BETWEEN:
GENPHARM INC. and BELLCO S.p.A.
Plaintiffs
-and-
GAMBRO LUNDIA AB
Defendant
AND BETWEEN:
GAMBRO LUNDIA AB
Plaintiff by Counterclaim
-and-
GENPHARM INC. and BELLCO S.p.A.
Defendants by Counterclaim
REASONS FOR ORDER AND ORDER
HUGESSEN J.
[1] This action concerns a patent for the preparation of fluids for use in hemodialysis, a medical procedure that removes waste materials and fluids from patients with impaired kidney functions. The defendant, Gambro Lundia AB ("Gambro") owns Canadian Patent No. 1,286,284 (the "'284 Patent"). The '284 Patent claims a system for preparing a fluid for medical procedures such as hemodialysis by mixing a powder concentrate and water. The '284 Patent covers the use of a powder concentrate cartridge to prepare a fluid used in hemodialysis procedures, the cartridge itself, the method of making the cartridge, the use of a concentrate in powder form to fill the cartridge, and for the system formed by the use of one or more of these elements in combination. Gambro's Canadian subsidiary, Gambro Canada Ltd., distributes "BiCart", a powder bicarbonate concentrate cartridge, and hemodialysis machines for use in the patented system.
[2] The plaintiff Genpharm Inc. ("Genpharm") is the Canadian distributor of the plaintiff Bellco S.p.A.'s ("Bellco") Formula hemodialysis machines which can operate with either liquid bicarbonate concentrate or dry powder concentrate. The machines have been modified so as to accept and operate with BiCart cartridges. By their action the plaintiffs seek a declaration that there is no direct or induced infringement where Gambro's BiCart cartridges are used with Bellco's Formula machines. They also challenge the validity of the '284 Patent. Gambro has counterclaimed for infringement.
[3] The plaintiffs now move for summary judgment and other subsidiary interlocutory relief. The principal thrust of their argument is that they are not liable for any acts that would otherwise be an infringement of the '284 Patent first, because they do not themselves infringe the '284 Patent since they do not themselves use Gambro's BiCart cartridges on the Formula dialysis machines sold by them in Canada; and, second, because the hospitals and other similar customers to whom they have sold those machines do not infringe the '284 Patent since they buy the cartridges they use from Gambro and thus have an "implied license" to use Gambro's cartridges on Genpharm's Formula machines.
[4] The evidence on the first of those propositions is not compelling and the credibility of the Genpharm representative who gave it was seriously compromised on cross-examination. There is, in my view, clearly a genuine issue for trial on the question of whether Genpharm's employees use the BiCart cartridges when they demonstrate, set up, test, and calibrate the machines which they sell to their customers. Normally, that should be enough to dispose of the summary judgment motion, but the plaintiffs, expanding and elaborating on the second of their above propositions, say that any cartridges "used" by them come from their customers who have acquired them from Gambro and have impliedly sub-licensed Genpharm under the same license they have themselves impliedly received from the latter. I have very serious doubts as to whether there is any evidentiary foundation for this argument in the materials produced on this motion, but since there can be no question that all the cartridges used on either party's machines originate with Gambro I think I should at least briefly consider its legal foundations.
[5] Central to the plaintiffs' argument is the proposition that, in law, the seller of a patented article "exhausts" his patent rights in that article and impliedly licenses the buyer to use it in the manner taught by the patent. Since all of Genpharm's customers are also customers of Gambro and continue to purchase all of their cartridges from the latter, it is said that Genpharm neither itself infringes nor induces the infringement by its customers of Gambro's patent. On the facts of the present case that is a rather startling proposition when one considers that the cartridge is an inexpensive (under $10) albeit important element in a combination system worth many thousands of dollars, the relationship being not dissimilar to that of a spark plug to an automobile. It would indeed be surprising if the purchase of the former gave an implied license to practice a patent on the latter.
[6] One fallacy in the plaintiffs' argument lies in the fact that the '284 Patent covers not only the various elements in the combination claimed but also in the combination itself. The sale of the patented cartridge undoubtedly gives the right to use that cartridge but not the right to practice any of the other elements protected by the patent. The plaintiffs respond to this argument by saying that the cartridge is the central and essential element in the '284 Patent and the only one which is not covered by the prior art. That may or may not be so, but the plaintiffs have produced no expert evidence either as to the state of the prior art or as to the knowledge of the person skilled in the art to whom the patent is addressed, and the defendants, who have filed an expert affidavit, take issue with the point. Thus, on the present state of this record, the question clearly constitutes a genuine issue for trial which would not be appropriate for resolution on summary judgment.
