Canada: Late Pleadings Amendments Allowed, but with Solicitor and Client Costs on the Merits of Addressing Them (Intellectual Property Weekly Abstracts Bulletin – Week of August 10)

Last Updated: August 12 2015
Article by Chantal Saunders, Beverley Moore and Adrian J. Howard

Most Read Contributor in Canada, September 2016

Patent Infringement Actions

Late Pleadings Amendments Allowed, but with Solicitor and Client Costs on the Merits of Addressing Them
Arctic Cat Inc. v. Bombardier Recreational Products Inc., 2015 FC 938

Bombardier brought a motion for leave to amend its Statement of Defence and Counterclaim to expand the list of prior art and include a new ground of invalidity (ambiguity). There were three months left before trial, a pre-trial conference had been held and the parties had exchanged their expert reports in chief. The Court granted the motion with respect to the prior art, but not with respect to the new allegation. However, the Court also ordered solicitor and client costs not only on the motion, but for all costs reasonably incurred by Arctic Cat to consider and react to the amendments, in any event of the cause.

The proposed new prior art references were known to Bombardier, and disclosed to Arctic Cat in the context of US proceedings, however they were not part of this case until Bombardier delivered its expert report. The pre-trial conference was held the day before expert reports were due, but no mention was made of the new prior art or allegation.

The Court held that Bombardier's "conduct cannot be countenanced. It must be condemned in the strongest terms and any repetition must be dissuaded." The Court also held that the amendments constituted a radical change, and that Arctic Cat had pursued a course of action that may be difficult to alter. Furthermore, the Court held that Bombardier's conduct in failing to disclose the new prior art and its expert's intention to raise ambiguity as soon as their relevance to the Canadian case was brought to its attention, and at the latest at the pre-trial conference, is inexcusable and unjustifiable. However, on the evidence, the Court concluded that allowing the proposed amendments with respect to prior art would not cause substantive prejudice that could not be compensated in costs.

Trademark Decisions

Registrar's Decision of Failure to Establish Use of Trademark Upheld by Court
Padcon Ltd. v. Gowling Lafleur Henderson LLP, 2015 FC 943

This is an appeal of a decision of the Registrar of Trademarks (Registrar) finding that the applicant failed to establish use of the trade mark "THE OUTRIGGER STEAKHOUSE AND BAR" in association with "restaurant, bar and pub services" (Mark) in response to notice under section 45 of the Trademarks Act.

The Court dismissed the appeal, finding that the new evidence submitted by the applicant would not have materially affected the decision by the Registrar, and the decision was reasonable. The Registrar determined that in this case, the Mark was used only in association with a particular item on the menu, and was not use of the Mark in association with restaurant, bar and pub services. The Court concluded that the Registrar's decision that the Mark had not been used as registered was reasonable. The Court also held that, even if it had considered the new evidence and conducted a de novo review, the Registrar did not err.

Contempt Award takes into Account both Prior Conduct and Conduct After the Order
Trans-High Corporation v. Hightimes Smokeshop and Gifts Inc., 2015 FC 919

In this case, Trans-High had previously been successful in a trademark infringement action (Decision here; summary here). Hightimes had been enjoined from selling, distributing or advertising any goods and services in association with the Applicant's mark.However, the respondent continued to do so. A contempt hearing took place where the Respondent pleaded guilty to contempt.These reasons address remedies.

The Court held that in this case, the acts of contempt are both objectively and subjectively serious, as the Respondent's behaviour challenges both the judicial authority of the Court and the public's confidence in the administration of justice. It took the Respondent 15 months to amend their corporate registration; 16 months to remove the signage from their shop; and the transfer of the domain name and payment of damages and costs has yet to occur. No explanation for the delay was offered. The Applicant repeatedly offered leniency in exchange for compliance, but was met with obfuscation and evasion.

The Court held that although this was the first contempt conviction, the respondent has a history of trademark infringement. A further mitigating factor was the size of the Respondent's business. An award of $10,000 for each count of contempt was granted, for a total of $50,000. However, this amount will be reduced to $10,000 if the Respondent pays the monetary damages owed under the infringement decision, and its costs owed under this decision within 30 days. Furthermore, if the order is not satisfied within 30 days, the respondent will be imprisoned for 14 days, and until the penalties are paid. Costs on a solicitor and client basis were fixed at $62,500.

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