Introduction

In a closely watched intellectual property dispute before the Canada Federal Court of Appeal, Steelhead LNG (ASLNG) Ltd. failed to overturn a lower court ruling in its patent infringement action against ARC Resources Ltd. The appeal, closed on April 11, 2024 (Case No. A-210-22), centered on Canadian patent CA3027085A1 — covering a water-based LNG apparatus — and raised a pivotal question about the scope of “use” under Section 42 of the Patent Act.

The Court’s dismissal, with costs awarded to ARC Resources, sends a clear signal to patent holders in Canada’s energy sector: the statutory monopoly granted under the Patent Act has defined boundaries, and courts will not expand the interpretation of “use” to accommodate novel or expansive readings. For LNG patent litigation and offshore energy IP strategy broadly, this outcome carries significant precedential weight that patent attorneys, in-house IP counsel, and R&D teams should carefully examine.

Case Overview

The Parties

The Patent at Issue

At the center of this litigation is Canadian Patent Application No. CA3027085A1, which covers “a water-based apparatus comprising a hull, an AER (Auxiliary Engine Room) system and storage tanks.” This invention relates to floating LNG infrastructure — precisely the type of capital-intensive, marine-based energy technology where proprietary designs carry significant commercial value. The claimed invention reflects sophisticated engineering at the intersection of naval architecture and LNG processing systems.

The Accused Product and Conduct

Unlike traditional infringement cases involving a competing physical product, the alleged infringement here revolved around how ARC Resources used or engaged with confidential technical information connected to the patented apparatus — a distinction the Court ultimately found dispositive. The appellants argued for a broad interpretation of “use” sufficient to capture this conduct within the patent’s monopoly.

Legal Representation

Both firms are recognized Canadian IP and commercial litigation practices, lending high-quality advocacy on both sides of this interpretive dispute.

• • Plaintiff (Steelhead LNG): Andrea Rico Wolf, Kevin Siu, Tim Gilbert, and Vik Tenekjian of Gilbert’s LLP
• • Defendant (ARC Resources): Andrew R. Brodkin and Daniel Cappe of Goodmans LLP

Litigation Timeline & Procedural History

Case No. A-210-22 proceeded before the Canada Federal Court of Appeal — indicating this matter had already been adjudicated at the Federal Court trial level before Steelhead LNG pursued an appeal. The appellate record closed on April 11, 2024. Specific filing dates for the original action and the notice of appeal are not disclosed in the available case data.

A notable procedural dimension involves the appellants’ motion to file new evidence on appeal — a motion designed to bolster their expansive interpretation of “use” under Section 42. The Court dismissed this motion alongside the primary appeal, finding the proposed new evidence was predicated on the same erroneous legal interpretation underlying the appeal itself. This procedural outcome reinforces that evidentiary motions tethered to flawed legal theories will not survive independent scrutiny.

Separately, the Court acknowledged that Steelhead LNG had commenced parallel proceedings before the Supreme Court of British Columbia, pursuing claims related to copyright, moral rights, and non-disclosure agreement enforcement — a strategic litigation posture worth noting.

The Verdict & Legal Analysis

Outcome

The Canada Federal Court of Appeal dismissed the appeal in its entirety, with costs awarded to ARC Resources Ltd. No damages were assessed in Steelhead LNG’s favor. The appellants’ motion to introduce new evidence was similarly dismissed, with costs.

The Central Legal Question: Defining “Use” Under Section 42

The decisive issue was whether the motion judge erred in rejecting the appellants’ interpretation of “use” as defined under Section 42 of the Patent Act — the provision that grants a patentee the exclusive right to make, use, and sell a patented invention. Steelhead LNG advanced what the Court characterized as a “novel and expansive interpretation” of “use,” apparently seeking to extend the patent monopoly beyond physical manufacture or direct deployment of the patented apparatus into conduct involving access to or exploitation of associated confidential information.

The Court found no error in the motion judge’s rejection of this interpretation. The ruling affirms that the subject matter and time-limited monopoly granted by the Patent Act has specific, judicially defined contours — and those contours do not stretch to capture every form of commercial advantage a competitor might derive from exposure to a patented concept.

Legal Significance and Reasoning

The Court’s reasoning carries meaningful precedential value in several respects:

• • Boundary of Patent Monopoly: The decision reaffirms that Section 42 protection is invention-specific and conduct-specific. Patent rights protect against unauthorized making, using, and selling of the claimed invention — not against all downstream exploitation of information or ideas connected to it.
• • Interaction With Confidential Information Claims: The Court explicitly redirected the appellants toward alternative legal vehicles — copyright, moral rights, and non-disclosure agreement enforcement — as more appropriate remedies for the conduct alleged. This guidance is practically significant: it delineates where patent law ends and trade secret or contract law begins in the Canadian IP framework.
• • Appellate Evidentiary Standard: The dismissal of the new evidence motion underscores that appellate courts will not permit evidentiary expansion to rehabilitate legally deficient theories. The proposed evidence was rendered irrelevant by the Court’s rejection of the underlying legal interpretation.

Strategic Takeaways

• • For Patent Holders: Carefully assess whether alleged infringing conduct falls within the recognized scope of patent “use” before committing to infringement litigation. Overreach in claim framing — particularly novel interpretations of statutory terms — risks adverse cost awards and judicial skepticism.
• • For Accused Infringers: Where a plaintiff’s infringement theory depends on an expansive or unprecedented reading of a statutory term, early motion practice challenging that interpretation (as ARC Resources pursued here) can be a highly effective and cost-efficient defense strategy.
• • For R&D and Business Development Teams: This case illustrates why multi-layered IP protection strategies matter. Relying solely on patent rights to protect against competitive use of confidential technical information is legally insufficient. Robust NDAs, trade secret protections, and copyright strategies should accompany patent filings — particularly in collaborative energy development environments.

Industry & Competitive Implications

The LNG sector — particularly floating and offshore liquefaction infrastructure — is characterized by long development timelines, significant capital investment, and close collaboration between technology developers and energy majors. These dynamics create inherent tension around IP ownership and the treatment of technical information shared between parties.

This ruling highlights a structural vulnerability in IP strategies that depend exclusively on patent protection in partnership or pre-commercial contexts. For energy companies and LNG technology developers, the case underscores the importance of comprehensive information governance frameworks: well-drafted NDAs, clearly defined IP ownership clauses in development agreements, and parallel copyright registrations for technical documentation and design works.

ARC Resources’ successful defense also signals that Canadian courts will apply rigorous statutory construction to patent claims rather than extend protections beyond legislative intent — a posture consistent with recent Canadian Federal Court jurisprudence emphasizing the balance between patent holders’ rights and the public domain.

For companies operating in offshore energy, marine LNG, or adjacent technology sectors, this case is a timely reminder that freedom-to-operate (FTO) analyses must account for Canadian patent law’s defined scope of “use” — which may be narrower than U.S. equivalents in certain conduct-based infringement scenarios.