Federal Court Decisions

Date: 20060511

Docket: T-1348-01

Citation: 2006 FC 586

Ottawa, Ontario, May 11, 2006

PRESENT:      THE HONOURABLE MR. JUSTICE MOSLEY

BETWEEN:

DIMPLEX NORTH AMERICA LTD.

Plaintiff

and

CFM CORPORATION

Defendant

REASONS FOR JUDGMENT ANDJUDGMENT

INTRODUCTION

[1]                Electric simulations of wood or coal fuelled fireplaces and stoves have been marketed for many years but, until recently, lacked a realistic "flame effect". Dimplex North America Limited., developed an improved flame simulating assembly and achieved success in the marketplace with electric fireplaces and stoves employing that device. The firm obtained patent protection for its innovation. Dimplex brought this action against CFM Corporation for infringing that patent. I find that the patent is valid, that CFM's products are infringing and that the defendant is liable in damages or to account for its profits from use of the Dimplex technology.

BACKGROUND

[2]                The plaintiff, Dimplex North America Limited ("Dimplex"), is the Cambridge, Ontario based subsidiary of a group of Irish companies known as "Glen Dimplex". Dimplex manufactures and sells electric fireplaces and stoves. The defendant, CFM Corporation ("CFM"), formerly CFM Majestic Inc., is also an Ontario company with a principal office at Mississauga. CFM was founded in 1986 and manufactures and sells a broad range of home-related products including fireplaces and barbecues.

[3]                Dimplex is the owner of Canadian Patent 2,175,442 (the "'442" or "Hess" patent) entitled "Flame Simulating Assembly". The application was filed on April 30, 1996, published on October 31, 1997 and the patent was issued on December 22, 1998 naming Kristoffer Hess, David Miller MacPherson and Ignazio Gallo as co-inventors. It will expire on April 30, 2116. Dimplex obtained a corresponding United States Patent, No. 5, 647,580 (the "'580 patent" or "U.S. Hess" patent) on July 1, 1997. U.S. patent 4,965,707 (the "'707" or "Butterfield" patent) was incorporated as prior art in both Hess patents. CFM has manufactured and sold in Canada and exported from Canada for sale, including to the United States, electric fireplaces and stoves alleged to infringe the '442 patent.

[4]                This action was commenced by a Statement of Claim filed on July 24, 2001 claiming infringement and seeking a permanent injunction, damages or an accounting of profits, with interest and costs. As Dimplex has alleged that CFM's infringement has been reckless or wilful, it is also seeking aggravated, punitive or exemplary damages.

[5]                On consent, a Bifurcation Order was issued on January 8, 2002. As a result of that Order, the trial of this action was limited to a determination of the issues of liability and of eligibility for the remedies sought including entitlement to any punitive, exemplary or aggravated damages. Determination of the quantum of the damages or of the profits, as the plaintiff may elect, will be the subject of a reference after all appeals have been resolved or the time for appeal has expired. If entitlement to punitive, exemplary or aggravated damages is decided in favour of Dimplex, the parties agreed that the quantum of such damages will be referred back to the Court for determination.

[6]                In the United States, CFM filed suit against Dimplex in the U.S. District Court for the Northern District of Illinois for a declaratory judgment of non-infringement, invalidity and unenforceability over the '580 patent. Dimplex counterclaimed for infringement. The U.S. proceedings were concluded by a jury verdict in favour of Dimplex on March 8, 2005, including a finding of wilful infringement. A permanent injunction was granted by the presiding judge on May 11, 2005. Under U.S. patent law (35 U.S.C.A. § 284) the Court had the discretion to consider enhancement of damages of up to three times the amount of compensatory damages because of the finding of wilful infringement. Dimplex was granted a 50% enhancement. The judgment in favour of Dimplex was affirmed by the U.S. Circuit Court of Appeals for the Federal Circuit on May 3, 2006.

APPLICABLE LEGISLATION

[7]                As the '442 patent application was filed on April 30, 1996, published on October 31, 1997 and issued on December 22, 1998, all issues in this case are governed by the current version of the Patent Act, in effect as of October 1, 1996, by reason of the transitional provisions set out in sections 78.4 and 78.5 of the Patent Act R.S.C. 1985 c.P-4.

THE ISSUES

[8]                The following are the issues addressed in these proceedings:

1.          What construction ought to be given to the claims of the '442 Patent by the Court?

2.          Based on the Court's construction, is the '442 Patent invalid for any of the reasons of anticipation, obviousness or ambiguity?

3.          If the '442 Patent is valid, do CFM's electric fireplace products infringe the patent?

4.          If the patent is valid and was infringed, is Dimplex entitled to all of the remedies it has claimed?

THE FACT EVIDENCE

[9]                Dimplex relied upon the testimony of Mr. Martyn Champ, President of Dimplex North America, Mr. Kristoffer Hess, Dimplex Vice-President Engineering, documentary productions and evidence read in from the examination for discovery of Mr. Colin Adamson, President and Chief Executive Officer of CFM at the material times. CFM relied primarily upon the cross-examinations of the Dimplex witnesses, the documentary evidence and the testimony of Donald Jamieson, CFM's Director of Research and Development.

[10]            Champ and Hess testified about the background leading to the development of Dimplex's fireplace technology, to the introduction of the firm's products into the marketplace and their commercial success and to the issuance of the '442 patent. They also described events relating to the alleged infringement by CFM. I found them to be credible and reliable witnesses and base this account of the facts largely on their evidence.

[11]            Champ joined Dimplex as president in December 1993 at which time gross sales were approximately $30-31 million annually of low-margin commodity electric heating products, such as fan and baseboard heaters. Dimplex annual sales are currently in the range of $130 million of which approximately 89% comes from electric fireplaces and related products. As of its 2005 fiscal year, Dimplex has sold over 190,000 electric fireplace units in Canada, as well as over

648,000 units in the U.S. I find that this increased business was due primarily to the successful introduction of the improved flame simulating apparatus described in the '442 patent.

[12]            In 1993, Dimplex was faced with declining sales of its commodity heating products, partially as a result of increased electricity rates and an increase in the use of natural gas heating. Sales were stagnant and profit margins were squeezed. The firm operated at a loss in fiscal years 1993-1995. Champ's mandate was to rejuvenate the firm and to diversify the product line.

[13]            Glen Dimplex had, for many years, sold electric fireplaces in the United Kingdom and Ireland where there was an established market for such products. Through another subsidiary, the company attempted, unsuccessfully, to sell similar fireplaces in North America. They were left with an inventory of some 9,000 units in 1994 which Champ was asked to try to liquidate.

He managed to unload about 400 before abandoning the project and shipping the remainder back to Ireland for distribution in that market.

[14]            These "Manhattan" models employed a screen with a partially reflecting surface and a diffusing surface and illuminated ribbons that fluttered under the influence of a fan. As demonstrated in the courtroom, the "fire" in the Manhattan unit does glow somewhat like a coal fire but the visual effects bear little resemblance to the wood or gas flames familiar to North Americans.

[15]            Champ thought that a different product could succeed in this hemisphere if it had a flame effect that resembled that of a log fire. He put his staff to work on the project and they developed a prototype based on the Manhattan model. Early in 1995, Champ hired Kristoffer Hess as Vice-President, Engineering, with a mandate to improve on the prototype. Hess came to Dimplex with a proven track record in consumer product development with other companies such as Black & Decker.

[16]            Mr. Hess began his work by experimenting with lights, Christmas tinsel and garland, screens and gift wrap to try to get a realistic flame effect. He demonstrated these efforts in court. The effect he was seeking was that of a bright light with varying intensity moving in an upward direction. To achieve that result, he retained some of the elements of the Manhattan unit and the subsequent prototype notably the diffusing screen, disclosed in the Butterfield Patent, and adopted a rotisserie like rod with reflective strips termed the "flicker" element to reflect light back through the flame effect element. When rotated, the appearance in the screen was of rising flames.

[17]            By September, 1995 Hess and his team had a rough working model. The basic elements were an array of light bulbs on the bottom producing light that shone up onto the flicker element and was reflected through the screen with the diffusing layer on the back and a partially reflective front surface. In front of that is a simulated fuel bed. Theytook this prototype to the annual Home Hardware Company show at St. Jacob's, Ontario and were encouraged by the interest the unit attracted from hardware store dealers. The decision was made to go into commercial production and to seek patent protection for the flame simulating assembly.

[18]            About twenty sales of the prototype were made through a municipal electrical utility before commercial production was begun. About 4000 units of that product, the SIA 1400-120 were manufactured. It employed the black cloth and a fan to make it move. As demonstrated in the courtroom, this model had a much more realistic flame effect than the Manhattan unit.

