Recent Decisions December 2004

I. FEDERAL COURT DECISIONS

(a) Patents

1. Olof A. Hallstrom, Jr. and Hallco Manufacturing v. Trans-Isle Freightways, September 16, 2004 FCTD (Hugessen J.) Motion for Summary Judgment/Weight Given to Evidence of Foreign Counsel Regarding Foreign Law /Purposive Interpretation of a Contract/Extrinsic Evidence.

Three motions for summary judgment based on same facts brought by defendants in an underlying patent infringement case. The plaintiffs and the defendants had signed, after patent litigation in the U.S., a Confidential Settlement Agreement (“CSA”), which purportedly released all parties from any “existing” claims regarding the subject U.S. patent dispute, including claims regarding “foreign counterparts” of the U.S. patents. The Canadian patent in the underlying litigation was the counterpart of one of the U.S. patents listed in the CSA, with the same “claim 9” issue that had already been litigated in the U.S. Both parties agreed that the CSA was to be construed in accordance with the laws of Oregon, where it was signed. The defendants asserted that the CSA released them from liability, and that there was no genuine issue for trial. The plaintiffs asserted that as there was a dispute as to Oregon law, the case must go to trial. Three questions were at issue in deciding this motion: 1) whether Oregon law would view the releasing provision in the CSA as ambiguous, 2) whether extrinsic evidence is allowed under Oregon law, 3) whether such evidence would be allowed to resolve such ambiguity.

Held: Motion for summary judgment allowed, underlying actions dismissed. Evidence from Oregon lawyers as to the probable result by an Oregon Court is only useful to the extent that it shows how an Oregon Court would apply different rules. There was no ambiguity in the word “existing” in the CSA, the purpose of the provision was to deal with the release of claims under the listed patents, and then dispose of all other claims that might be asserted under foreign patent counterparts. The law of Oregon is the same as the law of Canada regarding extrinsic evidence. It can be introduced to demonstrate an ambiguity that is not apparent from the face of the agreement. Extrinsic evidence of the recollection of lawyers who were acting for the parties at the time the CSA was signed was unreliable as the CSA was signed six years before the evidence was given. However, a transcript by a court reporter during negotiations was reliable, and clearly demonstrated that there was an intent to release the parties involved from all known claims relating to the U.S. patent litigation. At the time when the CSA was being negotiated, the Canadian patent was known to the plaintiffs, which had the same “claim 9” issue, as in U.S. patent action. Therefore, the plaintiffs were precluded from bringing an action in Canada.

Back to top

2. AstraZeneca Canada v. Apotex and Canada (Minister of Health and AG), (Application No.1) September 20, 2004 FCTD (Kelen, J.) Application for Judicial Review/Whether NOC Issued Unlawfully because Apotex not Required to Issue a New Allegation/New Formulation /Patented Medicines (Notice of Compliance) Regulations

Application for judicial review of an NOC issued to Apotex for omeprazole 20 mg capsules. Astra alleges that the NOC was issued unlawfully because the Minister did not require Apotex to serve a new allegation under s. 5 of the Regulations for a revised formulation of the medicine, pursuant to Astra's '693 and '891 patents, both on the Patent Register. A previous allegation with respect to the same medicine and the same patents had been the subject of a prohibition application under the Regulations, which was dismissed by Consent Order in 1996. The Minister's delegate advised Astra that Apotex would not be required to address the '693 and '891 patents since this Court had dismissed Astra's application to prohibit. Further, the Minister advised that she had no authority to require Apotex to file another allegation regarding the '693 and '891 patents.

Held: Application dismissed. An application for judicial review does not lie with respect to the Minister's decision in this case. The Minister is not required to assess whether Apotex's revised formulation for omeprazole capsules is materially different for the purpose of the Regulations than the formulation which is the subject of a Federal Court Order dismissing an application for prohibition with respect to the same patents and the same drug. If Apotex has misrepresented the revised formulation, then that should be dealt with under the Patent Act. In the alternative that this decision is subject to judicial review, the Court applied the pragmatic and functional approach and found the standard of review to be reasonableness. The Minister did not err as the decision was reasonably open to her under the Regulations and on the basis of the evidence before her. The fact that the formulation changed is not unusual. The Minister acted reasonably in not requiring Apotex to file a new allegation and in relying upon the 1996 Consent Order. The Minister's decision to rely upon Apotex to comply with its obligations under the Regulations was reasonable.

