Steelhead LNG Limited Partnership v. ARC Resources Ltd.

2024 BCSC 1872 Steelhead LNG Limited Partnership v. ARC Resources Ltd.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Steelhead LNG Limited Partnership v. ARC Resources Ltd., 2024 BCSC 1872 Date: 20241009 Docket: S197484 Registry: Vancouver Between: Steelhead LNG Limited Partnership, and Steelhead LNG Corp. Plaintiffs And ARC Resources Ltd. Defendant Before: The Honourable Justice Kent Reasons for Judgment Counsel for the Plaintiffs: T. Gilbert Z. Cynader T. Dumigan Counsel for the Defendant: H. Poulus, KC B. Clarke Place and Dates of Hearing: Vancouver, B.C. August 9-10, 2023, September 6, 2023 and September 12, 2024 Place and Date of Judgment: Vancouver, B.C. October 9, 2024 Table of Contents Introduction and Overview.. 3 The Tabib Judgment. 6 The Manson Judgment. 8 Parties' Submissions. 15 The Defendant's Submissions. 15 The Plaintiffs' Submissions. 16 Analysis and Determination.. 17 Introduction and Overview [1] By way of their Notice of Application filed March 21, 2023, the plaintiffs applied to add Rockies LNG Limited Partnership and Rockies LNG GP Corp. as defendants to these proceedings and for leave to file a Further Amended Notice of Civil Claim. [2] By way of its Notice of Application filed August 2, 2023, the defendant applied for an order pursuant to rule 9-5(1) to strike certain paragraphs in the amended Notice of Civil Claim or, alternatively, to strike those same paragraphs along with certain additional paragraphs in the

proposed Further Amended Notice of Civil Claim should leave be granted for the latter pleading to be filed. [3] The original Notice of Civil Claim was filed in this Court on July 4, 2019, naming as the defendant Seven Generations Energy Ltd ("7G Ltd."). That defendant filed what it called a pro forma Response to Civil Claim on August 30, 2019 denying each allegation in the Notice of Civil Claim but otherwise stating that it was "unable to plead with specificity until the Plaintiffs particularize the information that is alleged to be confidential and to have been disclosed to, and improperly used by, the Defendant". [4] The defendant then applied for an order requiring the plaintiffs to provide further particulars of (1) the information alleged to be confidential and (2) the manner in which that information had been misused by the defendant. It also applied for an order that the plaintiffs' post security for costs on the grounds that they were insolvent. [5] In reasons for judgment issued on June 5, 2020, Justice Giaschi of this Court ruled that the particulars sought by the defendant were unnecessary (the NOCC contained 87 paragraphs in some 23 pages), and that the defendant well knew the case it had to meet. However, he directed the plaintiffs to provide additional particulars "to the extent that they were now known". He also issued an order requiring the plaintiffs to post

security for costs in the amount of $316,050. [6] Mr. Justice Giaschi's reasons for judgment describe the underlying litigation in detail and I will not repeat all of that here. Suffice it to say the plaintiffs allege that the defendant used extensive confidential information and copyrighted materials (as defined) in developing a competing LNG project in breach of various contractual non-disclosure and confidentiality provisions. Liability was (and is) asserted on the basis of both the law of contract and also in tort for breach of confidence and breach of copyright. [7] In the meantime, another related company, Steelhead LNG (ASLNG) LTD. ("Steelhead ASLNG") had applied for, and on November 3, 2020 was issued, a Patent for an invention entitled "Liquefaction Apparatus, Methods, and Systems" (the "085 Patent"). In December 2020, Steelhead ASLNG. along with one of the plaintiffs in this litigation, Steelhead LNG Limited Partnership, issued suit in the Federal Court against 7G Ltd., Rockies LNG Limited Partnership, Rockies LNG GP Corp. and Birchcliff Energy LTD., alleging "wilful misconduct" (misappropriation of confidential information) by way of an "infringing competing LNG project". [8] The pleadings in that Federal Court action are extensive. They included a counterclaim by the defendants against not only the two plaintiffs but also three private equity funds who owned the

