This article describes the procedure typically followed during intellectual property litigation in the Federal Court of Canada. Keep in mind that the process, expense, pace and duration of litigation varies depending on the nature of the action and the activities of the parties and their counsel.
Lawsuits have five main stages, which are dealt with in the following numbered paragraphs in this article:
VII-VIII. Preparation for Trial
X. Post-trial Matters
I. Statement of Claim
Most lawsuits begin with the filing of a Statement of Claim, which sets out the identity of the parties, the alleged facts, legal grounds for the action and remedy sought. It usually costs $3,000 to $10,000 to have an initial meeting with a lawyer and to prepare and file a Statement of Claim.
II. Statement of Defence (and Counterclaim)
Canadian defendants must respond with a Statement of Defence and any Counterclaim within 30 days of receiving the Statement of Claim (40 days for American defendants; 60 days for all other foreign defendants).
The time period in which a Statement of Defence must be delivered is often extended for at least another 15-30 days, either with the consent of the plaintiff’s counsel or by court order, if additional time is necessary for the preparation of a defence. The time limit may also be extended by interlocutory applications, as outlined below.
III. Reply and Defence to Counterclaim
If the defendant files only a Defence, the plaintiff has 10 days from the time of service to file his Reply.
Any Defence to a Counterclaim must be filed within 30 days of receiving service of the Counterclaim.
Once all pleadings have been completed, it is said that pleadings are "closed." It typically takes six to seven months from the filing of the Statement of Claim to close pleadings.
IV. Interlocutory Applications
In many intellectual property actions, a party will request particulars—further details of the Statement of Claim or Defence. If the pleadings are considered to be highly defective, a motion to strike the pleading can be brought.
Particulars may be granted voluntarily, and/or the party may apply for a court order obliging the other side to provide such further information.
In most intellectual property litigation, the parties will agree to split the issues of liability and damages/profits. A court will issue a bifurcation order, which defers the issues of damages or profits to a post-trial reference. This arrangement decreases the cost of the action because the length of the examinations for discovery and trial are reduced.
Whoever wins the case usually recovers some of its legal costs from the losing party. Security for costs may be required if a plaintiff is a foreign corporation/entity having no assets in Canada to satisfy a possible order to pay costs (only in rare instances will a defendant be required to post security). If the court requires security for costs, a stay is usually ordered pending payment of the security. This security can be given by way of cash, bond or irrevocable letter of credit drawn on a Canadian chartered bank. If a co-plaintiff has assets in Canada, it may be able to undertake to have responsibility for all the plaintiffs’ costs, thereby obviating the need for security for costs.
If there is no real issue for trial on a certain point of law, or the case in its entirety, the Court can resolve that issue by summary judgment.
V. Document Discovery
The parties have 30 days from the close of pleadings to file their Affidavits of Documents. This Affidavit lists and discloses every document in the possession, power or control of a party, which relates to any unadmitted allegation raised in the pleadings. Most parties extend the deadline for the preparation of the list of documents since it is such a large task.
Many cases settle at this stage because of the large cost (legal and administrative) in preparing the list.
The Affidavit of Documents is an important step in the action and the importance of fully disclosing all relevant documents cannot be overemphasized. For further clarification, please note the following definitions:
document—this includes sound recordings, video tapes, films, photographs, charts, graphs, maps, plans, surveys, books of account, computer disks and information stored or recorded by means of any device;
relevant—a relevant document is one that relates to any matter at issue in the action (as set out in the pleadings) and, whether favourable or not, it must be listed and disclosed in the affidavit of documents. If it tends to prove or disprove any allegation, then it is relevant;
possession, power or control—possession is self-evident; power and control means that a party is entitled to obtain the original document or a copy from a person who is not a party to the action.
The Affidavit of Documents is divided into four Schedules:
Schedule 1 — documents which are in the party’s possession, power or control that the party does not object to producing for the other party in the action.
Schedule 2 — documents in the party’s possession, power or control for which it claims privilege and objects to producing for the other party in the action.
Schedule 3 — documents formerly in the party’s possession, power or control but which are no longer there. It is necessary to state when and how possession, power or control was lost as well as the present location of the document (if known).
Schedule 4 — documents that are relevant and which the party believes are in the possession of somebody who is not a party to the action.
The Affidavit of Documents must be sworn by an authorized representative of each party. It must also include a statement by the party that it never had possession, power or control of any document relating to any issue in the action except for those listed in the Affidavit.