Back to top

3. AstraZeneca Canada v. Apotex and Canada (Minister of Health and AG), (Application 2 & 3) September 20, 2004 FCTD (Kelen J.) Judicial Review of Decision to Issue NOC/Section 5(1) Requires a Second Person to Market the Drug in Canada/Marketing /Patented Medicines (Notice of Compliance) Regulations

Application for judicial review to set aside a decision of the Minister to issue an NOC to Apotex for 20 mg and 40 mg capsules of omeprazole, without requiring Apotex to address Astra's '470 and '037 patents, which were added to the Patent List after Astra ceased marketing omeprazole (LOSEC) in Canada. Apotex was not required to address either patent because Astra had not fulfilled the prerequisites under s. 5(1) of the Regulations to require a “second person” to address those patents. The Minister concluded that Astra failed to market LOSEC 20 mg capsules pursuant to the NOCs for which the '470 and '037 patents were listed. The Court addressed 4 issues in this application: 1) the standard of review for Minister's decisions under the Regulations; 2) whether the Minister erred in law by interpreting s. 5 of the Regulations as not requiring Apotex to address the '470 and '037 patents because the drug had not been “marketed” pursuant to an NOC in respect of the patents; 3) whether the Minister erred in finding that LOSEC was not marketed in Canada after May 22, 2002 as claimed by Astra; and 4) whether the Minister breached the duty to act fairly by not providing Astra with an adequate opportunity to know and respond to Apotex's representations on the first two issues.

Held: Application dismissed. The Court applied the pragmatic and functional approach and determined that the proper interpretation of “marketed” in s. 5 is a question of law resulting in a standard of review of correctness. The determination of whether LOSEC capsules were marketed in Canada after May 22, 2002 is a question of fact resulting in a standard of patent unreasonableness. The Minister did not err in interpreting s. 5 as not requiring Apotex to address Astra's patents. The patented drug could not be a drug manufactured and sold pursuant to patents listed on the Patent Register after the applicant stopped marketing LOSEC 20 mg capsules in 1996. The wording in s. 5(1) can only refer to a drug marketed in Canada pursuant to an NOC in respect of which the patent in question has been listed. The applicant's LOSEC 20 mg capsules could not have been “marketed” in Canada since the NOCs were issued after 1996 and since the patents were added after 1996. A patent drug company should not be able to use the Regulations to delay a generic drug by listing new patents for a drug no longer sold in Canada. The Minister was not patently unreasonable in concluding that LOSEC 20 mg had not been marketed. “Marketing” means more than mere “sales” or “sold”. It means “the action of, or business of, promoting and selling products including market research and advertising”. The Minister acted fairly as the applicant was given the opportunity to provide specified evidence and was advised of the consequences if that evidence was not satisfactory.

Back to top

4. GlaxoSmithKline v. Apotex and Canada (Minister of Health & AG), September 23, 2004 FCTD (Lemieux J.) Application by GSK to Quash NOC Issued to Apotex because Apotex Failed to Serve an NOA on GSK/Administrative New Drug Submission Cross-referencing 3M's NOC /Patented Medicines (Notice of Compliance) Regulations.

Apotex was granted an NOC for its inhalation product Apo-Salvent CFC Free containing the medicine salbutamol sulphate. GSK asserted that the Minister erred in granting an NOC to Apotex, arguing that Apotex's product contains the same medicine as GSK's Ventolin, and is delivered by the same oral route, in the same strength and in the same inhalation dosage form. GSK holds an NOC for its drug Ventolin, a product which contains the medicinal ingredient salbutamol sulphate for oral inhalation. GSK argued that Apotex's failure to send an NOA to GSK under s. 5(1.1) of the Regulations was grounds to quash the NOC. The Minister and Apotex argued that an NOA was unnecessary because Apotex's submission was an administrative submission, cross-referencing 3M Canada's NOC. Apotex licenses from 3M the medicine salbutamol sulphate administered through inhalation. 3M holds an NOC for the medicine, under the brand name Airomir. Apotex compared its product to Airomir finding them identical, the only difference being a name change.

Held: Application to quash dismissed. The Minister was correct to issue an NOC to Apotex without requiring Apotex to serve an NOA on GSK. Lemieux J. found that Apotex's administrative new drug submission is not a submission for an NOC within the meaning of the words found in s. 5(1) or 5(1.1), and consequently, Apotex did not have to serve an NOA on GSK. Apotex's submission was in accordance with the Minister's policy for minor changes in materials previously filed in support of an NOC, which had issued to 3M. In the alternative, if the Regulations do apply to an administrative new drug submission, s. 5(1.1) does not apply since s. 5(1) applies because Apotex compared its drug with or made reference to 3M's Airomir for the purpose of demonstrating bioequivalency.

Back to top

5. Abbott Laboratories v. Canada (Minister of Health) and Pharmascience, October 1, 2004 FCTD (Gibson J.) Non-infringement because Product Produced by a Different Process/NOA Insufficient/Patented Medicines (Notice of Compliance) Regulations

Application by Abbott to prohibit the Minister from issuing to Pharmascience an NOC for clarithromycin after the expiry of the '732 patent. Pharmascience issued an NOA to Abbott relating to Abbott's '732 patent, which covers form II clarithromycin. Pharmascience argued non-infringement, asserting that its form II clarithromycin is produced by a different process. It was undisputed that the end product, form II clarithromycin, was the same. The '732 patent covers a process by which form II clarithromycin is manufactured directly from the precursor by way of recrystallization, as opposed to converting form I to form II clarithromycin. Pharmascience argued that its process, to be carried out off-shore and imported into Canada, proceeded through a solid-state transformation, which involved a direct transformation of a crystalline form to a different crystalline form, and did not involve a recrystallization.