majority of partnership units in Steelhead LNG Limited Partnership. The defence and counterclaim rather colourfully described the plaintiffs' claim as a "cascade of fictions and an abuse of process". The relief sought in the counterclaim included a declaration that no patent infringement had occurred and that, in any event, the 085 Patent was "invalid and void". [9] 7G Ltd. was the subject matter of amalgamation and the successor corporation was ARC Resources Ltd. Amendments to the pleadings in both the Federal Court action and the action in this court resulted in ARC Resources Ltd. becoming the named defendant in the place of 7G Ltd. [10] ARC Resources Ltd. appealed Giaschi J.'s order dismissing its application for particulars. In reasons for judgment dated April 7 and indexed at 2022 BCCA 128, the appeal was dismissed. [11] The plaintiffs in the Federal Court action then applied for an order requiring the defendants to produce further and better Affidavits of Documents and also for an order granting leave for the plaintiffs to add Western LNG as a defendant. On February 28, 2022 Case Management Judge Tabib dismissed the application (the "Tabib Judgment"). An appeal of that judgment was also dismissed by Justice McDonald of the Federal Court on May 25, 2022 indexed at 2022 FC 756. [12] The defendants in the Federal Court action brought a motion for summary trial seeking a

declaration that they had not infringed the Steelhead Patent and for an order dismissing the plaintiffs' action in its entirety. That order was granted by Mr. Justice Manson of the Federal Court on July 6, 2022 and the reasons for judgment are indexed at 2022 FC 998 (the "Manson Judgment"). [13] The Manson Judgment was appealed and in reasons for judgment dated April 11, 2024 and indexed at 2024 FCA 67, the Federal Court of Appeal unanimously dismissed the appeal. [14] The parties have advised me that leave is being sought to further appeal the summary dismissal judgment to the Supreme Court of Canada. As at the date of the hearing, that leave application had not been determined. [15] By the time of the final appearance before me, the issues in dispute had been further refined by the parties. [16] The plaintiffs are no longer seeking to add the two Rockies entities as defendants in this action. As well, the plaintiffs have redrafted their proposed amendments to the Further Amended Notice of Civil Claim in order, so they say, to specifically address some of the concerns raised by the defendant. [17] The question that is now squarely before me is whether portions of the plaintiffs' most current and/or proposed amended pleadings should be struck out/refused on the grounds of abuse of process or issue estoppel in light of the findings "made by the Federal Court in both the Tabib

and Manson Judgments". Another possibility, urged in the alternative by the plaintiffs, is whether the Court should exercise its discretion to decline any determination at this time, allow the proposed revised amendments to be made, and direct that the questions of abuse of process/issue estoppel be determined at a later date, whether at a summary trial or any "full" trial in due course. [18] Attached as Appendix A to these reasons for judgment is a colour copied annotated version of the proposed Further Amended Notice of Civil Claim. This document usefully highlights, in separate colours: · the paragraphs sought to be struck in the defendants' original Notice of Application (highlighted text); · the plaintiffs' recently proposed "narrowing amendments" (red text); · the further amendments which the defendants say are required to make the pleading "congruent" with the Manson Judgment (blue text); and, · the further amendments required to render the pleading "congruent" with the Tabib Judgment (green text). [19] For the reasons that follow I permit the plaintiffs to amend their pleading as proposed, dismiss the defendant's application to strike parts of the plaintiffs' pleading, and direct that the issues of abuse of process or issue estoppel be determined at trial. The Tabib Judgment [20] The Tabib judgment is quite short (10 pages) brackets and is unpublished. The paragraphs

are not numbered. [21] The plaintiffs in the Federal Court action were seeking production of documents related to the design and development of a certain floating LNG facility project then being pursued by the defendants and Western LNG known as the Ksi Lisims Project. The defendants acknowledged that these Kis Lisims' documents did in fact exist and had not been produced in the litigation. Their position was that the Ksi Lisims Project was a different project from the "infringing Competing LNG Project" alleged in the statement of claim and hence were irrelevant and immune from discovery in the Federal Court litigation. [22] The key parts of the Tabib judgment for present purposes include the following: The Defendants deny that they have ever proposed an LNG project based on the Plaintiffs' confidential information or on the patent. Still, they acknowledge having proposed one, and only one, LNG project in the time frame identified in the statement of claim. The defendants' position is that they have produced the documents related to that LNG project, and that the Ksi Lisims project is a different project. It is up to the Plaintiffs to show that, on the balance of probabilities, the documents related to the Ksi Lisims project are likely relevant to the allegations of the statement of claim, i.e., That those documents should show that the Ksi Lisims project is the same as the