[7] The plaintiffs rely heavily on a decision of the U.S. Court of Appeal for the Federal Circuit in Anton/Bauer Inc. and Alex Desoro v. PAG LTD., 329 F.3d 1343 (Fed. Cir. 2003). In that case the plaintiff Anton/Bauer had a patent for its "Battery Pack Combination" (the "'204 Patent'"). The '204 Patent contained a combination claim for interlocking and releasing male and female plates. Anton/Bauer sold male plates individually and with battery packs. It sold female plates directly to the portable television and video camera industry, as well as to end users. The male and female plates were never sold together as the patented combination. The defendant PAG sold a battery pack that could be used in combination with the female plates, thus forming the patented combination. The Court noted that the sales of the female plates were authorized, and that there was no evidence of restrictions on the use of the female plates. It held that Anton/Bauer had granted purchasers of its female plate an implied license to practice the invention claimed in the '204 Patent and that accordingly use by such purchasers of the PAG battery pack did not constitute infringement.
[8] In my view, the present case can be readily distinguished. In Anton/Bauer, the Court noted that the fact that the plaintiff sold both the male and female plates separately and not as the patented combination, "does not, without more, suggest that Anton/Bauer did not intend to grant an implied license". But the Court also noted that, "different facts may have led to a different result". It noted, for example, that had Anton/Bauer sold the male and female plates together, the case might have been decided differently. In the present case it appears that Gambro sold and continues to sell replacement cartridges only to persons to whom it has sold Gambro machines, and, even though such users may subsequently have also become users of the plaintiffs' machines, there could not initially have been any implied license to use them other than with Gambro machines. Nor can it be inferred that Gambro has consented to the use of its product on Genpharm machines from the simple fact of it having agreed to sell BiCart cartridges to former customers who subsequently became purchasers of Genpharm machines; such sales are in my view satisfactorily explained by the fact that to refuse to sell to such customers would have had the result of placing the lives of innocent patients at risk since, for those who require it, hemodialysis is, literally, a matter of life or death.
[9] Also of critical importance in comparing the two cases is the difference which I have already noted in the relative importance of the products sold. The Court in Anton/Bauer stated at Note 3:
We do not address the question of whether the grant of a license to practice a patented combination may be inferred from the sale of any part (no matter how minor) of the combination.
[10] Thus, even if the statement of the law by the Federal Circuit is ultimately found to be applicable in Canada, the reach of Anton/Bauer does not extend to the fact pattern in the present case which in my view points away from rather than towards any suggestion that Gambro ever intended to authorise purchasers of the BiCart cartridges to practice the '284 Patent. Moreover, I think that there are strong policy reasons to limit the notion of an implied license to the purchaser of a patented article in the case of combination patents. The protection afforded to combination claims would be severely eroded if an end user could practice a patent simply by purchasing the least expensive (and in this case disposable) part, where that part is sold separately without the patentee having expressly imposed conditions and restrictions on the buyer's right to use or resell it.
[11] Ultimately, of course, the question of whether or not the seller has granted an implied license to practice his patent is one of fact to be determined only after an examination of the entire course of dealing between buyer and seller and the drawing of the proper inferences as to their respective states of mind. Here, there is evidence that at least some of Genpharm's customers required it to give them an indemnity against suits by Gambro for patent infringement. In those circumstances such customers clearly did not think that they had or would receive a license from Gambro. In any sale it is unusual, though admittedly not impossible, for the buyer to obtain more benefits than he has bargained for and the inference is that no license was granted.
[12] Since, as already indicated, it is in any event my view that the plaintiffs have not established that there is no genuine issue for trial, the motion for summary judgment must be dismissed.
[13] The plaintiffs have requested alternative Orders in the event that the Court does not find that the plaintiffs have not infringed the '284 Patent. Most of those requested alternatives relate to allegedly "material facts" which are said not to be in dispute. While it may be that the defendants have not so far produced any evidence contradicting those facts I can see no merit in making such Orders at this time and the matter should be left to the judge who will preside at the pre-trial conference.
[14] A further alternative Order proposed by the plaintiffs is for an Order pursuant to Rule 220 that the Court determine as a preliminary question of law whether Gambro's patent rights are exhausted once it sells the BiCart cartridges to a customer, and whether, to the extent that the plaintiffs do not sell cartridges in Canada the plaintiffs will not be liable for infringement of the '284 Patent. In the absence of an agreed statement of facts the proposed question is far from being purely one of law and such an order would not be appropriate at this time.
[15] The motion for summary judgment is without merit and should not have been brought. The defendant is entitled to costs on an elevated scale and I would fix such costs in the sum of $15,000 payable forthwith and in any event of the cause.
ORDER
The motion for summary judgment is dismissed with costs to the defendant fixed in the amount of $15,000 payable forthwith and in any event of the cause.
Judge
Ottawa, Ontario
November 30, 2005
FEDERAL COURT
NAME OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-475-03
STYLE OF CAUSE: GENPHARM INC. et al v. GAMBRO LUNDIA AB
PLACE OF HEARING: OTTAWA, ONTARIO
DATE OF HEARING: NOVEMBER 17, 2005
APPEARANCES:
TIM GILBERT AND SHONAGH MCVEAN FOR PLAINTIFF
DOUGLAS N. DEETH AND HEATHER E.A.WATTS FOR DEFENDANTS
SOLICITORS OF RECORD:
GILPBERT'S LLP
TORONTO, ONTARIO FOR PLAINTIFF
DEETH WILLIAMS WALL LLP
TORONTO, ONTARIO FOR DEFENDANTS