Held: Order granted to prohibit the Minister from issuing Pharmascience an NOC. Pharmascience provided little evidence, other than bald assertions, that the form II clarithromycin would not be produced in a fashion which is covered by the '732 patent. Pharmascience's NOA was therefore deemed to be insufficient. Pharmascience produced emails between itself and the importer stating that the form II clarithromycin would be produced via the “slurry” route. This was held to be insufficient evidence on which to base an NOA. While considering the insufficiency of the NOA dispositive of the matter, Gibson J. proceeded to analyze the claims for completeness. Pharmascience argued that its “slurry” route to produce form II clarithromycin was entirely different from Abbott's patented recrystallization route. Gibson J. found Abbott's experts more credible and also found that Pharmascience's “slurry” route was indeed a recrystallization that would infringe the '732 patent.

Back to top

6. Apotex v. Merck, Apotex and Canada (AG), October 20, 2004 (Aronovitch, P.) Motion to Strike Defence and Counterclaim/ Section 8 Proceeding/Infringement/Set-off/Patented Medicines (Notice of Compliance) Regulations

Motion brought by Apotex to strike several paragraphs of Merck's statement of defence and counterclaim that allege infringement, and seek a remedy by way of set-off. Apotex maintains that the impugned paragraphs disclose no reasonable defence, are immaterial, redundant, frivolous and vexatious, will delay the fair trial of the s. 8 action and are an abuse of process of the Court. An underlying suit was brought by Apotex pursuant to s. 8 of the Regulations for damages suffered by reason of an eleven month delay in the issuance of an NOC to Apotex for the sale of Apo-lovastatin. Merck is defending and counterclaiming on the basis that Apotex is not entitled to damages under s.8, alleging that Apotex has infringed Merck's '380 patent and would not have been in a position to market non-infringing lovastatin had an NOC issued to Apotex earlier. The question raised by this motion is whether Merck's defence of Apotex's alleged infringement will stand in light of what Apotex maintains is an “automatic” or absolute statutory right to damages.

Held: Motion dismissed. Apotex has failed to cite any authority that dictates that Merck's proposed defence and counterclaim are prohibited beyond doubt. However, the Court found that to the extent that the pleadings are inconsistent with Merck's representations, Merck's open-ended pleadings, if not particularized, will amount to an abuse of process. Merck is directed to particularize its pleadings in a manner that is consistent with its representations to the Court and to stipulate the period of alleged infringement that underlies the declaration of infringement that is sought. Contentious issues of statutory interpretation involving s. 8 should not be dealt with on motions to strike pleadings, and should instead be left to the trial judge. With regard to whether s. 8 may be said to impose absolute liability, s. 8(5) makes it clear that the Court may consider “the conduct” of the parties and “all matters that are relevant'. The second person's infringement as “conduct” or a “relevant matter” are matters which may be taken into consideration in assessing damages. Apotex is required, in a s.8 action, to establish or prove the loss it has suffered, and which entitles it to recover damages. Allegations of infringement, the absence of a non-infringing process or product in the period prior to the issuance of the NOC are not hypothetical and may be proven through evidence at trial. Remedies in the two proceedings are not mutual debts. Money paid to Apotex in this s. 8 proceeding is not recoverable by Merck upon a finding of infringement, if any, in the patent infringement action. Pleadings should not be struck under r.221(d) for undue delay, for which prejudice is the principal factor for consideration, given that the substantive rights of Merck are at issue. There is no abuse of process. Procedural safeguards, such as consolidation, will allow for the efficient management of the s. 8 proceeding and the patent infringement action.

Back to top

7. Eli Lilly Canada v. Apotex, October 20, 2004 (Hugessen J.) Assignment of Patents /Section 45 of the Competition Act /Conspire to Limit Competition

Eli Lilly accused Apotex of infringing 8 patents pertaining to the processing of the antiobiotic ceflacor. Four of the 8 patents had been assigned to Lilly by Shionogi, a defendant by counterclaim. Apotex accused Lilly and Shionogi of lessening competition, in violation of s. 45 of the Competition Act. Hugessen J. originally ruled that Lilly and Shionogi were not in violation of the Competition Act and dismissed Apotex's claim. Apotex successfully appealed to the Federal Court of Appeal, and the Appeal Court stated that the motion should be remitted for further consideration to Hugessen J. Lilly and Shionogi sought summary judgment of Apotex's claim that they were in violation of the Competition Act.

Held: Motion for summary judgment granted. Hugessen J. ruled that where an agreement deals only with patent rights and is itself specifically authorized by the Patent Act, any lessening of competition resulting therefrom is not undue, and is therefore not an offence under s. 45 of the Competition Act. Apotex argued that with Shionogi agreeing to assign all of its patents relating to ceflacor, Shionogi and Lilly entered into an agreement to lessen competition, as Lilly would own all of the processes relating to the production of ceflacor. Hugessen J. acknowledged a lessening of competition, but that lessening was not undue because it had been authorized in the Patent Act. Hugessen J. stated that s. 50 of the Patent Act specifically authorizes agreements to assign a monopoly right, and therefore dismissed Apotex's claim.