initial project. The Plaintiffs have not met their burden. The evidence on record shows that when Western LNG joined the defendants and others in 2020, it did so on the understanding that it would use its own design for the LNG facility at Ksi Lisims. Whether or not that design is infringing is irrelevant. The defining characteristics of the allegedly infringing project, as pleaded, is that it is they based on the plaintiff's confidential information, including the as yet unpublished invention. A concept that might infringe the patent but is not based on the allegedly misappropriated information is no longer the "infringing Competing LNG Project"; it is an infringing project, and falls outside the scope of the statement of claim has pleaded. The plaintiffs have led no evidence to show that it is likely that the project, as it evolved with the participation of Western LNG, continue to be "based" on the information allegedly misappropriated. Rather, the evidence is overwhelmingly to the effect that the design for the LNG facility at Ksi Lisims, whether or not it otherwise infringes, originated from Western, without influence from any information supplied by the Defendants, let alone the Plaintiffs' confidential information. The court is not satisfied that the Ksi Lisims project is likely the same as the original allegedly infringing project or that the documents relating to the

Ksi Lisims project are relevant to the issues as pleaded. [23] The "evidence" before Case Management Judge Tabib included affidavit material which had been prepared by the defendants for use on a proposed Motion for Summary Trial. One of the grounds of the appeal raised by the plaintiffs was that CMJ Tabib should not have considered evidence when assessing the plaintiff's request to amend their claim. In her judgment on appeal, Justice McDonald noted that the application was not just a request to amend pleadings but also a request to add Western LNG as a defendant, a matter on which evidence was required and hence was properly before CMJ Tabib. Justice McDonald held there was "no error in law arising from the CMJ's consideration of the evidence" in the context of the necessity of adding Western LNG as a party to the action. [24] On the application before me, the defendant is arguing that it would be an abuse of process to allow further amendments to the plaintiff's pleading which do not acknowledge that the "designed for the LNG facility at Ksi Lisims originated from Western without influence from any information supplied by the defendants, let alone Steelhead's confidential information". The Manson Judgment [25] This judgment relates to the defendants' subsequent motion for a summary trial of the Federal Court patent infringement action. The court was satisfied that the

summary trial process was appropriate. The testimony of both expert and fact witnesses was adduced by way of affidavit supplemented by viva voce testimony at the hearing. As the court noted, 28. The only issue for determination on this motion is whether the Defendant's activities constitute infringement of the 085 Patent contrary to s. 42 of the Patent Act, by virtue of using the steelhead patented design to obtain a commercial benefit. [26] Section 42 of the Patent Act, R.S.C. 1985, c. P-4 reads as follows: Contents of Patent 42. Every patent granted under this Act shall contain the title or name of the invention, with a reference to the specification, and shall, subject to this Act, grant to the patentee and the patentee's legal representatives for the term of the patent, from the granting of the patent, the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used, subject to adjudication in respect thereof before any court of competent jurisdiction. [emphasis added] [27] The parties agreed there had not been any infringement by reason of making, constructing or selling the 085 claimed invention. The defendants admitted for the purposes of the summary trial that they had received a drawing of and a conceptual design of the plaintiff's LNG facility "invention" and that this material was presented to third

parties to demonstrate the feasibility of a floating natural gas liquefaction facility. [28] In the result, Justice Manson held that: · the patented invention (i.e. the Steelhead LNG facility) did not exist during the relevant time frame and therefore could not be "used"; · the 085 Patent did not claim the conceptual design of the LNG facility invention; · showing conceptual design drawings to third parties for promotional purposes does not amount to "use" of a patented invention and does not amount to patent infringement; · there was no evidence that the defendants obtained any sort of commercial benefit through their promotional use of the plaintiff's conceptual design and feasibility studies; · since the defendants had never made, constructed or sold the invention claimed in the 085 Patent, and since their promotional activities did not amount to "use" of the patented invention, the plaintiff's action for patent infringement had been brought before any infringement had actually occurred and thus was, at best, premature. [29] The plaintiff's action in the Federal Court was therefore dismissed in its entirety, however the defendant's Counterclaim for, among other things, challenging the validity of the plaintiff's patent, was permitted to stand as a continuing, separate proceeding. [30] As noted earlier, Justice Manson's decision was upheld by the Federal Court of Appeal (2024