[19]            However, the movable black cloth flame effect element frayed in operation and was costly to produce. It was replaced by static sheet metal. The electric fireplace (trial exhibit P-14), Dimplex introduced at the annual Hearth Products Association (now the Hearth Patio and Barbeque Association [HPBA]) in March 1996, generated considerable interest from the industry, including over 600 sales leads, and positive media attention. Dimplex filed its patent application the next month.

[20]            As described in an industry publication in May 1996, the Dimplex fireplace created the "ultimate illusion". The flames were brighter and more the colour of flames in a real wood burning fire. The flames appeared to be coming from within the logs. This was achieved through the reflection of the log set, actually a half log set, in the partially reflecting screen, leaving an impression of depth. The flames appear to be moving upward and not just wavering side to side as in the Manhattan unit employing the Butterfield assembly.

[21]            Without having any real sales force at the outset, Dimplex managed to sell about 1000 DIA units by the end of 1996. When exhibited in the competitive U.K. market, the product won awards for "best appearance" and "best of class". It is clear from the evidence that Dimplex had developed an attractive new product that was a commercial success.

[22]            At the National Association of Home Builders (NAHB) show at Houston, Texas in January, 1997 Dimplex presented the DIA 1500-120 model electric fireplace under the Symphony brand. CFM did not have a competing product on display at that show but its CEO, Colin Adamson, was present and spent some time watching the traffic at the Dimplex booth.

[23]            Shortly after the Houston show, Adamson went to Ireland in an effort to purchase Dimplex from its parent company. He was not successful. In March 1997, Adamson invited Champ to visit the CFM head office in Mississauga to follow up on the discussions in Ireland. During that meeting, Adamson asked Champ to license the fireplace technology to CFM. Champ refused but countered with an offer that Dimplex would manufacture electric fireplaces under an original equipment manufacturer's ("OEM") arrangement to be sold under the CFM brand. Adamson did not pursue that offer.

[24]            Champ received two follow up calls from CFM management seeking a licensing arrangement. These approaches ended when CFM learned that Dimplex had concluded an OEM arrangement with Hearth Technologies International (HTI), to produce fireplaces to be sold in the U.S. under the Heat-n-Glo brand. CFM then pursued other options, including the attempted acquisition of electric fireplace technology from another manufacturer and the purchase of a company with an established dealer network in the U.S.

[25]            The first electric fireplace that CFM put on display was presented at a HPBA show held at St. Louis, Missouri in March 1998. That fireplace unit was manufactured by a U.S. company, Electro Industries Inc. CFM labeled the Electro fireplace as its own product. Electro had, in the immediately preceding months, reached an agreement with Dimplex to cease production of fireplaces that might infringe the Hess patents. CFM was aware of this and modified the Electro unit's reflecting screen in an attempt to avoid the patent issue. CFM and Electro were considering a joint venture. However, the fireplace model displayed was not successful, perhaps as a result of the modification, and was not put into production. By mid-1998, CFM did not have an electric fireplace on the market.

[26]            Donald Jamieson joined CFM in August 1998. He had worked at Lennox Industries for 15 years primarily on gas appliances, furnaces and fireplaces. While at Lennox, he had designed an electric glowing ember bed device that was could be placed in a gas unit. He also worked on an electric fireplace model comprising a flat-screen panel television which was displayed at the 1998 HPBA show.

[27]            At CFM, among other duties, Mr. Jamieson was responsible for ensuring that a prototype of a new electric fireplace would be ready for presentation at the 1999 shows. During the development of this prototype in the fall of 1998, several competitor units were purchased and brought to the laboratory. The items were observed while in and out of operation and then disassembled for examination. One of the units dismantled and examined was a Dimplex Symphony unit.

[28]            When Mr. Jamieson joined CFM, he reviewed a folder containing electric fireplace patents, including the U.S. Hess '580 patent. Jamieson testified that in developing products for CFM, he and his team avoided what were thought to be the essential components described in the Hess '580 patent. The first electric fireplace they developed was the AE 1000 model displayed at the March 1999 HPBA show in St. Louis. Champ testified that from his observation of its performance, the AE 1000 was not a competitive threat to his products. The marketplace evidently agreed as few units were sold.

[29]            However by the time of the March 2000 HPBA show held in Baltimore, Maryland, CFM had developed a greatly improved product, the AE 2000. In the opinion of the Dimplex witnesses and from the Court's own observation from the courtroom demonstration, the flame effect in that product was much improved from that of CFM's earlier effort. Dimplex acquired one of the AE 2000 models from a retailer when they went on sale in the fall of 2000. Hess took it apart and concluded that it incorporated the technology described in the '442 patent.

[30]            What led to the improvement of the CFM technology between the AE 1000 model and the AE 2000 model and subsequent CFM electric fireplaces?

[31]            Much was made at this trial about the role a Mr. Colm Martin may have played in the improvement of CFM's electric fireplaces. As this is largely the basis for Dimplex's claim for aggravated, or punitive and exemplary damages, I will describe it in some detail.

[32]            Mr. Martin, an engineer employed by Glen Dimplex in Ireland, joined Dimplex North America on secondment briefly in the fall of 1996. He returned in the fall of 1997 and remained until early September 1998. During this time he reported to Kristoffer Hess and worked on the design of Dimplex models incorporating the '442 patent technology. At this stage Dimplex was exploiting its success with variations on the Symphony model but the core technology remained the same.

[33]            Dimplex employees were allowed to buy discontinued and prototype fireplace models for personal use. Mr. Martin purchased one fireplace from Dimplex on January 30, 1998, ostensibly for his landlord's use and another on September 3, 1998. The fireplace purchased in September 1998 was the most up to date model, intended to be launched in the marketplace in November 1998. Dimplex policy allowed the selling of such prototypes solely to employees. One or more had already been sold to other employees in August 1998. There is no evidence of what Mr. Martin did with that fireplace.

[34]            Martin knew when he bought the fireplace on September 3^rd, that he was leaving Dimplex to go to CFM. Approached initially by a head-hunter, he had received an offer of employment in July 1998 following an interview with the CEO, Colin Adamson, and CFM's then president, James Lutes. His experience with electric fireplaces was undoubtedly a major factor in this hiring. Martin began working at CFM effective September 8, 1998. By November, 1998 he was manager of the electric fireplace development project.

[35]            Early on the morning of his last day at Dimplex, Mr. Champ confronted Martin and asked him to sign a document acknowledging that he was not taking with him any proprietary information, trade secrets, drawings or technical information that could potentially harm Dimplex's business. Martin refused.

[36]            On September 24, 1998 Dimplex's solicitors wrote to CFM expressing concern that Mr. Martin had been hired by CFM, given his intimate knowledge of Dimplex's product design and development processes and plans, and the overtures which had been made by CFM to acquire or enter into a business relationship with Dimplex. CFM refused to provide any undertakings to Dimplex in reply but offered an assurance that there would be no misuse of confidential information. There is no evidence that Martin breached Dimplex confidence.

[37]            Mr. Martin worked on many aspects of the AE 1000, including general design of the cabinet, tinted light screen, plastic light filter screen, and a rotating chrome reflector described as the "soup can" analogous to Hess' rotisserie but not infringing. Martin was listed as the sole inventor on CFM's initial U.S. and Canadian patent applications for the AE 1000. But his performance at CFM was not satisfactory, according to Mr. Jamieson, and he was encouraged to seek other opportunities. Martin resigned on April 9, 1999, giving two weeks' notice. He left with a positive reference signed by Jamieson.

[38]            Jamieson testified that CFM began working on the AE 2000 electric fireplace unit, the first allegedly infringing model, in June 1999, several months after Martin's departure. The AE 2000 design included a sheet-metal screen with flame shaped cut outs and a flicker element, which CFM called a "Flame Generating Assembly". Jamieson could not recall who came up with the idea of using the flicker element. The minutes of CFM's research and development committee for the relevant time-period have not been produced. The AE 2000 was released in November 1999. According to CFM's 2001 Annual Report, while the AE 1000 was not a big seller, CFM saw a fivefold increase in sales of the AE 2000 over the prior model.

[39]            CFM has produced several fireplace and stove models subsequent to the AE 2000, mostly differentiated by changes in aesthetic elements such as door sets and cast-iron fronts. Features such as remote controls were also added. However, the core technology of the CFM fireplaces and stoves remained the same from the AE 2000 model forward until the outcome of the U.S. infringement proceedings. As of CFM's fiscal year 2004, the defendant had sold over 310,000 units employing the technology initially presented in the AE 2000. CFM continued to sell fireplaces employing the same technology until March 2005 when, in response to the U.S. ruling, it replaced the screen with a partially reflecting surface that it was employing with a matte screen.

[40]            Having considered the evidence in this trial, I have no difficulty finding that CFM's success in the electric fireplace marketplace stemmed largely from the changes it made to its flame effect technology in June - September, 1999. As I will discuss below, those changes infringed the '442 and '580 Hess patents.