Back to top

8. Boston Scientific, Johnson & Johnson, Expandable Grafts Partnership and Cordis v. Arterial Vascular Engineering Canada, Medtronic Ave. and Medtronic of Canada, October 20, 2004 FCA (Sexton J.A.) Appeal from a Decision of a Motions Judge Granting a Stay of the Motion for Summary Judgment

The Motions Judge had granted a stay of the motion for summary judgment upon two bases: 1) a press release by the Government of Canada that proposed legislative amendments to the Patent Act which would retroactively allow for the correction of incorrect past fee payments, and 2) a pending application for leave to appeal to the Supreme Court from the Dutch Industries case, where the decision would directly affect the rights of the parties in this case.

Held: Appeal dismissed because it was appropriate for the Motions Judge to grant a stay based upon the pending leave application in Dutch Industries. No comment was made with regards to the other basis for the stay, except to say that it is a rare circumstance where the Court will decline to proceed because of anticipated legislative changes.

Back to top

9. Apotex v. Eli Lilly and Company and Eli Lilly Canada, October 27, 2004 FCA (Linden, Sexton, Evans JJ.A.) Relevance of U.S. Parent Company Having Significant Control over Canadian Subsidiary to be Considered a “First Person”/Agency/Patented Medicines (Notice of Compliance) Regulations

Appeal by Apotex from a motion for summary judgment. Lilly US asserted, in its motion, that it was not properly joined as a defendant to Apotex's claim because it was not a “first person” for the purpose of s. 8 of the Regulations. The Motions Judge held that when determining whether Lilly US was a “first person”, the amount of control exercised by Lilly US over Lilly Canada was irrelevant, in respect of applications by Lilly Canada for regulatory approval to market drugs in Canada. The dispute required a determination of whether Lilly US, pursuant to s. 4(1), could be deemed to have submitted the patent list to the Minister despite the list being submitted in the name of Lilly Canada.

Held: Appeal allowed. Order set aside and motion for summary judgment dismissed. The Motions Judge erred in law in the exercise of her discretion in finding the control exerted by the Lilly parent company irrelevant. The fact the action was based on legislation rather than the common law does not necessarily preclude the application of common law concepts, such as agency. Whether, for the purpose of s. 8, a “first person” includes the corporation who directed the submission of the patent list in the name of the subsidiary is a sufficiently difficult legal question to require a trial. Finding of facts relating to agency or control may be relevant and therefore a trial is warranted.

Back to top

10. Pfizer et al. v. Canada (Minister of Health) and Apotex, October 28, 2004 FCTD (Heneghan J.) Affidavit Evidence Struck due to Inadmissible Hearsay Evidence/Variation of a Protective Order/Patented Medicines (Notice of Compliance) Regulations

Appeal by Pfizer from an Order of Lafrenière P. Pfizer sought to strike 8 affidavits filed by Apotex in support of two NOAs. Pfizer was granted partial relief; one full affidavit and the first sentence of a second affidavit were struck due to inadmissible hearsay. Furthermore, Pfizer was invited to raise the argument in relation to the other affidavits before the trial judge hearing the application. Pfizer also unsuccessfully sought to vary the Protective Order. Pfizer argues that the Apotex affidavits improperly try to supplement the NOAs served by Apotex. Pfizer further argues that Lafrenière P. was wrong in refusing to vary the Protective Order, which would allow Pfizer to commence an independent judicial review proceeding. Apotex also appeals from the Order submitting that the struck affidavits do not meet the test for hearsay evidence. Apotex submits that Lafrenière P. confused the admissibility of the affidavits with the weight to be given to that evidence.

Held: Pfizer appeal dismissed. Lafrenière P. made no reviewable error in directing that a decision to strike affidavits in an application for judicial review should be left to the trial judge. Further, Lafrenière P. made no reviewable error in dismissing Pfizer's motion to vary the Protective Order. He provided Pfizer the opportunity to commence its “other” application for judicial review and to then seek variation of the Protection Order, without foreclosing the possibility that such an Order may be made.
Appeal by Apotex granted in part. One of the two affidavits was improperly struck. In this affidavit, the witness deposed to the occurrence of certain steps, expressed his opinion and then stated that he was unable to locate copies of the “above noted spectra from my archived files”. This is not inadmissible hearsay evidence. The affidavit addresses matters that are in issue in the proceeding and to that extent, there is controversy between the parties. The evidence is admissible. The opening sentence of the second affidavit is inadmissible hearsay; there is no declared source of the information and no basis upon which to draw the distinction inherent in the test set out by Sopinka J. in Lavallee.

