Federal Court rejects motion for summary judgment in Canadian patent infringement case following voluntary dismissal of parallel US litigation

In a recently released decision, the Federal Court (FC) considered what happens when a patent infringement plaintiff agrees to resolve a dispute in a foreign jurisdiction, but continues to press parallel litigation against the same defendant in Canada.

In this case, the defendant sought summary judgment based on the terms of a voluntary dismissal between the parties in the United States. The FC dismissed the motion, rejecting the arguments that there was no genuine issue for trial; that the matter was res judicata; and that it was an abuse of process for the plaintiff to maintain its action.

The FC’s decision shows the interplay between Canadian and foreign law in cases of this kind and highlights the importance of clear expert evidence on the applicable foreign law. While the case did not involve a pharmaceutical patent, parallel litigation is common in the pharmaceutical space. As such, the Court’s comments may be of interest to Pharma in Brief readers.

Background

The Plaintiff, Google LLC (Google), brought an action (the Canadian Action) against the Defendant, Sonos, Inc. (Sonos), alleging that Sonos infringed Canadian Patent 2,545,150CA 150) by selling certain smart speaker products (the Impugned Products).

CA 150 relates to noise suppression and echo cancellation technology. It claims priority from the same US application that led to US Patent No. 7,065,206 (US 206). CA 150 and US 206 have identical titles, detailed descriptions, and figures. The 11 claims in CA 150 are identical to 11 of the 20 claims in US 206.

Google also launched a patent infringement action against Sonos in the US (the US Action), alleging that the Impugned Products infringed US 206. In both cases, Sonos took the position that the Impugned Products are missing an essential element of the asserted claims of US 206 and therefore do not infringe.

The parties exchanged correspondence concerning Sonos’s non-infringement claims in the US Action, in which they disagreed on both construction claims and the facts relating to infringement. Google also advised that it was willing to consider withdrawing its claim for infringement if Sonos was willing to make certain factual representations (the Representations) in a binding stipulation. Sonos complied, following which the parties jointly moved to dismiss the US Action with prejudice. This resulted in the US Court issuing the “Stipulation of Dismissal of the ‘206 Infringement Claim” (the Stipulation).

Following the issuance of the Stipulation, Sonos moved for summary judgment in the Canadian Action. It maintained that its non-infringement arguments concerning US 206 apply equally to CA 150. Sonos argued that the Representations and Stipulation establish facts that show that there is no infringement of the CA 150 and that Google’s claims should be barred by res judicata or, failing that, by the abuse of process doctrine.

The effect of foreign dates in Canada

Each of the defendant’s arguments in favor of summary judgment turned on the legal effect of the Representations and the Stipulation under US law.

The FC explained that proof of foreign law is a question of fact and generally requires expert evidence, as understanding and interpreting US legal documents is outside of the expertise of Canadian courts. However, Canadian courts are not bound to accept a foreign legal expert’s interpretation and application of foreign law. In cases where foreign law is at issue and that law is not proven as a matter of fact, Canadian courts are entitled to resort to the equivalent Canadian law.

In this case, the FC relied on expert evidence—supplemented by its understanding of Canadian law—to determine the effect of the Representations and the Stipulation as a matter of fact, then considered whether these facts supported any of the defendant’s arguments for summary judgment under Canadian law.

Application to this case

No admission. Sonos argued that there was no genuine issue for trial in Canada because an essential element of the claims was missing from the Impugned Products. Sonos argued that the relevant facts were established in the Representations and the Stipulation, that Google had admitted these facts by agreeing to the Stipulation, and that it could not now disavow its admissions.

In order to determine whether Google had made an admission, the FC conducted a review of the correspondence between the parties leading to the Stipulation having regard to the applicable US legal framework. The FC found that although Google had requested the binding factual representations from Sonos and agreed to dismissal based on those representations, Google had not expressly or otherwise agreed to the admissions. The FC also accepted expert evidence that under US law, the parties could have included an admission by Google in the Sipulation if that had been the intent.

The FC also noted that even if Google had admitted the facts as alleged by Sonos, the possibility of a different construction claims in Canada would be sufficient to raise a genuine issue for trial. This can occur even in a case of identically worded claims, since the principles of Canadian claims construction differ from those under US law. In short, the same facts could support an infringement finding in one jurisdiction, but not in the other.

No res judicata. Sonos argued that there was no genuine issue for trial in Canada because the issue had already been determined between the parties by a court of competent jurisdiction (ieres judicata”).

The FC accepted expert evidence that under US law, a voluntary dismissal represents a final judgment on the merits and will serve to bar any subsequent claims that were or could have been brought in the action. This is known as “claim preclusion” in the US and is analogous to the Canadian doctrine of cause of action estoppel. However, these doctrines were inapplicable, since infringement of a Canadian patent is a different cause of action to infringement of a US patent.

Rather, the FC understood Sonos’s argument to be based on the Canadian doctrine of issue estoppel, which applies when a particular point of fact has been determined with finality in another proceeding. The expert evidence showed that US has an equivalent doctrine called issue preclusion, and that it would not apply in this case because there was no determination of fact or law by a US court. The FC held that since there was no judicial determination of any of the facts supporting the summary judgment under US law, there was no basis to invoke issue estoppel under Canadian law.

The FC left open the possibility that foreign dates could give rise to issue estoppel in Canada under other circumstances:

The law appears to rest with the principle that, under the right circumstances, issue estoppel may be available to preclude re-litigation of an issue of fact that was determined in a foreign proceeding. However, there appears to be no precedent, or indeed any logical foundation, for the prospect of reliance on res judicata or its sub-doctrines to support conclusions on claims construction, validity, or infringement, that necessarily involve matters of Canadian patent law, resulting from findings in a foreign proceeding.

No abuse of process. Finally, Sonos argued that even if the specific criteria for res judicata were not met, the action should nonetheless be dismissed as an abuse of process. The FC disagreed. Sonos’s inability to rely on res judicata did not come from some failure to satisfy a technical requirement, but rather from the fact that the Representations and Stipulation did not decide the same issues present in the Canadian Action. It was not an abuse of process for Google to continue pursuing the action in Canada.

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Link to decision: Google LLC v Sonos, Inc2021 FC 1462

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