPlug non-infringing even on Dr. Edwards’ approach. He stated that Farmers Edge had implemented that further software change on July 28 in what I will refer to as the July 2021 Update.
[15] In response to this information, Farmobile requested documents regarding the July 2021 Update. Disputes about those documents, including the scope of production and redactions, and disputes about amendments to the pleadings, have occupied the parties in the subsequent months.
[16] On the productions side, the dispute over the scope of Farmobile’s request for documents related to the July 2021 Update was ultimately narrowed to its request for the FarmCommand “server-side software.” Farmobile alleges that the FarmCommand system operates through interaction between the CanPlug device, which has software running on it, and a server-based system in the cloud. Farmers Edge had produced both the CanPlug software and the server-side software after the April 2021 Update. With respect to the July 2021 Update, Farmers Edge produced the CanPlug software but refused to produce the server-side software on grounds of relevance. On December 16, 2021, Case Management Judge (CMJ) Ring heard Farmobile’s motion seeking production of the server-side software related to the July 2021 Update. As of the hearing of the three motions before me on December 20, 2021, CMJ Ring’s decision on that motion was under reserve.
[17] On the pleadings side, Farmobile advised Farmers Edge in September it would be alleging infringement with respect to the July 2021 Update. In October and November, the parties exchanged draft amended pleadings and objections to the drafts. As set out below, some of the amendments were consented to, but significant aspects of each party’s proposed amendments remain in dispute.
III. General Principles on Amendment of Pleadings
[18] As both parties’ motions to amend their pleadings rely on Rule 75(1) of the Federal Courts Rules, SOR/98-106, I set out the general principles relating to motions under that Rule before turning to each party’s motion. The Rule itself reads as follows:
Amendments with leave
Modifications avec autorisation
75 (1) Subject to subsection (2) and rule 76, the Court may, on motion, at any time, allow a party to amend a document, on such terms as will protect the rights of all parties.
75 (1) Sous réserve du paragraphe (2) et de la règle 76, la Cour peut à tout moment, sur requête, autoriser une partie à modifier un document, aux conditions qui permettent de protéger les droits de toutes les parties.
[19] The Federal Court of Appeal has confirmed that the general rule is that “an amendment should be allowed at any stage of an action for the purpose of determining the real questions in controversy between the parties, provided, notably, that the allowance would not result in an injustice to the other party not capable of being compensated by an award of costs and that it would serve the interests of justice”: Enercorp Sand Solutions Inc v Specialized Desanders Inc, 2018 FCA 215 at para 19, quoting Canderel Ltd v Canada, [1994] 1 FC 3 (CA) at p 10; McCain Foods Ltd v JR Simplot Company, 2021 FCA 4 at para 20. That allowing the amendment “would not result in an injustice to the other party not capable of being compensated by an award of costs” and that it “serve the interests of justice” are independent criteria to be met: Janssen Inc v Abbvie Corporation, 2014 FCA 242 at para 9.
[20] In assessing whether an amendment would serve the interests of justice, the Court may consider factors such as (i) the timeliness of the motion to amend; (ii) whether the proposed amendments would delay trial; (iii) whether the amending party’s prior position has led another party to follow a course of action in the litigation that it would be difficult to alter; and (iv) whether the amendments will facilitate the Court’s consideration of the substance of the dispute on its merits: Enercorp at paras 20–21, quoting Continental Bank Leasing Corp v R, [1993] TCJ No 18; Federal Courts Rules, Rule 3. These factors are considered together without any single factor being determinative.
[21] An amendment must also yield a sustainable pleading. As a result, an amendment that does not disclose a reasonable cause of action or defence, and is thus liable to be struck out under Rule 221, should not be permitted: Enercorp at para 22; McCain at paras 20–22; Teva Canada Limited v Gilead Sciences Inc, 2016 FCA 176 at paras 28–32. This includes amendments that are inadequately particularized to allow the opposing party to plead in response: Mancuso v Canada (National Health and Welfare), 2015 FCA 227 at paras 16–20. Similarly, amendments that represent a radical departure from the party’s prior positions are abusive and should not be permitted: Hospira Healthcare Corporation v The Kenny Trust for Rheumatology Research, 2020 FCA 191 at para 5; Merck & Co, Inc v Apotex Inc, 2003 FCA 488 at para 47.