Back to top

(b) Trade Marks

1. Effigi v. A.G. Canada, July 16, 2004 FCTD (Shore J.) Appeal of Registrar's Refusal /Section 37(1)(c) /Entitlement/ Applicability of Section 16

Appeal from the Registrar's refusal of a proposed use application under s. 37(1)(c). The Registrar refused the application on the basis of a subsequently filed application for a confusing mark which claimed a date of first use that predated the filing of the applicant's proposed use application.

Held: Appeal allowed. The Registrar erred in deciding that the provisions of s. 16(3) supplement those of s. 37(1)(c) when rejecting an application at the examination stage. The Court stated that the language of s. 37(1)(c) is ambiguous because it does not specify how the Registrar should choose between two co-existing applications. The respondent unsuccessfully argued that s. 16 should be used to interpret s. 37 because both include the phrase “person entitled to registration”. Rather, the Court held that s. 37 can be understood without referring to s. 16 and that s.16 only applies to post-examination processes (such as oppositions), as evidenced by the fact that s. 16(4) and (5) refer to the advertisement of the application. Although “use” is an important basis of trade-mark rights, the Registrar does not have jurisdiction to reject an application during examination based on someone else's prior use because the Registrar does not have sufficient information to be able to assess the use claims; use should therefore only be considered at the opposition stage. The Court found the following obiter dicta in Unitel International Inc. v. Reg. TMs [2000] F.C.J. 1652 (F.C.A.) to be very persuasive, “The only issue [pursuant to paragraph 37(1)(c] is whether there is confusion between an applicant's trade-mark and a trade-mark for which an application for registration is already pending.” [This decision is under appeal.]

Back to top

2. Disney Enterprises et al. v. 2631-5374 Québec and Rivard, October 4, 2004 FCTD (Harrington J.) Copyright Infringement /Summary Judgment/Effect of Plea Bargain

Motion for summary judgment by the plaintiffs in an action for copyright infringement. The defendants deny renting counterfeit movies to the public, but the corporate defendant did plead guilty to related criminal charges laid against it under the Copyright Act, which resulted in a $3000 fine.

Held: Motion dismissed. A guilty plea in criminal proceedings does not constitute an irrefutable admission in this case. Although the plaintiffs have made out a good prima facie case, the defendants should not be deprived of their day in Court as there are genuine issues with respect to the defence. The prejudicial effect of the guilty plea may be reduced by the defendants' argument that it was simply cheaper to pay $3000 than to proceed to a full-blown trial. Also, there might be a strain on the administration of justice if making a plea bargain in a criminal case could lead to automatic greater damages (in this case $225,000) in another action.

Back to top

3. Columbia Pictures et al. v. Frankl, October 21, 2004 FCTD (Tremblay-Lamer J.) Copyright Infringement/Summary Judgment /Satellite Broadcasting /Radiocommunication Act

Motion for summary judgment by plaintiffs who allege that the defendant has manufactured and sold pirate “smart cards” that permit unlawful viewing of encrypted U.S. satellite broadcasts. The defendant had previously pleaded guilty to charges under the Radiocommunication Act. Section 18(3) of that Act provides that conviction is proof, absent evidence to the contrary, of the wrongful conduct at issue in a civil proceeding.

Held: Summary judgment granted insofar as the injunctive relief is concerned - determination of the amount of damages payable by the defendant to each of the plaintiffs referred to a Prothonotary. As the defendant has not filed any evidence or submissions, there is no genuine issue for trial with respect to the Radiocommunication Act. There is also no genuine issue for trial with respect to the Copyright Act because there is uncontradicted evidence that the defendant authorized others to reproduce the plaintiffs' copyrighted works.

Back to top

(d) Practice

1. Contour Optik & Chic Optic v. Viva Canada & Viva Optique, September 16, 2004 FCTD (Morneau P.) Federal Court Rule 238/Third Party Examination for Discovery /Affidavit of Documents

Motion by Viva under r. 238 seeking leave to examine Scott Miller, a lawyer acting as counsel for a non-party competitor to Viva in a similar action. This was one of two motions by Viva in front of the Court, the other being for further and better affidavits of documents from the plaintiffs. Viva sought to examine Mr. Miller to establish that documents relevant to the validity of the subject patent, of which Mr. Miller was apparently aware, were not included in the plaintiff's original disclosure.

Held: Motion dismissed. Morneau P. emphasized that the examination of a third party under r. 238 is for the purposes of an examination for discovery, not for the purposes of supporting another motion. In addition, affidavit evidence of telephone conversations with Mr. Miller had already given Viva sufficient information to advance its motion for further and better affidavits of documents. This, coupled with r. 238(3)(d)'s requirement that the questioning not cause undue delay, inconvenience or expense, was enough for Morneau P. to deny Viva's motion.

Back to top

2. Eli Lilly v. Apotex and Shionogi, September 30, 2004 FCTD (Martineau J.) Motion to Extend Time for Service/Costs

Motion by Apotex for an order extending the time for the service and filing of Apotex's herein motion in appeal and in extension and for an order setting aside the order of Aronovitch P., which awarded costs to Eli Lilly in the amount of $10,000.00.