THE EXPERTS

[41]            Dimplex tendered the opinion evidence of Mr. Samuel R. Phillips, of Portola Valley, California, as an expert in optical systems, mechanical engineering and manufacturing.

Mr. Phillips is a professional engineer and a graduate of the California Institute of Technology with a Master of Science in Mechanical Engineering and a Bachelor of Science in Engineering. He has some 40 years of experience in optics and in the development and manufacture of a broad range of products including those constructed with sheet metal. Mr. Phillips has worked as a consulting engineer since 1985 and, for about six years, as an expert witness in technical litigation. Prior to being retained by Dimplex in May, 2004 he had had no experience with electric fireplaces.

[42]            Mr. Phillips is very knowledgeable and experienced in the fields of mechanical engineering and optical systems. The lack of direct experience with electric fireplaces did not diminish his ability to explain how they functioned or to comment on how a person skilled in the art, which he defined as a vocational school graduate with knowledge or experience in sheet metal work and electrical systems, would read the patent in question.

[43]            It became apparent during cross-examination that Mr. Phillips, in preparing his affidavit, copied or paraphrased some 29 passages from a brief submitted by Dimplex's counsel in the U.S. proceedings, including the dictionary definitions of eight terms. CFM urged me to conclude from this that Mr. Phillips was a professional witness, a "hired gun", an advocate for Dimplex and that his opinion evidence was not independent in the sense described by Cresswell J., in the "Ikarian Reefer" case, that is, the "product of the expert uninfluenced as to form or content by the exigencies of the litigation": National Justice Compania Riviera S.A. v. Prudential Assurance Company Ltd., [1993] 2 Lloyd's Rep. 68 at 81.

[44]            It is regrettable that Mr. Phillips chose to rely upon the terms and phrases employed in the U.S. brief to convey his views but I am not convinced that in so doing he lost the objectivity and impartiality required to assist the court with his expertise. In effect, he adopted the language in that brief as his own in writing his report as it accorded with his understanding of the technology at issue and used it to describe his opinion. While I do not condone this practice, I doubt that there are many expert reports that are not, to some extent, the product of collaboration between counsel and the expert if only to conform to varying legal requirements in different jurisdictions or to focus the report on the issues. I am unable to conclude that Mr. Phillips' evidence lacked such objectivity that I should ignore it or give it little weight. I found his evidence, generally, to be helpful, clear and precise.

[45]            CFM relied upon the opinion evidence of Dr. Samir Barudi of Huntington Beach, California. Dr. Barudi has a Doctorate in Chemical Engineering from the California Institute of Technology and other degrees in mechanical engineering and business engineering. He has 25 years of engineering experience, including more recently, experience with "hearth products", i.e., fireplaces and barbecues.

[46]            Dr. Barudi has industry related experience which Mr. Phillips has not. However, he had not worked with optics or electric fireplaces prior to 1993 when he joined Superior Fireplace, primarily a wood and gas fireplace company. While with Superior, Dr. Barudi attempted to improve its electric fireplace product. The result was not a success. Indeed during his tenure, as VP Engineering, Superior sought an OEM arrangement with Dimplex. Subsequently, Dr. Barudi was involved with several other enterprises attempting to gain a foothold in the hearth products marketplace. Dr. Barudi currently works as a college lecturer in chemistry, as a consultant, as an expert witness in litigation, and owns and operates an automotive service franchise.

[47]            I found Dr. Barudi's evidence to be generally helpful but had difficulty with certain of his views as they did not accord with the evidence as I saw it, or with the terms of the patent. Where the evidence of the two experts was in conflict, I tended to prefer that of Mr. Phillips.

[48]            Among the difficulties I had with Dr. Barudi's evidence was his insistence that the reflected image of the fuel bed must be "crisp" to fall within the claims, and his testimony that he could only see shadows of the logs in the CFM screen. Mr. Phillips had no difficulty in seeing the reflection of the ember bed and logs in the screen and neither did I when invited by counsel to observe the CFM demonstration units in operation in the courtroom. I concluded that Dr. Barudi shaped his opinion to support a finding on construction that a "crisp image" was an essential element of the claims.

CONSTRUCTION OF THE PATENT AT ISSUE

[49]            As frequently stated, the first step in analysing validity and infringement issues in a patent suit is to construe the claims. The relevant date for conducting the construction analysis in these proceedings is October 31, 1997when the '442 Patent was published. The principles to be applied by the Court were reiterated by the Supreme Court in Whirlpool Corp. v. Camco Inc., [2000] 2 S.C.R. 1067, 2000 SCC 67 [Whirlpool ]and the concurrently released Free World Trust v. Électro-Santé Inc., [2000] 2 S.C.R. 1024, 2000 SCC 66 [Free World Trust]. In essence, claims are to be read in an informed and purposive way to achieve fairness and predictability and to define the limits of the monopoly.

[50]            The key to purposive construction is the identification by the Court, with the assistance of the skilled reader, of the particular words or phrases in the claims that describe what the inventor considered to be the "essential elements" of his invention (Whirlpool, above, at para. 45). A patent "must be read by a mind willing to understand, not by a mind desirous of misunderstanding", per Chitty J. in Lister v. Norton Brothers and Co. (1886), 3 R.P.C. 199 at 203 (Ch. D.). A "mind willing to understand" necessarily pays close attention to the purpose and intent of the author. A patent must be given such interpretation "as best ensures the attainment of its objects": Whirlpool, above, at para.49.

[51]            The Court may have regard to the patent specification, including the drawings, in order to understand the sense in which certain terms are used, but the specification cannot be used to enlarge or reduce the scope of the claims, properly understood: Metalliflex Ltd. v. Wienenberger Aktiengesellschaft, [1961] S.C.R. 117 at 122, (1960), 35 C.P.R. 49; Whirlpool, above, at para.52.

           

[52]            A patent is notionally addressed to a person skilled in the art or science of the subject-matter and is to be read as such a person would have read it when it first became public. This hypothetical person possesses the ordinary skill and knowledge of the particular art to which the invention relates and a mind willing to understand a specification addressed to him. He is a man who is going to try to achieve success and not one who is looking for difficulties or seeking failure: Free World Trust, above, at paragraph 44, drawing on H.G. Fox in The Canadian Patent Law and Practice Relating to Letters Patent for Inventions, 4th ed. (Toronto: Carswell, 1969) at 184).

[53]            In these proceedings, the patent in question relates to the assembly of fairly common devices and materials to create the illusion of fire and flames in a sheet metal box. The expert witnesses agreed that the ordinary person skilled in the art would have to have some knowledge or equivalent experience in electrical services and sheet metal work. Mr. Phillips placed the degree of skill and knowledge at the vocational school level. Dr. Barudi would require some understanding of mathematics and some experience in the hearth industry, particularly with electric fireplaces. In my view, Dr. Barudi set too high a standard. Having viewed the innards of the several models exhibited in the courtroom and having heard the testimony of Messrs Hess and Jamieson as to how their respective products were developed, I think Mr. Phillips was more on the mark.

[54]            The '442 patent has 39 claims. Of these, Dimplex asserts that claims 1, 5, 7, 13, 14, 15, 16, 24, 25, 31, 32, and 33 have been infringed by CFM. Of the asserted claims, claims 1 and 31 are independent claims. Claims 5, 7, 13, 14, 15, 16, 24 and 25 are dependent upon claim 1; claim 32 is dependent on claim 31; claim 33 is dependent upon claims 1 through 25, 31 and 32.

[55]            There is substantial agreement between the parties on the meaning of the claims. The terminology in dispute in the independent claims 1 and 31 is highlighted below:

1. A flame simulating assembly comprising:

a light source;

a flame effect element having means for transmitting light from said light source to produce a moving flame effect;

at least one flicker element having at least one reflective surface, said flicker element being positioned intermediate of said light source and said flame effect element to reflect light from said light source for subsequent transmission by said flame effect element;

a screen having a partially reflecting surface and a diffusing surface, said flame effect element extending proximate to said diffusing surface wherein said transmitted light produces an image on the screen which resembles moving flames; and

a simulated fuel bed positioned adjacent to said partially reflecting surface wherein an image of the fuel bed is displayed on the screen and wherein the image of moving flames appears to emanate between the simulated fuel bed and its image in the screen.

31. A flame simulating assembly, comprising:

            a light source;

            at least one flicker element having at least one reflective surface for reflecting light from said light source;

            a rotor for rotating said flicker element about an axis;

            a screen having a partially reflecting surface and a diffusing         surface, wherein light reflected from said rotating flicker element         onto said diffusing surface produces an image which resembles         moving gasses from a fire; and

            a simulated fuel bed positioned adjacent to said partially            reflecting surface wherein an image of the fuel bed is        displayed on the screen and wherein the image of moving             gasses appears to emanate between the simulated fuel bed         and its image on the screen.