[22] With these principles in mind, I turn to the parties’ respective motions to amend their pleadings.
IV. Farmobile’s Motion to Amend its Pleadings
A. Nature of the proposed amendments
[23] Farmobile seeks to amend the Further Amended Statement of Claim it filed in August 2021 after the April 2021 Update. The proposed amendments set out in its draft Twice Further Amended Statement of Claim fall into two main categories:
(1) allegations that the CanPlug infringes certain device claims after the July 2021 Update (found in paragraphs 7, 9, and 12–16);
(2) allegations that after the April 2021 Update and the July 2021 Update, the asserted system and device claims are infringed “because the hardware and software components operate in a manner that is functionally equivalent to the previous system” (new paragraphs 17 and 32).
[24] For the reasons that follow, I grant leave to make the former amendments and deny leave to make the latter amendments.
B. The proposed amendments are allowed in part
(1) Allegations that the CanPlug infringes certain device claims after the July 2021 Update (paragraphs 7, 9, and 12–16)
[25] Farmobile’s proposed amendments to paragraphs 7 and 13–16 of the Further Amended Statement of Claim refer to the July 2021 Update to Farmers Edge’s “code / system” and asserts the CanPlug continues to infringe eight device claims of the ’742 Patent. The list of eight asserted claims is a subset of the ten claims asserted against the CanPlug after the April 2021 Update.
[26] The proposed amendments to these paragraphs may be summarized as follows:
Paragraphs 7 and 16: The CanPlug is alleged to assert the eight asserted device claims after the July 2021 Update. In paragraph 16, the CanPlug is alleged to comprise “each and every element” listed in the asserted claims “for the foregoing reasons” (referring to prior paragraphs).
Paragraph 9: The CanPlug is alleged to store certain identified descriptive information about a “farming operation land segment” after the July 2021 Update.
Paragraph 12: The CanPlug is alleged to determine that the farming operation occurred on the farming operation land segment and to store certain identified descriptive information about a “farming operation land segment” after the July 2021 Update.
Paragraphs 13, 14, and 15: Each paragraph states “[f]or the foregoing reasons, after the July 28, 2021 amendments to the code / system, the CanPlug continues to infringe” the claim or claims of the ’742 Patent referred to in the respective paragraph.
[27] I question whether these amendments are truly necessary. Even before the proposed amendments, the Further Amended Statement of Claim alleged the CanPlug infringed the asserted device claims of the ’742 Patent. This allegation did not change simply because Farmers Edge changed its software. Nevertheless, I believe the amendments serve the helpful purpose of confirming or clarifying that Farmobile continues to allege infringement even after the July 2021 Update, and to specify that two of the previously asserted claims are not asserted.
[28] Farmers Edge does not contend that Farmobile should not be permitted to amend its pleadings in response to the July 2021 Update. However, it opposes these proposed amendments on grounds that they are insufficiently particularized, asserting the amendments simply recite the patent claim elements without pleading sufficient material facts. It cites a number of decisions of this Court to the effect that a pleading cannot baldly allege infringement by reciting claims or claim elements and leave the defendant to guess how the claims are being construed or how the infringement is occurring: Faulding (Canada) Inc v Pharmacia SpA, 1998 CanLII 8165 (FC) at para 7, aff’d 1999 CanLII 8759 (FCA); Mostar v Drill-Tek, 2017 FC 575 at paras 21–22, 28; Edwards Lifesciences v Livanova (January 3, 2018, Court File No T-1831-16); Poyntz v Elcargo Fabrication (June 20, 2018, Court File No T-1338-17).