FCA 67). The Federal Court of Appeal expressly affirmed Justice Manson's finding that sharing designs or feasibility studies with potential stakeholders, investors or partners does not amount to "use" of a patented invention within the meaning of s. 42 of the Patent Act. However, it also observed: 88. The subject matter and time-limited monopoly granted by the Act does not offer the protection that the appellants are seeking. Recourse may lie elsewhere, in the protection of other forms of intellectual property including copyright and moral rights, or in the enforcement of any non-disclosure agreements between the parties respecting the treatment and use of confidential information required by the parties in the course of their business dealings. The appellants have in fact commence proceedings against the respondents to pursue such claims before the Supreme Court of British Columbia. [31] The proposed Further Amended Notice of Civil Claim attached as Appendix A to these Reasons identifies the specific paragraphs of Justice Manson's judgment which the defendant says represent the findings of fact or law which should be binding upon the plaintiffs for the purposes of this action. Although they are rather lengthy, I repeat them here: [2] The proceeding underlying this motion is a patent infringement action brought by the Plaintiffs, Steelhead LNG (ASLNG) Ltd. and Steelhead LNG

Limited Partnership (collectively, Steelhead or the Plaintiffs), pursuant to the Patent Act, RSC 1985, c P-4 asserting infringement of Canadian Patent No. 3,027,085 (the "085 Patent"). [11] The following facts and timeline are uncontested and outline the business relationship and interactions between and within the Parties: 1. In early 2014, Steelhead and 7G (the predecessor to the Defendant ARC Resources Ltd.) commenced discussions to further Steelhead's development of its LNG facilities in British Columbia. As part of their business relationship and under the protection of applicable confidentiality obligations, 7G came into possession of Steelhead's confidential information including, among other things, the design for their proposed LNG facility (the "Steelhead Design").

2. From February 2018 to November 2018, Steelhead (with 7G as their representative) began discussions with a group of natural gas producers (the "Consortium") with a view to pursuing the design, development, and construction of an LNG export project in British Columbia. In addition to 7G, the Defendant Birchcliff Energy Ltd. was also a member of the Consortium. On September 14, 2018, Steelhead disclosed to the Consortium confidential information, including the Steelhead Design. In November 2018, the Consortium unilaterally terminated discussions with the Plaintiffs.

3. Meanwhile, in January 2018, the Consortium (which, as stated above, included the Defendants Birchcliff Energy Ltd. and 7G) hired the engineering, procurement, and construction (EPC) firm Advisian to prepare a preliminary feasibility study of an LNG facility. In May 2018, Advisian's study was delivered to the Consortium and included broad outlines of an LNG facility -- there were no engineering designs or drawings. In July 2018, the Consortium hired KBR, a second EPC firm, to prepare a preliminary Front End Engineering Design (pre-FEED) study. Between August 2018 and January 2019, KBR's pre-FEED study was provided to the Consortium on a rolling basis. This study did involve some engineering designs and was classified as a "Class 4" design and cost estimate -- "Class 5" being the earliest stage and "Class 1" being the latest stage. The KBR study was considered to be in the conceptual stage: it included significant optionality (including essential aspects of the Steelhead Design) and had a cost range [XXX] The KBR pre-FEED study marked the end of the Consortium's conceptual LNG facility -- no further development steps were taken in respect to this specific design. As stated above, the business relationship between the Consortium and the Plaintiffs ended in November 2018 -- during the time that the KBR pre-FEED study was being provided to the Consortium.

4. On December 10, 2018, the Plaintiffs filed their application for the 085 Patent, which claims the Steelhead Design as the invention.