[56]            The significant differences between these claims are that claim 31 does not require a flame effect element and refers to moving gasses instead of moving flames.

[57]            The background portion of the '442 patent identifies U.S. patent 4, 965,707 (the '707 or Butterfield patent) as prior art. The Butterfield assembly uses a system of billowing ribbons and a diffusion screen to produce a flame effect as if from a coal fuel source. The background to the '442 Patent notes the need for an assembly to produce a flame effect that more closely resembles real flames from a wood log fire and with greater light intensity.

[58]            In the detailed description of the preferred embodiment, the inventors describe one means for achieving that impression in a simulated firebox housing. The simulated fuel bed would be supported on a platform at the lower front portion of the housing. The fuel bed itself is a translucent plastic shell vacuum formed and coloured to resemble logs and embers. Beneath it are three 60 watt light bulbs. Immediately behind the fuel bed is a transparent vertical screen with a partially reflecting surface and a diffusing surface. The fuel bed is reflected in the reflecting surface of that screen.

[59]            The preferred embodiment also speaks of using both a flicker element and a moving flame effect element formed from a lightweight, substantially opaque material such as polyester, supported loosely between horizontal supports. Slits are cut into it to permit the passage of light as it billows under the influence of air from a blower. Alternatively, as described in Butterfield it could consist of discrete elements (i.e., ribbons). The flicker element is a rod turned on its axis horizontally by an electric motor. The rod bears reflective strips which extend radially and when moved by the rotation of the rod gives the appearance of upward motion on the reflected light. While both the flicker element and the flame effect element would be used in the preferred embodiment, the inventors contemplated that the flicker element could be used alone. They also indicate that a screen as described in Butterfield could be employed, of which more will be said below.

The Disputed Terms:

"a flame effect element having means for transmitting light from said light source to produce a moving flame effect"

[60]            The issue with respect to this phrase is whether, as CFM contends, the flame effect element itself must move to produce a "moving flame effect". This is of significance because both the Dimplex and the CFM products produce a moving flame effect through the rotating flicker element rather than the flame effect element which remains stationary.

[61]            The detailed description of the preferred embodiment in the '442 Patent indicated that the flame effect element would be formed from a single thin sheet of a lightweight material such as polyester and would billow or ripple under the influence of air currents. As noted above, Dimplex initially used a sheet of black silk which frayed in operation and replaced it with static sheet metal for cost and quality control reasons.

[62]            Dr. Barudi read the specification, in conjunction with the concluding words of the phrase in the claim, as requiring the "flame effect element" to be movable. He supported that interpretation by references to the limitations set out in claims 2, 3 and 4. Claim 2 adds a limitation that the assembly claimed in claim 1 comprises means for moving the flame effect element to produce the moving flame effect. Claim 3 says that means is a airflow generator and claim 4 requires that the flame effect element be adapted to move in response to an airflow. Claims 2, 3 and 4 are not asserted by Dimplex in these proceedings.

[63]            In Mr. Phillips' opinion, the claim for the flame effect element in claim 1 is broadly stated and the element could either move or remain stationary in transmitting the light that produces a moving flame effect.

[64]            In closing argument, the defendant did not take the position that the flame effect element must move. It acknowledged the possibility that the necessary motion in claim 1 may come from the flicker element rather than the flame effect element. However, it argues that the flame effect element must at least be capable of motion to give meaning to the dependent claims. In support of that proposition, it relies on the concession by Mr. Phillips, on cross-examination, that while he believed claim 1 could read on a flame effect element that was made of glass, that interpretation would render claim 4 inoperable if the glass were immovable. Further, the defendant submits, claim 14 which requires movement of the flicker element is redundant if that movement is an essential element of claim 1.

[65]            Pelletier J., as he then was, discussed the relationship of dependent and independent claims in Halford et al.v. Seed Hawk Inc.et al. (2004), 46 F.T.R. 1, 2004 FC 88 at paragraphs 90-95. Justice Pelletier observed that it is clear from section 87 of the Patent Rules SOR/96-423 that a dependent claim includes all the features and limitations of the claim which it incorporates by reference. As a corollary to that principle, the independent claim cannot be given a construction which is inconsistent with the claims which are dependent upon it.

[66]            A construction of the flame effect element in claim 1 as either movable or immovable is not, in my view, inconsistent with the claims that depend upon it. A person skilled in the art would understand from a fair reading of the patent as a whole that a "flame effect element having means for transmitting light to produce a moving flame effect" could be one that moves or does not move, as the circumstances dictate. The key is that it is capable of transmitting light to produce a moving flame effect which it does through the flame shaped and other holes that pierce the element. Movement of that light is achieved by the rotation of the flicker element as claimed in claim 14.

[67]            The structure of claims 1 through 4 of the Hess patent, when read together supports this construction. The only limitation on the flame effect element in claim 1 is that it has the means for transmitting light. The further limitations requiring that it be adapted to move in response to an airflow are introduced in the dependent claims. There is no reference in claim 2 to any particular means for moving the flame effect element. Claim 3 defines the means as comprising an airflow generator and claim 4 specifies an additional property, that being the airflow response.

"a screen having a partially reflecting surface"

[68]            Mr. Phillips construed these terms as referring to a screen with a surface that partially bends light as that is what in his view a person of ordinary skill would understand from the meaning of "reflecting." A reflecting surface bends light. A partially reflecting surface therefore is one that partially bends light; the rest of the light gets through it. Again, this is an interpretation that was used by Dimplex counsel in the U.S. proceedings. That does not render it inaccurate.

[69]            The '442 patent specification incorporates by reference the '707 Butterfield patent as describing a suitably partially reflecting screen that could be successfully used as part of the invention. Dr. Barudi reads Butterfield as always requiring a partly or lightly silvered surface and reads that limitation into the meaning of "partially reflecting surface" in claim 1. However, he does not seem to have considered that Butterfield describes a number of acceptable embodiments for a partially reflecting screen ranging from plain glass to a semi-silvered surface.

[70]            Phillips views this range as consistent with the meaning of partially reflecting surface as each would have that effect, albeit to varying degrees. That is, in my view, a correct reading of Butterfield. A variety of materials may be used for the screen claimed including glass or plastics, such as the tinted "acrylite" product used by CFM. What is essential is a screen that is sufficiently reflective to create an illusion of depth in the displayed image of the fuel bed. Screens with a gloss finish would have that effect whatever their material. CFM's acrylite screens had a gloss finish.

[71]            The meaning of diffusing surface in the patent is clear. The experts agree that diffusion means dispersion in the scattering sense (i.e. dispersion and softening of light as by passage through frosted glass). Therefore, according to the plain and ordinary meaning of that term, claim 1 and claim 31 recite a screen with a surface that disperses and softens light.

"image of the fuel bed is displayed on the screen"

[72]            In his interpretation of this element of claim 1, Dr. Barudi stated that the image reflected on the screen had to be a "crisp likeness" of the fuel bed. His understanding of the ordinary meaning of the word "image" was of a physical likeness, an optical counterpart or a picture. The object is an illusion of depth that would allow for the flames to appear to emanate from between the simulated log bed and its reflection on the screen.

[73]            In his affidavit, Mr. Phillips says that this phrase means simply that a "representation" of the fuel bed can be seen on the screen. In choosing that term he relied upon the dictionary definition of "image" employed by Dimplex's U.S. counsel in drafting their brief. As submitted by the defendant, a strictly dictionary approach to construction is inappropriate. The Court must look to the specification to understand the sense in which the inventors have used the term: Whirlpool, above, at para. 52.

[74]            Mr. Phillips' testimony in chief was more helpful as he explained that in the context in which "image" is used in the claims, a person looking at the reflected image would see what would appear to be the back half of a complete fuel bed, from the middle of which a sheet of flames would appear to be rising. In this respect, the two experts were in agreement. The object would be to produce an illusion of depth so that you appear to have a real fuel bed with real flames, the effect the inventors were seeking to achieve. However, I do not accept that the reflection of the image must be "crisp" as opined by Dr. Barudi. Indeed that would seem to be counter-productive in fostering the desired illusion. An image that was too defined would disclose that the fuel bed is merely a plastic form.

"image of moving gasses from a fire"

[75]            As noted above, claim 31 differs from claim 1 in that it lacks a flame effect element and refers to an image of moving gasses rather than to an image of moving flames. The result is to produce confusion, CFM submits, and ambiguity rendering the patent invalid.

[76]            Mr. Phillips testified that, read in combination, the reference to gasses makes sense as there is no longer an element to give shape to the transmitted light in the form of flames. He understood the image to be of rising gasses in combustion emitting light. In arriving at that conclusion, Phillips relied in part on a still image from a video and expressed the view that flames could be seen at the top of the image and gasses towards the bottom.