[29] While a pleading cannot baldly claim infringement without adequate material facts, analysing the sufficiency of the material facts pleaded is contextual and fact driven: Mostar at para 23. This is consistent with the observations of Justice Rennie for the Federal Court of Appeal at paragraphs 18 and 19 of Mancuso:
There is no bright line between material facts and bald allegations, nor between pleadings of material facts and the prohibition on pleading of evidence. They are points on a continuum, and it is the responsibility of a motions judge, looking at the pleadings as a whole, to ensure that the pleadings define the issues with sufficient precision to make the pre-trial and trial proceedings both manageable and fair.
What constitutes a material fact is determined in light of the cause of action and the damages sought to be recovered. The plaintiff must plead, in summary form but with sufficient detail, the constituent elements of each cause of action or legal ground raised. The pleading must tell the defendant who, when, where, how and what gave rise to its liability.
[Emphasis added.]
[30] In my view, read in the context of the pleadings as a whole, the amendments to paragraphs 7, 9, and 12–16 allow Farmers Edge to know the nature of the infringement allegations made in respect of the July 2021 Update sufficiently to plead intelligently and adequately in response. They define the issues with sufficient precision to make the pre-trial and trial proceedings manageable and fair. Importantly, the amendments appear in the context of the existing language of paragraphs 6 to 16 of the Further Amended Statement of Claim, which sets out the aspects of the FarmCommand system and CanPlug device said to infringe the asserted claims of the patent. Those allegations may or may not be proven at trial. But I am satisfied that they set out with adequate particularity the infringement allegations made in respect of the July 2021 Update.
[31] Farmers Edge complains that Farmobile simply recites elements of the patent claims. The amendments in paragraphs 9 and 12 certainly set out the descriptive information stored by the CanPlug in language that echoes the asserted claims. However, I agree with Farmobile that references to information such as a “latitude coordinate,” a “longitude coordinate,” or an “elevation above sea-level” are difficult to put in different terms, and need not be stated in terms other than those used in the claims for Farmers Edge to understand them. As Case Management Judge Aylen held, “there is no hard and fast rule against a plaintiff pleading the language of the claims of the patents at issue in the proceeding” to set out the facts alleged to infringe a patent: Mostar at para 29.
[32] As for the other Enercorp/Continental Bank factors, I consider the request to amend to have been timely in reaction to the further updates to the Farmers Edge software in July 2021, and see no reason that the proposed amendments should delay trial. As noted above, while the amendments may not be strictly necessary, they will facilitate the Court’s consideration of the substance of the dispute on its merits. They will also not cause an injustice to Farmers Edge, having been raised in response to changes to Farmers Edge’s software. While the parties anticipate filing further expert reports in connection with the July 2021 Update, these additional reports could be described as required by the software amendments, the pleadings amendments, or both. In any event, these additional costs can be compensated for through any costs award following trial.
[33] Leave is therefore granted to amend paragraphs 7, 9, and 12–16 in accordance with the proposed Twice Further Amended Statement of Claim.
(2) Allegations that the system operates in a manner that is “functionally equivalent” to the previous system (new paragraphs 17 and 32)
[34] Farmobile seeks to add the following paragraph to its Amended Statement of Claim, as new paragraph 17:
Furthermore, and in the alternative, after the April 12, 2021 and July 28, 2021 amendments to the code / system, claims 1 3, 4, 9, 10, 11, 13, 17, 18, 19, 20, 26, 27, 31, 32, 33, 34, 35, 36, 37, 38, 39, 41, 42, 43 and 44 of the ‘742 Patent are infringed by Farmers Edge because the hardware and software components operate in a manner that is functionally equivalent to the previous system (i.e. before the code / system changes made on April 12, 2021). For example, the expert for the Defendant, Mr. Ault, opined in his April 13, 2021 and July 30, 2021 expert reports that after the April 12, 2021 and July 28, 2021 amendments to the code / system, Farmers Edge’s system and services have the same functionality and user experience. Accordingly, Farmers Edge’s code / system continues to deprive Farmobile of its exclusive right, privilege and liberty of making, constructing and using its invention, and selling it to others to be used, in claims 1 3, 4, 9, 10, 11, 13, 17, 18, 19, 20, 26, 27, 31, 32, 33, 34, 35, 36, 37, 38, 39, 41, 42, 43 and 44 of the ‘742 Patent.
