Case Comment

J.M. Voith GMBH v.
Beliot Corporation

citation(s): (1993), 47 C.P.R. (3d) 448

copyright 1997 Donald M. Cameron, Aird & Berlis




The Decision

At p. 471:

"This issue applies to the DEW triple-nip sections sold and manufactured by the defendant GEC to Midtec and the two DEW triple-nip press sections sold by GEC, and provided by the defendant VDI, to South Sabah.

When press sections are contracted for, there are many portions of the press sections, such as felts and electric motors, that are supplied by third parties directly to the paper mill. Generally, the press sections are not assembled, with all felts and rolls in place, until this is done on the site of the purchaser. They are shipped to the purchaser as unassembled components. Indeed, the plaintiff's expert witness, Mr. Schmitt testified at the earlier hearing of this matter, that the press sections in issue in this case would have been partially assembled at the manufacturing site and partially at the final installation site.

Accordingly, a contract for the sale of a complete paper machine may be divided among different manufacturers for different sections of the machine. The defendant VDI, for example, did not assemble the whole press section in the machines which it sold. It does not normally assemble the rolls at all, except to assemble one roll and check for fit at each location. It is then assumed that the other rolls are identical. This was the practice followed by the South Sabah machines

The evidence supports the finding therefore, that while there may have been pre-assembly of some parts of the machines in question, the general practice was to assemble the machines at the site of the purchaser. The question before the Court now is whether the manufacture and sale of component parts, delivered for assembly and use outside of Canada, constitutes an infringement of the plaintiff's patent.

The plaintiff's position is that the infringement takes place at the time of the sale and again at the time of manufacture, even if the machine is assembled out of the country at some later date. Selling or manufacturing, it is argued, are both infringements whether it is for use in Canada or for export. In the present case, it is maintained that the substance of the plaintiff's invention has been used for the benefit of the defendants in Canada.

The defendants argue however, that the exclusive rights conferred by a Canadian patent are limited territorially to Canada, and are further limited by Section 44 of the Patent Act to the "making, constructing, using and vending to others to be used the said invention". A patent protects only against the operable assembly of the whole invention and not the manufacture of its parts. Therefore, the production of parts of patented machines and their shipment, in less than fully assembled form, for construction and use abroad, does not, it is submitted, constitute infringement.

Neither side was able to produce any Canadian caselaw dealing with this point. Indeed, it appears to be novel issue and in my opinion, is an altogether different one from the sale of component parts within Canada, as discussed above. Although, the plaintiff did rely on a number of authorities in support of its position, as I read those cases, the fact situations contained therein are not on all fours with the facts of the case at bar.

For example, in The British Motor Syndicate, Ld., and others v. John Taylor & Sons Ld., [1900] 17 R.P.C. 189 (H.C.), the infringing article was transported out of the country in assembled form, not in component parts to be assembled outside the country, as is the fact situation here. Similarly, the Windsurfing case, supra, did not deal with the issue of whether sale of component parts, for assembly and use outside of Canada, constitutes infringement.

After carefully considering the arguments put forth by the parties and examining the authorities in this area, I am satisfied that the answer to this question depends upon the proper interpretation to be accorded to Section 44 of the Patent Act; the statutory enactment which bestows upon the patentee the "exclusive right, privilege and liberty of making, constructing, using and vending to others to be used the invention".

It is true that the rights conferred upon a patentee under the Patent Act are territorially confined to Canada. In Dole Refrigerating Products Ltd. v. Canadian Ice Machine Co. et al. (1958), 28 C.P.R. 32, Thurlow, J. made the following comments in this regard at p. 36:

...I think it is also important to bear in mind that the exclusive rights conferred by a Canadian patent are limited territorially to Canada and are further limited by s. 46 [now s. 44] of the Patent Act, to those of "making, constructing, using and vending to others to be used the said invention". A person who, beyond Canada, makes, constructs, uses, or sells the invention commits no breach of the Canadian patent.