Held: Motion for extension of delay denied; the order of the Prothonotary stands. The decision to allow or refuse an extension of time is discretionary and includes in this case consideration of the following factors: 1) whether Apotex had the intention to initiate an appeal before the time for appeal ran out; 2) the length of the period of extension; 3) prejudice to the opposing party; 4) the explanation for the delay; 5) whether it is in the interest of justice to grant the time extension; 6) whether the appeal itself has merit. Here, the relative merits of the arguments made by Apotex against the validity of the costs order are not sufficient to outweigh the negative elements of factors 1 to 5.

Back to top

3. Whirlpool Canada v. LG Electronics, October 5, 2004 FCTD (Lafrenière P.) Compel Attendance for Examination for Discovery

Whirlpool seeks to compel the attendance in Canada of a representative of the defendant for the purpose of examination for discovery. The defendant opposes the motion on the ground that an agreement is already in place between the parties regarding the location and scheduling of each of the examinations for discovery to be conducted. According to the defendant, the parties agreed that the representatives of Whirlpool Canada and LG Canada would be examined in Toronto, and that the representatives of Whirlpool Properties would be produced in Chicago and the examination of LG Korea's representatives would proceed in Korea.

Held: On the evidence, Whirlpool agreed, albeit reluctantly to conduct the discovery of LG Korea's representative in Korea in return for conducting the examination of the representatives of Whirlpool Properties in Chicago. In the absence of any evidence of fraud or unconscionable terms, a scheduling agreement between the parties should be respected. Whirlpool ought to have factored in the substantial costs associated with conducting an examination in Korea when negotiating. The costs for the translator and court reporter which have not been negotiated shall be split between the two parties.

Back to top

4. Merck & Merck Frosst Canada v. Brantford Chemicals, October 13, 2004 FCTD (Martineau J.) Federal Court Rule 3 /Federal Court Rule 7/Bifurcation

Appeal by the plaintiffs from an order that denied the bifurcation of the case at bar into one concerning infringement and one concerning damages.

Held: Appeal dismissed. Martineau J. reiterated that the Court will not disturb the discretionary order of a Prothonotary unless it was based upon a wrong legal principle or upon a palpable and overriding misapprehension of facts. The Court found that the requisite deficiencies were lacking. Martineau J. examined a list of representative factors to consider for a decision to bifurcate, but declared that such a list was neither closed nor determinative. The standard is whether the Court, on a balance of probabilities, is satisfied that severance is more likely than not to result in the just, expeditious and least expensive determination of the proceeding on its merits. The fact that the decision may assist the parties to reach an out-of-court settlement is not a factor to be weighed. It does not have to be certain that the splitting of the case will save time, or will lead to unnecessary delay. The onus is on the applicant to convince the Court to only a balance of probabilities standard.

Back to top

5. Express File v. HRB Royalty, October 14, 2004 FCA (Pelletier, Noël, Nadon JJ.A.) Appeal of Order to Strike Affidavit on the Ground of Hearsay

Appeal of the decision of Martineau J. dismissing an appeal from the decision of Morneau P. in which the Prothonotary ordered that certain portions of an affidavit be struck on the ground that they were hearsay, contrary to Federal Court r. 81. The appellant sought to defeat the motion to strike by arguing before the Prothonotary and the Motions Judge that the evidence, which was admittedly hearsay, was nonetheless admissible under the principled exception to the hearsay rule as set out in R v. Khan, [1990] 2 S.C.R. 531.

Held: Appeal denied. The appellant made the same argument before the Prothonotary and the Motions judge and the argument was rejected twice. It now argues that the Prothonotary and Motions Judge applied the wrong test and that their orders should be set aside so that it can make the same argument again. The Court of Appeal held that this appeal does not advance the “just, most expeditious and least expensive determination” of the issue, required by r. 3. There was no error in the decisions of the Prothonotary or Motions Judge. The Court of Appeal saw no reason for asking another judge to decide the same question.

Back to top

6. Gary Tyhy & Handy-Hitch Manufacturing v. Schulte Industries, October 14, 2004 FCTD (Snider J.) Federal Court Rule 221(1)

Motion to strike, or, in the alternative, a demand for further and better particulars with respect to Hand-Hitch's statement of claim for infringement of its patent by Schulte. The subject patent is for an off-set hitch.

Held: Motion dismissed. Schulte argued that the statement of claim merely reiterated the claims from Handy-Hitch's patent, which delineated their rights, but failed to set out the facts that constituted the alleged encroachment of those rights. Snider J. reviewed the recent case law, which sets a very high threshold for striking a statement of claim. “It is only where the claim is certain to fail because of some radical defect that the plaintiff should be driven from the judgment.” Here, Handy-Hitch was found to have carefully outlined the elements of the claim and tied them to the apparatus in issue. In the alternative, Schulte asked for better particulars on a specific function of their allegedly infringing hitch. The standard requires that Schulte demonstrate that the particulars are necessary, not just for preparation for trial, but to enable them to plead in response to the impugned pleadings. Snider J. pointed to an expert opinion supplied by Schulte, that specifically discussed the subject function, as being indicative that Schulte had ample information to plead its defence.