[Emphasis added.]
[35] Farmobile also seeks to add a sentence to its former paragraph 31 (new paragraph 32) to similar effect, referring only to the system claims.
[36] I pause to observe that the parties’ apparent practice of adding new amending paragraphs in a manner that renumbers paragraphs in the prior pleading entails inconvenience and potential confusion. In my view, the practice that I understand to be more common, namely giving new amending paragraphs sub-numbers such as “16.1” or “16A” to avoid unnecessary renumbering of later paragraphs, is preferable.
[37] Farmers Edge objects to the amendments in new paragraphs 17 and 32 on grounds that a claim of infringement based on “functional equivalence” is not just a novel claim, but an untenable one that is contrary to established Canadian law. It cites Free World Trust, in which the Supreme Court of Canada rejected the “spirit of the invention” as a concept informing the infringement analysis, and Eurocopter, in which the Federal Court of Appeal considered a functional equivalence argument to be contrary to Free World Trust: Free World Trust v Électro Santé Inc, 2000 SCC 66 at paras 31(d), 34–40, 45–50; Bell Helicopter Textron Canada Limitée v Eurocopter, société par actions simplifiée, 2013 FCA 219 at paras 82–85, 95–98. Farmobile responds that regardless of terminology, its claim is consistent with the recognition in Free World Trust that “[i]t would be unfair to allow a patent monopoly to be breached with impunity by a copycat device that simply switched bells and whistles, to escape the literal claims of the patent”: Free World Trust at para 55, citing Improver Corp v Remington Consumer Products Ltd, [1990] FSR 181 at pp 182, 192.
[38] I agree with Farmers Edge that Free World Trust confirms that the Canadian approach to patent infringement is that if all essential elements of a claim are present, there is infringement; if an essential element is not present, there is no infringement: Free World Trust at paras 20, 31(f), 68, 75; Western Oilfield Equipment Rentals Ltd v M-I LLC, 2021 FCA 24 at paras 48–49. I also agree that infringement cannot viably be established simply on the basis that a product has the “same functionality and user experience” as a prior product, without reference to the essential elements of a patent claim.
[39] Farmobile confirmed during oral argument that it was not trying to introduce the American doctrine of equivalents into Canadian law, nor to advance a novel theory of infringement in which there might be infringement even though not all essential elements of a claim were present. Rather, it confirmed that its pleading was, in essence, a pleading that the only elements of the asserted claims that are not present in Farmers Edge’s FarmCommand system and/or CanPlug device after the April 2021 Update are non-essential elements. It argues, with reference to the recent decision of the UK Supreme Court in Actavis, that its amendments are timely, since the essentiality analysis can only be reasonably undertaken once a variant is known, in order to assess whether the variant makes a difference to how the invention works: Actavis UK Limited v Eli Lilly and Company, [2017] UKSC 48 at paras 61–66; Free World Trust at para 31(e)(iii).
[40] It is difficult to glean from the text reproduced at paragraph [34]
above that Farmobile’s pleading is intended to be a pleading that the only elements of the asserted claims that are not present in the FarmCommand system and/or CanPlug device after the April 2021 Update are non-essential elements. Indeed, if this were the sole intent of the pleading, it could be considered redundant over the allegations of infringement in the earlier paragraphs, which I have allowed. However, even accepting this to be the intention of the pleading, the proposed allegation lacks adequate material particulars. Farmobile has not indicated in its draft pleading, or in particulars provided to Farmers Edge, which elements of the asserted claims it alleges to be non-essential. It is insufficient to broadly allege that a defendant’s system has all essential elements of a claim. It is similarly insufficient to broadly allege that any claim elements the defendant’s system does not have are non-essential without specifying which those non-essential elements are.