[77]            For Dr. Barudi, a flame is a gas in combustion and emits light. Gasses produced from burning fuel do not emit light until they are ignited by combustion at which point it becomes flame. His understanding was that the reference to moving gasses was meant to represent "heat shimmer" rising from the fuel bed. He described it as diffused shimmering as opposed to the defined flame shape. There is no reference to "heat shimmer" in the specification but it is a phenomenon commonly experienced on a hot summer's day. That is not what the inventors were referring to as I understand their use of the term gasses.

[78]            I agree with the defendant that in using two different terms, "flames" and "gasses", the inventors must have meant to refer to two different kinds of images and, as they are not employed together, the independent claims describe a device that creates an image of flames or gasses. However, notwithstanding the defendant's submission that this results in ambiguity, I do not have any difficulty understanding the inventor's intention as expressed in claim 31.

[79]            What the inventors sought to create is not a real fire but an illusion of fire. While the preferred embodiment includes a flame effect element to simulate the appearance of flames rising from a fire, the inventors have also claimed the assembly absent that element. They intended to claim the image of moving gasses from a fire when the assembly does not include a flame effect element. What remains is the display that the flicker element produces on the diffusing screen without masking by the flame effect element. It would appear to be gasses rising from the fuel bed emitting light. Whether that is accurate as a matter of combustion science is, in my view, irrelevant. The patent claims are in the realm of simulation.

Conclusion on Construction

[80]            A determination of the essential elements of a patent must relate to the inventiveness of the invention and be more than a mere summary of the main elements of a device. In other words, what produces a useful result in a novel and inventive manner and without which the device ceases to be inventive: Norac Systems International Inc. v. Prairie Systems and Equipment Ltd., (2002), 19 C.P.R. (4th) 360 at para. 16, 2002 FCT 337 (F.C.T.D.).

[81]               In my view, what was novel and inventive about the flame simulating assembly disclosed in the '442 patent was the combination of the following elements:

·         Light;

·         A static or movable sheet of material with cut outs to transmit that light in the shape of flames (flame effect element);

·         A rotisserie like rod with reflective strips rotating about an axis to reflect the light (the "flicker" element);

·         A screen having a partially reflecting surface and a diffusing surface wherein the light reflected from the rotating flicker element and transmitted by the flame effect element produces an image on the screen resembling moving flames from a fire;

·         A simulated fuel bed adjacent to the partially reflecting surface such that an image of the bed can be seen in the screen, producing an image of flames which appear to rise from the middle of the fuel bed.

VALIDITY

           

[82]            Pursuant to subsection 43(2) of the Patent Act, an issued Canadian patent is presumed to be valid in the absence of evidence to the contrary. The underlying rationale for this presumption is that the Commissioner of Patents is authorized to issue patents solely for inventions, defined in section 2 of the Act as any new and useful art, process, machine, manufacture or composition of matter, or new and useful improvement thereof. Thus the assumption is that the state of the knowledge and prior art respecting the subject matter has been studied by persons employed by the Commissioner who are skilled in the field. A person who challenges the novelty and inventiveness of the patent bears the onus of establishing its invalidity: Free World Trust et al. v. Électro Santé Inc. et al. [1997] R.J.Q. 2907, 81 C.P.R. (3d) 456 (Que. C.A.), aff'd [2000] 2 S.C.R. 1024, 2000 SCC 66.

[83]            CFM alleges that the '442 patent is invalid by reason of obviousness, anticipation and ambiguity.

Obviousness

[84]            Where the validity of a patent is challenged on the basis of anticipation and obviousness, obviousness should be considered first. With obviousness, or lack of inventive ingenuity, the invention need not be disclosed in one single patent or piece of prior art, as is the case for anticipation. The question is whether the available knowledge on the claim date would lead directly to the invention. As noted by Hugessen, J.A., as he then was, in Beloit Canada Ltd. v. Valmet Oy, (1986), 8 C.P.R. (3d) 289 at 294, 64 N.R. 287 (F.C.A.) [Beloit] "a patent that lacks inventiveness cannot be novel: one that lacks novelty may still be inventive."

[85]            We are also indebted to Justice Hugessen for the frequently cited test for obviousness set out in Beloit as follows at 294:

The test for obviousness is not to ask what competent inventors did or would have done to solve the problem. Inventors are by definition inventive. The classical touchstone for obviousness is the technician skilled in the art but having no scintilla of inventiveness or imagination; a paragon of deduction and dexterity, wholly devoid of intuition; a triumph of the left hemisphere over the right. The question to be asked is whether this mythical creature (the man in the Clapham omnibus of patent law) would, in the light of the state of the art and of common general knowledge as at the claimed date of invention, have come directly and without difficulty to the solution taught by the patent. It is a very difficult test to satisfy.

[86]            In its amended Statement of Defence dated March 24, 2004, the defendant cites European, U.K. and U.S. patents, together with log sets manufactured by Harris Systems Inc., and electric fireplaces manufactured by Majestic, both CFM subsidiaries, as prior art. None of these in my view, demonstrate that the combination of elements in the Hess '442 patent would have been "plain as day" or "crystal clear" to the skilled technician who was searching for something novel: Bayer Aktiengesellschaft v. Apotex Inc. (1998), 60 C.P.R. (3d) 58 at 81, [1995] O.J. No. 141 (QL) (Ont. Gen. Div.), aff'd (1998), 82 C.P.R. (3d) 526, 113 O.A.C. 1 leave to appeal dismissed [1998] S.C.C.A. No. 563.

[87]            I was persuaded by Mr. Hess' demonstration of the process by which he and his team came to realize the improved flame effect that, while simple in hindsight, it took real inventiveness. Finding the solution to the failure of the Manhattan units to present a realistic image considerably more than the "mere scintilla of invention" sufficient to support the validity of a patent: Tye-Sil Corp. v. Diversified Products Corp. (1991), 35 C.P.R. (3d) 350 at 363, 125 N.R. 218 (F.C.A.). The team experimented intensively over several months with many variables before arriving at the optimal combination.

[88]            As evidence of obviousness, the defendant points to Dr. Barudi's description of his first impression upon learning that a patent had been issued for the Dimplex simulated fireplace assembly. He said he was surprised. In Dr. Barudi's view, the arrangement of the parts in the '442 patent would have been evident to someone skilled in the art and were well-known in the industry long before 1996. Lights, mirrors, screens and ember beds to simulate the appearance of wood or coal fires had been used for quite some time prior to the filing of the '442 patent. Assembling them into something like the Dimplex assembly would not have been considered novel or inventive, in his opinion.

[89]            Mr. Phillips agreed that components of the Hess patent can be found in earlier patents. However, the Hess patent does not claim the elements alone but in combination. As argued by the plaintiff, despite the consistent inclusion of light bulbs, flicker elements, screens, flame effect elements and the like in the prior art, no one else arrived at the invention taught by the '442 patent.

[90]            In considering Dr. Barudi's evidence on this issue, it is helpful to refer to another oft-quoted passage from Beloit, above, at 295:

Every invention is obvious after it has been made, and to no one more so than an expert in the field. Where the expert has been hired for the purpose of testifying, his infallible hindsight is even more suspect. It is so easy, once the teaching of a patent is known, to say, "I could have done that"; before the assertion can be given any weight, one must have a satisfactory answer to the question, "Why didn't you?"

[91]            One must wonder why Dr. Barudi, when he was involved in the industry as a skilled person, did not take advantage of his knowledge of the elements of the invention to develop a commercially viable product. By his own admission he was not successful in that regard. Indeed, there was evidence that Superior Fireplaces, for which he worked as Vice-President Engineering, sought a licensing arrangement with Dimplex as did others in the field including CFM. Another firm with which he was involved, Innohearth, went bankrupt trying to develop a competitive product.

[92]            In his testimony, Dr. Barudi saw close similarities between what is disclosed in the Hess '442 patent and the Butterfield patent. For example, as disclosed in Butterfield, both employ a flame effect element which in Hess can be the same design as in Butterfield. The latter contains no flicker element, but Barudi saw that as an uninventive addition to the Butterfield design.

[93]            Mr. Phillips testified that the Butterfield patent operates on an entirely different principle of light reflection and not light transmission as in the '442 patent. The flame effect element in Butterfield operates by reflected light but in Hess it operates by transmitting light. All of the independent claims in Hess call for the flame effect element to be able to transmit light and say nothing about reflection, whereas the Butterfield patent requires the flame effect element to be able to reflect light and says nothing about transmission.

[94]            CFM argues that there must be some light transmission in Butterfield because the reflecting ribbons may have slits or holes in them. Mr. Phillips conceded that there could be some reflection of light off the back panel of the Butterfield unit and through the slits or holes in the ribbons. But this concession was made while he was being pressed on cross-examination to agree that virtually any surface would reflect light to some degree. That may in theory be true but it is not an element of the Butterfield design that any skilled technician would have recognized. There is no discussion in Butterfield of light reflecting from the back surface of the unit.