The question therefore is what activities are the defendants prohibited from doing by reason of the grant of patent to the plaintiff? The answer, quite simply is that they cannot, in Canada, make, construct, use or sell to others to be used, the plaintiff's invention. What then is the plaintiff's invention? There is no dispute that Beloit's invention embodies the marriage of old, previously known parts, into a new configuration. Accordingly, the only protection which the Patent Act affords to the plaintiff - the exclusive monopoly Beloit enjoys - is with respect to the amalgamation of those parts in a new and innovative fashion which comprises the essence of its invention. The singular parts of the invention are not protected.

In this respect, I must agree with the findings of the United States Supreme Court in Deepsouth Packing Co. Inc. v. Laitram Corp. (1972), 173 U.S.P.Q. 769. There, the question was whether the defendant Deepsouth was prohibited by patent law from exporting its product, in less than fully assembled form, for use abroad, on the grounds that once assembled, the product infringed the plaintiff's patent. The Supreme Court upheld the defendant's right to engage in the activities in which is was involved making the following comments at pp. 770-4;

None of the parts referred to are new, and none are claimed as new; nor is any portion of the combination less than the whole claimed as new, or stated to produce any given result. The end in view is proposed to be accomplished by the union of all, arranged and combined together in the manner described. And this combination, composed of all the parts mentioned in the specification, and arranged with reference to each other, and to other parts of the [machine] i the manner therein described is stated to be the improvement, and is the thing patented...

As is usual in combination patents, none of the elements in either of these patents were themselves patentable at the time of the patent, nor are they now,

The statute makes it clear that it is not an infringement to make or use a patented product outside of the United States. Thus in order to secure the injunction it seeks Laitram must show a s. 271(a) direct infringement by Deepsouth in the United States, that is, that Deepsouth "makes", "uses" or "sells" the patented product within the bounds of this country.

Laitram does not suggest that Deepsouth "uses" the machines. Its argument that Deepsouth sells the machines... cannot carry the day unless it can be shown that Deepsouth is selling the "patented invention". The sales questions thus resolves itself into the question of manufacture; did Deepsouth "make" (and then sell) something cognizable under the patent law as the patented invention or did it "make" (and then sell) something which fell short of infringement?

We cannot endorse the view that the "substantial manufacture of the constituent parts of a machine" constitutes direct infringement when we have so often held that a combination patent protects only against the operable assembly of the whole and not the manufacture of its parts.

In sum: the case law and statutory law resolves this case against the respondent. When so many courts have so often held what appears so evident - a combination patent can be infringed only by combination - we are not prepared to break the mould and begin anew.

In the present case, when the defendants shipped the unassembled parts in question out of the country, they cannot be said to have made, constructed, used or sold to others, in Canada, the plaintiff's invention. In order to be considered to have infringed Beloit's patent, the defendants must have sold the components of the invention for use and assembly in Canada, as held by the Court of Appeal in Windsurfing, supra, or they must themselves have assembled those parts in the manner described within the claims of the patent, within the boundaries of this country, and later exported the finished product, as in British Motors, supra. The evidence is clear that this is not what happened and for this reason the contracts in question do not constitute an infringement under Canadian patent laws.

I am not by any means questioning the findings of the Court of Appeal in the Windsurfing decision. Indeed, I wholeheartedly accept the findings made therein for the reasons stated above. However, it is my opinion that the decision is limited to the particular facts upon which it was based, namely, an infringer selling unassembled parts of an invention for use in Canada. It would be a grave error to extend that finding to the present situation. What the plaintiff is in fact seeking here, is an extension of the protection granted to it by the Patent Act, beyond the boundaries of this country. If Beloit is in need of protection in mark other than those in Canada, it must seek that protection through the patent laws of those countries where its invention is being used.

As stated previously, having found and determined that the contract between VDI and Klockner Stadler Hunter Ltd. for installation of machines in South Sabah, Malaysia being prescribed by the Quebec Civil Code, no damages are recoverable in relation to this contract.

For these reasons, the sale and manufacture of Dew Triple Nip press section sold and manufactured by the Defendant GEC to Midtec does not constitute an infringement of the Plaintiff's patent. Had I not already concluded that the Plaintiff's claim with respect to the two South Sabah machines was prescribed, they would also not constitute an infringement on the basis that they were assembled outside of Canada."


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