[41] Contrary to Farmobile’s arguments, this lack of detail cannot be attributed to the outstanding dispute over disclosure of the July 2021 Update server-side software, as the allegation on its face pertains to the system after the April 2021 Update. Farmobile has had all relevant software and associated productions connected with the April 2021 Update for many months, yet has given no indication which elements of the claims it asserts are alleged to be non-essential. In any event, to the extent that Farmobile alleges that it needs the server-side software to conduct its essentiality analysis for purposes of alleging infringement after the July 2021 Update, the solution is not to plead blindly in advance of getting the necessary information and expect to fill in the blanks later.
[42] The proposed amendments at new paragraphs 17 and 32 are therefore not permitted.
[43] I note as a final point on this issue that it may not be necessary in every case to have a separate pleading regarding non-essential elements. An allegation of infringement is an allegation that all essential elements of a claim are present, regardless of the presence or absence of any non-essential elements. As Justice Binnie noted in Free World Trust, the identification of elements as essential or non-essential is made on the basis of the common knowledge of the worker skilled in the art to which the patent relates: Free World Trust at para 31(e)(i). It is therefore frequently the subject of expert evidence, designed to assist the Court in making the necessary and relevant determinations of essentiality. If a defendant’s expert asserts that a product does not infringe because it does not have a certain claim element, and the plaintiff’s expert asserts that the identified element is not an essential element, I question whether a pleadings amendment is needed in every case to identify non-essential elements to ensure the fairness of the trial process.
C. Conclusion
[44] Farmobile is therefore granted leave to amend its Further Amended Statement of Claim through the filing of a Twice Further Amended Statement of Claim containing the amendments proposed in paragraphs 7, 9, and 12–16, but not those proposed in new paragraphs 17 or 32.
[45] Consequential amendments to subsequent pleadings are addressed below.
V. Farmers Edge’s Motion to Amend its Pleadings
A. Nature of the proposed amendments
[46] Farmers Edge’s proposed Thrice Further Amended Fresh as Amended Statement of Defence and Counterclaim contains a number of different categories of proposed amendments. Four of them may be quickly disposed of:
The proposed amendments in paragraphs 2, 13–15, and 18–19 are simply formal, updating paragraph numbers and asserted claims of the patent. Farmobile has consented to these amendments and leave is granted to make them.
Proposed new paragraphs 33 and 35 assert a res judicata defence in response to Farmobile’s assertion of the device claims. Farmobile has consented to these amendments and leave is granted to make them.
Proposed new paragraph 34 responds to Farmobile’s proposed “functionally equivalent” pleading (Farmobile’s proposed new paragraph 17, discussed above). Given my refusal to permit this amendment, the responding paragraph is unnecessary. Leave is therefore denied to add this paragraph.
Proposed new paragraph 38 sets out an alternative defence based on non-infringing alternatives. Farmobile is correct that this is somewhat duplicative of Farmers Edge’s existing paragraph 16. However, the allegation in new paragraph 38 is directed at the CanPlug in particular and includes the allegation, not found in paragraph 16, that Farmers Edge has already implemented NIAs. Leave is granted to add this paragraph.
[47] This leaves the following contested categories of amendments:
(1) allegations arising from the acquisition of Farmobile by Ag Growth International, Inc [AGI] (found in new paragraphs 25–27);
(2) allegations that the asserted claims of the ’742 Patent are invalid based on inutility and overbreadth (paragraphs 28–31);
(3) an allegation that one of the inventors of the ’742 Patent represented that the prior art relevant to the subject matter of the patent was very strong and that Farmobile concluded it would be futile to continue prosecution of the related United States Patent (new paragraph 32);
(4) an allegation that Farmobile’s profitability is relevant to Farmobile’s claim for royalty damages (new paragraph 39); and
(5) allegations that Farmobile is a non-practicing entity with no ability to service Farmers Edge’s customer base (new paragraphs 31, 40–41).