5. On February 8, 2019, the 085 Patent was published.

6. From approximately February 2019 to May 2020, the Consortium showed a high-level summary of the KBR pre-FEED study design to third party potential investors, LNG off-takers, and large-scale industry contractors as part of large presentations, and allowed four of these third parties to see the KBR pre-FEED study itself. None of the third parties referred to above participated further with the Defendants in respect to the KBR pre-FEED study or design contained therein. The Consortium also met with Indigenous stakeholders throughout this period.

7. In April 2019, the Consortium began discussions with Western LNG, a Houston-based company engaged in the development of North American LNG export facilities, regarding the design and development of a potential LNG facility. At no time was the Plaintiffs' Steelhead Design, the 085 Patent, the Advisian feasibility study, or the KBR pre-FEED study provided to Western LNG; Western LNG provided and relied upon its own LNG facility design.

8. On July 4, 2019, the Plaintiffs commenced a civil claim in the British Columbia Supreme Court against the Defendants alleging breach of copyright and moral rights of the Steelhead Design.

9. As of May 1, 2020, the Consortium was formalized as the Defendant Rockies LNG Limited Partnership with several limited partners including the Defendants 7G (now ARC Resources Ltd.), Rockies LNG GP Corp., and Birchcliff Energy Ltd.

10. On November 3, 2020, the 085 Patent was issued.

11. On December 9, 2020, the Plaintiffs commenced the underlying patent infringement action.

12. On July 2, 2021, Western LNG, Rockies LNG Limited Partnership, and the Nisga'a First Nation entered into an agreement to develop the Ksi Lisims project, which is not the subject of this motion or the underlying action (see Steelhead LNG (ASLNG) Ltd. et al. v. ARC Resources Ltd. et al., 2022 FC 756 aff'g Steelhead LNG (ASLNG) Ltd. et al. v. ARC Resources Ltd. et al., T-1488-20, Order of Case Management Judge Tabib dated February 28, 2022 (unpublished)). [39] Thus, the issue is narrowed to whether the Defendants' conceptual design for purposes of potential future development of an LNG facility (as set out in KBR pre-FEED study) and presentation of the same to third party stakeholders between February 8, 2019 (the publication date of the 085 Patent) and May 2020 (when the KBR pre-FEED study was abandoned) constitutes use of the 085 Patent, contrary to section 42 of the Patent Act. (2) The Expert and Fact Witnesses (a) The Defendants' Fact Witnesses (i) Ms. Charlotte Raggett [42] Ms. Raggett was a credible and knowledgeable witness. On cross-examination, she highlighted that: 1. Building a FLNG facility takes many years (upwards of ten years) and costs billions of dollars (potentially exceeding ten billion dollars); 2. The crucial "go/ no go" decision for a FLNG project is referred to as the Final Investment Decision or "FID"; 3. Pre-FID work can be broken down into three

stages: the feasibility stage, the pre-FEED stage, and the FEED stage; 4. The KBR pre-FEED was classified as a "Class 4" design and cost estimate, with "Class 5" being the earliest stage and "Class 1" being the latest stage -- Class 4 design and cost estimate was at a "conceptual stage" only; 5. The KBR design had multiple options to be considered in the design, including: [XXX] [XXX] [XXX] [XXX] [XXX] 6. During the relevant times, engagement with Indigenous stakeholders, specifically the Nisga'a First Nation, were facilitated by a team member with strong relationships to First Nations in Northern British Columbia; the Nisga'a First Nation gave a presentation to the Defendants, not the other way around; and discussions regarding an LNG project were more broadly focussed and did not include the specific KBR design.

7. The reference in a presentation of a [XXX] [XXX] [XXX] -- not the subject of this motion or the underlying action.

8. By the time the Defendants were engaged in discussions with Western LNG, Ms. Raggett believed that the Defendants had developed credibility with important stakeholders, including the government, regulators, First Nations, and local communities. [57] On cross-examination, Mr. Ravesloot agreed that: 1. At the pre-FEED study stage, an LNG facility cannot produce LNG.

2. Though the mandate provided to KBR by the Defendants for their pre-FEED study may have included the elements of the 085 Patent, this mandate was given eight months before its publication date and the relevant period for this motion.