[95]            I am satisfied that the reference in Butterfield to slits or holes in the ribbons contemplated that they might promote the movement of the reflective ribbons, not that they would transmit light reflected off the back panel through the openings. It is overreaching to suggest that this is comparable to the transmission of light through the flame cut-out shapes in the '442 patent.

[96]            In its closing argument, the defendant framed the obviousness issue as whether Dimplex should be accorded a monopoly for, in CFM's view, simply adding a "rotisserie" to the Manhattan unit, the commercial embodiment of the Butterfield patent. This was an obvious and uninventive step, it argues.

[97]            Log sets employing lights and artificial logs to provide a simulation of a glowing fire were fairly common in the industry. For several years, a division of CFM (the Harris division) manufactured a log set which contained a rotisserie-like reflecting rod. In Dr. Barudi's opinion, the insertion of a flicker element or rotisserie into the Manhattan unit is something that would have been arrived at directly and without difficulty by a person skilled in the art. There would have been no mechanical or engineering obstacles, nor would it have required experimentation. In his view, the flicker element of the '442 patent is also in the 1988 U.S.patent 4, 890, 600 (the "Meyers patent")

[98]            The Meyers patent, issued in 1990, disclosed a log set which incorporated a motorized reflection wheel with reflective strips. The wheel reflected light through an amber-red coloured lens in the log set to generate the illusion of logs burning with a fiery glow. Alcohol gel fuel was burned to generate heat. But to achieve the appearance of flames, which the alcohol would not normally produce, required an additive to the fuel. There is nothing disclosed in that patent, in my view, that would suggest to a person skilled in the art that the method could be adapted and modified for use with the Butterfield patent to create an image of moving flames on a screen.

[99]            U.K. Patent No. 1, 088,577 ("Everton"), issued in 1966, disclosed the use of ribbons moved by a fan to provide a shifting pattern of colours in combination with a "system of shadows" to simulate the light "and possibly the flames" associated with a solid fuel fire. Dr. Barudi suggested that this was similar to the flame effect element disclosed in claim 1 of the '442 patent and to the Butterfield patent. As I read Everton, the design was very basic and did not teach the use of a flame effect element to transmit light to create an image of moving flames or moving gasses. Nor, in my view, would a person skilled in the art think to combine Butterfield with Everton to achieve the desired effect. They are essentially alternative methods to simulate a glowing fire.

[100]        CFM considered many ways to improve the flame image in its fireplaces and stoves including buying or licensing technology from its competitors, in particular Dimplex. The idea of adding a flicker or rotisserie element did not apparently occur to them, in some undisclosed manner, until June 1999. Jamieson testified that they kept a drawer full of fireplace patents, bought and disassembled competing products. Colm Martin was hired away from Dimplex with at least the hope, unfulfilled as it seems, that he could design a better fireplace assembly for CFM.

It was not until CFM incorporated the flicker element and the Butterfield screen in its fireplaces in the fall of 1999 that they achieved an appealing flame effect. The evidence supports the inference that CFM first tried to work around the '442 patent and when that effort failed, simply copied what was a proven success.

[101]        Dimplex went from selling no electric fireplaces to several hundred thousand units annually in a few years. Similarly, CFM enjoyed great sales results with its fireplaces employing the Hess technology.This evidence of commercial success supports the conclusion that the combination of known elements was not obvious: Windsurfing International Inc. et al. v. Triatlantic Corporation (1984), 8 C.P.R. (3d) 241 at 260, 63 N.R. 218 (F.C.A.).

[102]        I am satisfied that Dimplex's success in the marketplace was due to the patented flame effect of the '442 patent.The technology was recognized as an advance in achieving a realistic flame effect as measured by the praise received from the industry, unsolicited media attention and commercial success. CFM recognized that advance and sought to acquire it through purchase or licensing. Other firms in the industry also sought private label manufacturing arrangements with Dimplex for the use of the assembly technology. This is compelling evidence of inventiveness.

           

Anticipation

[103]        In asserting that a patent has been anticipated, the argument is that the invention has already been disclosed to the public and is therefore not novel. As described by Justice Hugessen in Beloit,above, at 297:

..anticipation must be found in a specific patent or other published document; it is not enough to pick bits and pieces from a variety of prior publications and to meld them together so as to come up with the claimed invention. One must, in effect, be able to look at a prior, single publication and find in it all the information which, for practical purposes, is needed to produce the claimed invention without the exercise of any inventive skill. The prior publication must contain so clear a direction that a skilled person reading and following it would in every case and without possibility of error be led to the claimed invention. Where, as here, the invention consists of a combination of several known elements, any publication which does not teach the combination of all the elements claimed cannot possibly be anticipatory.[Emphasis added].

[104]        This description of the correct approach to considering anticipation was cited with approval by the Supreme Court of Canada in Free World Trust, above, at paragraph 26. Moreover, Justice Binnie in that decision cautioned against the use of ex post facto deduction in evaluating whether an invention was anticipated by a particular publication, since assembling a dossier of prior art with the benefit of hindsight is "all too easy after an invention has been disclosed": Free World Trust, above at para. 25).

[105]        Among the references cited as instances of prior art in the defendant's pleadings, CFM focused its submissions with respect to anticipation on the Butterfield patent and European patent number application 0,611,921 (the "O'Niell application") published in August 1994. As discussed above, I am satisfied that Butterfield did not disclose all of the essential elements of the disputed claims, notably the flicker element and flame effect element. One could not find in Butterfield all the information needed to produce the claimed invention without the exercise of additional inventive skill.

[106]        With respect to the O'Niell application, the defendant submits that there is no dispute that it teaches a flame simulating assembly that has a light source, a fuel bed and a screen with the same reflective properties as seen in the '442 patent. Dr. Barudi's evidence supported that interpretation. The only question, CFM submits, is whether O'Niell includes a flame effect element and flicker element as required by claim 1.

[107]        O'Niell's simulated solid fuel fire discloses a rear reflector, a screen which transmits and reflects light and a "flag-like member" positioned between the rear reflector and the screen. A fuel bed is positioned in front of the screen and the whole is illuminated. CFM contends that the "flag-like member" is a flame effect which transmits light as claimed by Hess.

[108]        O'Niell does not disclose a flicker element in its preferred embodiment nor do any of the figure drawings show one. However, O'Niell discusses a "reflective paddle wheel" in Great Britainpatent 1 272 644 as an alternative way of trying to introduce colour when used with a concave reflective surface reflecting light onto a patterned screen. The defendant submits that this was an incorporation by reference. From a close reading of the O'Niell patent, I do not agree that the inventor was incorporating that method in his application. Neither did Dr. Barudi when pressed on cross-examination. Indeed, O'Niell takes pains to state that the paddle wheel would not achieve the desired results. The application clearly teaches away from that alternative. But even if it were employed, the paddle wheel would not serve to reflect light for transmission by the "flag member", the key element disclosed by O'Niell, as set out in the Hess patent.

[109]        In Mr. Phillips' opinion, the O'Niell application would simulate moving flames by a method inverse to that of the '442 patent. Hess creates an image using flickering light which is transmitted through a flame effect element. O'Niell, if ever put into practice, would create an image using steady light and moving shadows. The coffin shaped "flag member' intercepts reflected light and casts shadows influenced by an air current. The application does not teach the transmission of light through the diamond shaped opening in the centre of the flag but rather reflection of light to a metallized strip of plastic or foil set in the aperture. This reflected light would simulate sparks.

[110]        There are other significant differences, such as the use of a concave reflective surface, but these are sufficient in my view to conclude that O'Niell is not an anticipatory prior publication. It does not contain so clear a direction that a skilled person reading and following it would in every case and without possibility of error be led to the claimed invention.

[111]        I find, therefore, that none of the prior art publications cited by CFM teach the combination of the elements claimed and none meet the test for anticipation.

Ambiguity

[112]        As discussed above, independent claims 1 and 31 differ in that the former refers to a flame simulating assembly that produces an "image of moving flames" and the latter speaks of producing an "image which resembles moving gasses from a fire". This choice of language by the inventors is ambiguous and creates confusion, the defendant submits. As explained by Dr. Barudi, a flame is a gas that is in combustion and emits light. A gas produced from a burning fuel does not emit light. It may refract light - his illustration being heat shimmer - but will not emit light until ignited by combustion at which point it becomes a flame.

[113]        CFM points out that the '442 patent does not explain the difference between a "flame" image and a "gas" image. But a failure to define a term in the disclosure is not sufficient reason to invalidate a patent for ambiguity: Mentmore Manufacturing Co. v. National Merchandise Manufacturing Co. (1974), 14 C.P.R. (2d) 151 at para 8, [1974] F.C.J. No. 410 (QL) (F.C.T.D.); Corning Glass Works v. Canada Wire & Cable Ltd. (1984), 81 C.P.R (2d) 39, 2 C.I.P.R. 77 (F.C.T.D.); Steel Co. of Canada Ltd. v. Sivaco Wire and Nail Co. (1973), 11 C.P.R (2d) 153, [1973] F.C.J. No. 603 (QL) (F.C.T.D.).