[48] For the following reasons, I conclude that none of these proposed amendments are in the interests of justice and decline to grant leave.
B. The contested amendments are not allowed
(1) Allegations regarding AGI’s acquisition of Farmobile (new paragraphs 25–27)
[49] In paragraph 25 of its proposed pleading, Farmers Edge alleges that on April 16, 2021, AGI “acquired the balance of the outstanding shares of Farmobile.” This allegation appears to stem from a press release announcing AGI’s acquisition of all outstanding shares of “Farmobile, Inc.,” building on AGI’s earlier minority equity investment. This allegation then leads to two further allegations.
(a) Transfer of ownership, champerty and/or maintenance
[50] First, in proposed paragraph 26, Farmers Edge seeks to allege that AGI entered into arrangements to acquire the legal and equitable title to the ’742 Patent, such that Farmobile has no standing to bring this action or, alternatively, that AGI is improperly supporting the litigation and is controlling the litigation “in a relationship resembling champerty and/or maintenance.” Farmers Edge seeks to allege this disentitles Farmobile to equitable remedies, punitive damages, or increased costs, and entitles Farmers Edge to elevated costs.
[51] Leaving aside whether “a relationship resembling champerty and/or maintenance” is a sustainable legal concept, the primary difficulty with this proposed pleading is that Farmers Edge has no factual foundation for it whatsoever, as counsel conceded during oral argument. It is simply an assertion being made by Farmers Edge with an apparent eye to conducting discovery on the AGI transaction to uncover facts that might show an improper relationship. It is, in other words, a classic fishing expedition. As Justice Stratas noted at paragraph 18 of Lukács v Swoop Inc, 2019 FCA 145:
[O]ne cannot plead allegations without having at least some evidence behind the allegations. Making bald, conclusory allegations in a pleading, such as a motion for leave to appeal, without any evidentiary foundation is an abuse of process […]. A legal proceeding, such as a motion for leave to appeal “is not a fishing expedition and a plaintiff who starts proceedings simply in the hope that something will turn up abuses the court’s process”: Kastner v. Painblanc (1994), 58 C.P.R. (3d) 502, 176 N.R. 68 [[1994] FCJ No 1671] at para. 4 (F.C.A.).
[Emphasis added; some citations omitted.]
[52] Farmers Edge contends that its allegation should be taken as true for purposes of assessing its pleadings amendment and that it is not required to plead evidence. It argues that the Supreme Court has recognized that a claimant may not be in a position to prove the facts pleaded at the time of a motion to strike pleadings and “may only hope to be able to prove them,” particularly where they are a stranger to a transaction: R v Imperial Tobacco Canada Ltd, 2011 SCC 42 at para 22; Enercorp at para 37; McCain at para 39.
[53] While the approach taken on a motion to strike pleadings is relevant, it is not the only relevant principle on a motion to amend. The amendment must serve the interests of justice, a question assessed through a variety of factors including whether the proposed amendments would delay trial, and whether they will facilitate the Court’s consideration of the substance of the dispute on its merits: Enercorp at paras 20–21, citing Continental Bank. In my view, both of these Enercorp/Continental Bank factors speak strongly against allowing an amendment that appears to be no more than speculation. Indeed, Farmers Edge relies on its own amendments as necessitating an adjournment or bifurcation, as discussed further below. I also cannot read Imperial Tobacco, Enercorp, or McCain as permitting or encouraging amendments in the nature of a fishing expedition simply because they might support a defence if the baldly asserted allegations of fact turn out to be true: Lukács at para 18; Kastner v Painblanc, [1994] FCJ No 1671 (CA) at para 4; Tomchin v Canada, 2015 FC 402 at paras 38–40, 47; Astrazeneca Canada Inc v Novopharm Limited, 2009 FC 1209 at para 17, aff’d 2010 FCA 112 at para 5. As Justice Hughes noted in Astrazeneca, pleadings that are based on “assumptions and speculation” cannot be taken as true for purposes of a motion to strike, even if “a competent solicitor can draft a [pleading] that has the appearance of setting out a cause of action”: Astrazeneca at paras 10, 13.