It should be noted that while all documents must be listed, it is not necessary to provide privileged documents. Privilege can be claimed for the following: all correspondence passing between a party and its solicitors requesting or giving legal advice, documentation prepared for the substantial purpose of conducting the litigation and documents relating to settlement negotiations.
If an Affidavit of Documents appears defective or incomplete, an interlocutory motion can be brought to order the production of a further and better Affidavit.
VI. Oral Examination for Discovery
After delivery of the list of documents, oral examinations for discovery will be held (written discoveries may be held instead if the parties wish - such discoveries are rare). This is a question and answer proceeding held outside of court, but under oath and before a court reporter. It is held in a lawyer’s office or the reporter’s boardroom. Discoveries usually last a few days per party, however, because adjournments are needed to find answers and documents, and to bring motions to compel answers the discovery period lasts from six months to a year. Depending upon the number of issues in play and the number of documents produced, in some cases, discoveries can be quite lengthy.
The purpose of this procedure is to obtain admissions from the other side to narrow the issues for trial. The questions and answers are transcribed (and sometimes videotaped) and can be used by a party at trial as evidence or in cross-examination.
Each party must provide an informed officer, employee or other representative to be questioned, under oath, by the lawyer from the opposing side. The lawyer asking the questions may be assisted by his or her client, and the party being questioned can be assisted by his or her lawyer.
Under Federal Court Rule 235, a party can examine for discovery any adverse party but only once. A corporation or partnership can select an informed officer, director or member to be examined on its behalf. If the opposite party finds that person to be unsatisfactory, they can move to have a second individual brought forward for discovery.
In a case where the assignee of a right is a party to an action, the assignor of the right may also be examined for discovery under Federal Court Rule 237(4) even if it is not a party to the lawsuit. Where the assignor is outside of Canada, his or her evidence may be taken with the aid of an order of the foreign court. Such discovery is usually done by agreement between the parties. The discovery of the assignor can be used only for the purposes of gathering information and, unless the assignor is also a representative of a party, statements made by the assignor are not binding against the party at trial.
If questions cannot be answered immediately at the discovery, several options are available to the party:
- Undertakings may be given to provide the answer at some time after the adjournment of the examination;
- Questions may be refused to be answered; or
- Questions may be taken under advisement (i.e., "We will look into that and advise you later whether we will be answering the question."). Technically, an advisement is a refusal with an indication that counsel may change his or her mind upon further reflection.
A party may bring a motion to compel the other side to respond to the questions refused to be answered or taken under advisement, or to compel compliance with undertakings.
Once all motions have been disposed of, undertakings fulfilled and questions ordered to be answered have been provided - a reattendance of the representatives is usually required. This allows a party to ask questions to follow up on information and documents produced pursuant to the undertakings and court orders.
Once all questions have been answered, discovery is said to be completed. It usually takes one to two years from the commencement of an action to complete discovery.
VII. Application to fix the time and place of trial
Once discovery has been completed, an application can be made for a trial date. If the parties can agree on a schedule to complete discovery, an application for a trial date can sometimes be made before discovery is completed.
In many cases, the parties will agree on trial dates and file a Joint Application. If they cannot agree, a Unilateral Application is filed by one party (usually the plaintiff).
The length of trial varies depending on the nature of the action.
VIII. Preparation for Trial
Preparation for trial involves the assembly of documents and evidence from the examinations for discovery, interviews of potential fact witnesses, and preparation of expert witnesses and expert affidavits. The affidavits of expert witnesses must be filed and exchanged 60 days before the date of trial, and rebuttal reports must be filed and exchanged at least 30 days prior to trial.
It usually takes at least twice as many billable hours to prepare for trial as it does to conduct the trial itself. Preparation for a five-day trial would typically cost approximately $100,000 for legal fees. Expert witness fees and disbursements would be an additional expense.
It usually takes at two to three years from the commencement of the action to get to trial. In the Federal Court, the trials are heard by a single judge; there are no jury trials.
After the trial, a judge usually reserves on his or her decision for at least three months. A five-day trial would typically cost approximately $50,000 for legal fees.
X. Post-Trial Matters
There is an automatic right of appeal to the Federal Court of Appeal (the deadline for filing a Notice of Appeal is 10 days for interlocutory orders, 30 days for final orders).
If the plaintiff succeeds, and the defendant cannot agree on the amount of damages or profits payable, then a reference is held to determine the amount of damages or profits owing.
The "winner" of the lawsuit usually recovers its "costs" (about 30 to 50 per cent of the actual legal fees expended by a party and 100 per cent of its disbursements such as expert witness fees). If the parties cannot agree on the costs, a taxation of costs (a mini-trial on the issues) can be held.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.