3. The presentations given by the Defendants were relatively early engagement to demonstrate to potential stakeholders that the Consortium are aware of and are addressing the challenges and are advancing components which must mature before a FID can be made.

4. While he thought it would be unusual and unlikely that the Defendants would start a new development with a new design, he conceded that this appears to be what occurred with Western LNG and the Ksi Lisims project. [85] In addition, the Plaintiffs have not provided evidence that a commercial benefit was obtained by the Defendants through their presentation of the KBR pre-FEED study. As stated above, all third parties shown the KBR study did not engage in further business relationships with the Defendants, and the testimony of Ms. Raggett revealed that relationships with Indigenous stakeholders were as a result of a team member and that the KBR pre-FEED study was never part of the discussions with First Nations. In addition, Western LNG approached and entered into a relationship with the Defendants accompanied by its own LNG facility design. [32] In essence, by opposing and/or modifying the plaintiffs' proposed further amendments to their pleading, the defendant is saying that the Federal Court judgments estop/prevent the plaintiffs from denying that: · the design of the Ksi Lisims facility/project originated solely from and was supplied entirely by Western LNG without reference to any of the plaintiff's confidential information; · the Ksi Lisims facility/project is independent from and is not a continuation of any conceptual floating natural gas liquefaction facility design

pursued by the defendants before May 2020 (the date when the defendants discontinued their work with any engineering, procurement and construction contractors with whom the plaintiffs were actively engaged); · at no time was the plaintiff's LNG facility design, it's 085 Patent or any of its feasibility/engineering studies provided to Western LNG; · none of the third parties who were shown the defendant's preliminary feasibility and engineering studies participated in any related further business with the defendants; · in May 2020, the KBR pre-FEED was abandoned by the defendants in favour of the facility design originating entirely from Western LNG; and, · the defendants relationship with the Nisga'a Nation arose out of a pre-existing relationship with an employee of the defendants without the plaintiff's confidential information being used in any fashion. Parties' Submissions The Defendant's Submissions [33] The defendants submit that substantial portions of the plaintiffs' claim against it have already been conclusively determined by the Federal Court and that the continued pursuit of these claims in this action amounts to impermissible re-litigation. They invoke the doctrines of issue estoppel and abuse of process as grounds for striking out the claims in paras. 29-33 and 96-99 of Part 1 of the Amended Notice of Civil Claim or, alternatively, paras. 29-33, 81-88, 99 & 99.2

of Part 1 of the Proposed Further Amended Notice of Civil Claim. They say the Federal Court has made findings of material fact and/or conclusions of mixed fact and law which are binding upon the parties in this litigation and which are wholly at odds its with the allegations to the contrary made in the plaintiff's current or proposed pleading. [34] The defendants invoke the well-known cases of Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44 and Toronto (City) v. Canadian Union of Public Employees (C.U.P.E.), Local 79, 2003 SCC 63 in support of the doctrines of issue estoppel and abuse of process. They acknowledge that the Federal Court action and the action in this court deal with different causes of action, however submit that the legal distinction between the tests for patent infringement and breach of confidence do not preclude the court from finding that material facts and issues are common to both actions and have already been decided in the defendant's favour by the Federal Court. [35] To the extent that the plaintiffs seek to circumvent or distinguish the Tabib Judgment on the grounds that it was "merely" an interlocutory procedural application (production of documents), the defendant invokes Gonzalez v. Gonzalez, 2016 BCCA 376 at paras. 13-15 in support of the proposition that the doctrines of issue estoppel or abuse of process can nonetheless apply (and should in

this particular case). The Plaintiffs' Submissions [36] The plaintiffs remind the court that in order to strike out pleadings under SCCR 9-5, the applicant must meet the high threshold test whether it is "plain and obvious" that the claim(s) is unsustainable, whether by virtue of issue estoppel/abuse of process or otherwise. They say that none of the allegations regarding the nature, scope or misuse of the plaintiff's confidential information were ever explored, much less decided, in the Federal Court. They argue that the legal and factual issues in the Federal Court patent proceeding are much more narrow, and are distinct from, the breach of contract and breach of confidence issues before this court, matters with which are beyond the statutory jurisdiction of the Federal Court. [37] The plaintiffs submit that, at its core, the Tabib Judgment was about the scope of the Federal Court pleadings i.e. whether the Ksi Lisims project was the same as the "infringing Competing LNG Project" alleged by the plaintiffs in the Federal Court action. CMJ Tabib concluded that the pleadings were not sufficient in that regard, noting there were no allegations tying Western LNG's activities to the alleged infringing project. She emphasized that the plaintiffs had not sought leave to amend the pleadings to expressly identify the Ksi Lisims project as the allegedly infringing project. They argue