[54] This is particularly so when the pleaded allegation that AGI acquired the ’742 Patent as an asset runs contrary to the available information that AGI’s purchase was a share transaction and one, moreover, relating to the shares of Farmobile, Inc and not Farmobile, LLC, which is the plaintiff and registered owner of the ’742 Patent.
[55] Proposed paragraph 26, alleging the transfer of the ’742 Patent and a “relationship resembling champerty and/or maintenance,” is not permitted.
(b) Due diligence allegations
[56] Second, in proposed paragraph 27, Farmers Edge seeks to allege that in the context of the AGI transaction, the due diligence process included an evaluation of the litigation that revealed that “Farmobile’s claim for damages is baseless and/or highly exaggerated.” Farmers Edge again seeks to allege that this disentitles Farmobile to equitable remedies, punitive damages, or increased costs, and entitles Farmers Edge to elevated costs.
[57] Again, however, this allegation is made without any factual foundation whatsoever, with respect to either the existence or content of the asserted due diligence evaluation, other than Farmobile’s contention that it is common in the context of an acquisition to conduct an audit on outstanding litigation. The apparent goal of the amendment is to seek discovery regarding the transaction including disclosure of due diligence materials, in hopes that such discovery will show as true what is currently only bald speculation. For the reasons discussed above, such a pleading is an improper fishing expedition: Lukács at para 18. It would also unnecessarily delay this matter and distract the parties from the material issues in dispute in pursuit of a tangential and questionably relevant side issue pertaining to alleged assessments of the litigation occurring in a due diligence context.
[58] Proposed paragraph 27, pertaining to the due diligence allegations, is not permitted. As paragraphs 26 and 27 are not permitted, paragraph 25 has no relevance and will also not be permitted.
(2) Invalidity allegations (new paragraphs 28–31)
[59] Farmers Edge has contested the validity of the ’742 Patent as an alternative pleading since the outset of this action. Its current Twice Further Amended Fresh as Amended Statement of Defence and Counterclaim alleges that all of the claims of the ’742 Patent are invalid on grounds of anticipation and obviousness. It also alleges that the system claims asserted in the Amended Statement of Claim, namely claims 20, 26–39 and 41–44, are invalid for being broader than any invention disclosed in the ’742 Patent.
[60] Farmers Edge now seeks to add two new invalidity allegations as they pertain to the device and system claims Farmobile now asserts. Farmers Edge seeks to allege the claims are invalid because their utility was neither demonstrated nor soundly predicted before the filing date and/or that any sound prediction was not disclosed in the patent. It also seeks to allege the claims are invalid because the claims are broader than any invention purportedly made by the inventors (as opposed to being broader than any invention disclosed in the patent, the current pleading). In each case, Farmers Edge’s proposed allegation includes reference to Farmobile’s device known as the “PUC.” Farmers Edge seeks to allege the PUC was non-functional, that its code could not function according to the device claims, and that the server/system software intended to interface with the PUC could not function according to the system claims.
[61] In my view, it is not in the interests of justice to permit Farmers Edge to assert these new invalidity allegations at this stage for the following reasons.
[62] First, the request to add these invalidity allegations is not timely. The parties have served their technical expert reports in respect of Farmers Edge’s allegations of invalidity. Farmers Edge has conducted discoveries that included discovery on issues relevant to invalidity allegations. It has also amended its pleadings on a number of occasions, as is clear from the title of its current and proposed pleadings. Farmers Edge’s pleadings amendments included amendments to its invalidity allegations, and even included a draft allegation of inutility that was served in a draft amended pleading in November 2019 but not pursued.
[63] In this regard, Farmers Edge submits that its amendments are responsive to Farmobile’s “reinterpretation” of the ’742 Patent in the wake of the April 2021 Update and the July 2021 Update. It argue