Back to top

(e) Industrial Designs

1. Rothbury International v. Ministry of Industry and Commissioner of Patents, April 16, 2004 FCTD (Tremblay-Lamer J.) Section 22 Industrial Design Act/Originality

Plaintiff seeks an order stating that the subject of its industrial design application is complete, valid and registrable. The plaintiff's application to register its New Pisa II block (NPII) was refused; the Commissioner dismissed the application because of a lack of originality in the design compared with the prior art and further concluded that the changes made to the design resulted from functional features in the configuration of the block. An appeal to the Patent Appeal Board was dismissed and so the plaintiff appealed to the Federal Court pursuant to s. 22 of the Industrial Design Act.

Held: The plaintiff's industrial design is to be entered on the Register of Industrial Designs. The Court agreed that an appeal under s. 22 should be dealt with in the same way as an appeal under s. 56 of the Trade-marks Act or an appeal under s. 41 of the Patent Act. Because the plaintiff filed new evidence before the Court, which the Court felt would have changed the Commissioner's decision, the applicable standard of review is that of the correct decision. The NPII blocks have a transverse recess, which was created to distinguish the plaintiff's blocks from those of competitors. “The recess gave a different aesthetic appearance, which offered the consumer a choice as to the facade he wanted to give his wall.” The consumer to be considered is one who is fully familiar with the art of blocks used to put up revetment walls and division walls (contractors, engineers, etc.) The Commissioner erred in assessing the degree of originality required to register the industrial design. He also erred in concluding that the recess had a purely functional role; he failed to consider its aesthetic aspect.

Back to top

II. OTHER COURT DECISIONS

1. SOCAN v. Canadian Association of Internet Providers, June 30, 2004 SCC (McLachlin C.J.) Appeal/Copyright Board/Tariff 22/Copyright Royalties

Appeal from judicial review by the FCA of Copyright Board's decision concerning liability of Internet Service Providers (ISPs) to pay copyright royalties for music transmitted over their services. SOCAN applied in 1995 to the Copyright Board to approve Tariff 22 regarding royalties to be paid by both ISPs and content providers for Internet transmissions of music. The Board had found ISPs to be exempt under s. 2.4(1)(b) of the Copyright Act which provides that third parties, acting merely as passive conduits, who supply the "means necessary" for a telecommunication are exempt from any liability. "Means" was defined broadly to include most ISP services such as providing hardware connectivity, and software and operating cached sites. If an ISP did more than provide such means, however, they would lose the statutory exemption and could become liable on the basis of authorizing copyright infringement. The Board also held regarding jurisdiction that the ISP's server had to be within Canada for it to be liable.

The FCA agreed with the Board regarding the s. 2.4(1)(b) exemption, with the exception that caching activity fell outside of the exemption. The FCA also disagreed with the Board's jurisdictional holding, choosing instead to apply a test whereby an ISP could be liable to pay the royalty whenever there was a "real and substantial connection" with Canada.

Held: Appeal dismissed. Case sent back to the Copyright Board to determine amount of royalty to be paid by content providers only. The SCC agreed with the FCA regarding the applicability of s. 2.4(1)(b) and exempted ISPs from liability in respect of most of their commercial activities. Furthermore, the SCC found caching was within the exemption, being merely a manner by which to deliver faster and more economic service through an activity that was content neutral. It further found it impractical, given the amount of data going over their services, for ISPs to have actual knowledge of any infringement. Where an ISP received notice of infringing content on its service, though, its failure to remove that content could lead to a finding of authorizing infringement.

Regarding jurisdiction, the SCC agreed that the "real and substantial connection" test was appropriate, with relevant connecting factors to be considered including the location of the content providers, the host server, the intermediaries and the end user.

Back to top

2. R. v. Chen, October 1, 2004 BCPC (Bruce J.) Copyright Infringement /Punishment /Mitigating Circumstances

The defendant entered a guilty plea to selling clothing knowing that such products infringed the copyright belonging to various brand name manufacturers contrary to s. 42(1)(b) of the Copyright Act. The parties agreed to a twelve month jail term to be served in the community but disagreed about the appropriate amount of the fine. The Crown requested $10,000, representing approximately 25% of the estimated gross sales revenue. The defendant argued for a fine in the range of $1000 to $2500 based upon the mitigating circumstances, the defendant's ability to pay, and the limited amount of profit earned. The defendant is a single mother, an immigrant who has limited ability to earn income, and a first offender. The defendant's customers knew that the wares were counterfeit.