that the Tabib judgment "should not be afforded any weight given the procedural context". [38] Insofar as the Manson Judgment is concerned, the plaintiffs say it dealt solely with the issue of patent infringement and, in particular, the narrow question whether the defendants' presentation to third parties of the plaintiff's conceptual design and feasibility studies constituted an infringing "use" of the invention claimed by the plaintiff's patent, contrary to s. 42 of the Patent Act. [39] The plaintiffs submit that Justice Manson did not consider confidential information at all, nor did he determine any allegations regarding its use or misuse. They cite Netbored Inc. v. Avery Holdings Inc., 2005 FC 1405 at paras. 53-54 for the proposition that the Federal Court "does not have jurisdiction to hear and determine issues as to "confidential information"". [40] The plaintiffs urge the court to note the significant distinction between the subject matter of the patent (an invention/facility for the liquefaction of natural gas) and the much broader concept of an LNG project and all of its complexities (permitting, land acquisition, regulatory approvals, pipeline development, and the like). They emphasize that the litigation in this court concerns a 4-year business relationship between the parties with associated contractual, common law and fiduciary duties along with the alleged

conveyance and subsequent misuse of confidential information provided by the plaintiff to the defendant over that period, including technical information and information related to marketing, business relationships, commercial strategies, and financial analyses, among other things. [41] The plaintiffs also ask the court to keep the notion of fairness "top of mind", suggesting that the plaintiffs should be permitted to advance its confidential information allegations in this court rather than having them determined "collaterally or incidentally" by the Federal Court which had no jurisdiction to even hear them. Analysis and Determination [42] The breach of confidentiality alleged in this case is much broader than the design of any particular facility for liquefaction of natural gas and extends to Steelhead's "LNG Development Strategy" as defined in the plaintiffs' proposed pleadings i.e. the "project" versus "facility" distinction referred to above. If such information is in fact confidential and was improperly used by the defendant in pursuit of the Ksi Lisims project with Western LNG and others, there may exist a viable claim which might succeed at trial. In my view, it is appropriate for the plaintiffs to have an opportunity to develop this claim through discovery and into trial. [43] By their strikeout application, the defendant is not seeking dismissal of the litigation.

Instead, they are only seeking surgical excision of certain specific allegations and/or are asking the court to effectively require certain admissions from the plaintiffs, admissions which the defendant obviously believes will severely limit successful prosecution of the remaining claim. Yet, as noted above, the court retains a residual discretion to decline estoppel even where the prerequisite elements are present, and this requires a nuanced inquiry into the fairness of using the results of prior proceedings in subsequent related litigation. That is an inquiry which, in my view, should be determined at trial based on findings of fact respecting the parties' respective conduct and the manner in which any confidential information has actually been (mis)used ("use" in a sense other than what is contemplated by s. 42 of the Patent Act). This is precisely the type of "recourse" referred to by the Federal Court of Appeal in para. 88 of it's judgment referred to above. [44] In the result, for the reasons stated, I make the following orders: · the plaintiffs are granted leave to further amend their Notice of Civil Claim in the manner proposed and as reflected in Appendix A to these Reasons for Judgment (without inclusion of the additional paragraphs proposed by the defendant as marked in blue and green in Appendix A); · the defendant's application to strike out and/or qualify parts

of the plaintiffs' pleading is dismissed; · however, the defendant is granted leave to amend its Response to Civil Claim to specifically allege and particularize its defences respecting issue estoppel and abuse of process through impermissible re-litigation; and, · any questions regarding the application of issue estoppel or abuse of process will be determined at trial. [45] In the circumstances, the costs of these applications will be in the cause. "Kent J." Appendix A