[114]        Mr. Phillips had no difficulty understanding the inventors' intention in claim 31. The defendant's objection to his testimony in this respect turns largely on his use of a still photograph from a video of a fireplace in operation to illustrate his understanding. The photograph showed both defined flame shapes at the top of the image and an amorphous, undefined light beneath. I agree with the defendants that there is nothing in the claims or aspects of the invention that indicates that the device produces an image of a flame and an image of a gas at the same time. It is one or the other. Nonetheless, everything is disclosed that would require the invention to function properly with or without the flame effect element: Pioneer Hi-Bred Ltd. v. Canada(Commissioner of Patents), [1989] 1 S.C.R. 1623 at 1638, 60 D.L.R. (4th) 223; Risi Stone Ltd. v. Groupe Permacon Inc. (1995), 101 F.T.R. 241, 65 C.P.R (3d) 2 (F.C.T.D.)

[115]        As I have indicated above in construing the reference to moving gasses in claim 31, the inventors intention is clear enough from the claims and the specification even if it does not conform to the science of combustion. The inventors were claiming the means to create an illusion of fire through simulation, not an actual solid fuel burning assembly. In that context, the meaning of the claim and relationship to the other claims of the patent is understandable and I do not find the patent invalid for ambiguity.

INFRINGEMENT

[116]        It is clear from the evidence that all of the CFM electric fireplace models from the introduction of the AE 2000 until the substitution of a matte screen in March 2005 employed the same core technology and component parts. Differences between the models were largely cosmetic or aesthetic elements. A list of the model numbers employing the allegedly infringing technology was submitted as part of the trial record and has been reproduced as Appendix "A" to the judgment attached to these reasons.

[117]        It was not disputed that each of the impugned CFM products are flame simulating assemblies and employ a light source as disclosed in the patent. Nor that what the '442 patent discloses as being the flicker element is what CFM used in the allegedly infringing units or that a "moving flame effect" was produced. CFM also used a screen which has a diffusing surface as contemplated in the Butterfield patent incorporated by reference in the '442 patent. In the CFM units, the flame effect element is called a "Flame Deflector" and the rotating flicker element is termed a "Flame Generating Assembly" but there is no material difference between these devices and those claimed in the '442 patent.

[118]        The defendant maintained that CFM's products did not contain certain elements of the '442 patent, as Dr. Barudi construed it, notably a moving flame effect element, a partially reflecting screen that is semi-silvered , or a crisp image of the fuel bed reflected in the screen. As discussed above, I have concluded that none of these are essential elements of the asserted claims. CFM cannot escape liability for infringement by asserting that its flame effect element does not move, its screen is not semi-silvered and does not reflect a clear image of the fuel bed.

[119]        I am satisfied that the CFM units accused of infringement contain the essential elements of the '442 patent as I have construed them. Save for the AE 1000, AE 1001, AE 1003, HEF 330, and the early version of the KE 1000, each contains the same inner workings as the Dimplex units employing the '442 Patent technology. I find, therefore, that the plaintiff has made out its case for infringement against the defendant on a balance of probabilities.

            Was it Wilful or Reckless Infringement?

[120]        As a result of my finding that CFM infringed the '442 patent, Dimplex will be entitled to general or compensatory damages or, on its election, to an accounting of CFM's profits arising from the infringement. However, Dimplex alleges that CFM wilfully or recklessly infringed the '442 patent and that it should, therefore, be entitled to additional relief against CFM in the form of aggravated, or exemplary and punitive damages. Dimplex submits that over a period of two years, from 1997 to 1999, CFM deliberately engaged in a sequence of acts which when considered together demonstrate a reckless indifference to Dimplex's proprietary rights.

[121]        In general, aggravated damages may be awarded where the defendant's conduct has been particularly high-handed or oppressive. There must be a finding of motivation by actual malice which increased the injury to the plaintiff: Lubrizol Corp. v. Imperial Oil Ltd., [1996] 3 F.C. 40, (1996), 67 C.P.R. (3d) 1. Punitive or exemplary damages are awarded for "high-handed, malicious, arbitrary or highly reprehensible conduct that departs to a marked degree from ordinary standards of decent behaviour" Whiten v. Pilot Insurance Co. [2002] 1 S.C.R. 595, 2002 SCC 18; Performance Industries Ltd. v. Sylvan Lake Golf and Tennis Club [2002] 1 S.C.R. 678, 2002 SCC 19 at para 79.

[122]        The Federal Court of Appeal confirmed the availability of aggravated, punitive or exemplary damages in intellectual property cases, inLubrizol. However, the Court observed that such action should always receive the most careful consideration and the discretion to award such damages should be most cautiously exercised, citing McIntyre J. in Vorvis v. Insurance Corp of British Columbia (1989), 58 D.L.R. (4th) 193 at 206.

[123]        There are no patent cases in the Federal Court that I am aware of where punitive damages have been awarded simply because the defendant knowingly or intentionally infringed the patent without more. Punitive or exemplary damages have been awarded in connection with litigation misconduct, or abuse of process, such as continuing activities found by the court to constitute infringement in disregard of a court order to cease such activities.

[124]        In Lubrizol, a patent case, the defendant continued to manufacture and sell the offending product for eight months after an interlocutory injunction was issued. The court characterized this as a "callous disregard for the interlocutory injunction". The court also took into account the means of the offender, the profit derived from the infringement and the fact that they may have intentionally hidden the fact that they were infringing the patent.

[125]        In Profekta International Inc. v. Lee (1997), 214 N.R. 309, 75 C.P.R. (3d) 369 (F.C.A) punitive damages were added upon appeal in a situation where there had been a continuing violation of copyright by the respondent. There were other factors such as ignoring a cease and desist letter. The respondent's attitude was that she would rather pay legal fees in order to contest the applicant's claim than abide by the copyright. See also Society of Composers, Authors and Music Publishers of Canada v. 728859 Alberta Ltd. (2000), 6 C.P.R. (4th) 354, [2000] F.C.J. No. 590 (QL) (F.C.T.D.).

[126]        In Apotex Inc. v. Merck & Co (2002), 219 F.T.R. 259, 2002 FCT 626 (F.C.T.D.) Merck sought exemplary damages against Apotex for a knowing and willful breach of the permanent injunction of the court. Apotex argued that it had acted in good faith in the legitimate belief that it was not infringing the patent. Justice McKeown rejected that argument and concluded, citing Lubrizol, that an entitlement to punitive damages was appropriate, with the assessment of quantum, if any, to be determined subsequent to the determination of general damages or accounting of profits to be awarded in compensation for the infringement of Merck's patent rights.

[127]        Dimplex submits that because of the disparity in size between it and CFM - the latter at all relevant times being a much larger and diverse company - and as electric fireplace products are its chief revenue source, it was particularly vulnerable to attacks on its intellectual property. However, the evidence does not indicate that CFM set out to harm Dimplex but rather that CFM sought to expand its share of the electric fireplace market by taking advantage of Dimplex's improved flame effect.

[128]        The evidence that Dimplex relies upon in support of its contention that exemplary damages are called for relates largely to CFM's efforts to acquire Dimplex or to license the Hess technology and failing that, the subsequent hiring of Colm Martin. I do not find it surprising that CFM, having observed Dimplex's success with its fireplaces, would seek to buy the smaller company or acquire the source of that success. During the relevant period, CFM was rapidly expanding through the acquisition of other companies. Nor is it surprising that they would buy Dimplex products to determine how they worked or that they would obtain copies of any applicable patents and seek advice in an effort to avoid infringement or to design around existing patent rights.

[129]        CFM's hiring of Colm Martin does not establish that he was expected to, or did, breach confidence by disclosing Dimplex technology to CFM. The evidence indicates that he was hired away from Dimplex as part of its efforts to develop a competitive product but that was a common industry practice. Dimplex, for example, has hired several former CFM employees. I put little weight on the fact that Martin purchased a fireplace immediately before his departure. There is no evidence of what was done with it. In any event, it was open to CFM as Jamieson acknowledged, and as was done, to simply buy one of the Dimplex stoves and disassemble it to examine the technology. While the fireplace Martin bought was the latest model, the core elements were the same as in the previous units.

[130]        What is more telling, in my view, is that with Martin on board and contributing to the design of the AE 1000, CFM was still unable to come up with an attractive flame effect. It was several months after his departure that CFM made the alterations that resulted in the infringing products. It does not appear that Mr. Martin played any role in the design of the AE 2000 and subsequent CFM products.