Held: Twelve month conditional sentence and a fine of $2500 imposed. The accused's total gross revenue was estimated at $7200 but the mitigating circumstances resulted in the Court concluding that a $5000 fine was appropriate (the mitigating circumstances were: the defendant's guilty plea; the fact that she is a first offender; and the fact that the accused will be serving a lengthy conditional sentence during which she will perform 100 hours of community work service in reparation for her crime). The Court further reduced the fine to $2500, payable over 18 months, because it was highly unlikely that the accused could pay $5000 even given time to pay. “A fine should impose some hardship but not so as to create an impossible burden on the defendant or one that hangs over her for a lengthy period”.

Back to top

3. Mega Wraps B.C. v. Mega Wraps Holdings, October 5, 2004 OSCJ (Cullity J.) Interlocutory Injunction/Franchise Agreement / Balance of Convenience

Mega Wraps Holdings (“Holdings”) licenses franchisees to use its MEGA WRAPS trade-mark. Mega Wraps B.C. (“BC”), an area franchisor for Holdings, encountered financial difficulties. Holdings therefore attempted to cancel its agreement with BC and asked franchisees to deal directly with it. BC commenced an action in which it claimed orders enjoining Holdings from interfering in its business and its relations with franchisees, requiring it to comply with its obligations under the agreement and declaring that the agreement is still in force. BC succeeded in obtaining an interim interlocutory injunction.

Held: Interlocutory injunction granted. The balance of convenience favours BC because there is uncontradicted evidence that it will not be able to stay in business if the relief is not granted. It is not the function of the Court to attempt to resolve the factual issues that go to the merits of the dispute between the parties. A number of questions of credibility arise that cannot be decided on the basis of the record in this motion, but the allegations by BC that Holdings did not act in good faith are sufficiently supported by the evidence to raise serious issues for trial that bear directly on the question whether the agreement was validly terminated. This satisfies the requirement of “a serious question to be tried”. BC will suffer irreparable harm if, pending trial, Holdings is permitted to act as if the agreement has been terminated.

Back to top

4. Robertson v. The Thomson Corporation, October 6, 2004 OCA (Weiler J.A.) Appeal of Summary Judgment Motion /Copyright Infringement /Collective Works /Newspaper Articles Reproduced on Electronic Media

Appeal of a summary judgment motion brought by freelance writers against newspaper publishers alleging infringement of copyright in their articles which appeared in print newspapers and then were placed on electronic databases. The Trial Court held that the publishers' copyright in their newspapers, as collective works/compilations, granted them the right to reproduce the collective works, in whole or substantial part, in any material form, including some electronic versions, such as a daily Internet edition. Storage of newspaper content on a database, however, did not constitute production of a substantial part of the collective work (i.e. the newspaper), but only a reproduction of the individual articles in which the writers held copyright.

The Trial Court further held that oral licences between the writers and publishers to include their articles in the newspapers did not have to be in writing to be valid. Such non-exclusive licences did not convey a proprietary interest as required under s. 13(4) of the Copyright Act. It also held that the electronic databases did not constitute "newspapers, magazines, or similar periodicals" for the purposes of interpreting s. 13(3), which restricts a publisher's reuse of employee generated content outside of a periodical.

Held: Appeal dismissed. The Court of Appeal upheld the Trial Court's finding that the reproduction of the newspaper on electronic databases did not constitute a reproduction of a substantial part of the publishers' collective work. Although, as defined under the Copyright Act, a compilation only required originality in selection or arrangement of content to be subject to copyright, the Appeal Court held that both original selection and arrangement had to be reproduced in an electronic format for it to constitute reproduction of a "substantial part" of the collective work. As only the selection of the newspaper (i.e. its chosen content) was preserved on the database, not its arrangement, the electronic reproductions were of the writers' individual articles, to which the publishers did not hold copyright. The Court of Appeal also agreed that (a) the oral licences between the writers and the publishers, being non-exclusive, did not have to be in writing and (b) the databases did not constitute newspapers, magazines, or similar periodicals under s. 16(3).

Back to top

5. Mediamix Marketing Group v. Whalen et al., October 14, 2004 OSCJ (Dawson J.) Interlocutory Injunction /Confidential Information /Non-competition Clause

Plaintiff seeks an interlocutory injunction against its former employee, Whalen. The plaintiff alleges that Whalen breached a written covenant and her common law duty by soliciting its clients after leaving and by making use of the plaintiff's confidential information, namely pricing and service information.

Held: Application for injunctive relief dismissed. The plaintiff has failed to establish a strong prima facie case because the evidence establishes that the clients are not in any way exclusive, and information about their identity and contact information can hardly be said to be confidential. The business that the parties are engaged in is fiercely competitive and customers almost always shop every job to get price quotes from a number of companies. The agreement signed by Whalen, which prevents her from soliciting clients for one year, is in effect, a non-competition clause. Enforcement of this clause would have the effect of preventing a relatively low-level employee, who is not in a fiduciary capacity, from engaging in the type of work that she was involved in at the plaintiff, for any other employer in competition with the plaintiff. Contacting customers who have been clients of the plaintiff will not cause irreparable harm as those clients will be shopping in any event. There is no concrete evidence that Whalen has any form of unique or almost unique information as a result of her employment that would give her an unfair edge.

Back to top