[131]        What I think is more likely is that, after Martin's departure, the failure of the AE 1000 led CFM's design team to copy a proven success. Mr. Jamieson's evidence that they attempted to design around the '442 patent was not convincing. He was unable to explain who came up with the idea of using the flame generating unit corresponding to the Hess flicker element and had only a vague idea of when it occurred. Nor was there any documentary evidence produced to explain this development.

[132]        While this was a deliberate appropriation of intellectual property in my view, it did not amount to conduct of such high handed, callous and oppressive nature as to offend the Court's sense of decency. Malice has not been established. Nor am I able to find from the evidence that CFM regarded the risk of damages for patent infringement as a mere cost of doing business. In any event, at this stage of the proceedings , I am unable to conclude that the infringing behaviour will not be sufficiently deterred by a general award of damages or by an accounting of profits at the plaintiff's election. Accordingly, I do not find an entitlement to aggravated or punitive damages.

REMEDIES

[133]        In its Amended Statement of Claim, Dimplex seeks the following relief:

a.        a declaration that the '442 Hess Patent has been infringed by CFM;

b.       a permanent injunction restraining CFM from further infringing the '442 Hess Patent;

c.        an Order directing CFM to deliver up to Dimplex, or to destroy under oath, all articles used or made in infringement of the '442 Hess patent;

d.       reasonable compensation from October 31, 1997 to December 22, 1998;

e.        damages or an accounting of profits, at the plaintiff's election;

f.         aggravated, punitive and exemplary damages;

g.        interest and costs.

[134]        Further to the Bifurcation Order issued on January 8, 2002, at this trial the Court is limited to determining Dimplex's entitlement to the claimed remedies. The quantum of the remedies will be determined on a separate reference pursuant to Rule 107 of the Federal Courts Rules, 1998.

[135]        I find that Dimplex is entitled to a declaration that the '442 Patent has been infringed by CFM. No reason has been advanced to disentitle Dimplex to make its election between damages or an accounting of profits. It is entitled to pre and post-judgment interest on the damages or profits from the date they arose and until paid. Costs are to be determined after the parties have had an opportunity to make submissions on that question.

[136]        Dimplex is not entitled to any reasonable compensation under subsection 55(2) of the Patent Act as the infringing acts occurred no earlier than June 1999 when the development of the AE 2000 units began.

[137]        An injunction will issue to restrain the defendant from further use, manufacture or sale of the subject-matter of the patent. It is not necessary, in my view, to order the delivering up or destruction of any articles used or made in infringement of the '442 Patent as CFM may render them non-infringing by substitution of the essential elements: Stiga AB v. SLMCanada Ltd., [1990] F.c.J. No. 1065, 34 C.P.R. (3d) 216, 39 F.T.R. 13 at 42.

JUDGMENT

UPON the Court hearing the trial of this matter from September 19, 2005 to October 5, 2005 on all issues relating to liability and entitlement to remedies;

AND UPON considering the evidence of the witnesses called by the parties and the submissions of counsel;

IT IS HEREBY ORDERED ANDADJUDGED that:

1.                   Claims 1, 5, 7, 13, 14, 15, 16, 24, 25, 31, and 32, 33, and 34 of Canadian Letters Patent 2,175,442 are declared valid and infringed by the Defendant;

2.                   The Defendant, its directors, officers, employees, agents, and all those in privity with or under the control of the Defendant, are permanently enjoined from:

(a)                further infringing Canadian Letters Patent 2,175,442; and

(b)                manufacturing, importing, exporting, selling or offering for sale, in Canada or from Canada, any products that fall within the scope of the '442 patent, including those products listed in Appendix "A" hereto.

3.                   The Plaintiff is entitled to make an election between the remedies of damages and an accounting of profits, the quantum of which are to be determined at a reference in accordance with Rule 107, to be scheduled on an expedited basis when any appeals from this decision have been concluded or the time for appeal has expired. The Plaintiff is further entitled to pre- and post-judgment interest on such damages or profits from the date they arose to the date of payment.

4.                   Costs are to be spoken to by way of a Notice of Motion.

"Richard G. Mosley"

Appendix "A"

AE2000/DEF33 AE3000/DEF33 AE3001/DEF33NH AE3002/DEF33TK AE3004/HEF33 AE4000/DEF33 AE4001/DEFNH AE4004/HEF33 AE4005/HEF33N AE4006/HEF33LG AE4007/HEF33AB AE4008/DEF33PW AE4009/DEF33PO AE4010/HEF336M AE5000/DEF33 AE5001/DEFD33 AE5005/HEF33N AE5006/HEF33 AE5007/HEF33 AE5016HEF330M AE5026/HEF330MW AE5036/HEF340W AE5046/HEF331M AE5047/HEF331B AE5056/HEF335M AE5066/HEF335W AE5076/HEF337B AE5086/HEF334G BE1000/DEF36 BE1001/DEF36NH BE1600/DEF36S2 BE1601/DEF36S2NH BE2000/DEF36 BE2001/DEF36NH BE2003/DEF36PW BE2004/DEF36PO BE3000/DEF36 BE3001/DEFD36 FE10RO/BREF36 FE10R1/BREF36R FE1304/HES30 FE1404/HES40 FE1413/HES20 FE14T4/TES500 FE2404/HES40 FE24T4/TES500 FE3404/HES40 FE34T4/TES500	GE10RO/BREF42 GE10R1/BREF42R HE1261/HEF26 HE1261W/HEF26 HE1262/HEF26S HE1263/HEF26WDV HE1331/HEF33 HE1331W/HEF33 HE1332/HEF33S HE1333/HEF33WDV HE1334/HEF33SDV HE1334W/HEF33SD HE2263/HEF26WDG HE2333/HEF33WD HE2333W/HEF33WD HE2334/HEF33SDM HE3263/HEF26WD HE3263W/HEF26WD HE3331W/HEF33V HE3332W/HEF33SV HE3333/HEFWDG HE3334/HEF33SD HE4263/HEF26WDNO HE4333/HEF33WDG HE400CO HE400NI HEF10 HEF201H HEF221A HEF221M HEF221N HEF221W HEF223M HEF223MC HEF223W HEF225M HEF225W HEF226C HEF227AC HEF228N HEF228W HEF33P HEF33RM HEF261WD HEF262W HEF264C HEF266C HEF267HC	HEF267T HEF268N HEF330/HEF33 HEF331/HEF331 HEF331MTB HEF332/HEF332 HEF336M HEF338L HEF339H HEF33M3 HEF341WTB HEF36DS HEF36VW6 HEF1330-OW HEF3324W HEF3325A HEF3325W HEF3326N HEF3327H HEF3341 HEMB30 HEMB33 HEMW33 KE1000/HE32EF1 (later models) KE100C/HE32EFCE KE2000/HE32EF1 KE2001/HE32EF1 KE3000/HE32EF KE3001/HE32EFNH PE1001/HEF435SWN PE1000/HEF430WN PE1002/HE460MP PE1012/HE470WP PE1011/HE481SMBP PE1021/HE491SWBP PE1031/HE425SMN PE1032/HE420MN RE1004/HEF26 RE2001/HEF26        RE2002/HEF26WD RE2003/HEF26S RE2004/DEF26 RE2005/HEF26D RE2006/DEFD26 RE2001/HEF260M RE2011/HEF260M RE2012/HEF261WD RE3000 RE3001 TEF262-C TEF300-A TEF300-C VE1263 VE1333 VE1363 VE2333 VEF3261 #011874114519/HES30 #011874118050/HE460MP #011874117718/HE420MN #011874117657/HE430WN #011874118067/HE470WP 2810/ACSB 2811/FS 2812/ACSS 2813/ACSG 2814/ACSM 2870/ACSBCE 2873/ACSGCE 2874/ACSMCE 2900/ACSB 2901/ACSG 2902/ACSM 2905/ACSB 2906/ACSG 2907/ACSM 45810 45812 45813 45814

FEDERAL COURT

NAME OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                                           T-1348-01

STYLEOF CAUSE:                           DIMPLEX NORTH AMERICA LIMITED

                                                            and

                                                            CFM MAJESTIC INC.

PLACE OF HEARING:                     Toronto, Ontario

DATE OF HEARING:                       September 19 to 30, 2005

REASONS FOR JUDGMENT:        MOSLEY J.

DATED:                                              May 11, 2006

APPEARANCES:

David Aylen Peter Choe Selena Kim	FOR THE PLAINTIFF
Arthur Renaud L.E. Trent Horne	FOR THE DEFENDANT

SOLICITORS OF RECORD:

DAVID AYLEN PETER CHOE SELENA KIM Gowling Lafleur Henderson LLP Toronto, Ontario	FOR THE PLAINTIFF
ARTHUR RENAUD L.E. TRENT HORNE Bennett Jones LLP Toronto, Ontario	FOR THE DEFENDANT